FORT WORTH, Texas, Aug. 07, 2018 (GLOBE NEWSWIRE) -- Hallmark Financial Services, Inc. (NASDAQ: HALL) today announced results for its second quarter ended June 30, 2018, including the following highlights:
- 2nd quarter 2018 net income of $5.1 million, or $0.28 per diluted share, versus a net loss of ($3.4) million, or ($0.18) per diluted share, for 2nd quarter 2017
- Year-to-date 2018 net income of $5.7 million, or $0.31 per diluted share, versus $0.6 million, or $0.03 per diluted share, for prior year-to-date
- 2nd quarter 2018 operating earnings (1) of $4.7 million, or $0.26 per diluted share, versus ($1.1) million, or ($0.06) per diluted share, for 2nd quarter 2017
- Year-to-date 2018 operating earnings (1) of $9.1 million, or $0.50 per diluted share, versus $1.6 million, or $0.08 per diluted share, for prior year-to-date
- 2nd quarter 2018 net combined ratio of 97.0% versus 105.1% for 2nd quarter 2017
- Year-to-date 2018 net combined ratio of 97.1% versus 101.9% for prior year-to-date
- Year-to-date 2018 gross premiums written of $326.7 million increased 10% from $297.2 million for prior year-to-date
- Year-to-date 2018 net premiums written of $181.3 million declined 4% from $189.4 million for prior year-to-date
(1) See “Non-GAAP Financial Measures” below
“I am pleased to report continued progress in our results that reflect improvement and momentum from the various actions we have undertaken the past couple of years to address the challenges that had emerged in our commercial and personal auto portfolios. We are also seeing results from our efforts to diversify into new specialty product lines and re-balance the geographic footprint of our book. We reported a net combined ratio of 97.0% for the quarter which was significantly improved from last year and in line with our expectations for the quarter. We continue to see strong rate increases in many of our product lines which contributed to the 7% increase in gross premiums for the quarter,” said Naveen Anand, President and Chief Executive Officer.
“Severity and litigation trends in commercial auto continue to be challenging. In addition to having successfully transitioned our claims operations to address the new realities in this line, we continue to drive meaningful rate increases and underwriting actions within our commercial auto portfolio and our more current accident years are performing in line with expectations. We are however, seeing irresponsible new competitors buying their way into the market by underpricing business. We continue to walk away from risks that don’t meet our pricing requirements or quality standards,” continued Naveen Anand.
Mark E. Schwarz, Executive Chairman of Hallmark, stated, “Book value per share at June 30, 2018 increased to $14.23 compared to $13.82 at December 31, 2017. Year-to-date net investment income was $8.8 million, a 2% decline compared to the prior year-to-date. Total cash and investments was $712.5 million, or $39.45 per share, as of June 30, 2018, a decrease of 2% from $40.12 per share as of December 31, 2017.”
| Second Quarter | |||||||||
| 2018 | 2017 | % Change | |||||||
| ($ in thousands, unaudited) | |||||||||
| Gross premiums written | 173,219 | 162,056 | 7 | % | |||||
| Net premiums written | 89,846 | 100,894 | -11 | % | |||||
| Net premiums earned | 90,978 | 90,707 | 0 | % | |||||
| Investment income, net of expenses | 4,406 | 4,587 | -4 | % | |||||
| Investment (losses) gains, net | 533 | (72 | ) | 840 | % | ||||
| Other-than-temporary impairments | - | (3,407 | ) | 100 | % | ||||
| Net income (loss) | 5,090 | (3,350 | ) | 252 | % | ||||
| Operating earnings (loss) | 4,669 | (1,089 | ) | 529 | % | ||||
| Net income (loss) per share - basic | $ | 0.28 | $ | (0.18 | ) | 256 | % | ||
| Net income (loss) per share - diluted | $ | 0.28 | $ | (0.18 | ) | 256 | % | ||
| Operating earnings per share - diluted | $ | 0.26 | $ | (0.06 | ) | 533 | % | ||
| Book value per share | $ | 14.23 | $ | 14.57 | -2 | % | |||
| Cash flow from operations | 9,320 | 3,545 | 163 | % | |||||
| Year-to-Date | ||||||||||
| 2018 | 2017 | % Change | ||||||||
| ($ in thousands, unaudited) | ||||||||||
| Gross premiums written | 326,724 | 297,168 | 10 | % | ||||||
| Net premiums written | 181,279 | 189,413 | -4 | % | ||||||
