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Fortegra Financial Beats on Earnings & Revs

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Fortegra Financial Corporation (FRF - Snapshot Report) delivered operating net income of 22 cents per share in the second quarter of 2013, surpassing the Zacks Consensus Estimate by 2 cents. Earnings were 10% ahead of 20 cents earned in the year-ago quarter.

Behind the Headlines

Fortegra Financial generated total revenue of $100.1 million, up 40.9% year over year. The outperformance was driven by higher service and administrative fees, higher brokerage, increase in commissions and fees, increase in net realized investment gain, net earned premium as well as other income. Total revenue surpassed the Zacks Consensus Estimate of $35 million.

Net revenue of Fortegra Financial improved 26.5% year over year to $36.8 million in the prior-year quarter.

Direct and assumed written premiums written by Fortegra Financial improved 7.8% year over year to $100.0 million.

Total expenses of Fortegra Financial increased 29.2% year over year to $29.8 million. The increase was attributable to higher personnel costs as well as higher other operating expenses

Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) increased 20.2% year over year to $12 million with adjusted EBITDA margin contracting 170 basis points to 32.7%.

Segment Update

Payment Protection: Net revenue improved 51.4% year over year to $22.6 million. The improvement stemmed from $6.8 million increase in net revenue, attributable to the acquisition of ProtectCELL in 2012 and $0.5 million for 4Warranty. However, the upside was partially offset by lower revenues from credit and warranty products, and Motor Club.

EBITDA increased 25.8% year over year to $7.8 million. EBITDA margin contracted 700 basis points to 34.5%, largely due to a change in the mix of business with the addition of ProtectCELL as well as higher operating expenses within the Motor Clubs division.

Business Process Outsourcing (BPO): Net revenue declined 10% year over year to $4 million. EBITDA increased slightly to $1.2 million from $1.1 million in year-ago quarter. EBITDA margin expanded 600 basis points to 30% attributable to lower operating expenses.

Brokerage: Net revenue improved 5.1% year over year to $10.3 million. EBITDA of $2.8 million increased from $2.6 million in the prior-year quarter. EBITDA margin expanded 70 basis points to 26.9%.

Financial Details

Fortegra Financial exited the quarter with total investments and cash and cash equivalents of $147.9 million, up from $133.3 million at the end of 2012.

Total debt of Fortegra Financial decreased to $122.5 million at the end of the quarter from $124.4 million at the end of 2012.

Share Repurchase Update

Fortegra Financial bought back $0.2 million shares in the second quarter.

The board of directors of Fortegra Financial expanded the existing $10.0 million share repurchase plan by another $5 million. As a result, the share repurchase program is presently worth $7.2 million.

Performance of other property and casualty insurers

American International Group Inc. (AIG - Analyst Report) reported second-quarter 2013 operating earnings per share of $1.12, significantly beating the Zacks Consensus Estimate of 85 cents and the year-ago quarter figure of 96 cents per share.

Cigna Corp.’s (CI - Analyst Report) second-quarter 2013 net operating earnings of $1.78 per share outpaced the Zacks Consensus Estimate of $1.59 per share. Moreover, the results surged nearly 19% year over year.

MetLife Inc. (MET - Analyst Report) reported second-quarter 2013 operating earnings per share of $1.44, comfortably exceeding both the Zacks Consensus Estimate of $1.33 and the year-ago quarter’s figure of $1.34.

Zacks Rank

Fortegra Financial carries a Zacks Rank #3 (Hold).
 

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