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Meadowbrook Insurance Posts Q4 Loss, Revs Down

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Meadowbrook Insurance Group Inc. reported fourth-quarter 2013 net operating loss of 30 cents per share substantially missing the Zacks Consensus Estimate of earnings of 12 cents a share. The number also declined from net operating gain of 1 cent a share reported in the year-ago quarter.

The bottom-line deterioration of Meadowbrook Insurance was attributable to declining revenues as well as significantly low net realized investment gains.

Including net realized gains, the company reported net loss of 24 cents a share for the quarter, significantly down from net income of 76 cents reported in the year-ago quarter.

Operational Update

Total revenue of Meadowbrook Insurance in the fourth quarter slid 34.4% year over year to $196.7 million. The decline was attributable to substantial decrease in net earned premiums and net realized gains. However, the result surpassed the Zacks Consensus Estimate of $185 million by 6.3%.

Net earned premiums during the quarter decreased 25% year over year to approximately $170 million during the reported quarter.

Total expenses of Meadowbrook Insurance fell 11.2% year over year to nearly $224 million during the quarter. The improvement was attributable to lower net losses and loss adjustment expenses, policy acquisition and other underwriting expenses.

Full-Year 2013 Highlights

Meadowbrook Insurance’s net operating loss stood at $2.36 per share in 2013, considerably wider than the net operating loss of 57 cents a share reported in 2012. The bottom line was affected by increased net ultimate loss estimates for 2012 and the years before that as well as quota share reinsurance treaty. The number also missed the Zacks Consensus Estimate of earnings of 9 cents a share for the year.

Including net realized gains and losses, net loss of Meadowbrook Insurance came in at $2.25 per share, compared to net income of 23 cents a share reported in 2012.

Revenues totaled $791.2 million during the year, declining 20.6% year over year primarily due to lower earned premiums.

Financial Update

Cash and invested assets as of 2013 end stood at $1.67 billion compared to $1.65 billion recorded on Dec 31, 2012.

Cash flow from operations for Meadowbrook Insurance decreased by $2 million year over year to $120 million in 2013.

Total shareholders’ equity stood at $413.4 million as of Dec 31, 2013, compared with $58.3 million as of 2012-end.

Dividend Update

In Feb 2014, the board of directors at Meadowbrook Insurance announced a quarterly cash dividend of 2 cents per share, which will be paid on Apr 7, 2014 to the shareholders of the record as of Mar 21.

2014 Guidance

Meadowbrook Insurance reiterated its 2014 guidance for net operating income, which is expected to range between 50 cents to 70 cents a share. Combined ratio is expected to be around 99-100% at the end of 2014 compared to 99.8% as of 2013-end. Gross premium written is anticipated to range between $775 and $800 million for the year 2014.

Zacks Rank

Meadowbrook Insurance presently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the multi line insurance industry include CNO Financial Group, Inc. (CNO - Free Report) , Old Republic International Corporation (ORI - Free Report) and AEGON N.V. (AEG - Free Report) . While CNO Financial and Old Republic sport a Zacks Rank #1 (Strong Buy), AEGON carries a Zacks Rank #2 (Buy).

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