| Net premiums earned | 182,925 | 179,930 | 2 | % | ||||||
| Investment income, net of expenses | 8,846 | 9,066 | -2 | % | ||||||
| Investment (losses) gains, net | (4,302 | ) | 1,988 | -316 | % | |||||
| Other-than-temporary impairments | - | (3,407 | ) | 100 | % | |||||
| Net income (loss) | 5,737 | 636 | 802 | % | ||||||
| Operating earnings | 9,136 | 1,558 | 486 | % | ||||||
| Net (loss) income per share - basic | $ | 0.32 | $ | 0.03 | 967 | % | ||||
| Net (loss) income per share - diluted | $ | 0.31 | $ | 0.03 | 933 | % | ||||
| Operating earnings per share - diluted | $ | 0.50 | $ | 0.08 | 525 | % | ||||
| Book value per share | $ | 14.23 | $ | 14.57 | -2 | % | ||||
| Cash flow from operations | (9,895 | ) | 12,384 | -180 | % | |||||
Second Quarter 2018 Commentary
Hallmark reported net income of $5.1 million and $5.7 million for the three months and six months ended June 30, 2018, respectively, as compared to ($3.4) million and $0.6 million for the three months and six months ended June 30, 2017, respectively. On a diluted basis per share, the Company reported net income of $0.28 per share and $0.31 per share for the three months and six months ended June 30, 2018, respectively, as compared to ($0.18) per share and $0.03 per share for the three months and six months ended June 30, 2017, respectively.
Hallmark's consolidated net loss ratio was 70.0% and 69.6% for the three months and six months ended June 30, 2018, respectively, as compared to 77.9% and 73.7% for the three months and six months ended June 30, 2017, respectively. Hallmark's net expense ratio was 27.0% and 27.5% for the three months and six months ended June 30, 2018, respectively, as compared to 27.2% and 28.2% for the three months and six months ended June 30, 2017, respectively. Hallmark’s net combined ratio was 97.0% and 97.1% for the three months and six months ended June 30, 2018, respectively, as compared to 105.1% and 101.9% for the three months and six months ended June 30, 2017, respectively.
During the three months and six months ended June 30, 2018, Hallmark’s gross premiums written were $173.2 million and $326.7 million, representing an increase of 7% and 10%, respectively from the $162.1 million and $297.2 million in gross premiums written for the same periods in 2017. Hallmark’s net premiums earned were $91.0 million and $182.9 million for the three months and six months ended June 30, 2018, respectively, as compared to $90.7 million and $179.9 million for the same periods in 2017. During the three months and six months ended June 30, 2018, Hallmark’s income before tax was $6.4 million and $7.2 million, respectively, as compared to ($4.9) million and $0.9 million reported during the same periods in 2017.
The increase in net premiums earned for both the three months and six months ended June 30, 2018 was driven by improvement in the Specialty Commercial and Standard Commercial Segments, partially offset by lower net premiums earned in the Personal Segment. The increase in income before tax for the three months and six months ended June 30, 2018 was due primarily to the increase in net earned premiums, as well as higher commissions, fees and finance charges and decreased losses and loss adjustment expenses (“LAE”). The quarterly results were also favorably impacted by investment gains of $0.5 million in 2018 as compared to investment losses of $3.5 million in 2017, while the year to date results were adversely impacted by higher net investment losses of $4.3 million for 2018 as compared to $1.4 million for 2017. The decrease in loss and LAE was primarily the result of unfavorable net prior year loss reserve development of $5.0 million and $4.5 million for the three and six months ended June 30, 2018, respectively, as compared to unfavorable net prior year loss reserve development of $10.2 million and $9.7 million during the same periods of 2017. The investment loss during the six months ended June 30, 2018 includes $3.9 million in loss attributable to the adoption effective January 1, 2018 of Accounting Standards Update No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” which requires equity investments that are not consolidated or accounted for under the equity method of accounting to be measured at fair value with changes in fair value recognized in net income.
Hallmark’s effective tax rate was 20.1% for the six months ended June 30, 2018 as compared to 30.9% for the same period in 2017. The decrease in the effective tax rate was due primarily to the lower statutory rate from the enactment of the Tax Cuts and Jobs Act on December 22, 2017.
Non-GAAP Financial Measures
The Company’s financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”). However, the Company also presents and discusses certain non-GAAP financial measures that it believes are useful to investors as measures of operating performance. Management may also use such non-GAAP financial measures in evaluating the effectiveness of business strategies and for planning and budgeting purposes. However, these non-GAAP financial measures should not be viewed as an alternative or substitute for the results reflected in the Company’s GAAP financial statements. In addition, our definitions of these items may not be comparable to the definitions used by other companies.
Operating earnings and operating earnings per share are calculated by excluding net investment gains and losses from GAAP net income. Management believes that operating earnings and operating earnings per share provide useful information to investors about the performance of and underlying trends in the Company’s core insurance operations. Net income and net income per share are the GAAP measures that are most directly comparable to operating earnings and operating earnings per share. A reconciliation of operating earnings and operating earnings per share to the most comparable GAAP financial measures is presented below.
| Weighted | |||||||||||||
| Income | Less Tax | Net | Average | Diluted | |||||||||
| ($ in thousands) | Before Tax | Effect | After Tax | Shares Diluted | Per Share | ||||||||
| Second Quarter 2018 | |||||||||||||
| Reported GAAP measures | $ | 6,372 | $ | 1,282 | $ | 5,090 | 18,174 | $ | 0.28 | ||||
| Excluded investment losses/gains | $ | (533 | ) | (112 | ) | (421 | ) | 18,174 | $ | (0.02 | ) | ||
| Operating earnings | $ | 5,839 | $ | 1,170 | $ | 4,669 | 18,174 | $ | 0.26 | ||||
| Second Quarter 2017 | |||||||||||||
| Reported GAAP measures | $ | (4,918 | ) | $ | (1,568 | ) | $ | (3,350 | ) | 18,424 | $ | (0.18 | ) |
| Excluded investment losses/gains | 3,479 | 1,218 | 2,261 | 18,424 | $ | 0.12 | |||||||
| Operating loss | $ | (1,439 | ) | $ | (350 | ) | $ | (1,089 | ) | 18,424 | $ | (0.06 | ) |
| Year-to-Date 2018 | |||||||||||||
| Reported GAAP measures | $ | 7,181 | $ | 1,444 | $ | 5,737 | 18,230 | $ | 0.31 | ||||
| Excluded investment losses/gains | 4,302 | 903 | 3,399 | 18,230 | $ | 0.19 | |||||||
| Operating earnings | $ | 11,483 | $ | 2,347 | $ | 9,136 | 18,230 | $ | 0.50 | ||||
| Year-to-Date 2017 | |||||||||||||
| Reported GAAP measures | $ | 920 | $ | 284 | $ | 636 | 18,663 | $ | 0.03 | ||||
| Excluded investment losses/gains | 1,419 | 497 | 922 | 18,663 | $ | 0.05 | |||||||
| Operating earnings | $ | 2,339 | $ | 781 | $ | 1,558 | 18,663 | $ | 0.08 | ||||
About Hallmark Financial Services, Inc.
Hallmark Financial Services, Inc. is a diversified specialty property/casualty insurer with offices in Dallas-Fort Worth, San Antonio, Chicago, Atlanta and Jersey City. Hallmark markets, underwrites and services over half a billion dollars annually in commercial and personal insurance premiums in select markets. Hallmark is headquartered in Fort Worth, Texas and its common stock is listed on NASDAQ under the symbol "HALL."
Forward-looking statements in this release are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that actual results may differ substantially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, continued acceptance of the Company’s products and services in the marketplace, competitive factors, interest rate trends, general economic conditions, the availability of financing, underwriting loss experience and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission.
For further information, please contact:
Mr. Naveen Anand, President and Chief Executive Officer at 817.348.1600
www.hallmarkgrp.com
| Hallmark Financial Services, Inc. and Subsidiaries | ||||||
| Consolidated Balance Sheets | ||||||
| ($ in thousands, except par value) | Jun. 30 | Dec. 31 | ||||
| ASSETS | 2018 | 2017 | ||||
| Investments: | (unaudited) | |||||
| Debt securities, available-for-sale, at fair value (amortized cost: $566,520 in 2018 and $604,999 in 2017) | $ | 568,826 | $ | 605,746 | ||
| Equity securities (cost: $40,308 in 2018 and $30,253 in 2017) | 57,914 | 51,763 | ||||
| Other investment (cost: $3,763 in 2018 and 2017) | 3,060 | 3,824 | ||||
| Total investments | 629,800 | 661,333 | ||||
| Cash and cash equivalents | 79,583 | 64,982 | ||||
| Restricted cash | 3,078 | 2,651 | ||||
| Ceded unearned premiums | 127,504 | 112,323 | ||||
| Premiums receivable | 112,188 | 104,373 | ||||
| Accounts receivable | 2,051 | 1,513 | ||||
| Receivable for securities | 3,780 | 5,235 | ||||
| Reinsurance recoverable | 215,045 | 182,928 | ||||
| Deferred policy acquisition costs | 14,058 | 16,002 | ||||
| Goodwill | 44,695 | 44,695 | ||||
| Intangible assets, net | 8,791 | 10,023 | ||||
| Deferred federal income taxes, net | 2,584 | 1,937 | ||||
| Federal income tax recoverable | 0 | 7,532 | ||||
| Prepaid expenses | 2,692 | 1,743 | ||||
| Other assets | 13,431 | 13,856 | ||||
| Total Assets | $ | 1,259,280 | $ | 1,231,126 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Liabilities: | ||||||
| Revolving credit facility payable | $ | 30,000 | $ | 30,000 | ||
| Subordinated debt securities (less unamortized debt issuance cost of $924 in 2018 and $949 in 2017) | 55,778 | 55,753 | ||||
| Reserves for unpaid losses and loss adjustment expenses | 520,552 | 527,100 | ||||
| Unearned premiums | 290,177 | 276,642 | ||||
| Reinsurance balances payable | 65,559 | 52,487 | ||||
| Current federal income tax payable | 187 | - | ||||
| Pension liability | 1,470 | 1,605 | ||||
| Payable for securities | 6,706 | 7,488 | ||||
| Accounts payable and other accrued expenses | 31,942 | 28,933 | ||||
| Total Liabilities | 1,002,371 | 980,008 | ||||
| Commitments and contingencies | ||||||
| Stockholders’ equity: | ||||||
| Common stock, $.18 par value, authorized 33,333,333 shares; issued 20,872,831 shares in 2018 and 2017 | 3,757 | 3,757 | ||||
| Additional paid-in capital | 123,017 | 123,180 | ||||
| Retained earnings | 156,585 | 136,474 | ||||
| Accumulated other comprehensive income | (865 | ) | 12,234 | |||
| Treasury stock (2,814,155 shares in 2018 and 2,703,803 shares in 2017), at cost | (25,585 | ) | (24,527 | ) | ||
| Total Stockholders’ Equity | 256,909 | 251,118 | ||||
| Total Liabilities & Stockholders' Equity | $ | 1,259,280 | $ | 1,231,126 | ||
| Hallmark Financial Services, Inc. and Subsidiaries | |||||||||||||
| Consolidated Statements of Operations | Three Months Ended | Six Months Ended | |||||||||||
| ($ in thousands, except share amounts) | June 30 | June 30 | |||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||
| (unaudited) | (unaudited) | ||||||||||||
| Gross premiums written | $ | 173,219 | $ | 162,056 | $ | 326,724 | $ | 297,168 | |||||
| Ceded premiums written | (83,373 | ) | (61,162 | ) | (145,445 | ) | (107,755 | ) | |||||
| Net premiums written | 89,846 | 100,894 | 181,279 | 189,413 | |||||||||
| Change in unearned premiums | 1,132 | (10,187 | ) | 1,646 | (9,483 | ) | |||||||
| Net premiums earned | 90,978 | 90,707 | 182,925 | 179,930 | |||||||||
| Investment income, net of expenses | 4,406 | 4,587 | 8,846 | 9,066 | |||||||||
| Investment gains (losses), net | 533 | (3,479 | ) | (4,302 | ) | (1,419 | ) | ||||||
| Finance charges | 1,161 | 936 | 2,201 | 1,989 | |||||||||
| Commission and fees | 1,032 | 653 | 1,735 | 725 | |||||||||
| Other income | 15 | 71 | 61 | 132 | |||||||||
| Total revenues | 98,125 | 93,475 | 191,466 | 190,423 | |||||||||
| Losses and loss adjustment expenses | 63,648 | 70,704 | 127,323 | 132,546 | |||||||||
| Operating expenses | 26,360 | 25,879 | 53,573 | 53,374 | |||||||||
| Interest expense | 1,128 | 1,193 | 2,155 | 2,349 | |||||||||
| Amortization of intangible assets | 617 | 617 | 1,234 | 1,234 | |||||||||
| Total expenses | 91,753 | 98,393 | 184,285 | 189,503 | |||||||||
| Income (loss) before tax | 6,372 | (4,918 | ) | 7,181 | 920 | ||||||||
| Income tax expense (benefit) | 1,282 | (1,568 | ) | 1,444 | 284 | ||||||||
| Net income (loss) | $ | 5,090 | $ | (3,350 | ) | $ | 5,737 | $ | 636 | ||||
| Net income (loss) per share: | |||||||||||||
| Basic | $ | 0.28 | $ | (0.18 | ) | $ | 0.32 | $ | 0.03 | ||||
| Diluted | $ | 0.28 | $ | (0.18 | ) | $ | 0.31 | $ | 0.03 | ||||
| Hallmark Financial Services, Inc. and Subsidiaries | ||||||||||||||||||||||||||||||
| Consolidated Segment Data | ||||||||||||||||||||||||||||||
| Three Months Ended Jun. 30 | ||||||||||||||||||||||||||||||
| Specialty Commercial Segment | Standard Commercial Segment | Personal Segment | Corporate | Consolidated | ||||||||||||||||||||||||||
| ($ in thousands) | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||
| Gross premiums written | $ | 136,079 | $ | 127,805 | $ | 21,574 | $ | 19,769 | $ | 15,566 | $ | 14,482 | $ | - | $ | - | $ | 173,219 | $ | 162,056 | ||||||||||
| Ceded premiums written | (72,083 | ) | (52,386 | ) | (2,645 | ) | (2,086 | ) | (8,645 | ) | (6,690 | ) | - | - | (83,373 | ) | (61,162 | ) | ||||||||||||
| Net premiums written | 63,996 | 75,419 | 18,929 | 17,683 | 6,921 | 7,792 | - | - | 89,846 | 100,894 | ||||||||||||||||||||
| Change in unearned premiums | 2,333 | (10,635 | ) | (824 | ) | (1,301 | ) | (377 | ) | 1,749 | - | - | 1,132 | (10,187 | ) | |||||||||||||||
| Net premiums earned | 66,329 | 64,784 | 18,105 | 16,382 | 6,544 | 9,541 | - | - | 90,978 | 90,707 | ||||||||||||||||||||
| Total revenues | 72,081 | 69,501 | 19,247 | 17,322 | 7,916 | 10,684 | (1,119 | ) | (4,032 | ) | 98,125 | 93,475 | ||||||||||||||||||
| Losses and loss adjustment expenses | 48,352 | 50,529 | 10,621 | 11,863 | 4,675 | 8,312 | - | - | 63,648 | 70,704 | ||||||||||||||||||||
| Pre-tax income (loss) | 8,770 | 3,632 | 2,656 | (199 | ) | (1 | ) | (892 | ) | (5,053 | ) | (7,459 | ) | 6,372 | (4,918 | ) | ||||||||||||||
| Net loss ratio (1) | 72.9 | % | 78.0 | % | 58.7 | % | 72.4 | % | 71.4 | % | 87.1 | % | 70.0 | % | 77.9 | % | ||||||||||||||
| Net expense ratio (1) | 22.3 | % | 23.2 | % | 33.2 | % | 34.9 | % | 33.7 | % | 26.6 | % | 27.0 | % | 27.2 | % | ||||||||||||||
| Net combined ratio (1) | 95.2 | % | 101.2 | % | 91.9 | % | 107.3 | % | 105.1 | % | 113.7 | % | 97.0 | % | 105.1 | % | ||||||||||||||
| Favorable (Unfavorable) Prior Year Development | (5,849 | ) | (8,032 | ) | 507 | (1,722 | ) | 359 | (419 | ) | - | - | (4,983 | ) | (10,173 | ) | ||||||||||||||
| 1 | The net loss ratio is calculated as incurred losses and loss adjustment expenses divided by net premiums earned, each determined in accordance with GAAP. The net expense ratio is calculated as total underwriting expenses offset by agency fee income divided by net premiums earned, each determined in accordance with GAAP. The net combined ratio is calculated as the sum of the net loss ratio and the net expense ratio. | |
| Hallmark Financial Services, Inc. and Subsidiaries | ||||||||||||||||||||||||||||||
| Consolidated Segment Data | ||||||||||||||||||||||||||||||
| Six Months Ended Jun. 30 | ||||||||||||||||||||||||||||||
| Specialty Commercial Segment | Standard Commercial Segment | Personal Segment | Corporate | Consolidated | ||||||||||||||||||||||||||
| ($ in thousands) | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||
| Gross premiums written | $ | 250,892 | $ | 223,312 | $ | 44,371 | $ | 40,462 | $ | 31,461 | $ | 33,394 | $ | - | $ | - | $ | 326,724 | $ | 297,168 | ||||||||||
| Ceded premiums written | (122,741 | ) | (88,310 | ) | (5,200 | ) | (3,927 | ) | (17,504 | ) | (15,518 | ) | - | - | (145,445 | ) | (107,755 | ) | ||||||||||||
| Net premiums written | 128,151 | 135,002 | 39,171 | 36,535 | 13,957 | 17,876 | - | - | 181,279 | 189,413 | ||||||||||||||||||||
| Change in unearned premiums | 5,868 | (8,289 | ) | (3,199 | ) | (3,439 | ) | (1,023 | ) | 2,245 | - | - | 1,646 | (9,483 | ) | |||||||||||||||
| Net premiums earned | 134,019 | 126,713 | 35,972 | 33,096 | 12,934 | 20,121 | - | - | 182,925 | 179,930 | ||||||||||||||||||||
| Total revenues | 145,205 | 135,336 | 38,122 | 35,048 | 15,536 | 22,547 | (7,397 | ) | (2,508 | ) | 191,466 | 190,423 | ||||||||||||||||||
| Losses and loss adjustment expenses | 95,895 | 92,119 | 22,301 | 22,909 | 9,127 | 17,518 | - | - | 127,323 | 132,546 | ||||||||||||||||||||
| Pre-tax income (loss) | 18,528 | 11,730 | 3,975 | 652 | (23 | ) | (1,650 | ) | (15,299 | ) | (9,812 | ) | 7,181 | 920 | ||||||||||||||||
| Net loss ratio (1) | 71.6 | % | 72.7 | % | 62.0 | % | 69.2 | % | 70.6 | % | 87.1 | % | 69.6 | % | 73.7 | % | ||||||||||||||
| Net expense ratio (1) | 23.0 | % | 24.4 | % | 33.2 | % | 35.2 | % | 34.6 | % | 26.3 | % | 27.5 | % | 28.2 | % | ||||||||||||||
| Net combined ratio (1) | 94.6 | % | 97.1 | % | 95.2 | % | 104.4 | % | 105.2 | % | 113.4 | % | 97.1 | % | 101.9 | % | ||||||||||||||
| Favorable (Unfavorable) Prior Year Development | (6,861 | ) | (8,332 | ) | 1,560 | (264 | ) | 848 | (1,088 | ) | - | - | (4,453 | ) | (9,684 | ) | ||||||||||||||
| 1 | The net loss ratio is calculated as incurred losses and loss adjustment expenses divided by net premiums earned, each determined in accordance with GAAP. The net expense ratio is calculated as total underwriting expenses offset by agency fee income divided by net premiums earned, each determined in accordance with GAAP. The net combined ratio is calculated as the sum of the net loss ratio and the net expense ratio. | |