þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
New Jersey | 22-2168890 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
40 Wantage Avenue | ||
Branchville, New Jersey | 07890 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
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Exhibit 10.1 | ||||||||
Exhibit 11 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
Table of Contents
Quarter ended
Nine Months ended
September 30,
September 30,
($ in thousands, except per share amounts)
2008
2007
2008
2007
$
400,541
409,523
1,177,610
1,231,631
(28,031
)
(31,263
)
(48,738
)
(97,007
)
372,510
378,260
1,128,872
1,134,624
36,134
43,674
112,515
124,179
(22,577
)
2,814
(19,139
)
27,205
30,481
29,331
90,344
89,186
568
1,390
2,989
4,423
417,116
455,469
1,315,581
1,379,617
215,095
204,304
635,140
616,235
40,351
42,455
127,136
128,053
121,271
125,630
374,075
373,249
1,151
1,440
3,265
3,949
5,036
5,832
15,472
18,155
24,794
24,670
75,433
74,089
6,852
4,424
19,807
22,187
414,550
408,755
1,250,328
1,235,917
2,566
46,714
65,253
143,700
10,449
234
34,467
30,571
(16,875
)
9,361
(27,360
)
2,871
(6,426
)
9,595
7,107
33,442
$
8,992
37,119
58,146
110,258
$
0.17
0.72
1.11
2.10
$
0.17
0.66
1.09
1.92
$
0.13
0.12
0.39
0.36
Table of Contents
Nine Months Ended September 30,
($ in thousands, except per share amounts)
2008
2007
$
189,306
183,124
(shares: 59,704 - 2008; 58,082 - 2007)
119
116
(shares: 45,759 - 2008; 849,349 - 2007)
92
1,699
(shares: 336,191 - 2008; 779,108 - 2007)
672
1,559
190,189
186,498
192,627
153,246
1,267
1,276
645
9,843
18,004
21,463
212,543
185,828
1,105,946
986,017
FAS 159,
net of deferred income tax effect of $3,344
6,210
58,146
58,146
110,258
110,258
(20,922
)
(19,633
)
1,149,380
1,076,642
86,043
100,601
FAS 159,
net of deferred income tax effect of $(3,334)
(6,210
)
(110,940
)
(110,940
)
(13,699
)
(13,699
)
88
88
319
319
(31,019
)
87,221
(52,706
)
96,878
(497,879
)
(345,761
)
(shares: 1,979,043 - 2008; 5,879,779 - 2007)
(45,450
)
(147,804
)
(543,329
)
(493,565
)
$
977,764
1,042,624
Table of Contents
Nine Months ended
September 30,
($ in thousands)
2008
2007
$
58,146
110,258
21,329
21,391
14,094
16,166
19,139
(27,205
)
(27,360
)
2,871
6,448
88,638
160,852
48,609
97,549
7,842
(18,235
)
(46,697
)
(93,717
)
(2,873
)
(154
)
2,331
(17,056
)
623
1,250
2,363
442
(6,473
)
(13,229
)
(15,849
)
(377
)
(6,587
)
17,586
10,782
2,330
133,945
132,878
192,091
243,136
(437,003
)
(377,021
)
(50,551
)
(127,392
)
(44,380
)
(51,197
)
(1,591,302
)
(1,622,327
)
112,890
102,660
1,599,629
1,590,804
4,530
915
229,598
264,528
63,143
126,395
11,263
31,815
(5,535
)
(10,427
)
(107,718
)
(71,247
)
(19,391
)
(17,912
)
(45,450
)
(147,804
)
(12,300
)
(18,300
)
6,000
(6,000
)
5,747
5,784
1,570
2,762
(8,754
)
(78,578
)
(175,470
)
5,795
(3,581
)
8,383
6,443
$
14,178
2,862
$
12,518
15,714
25,050
46,525
169
11,059
Table of Contents
Insurance Operations, which sells property and casualty insurance products and services
primarily in 22 states in the Eastern and Midwestern United States;
Investments; and
Diversified Insurance Services, which provides human resource administration outsourcing
products and services, and federal flood insurance administrative services (Flood).
Table of Contents
Pre-Adoption
Post-Adoption
Carrying/Fair
Impact of
Carrying/Fair
Value at
Fair Value
Value at
($ in thousands)
January 1, 2008
Election Adoption
January 1, 2008
$
274,705
(25,113
)
249,592
25,113
25,113
$
274,705
274,705
Accumulated
Other
Retained
Comprehensive
($ in thousands)
Earnings
Income
Total
$
1,105,946
86,043
1,191,989
9,554
(9,554
)
(3,344
)
3,344
$
1,112,156
79,833
1,191,989
Table of Contents
Fair Value Measurements at 9/30/08 Using
Quoted Prices in
Significant
Assets
Active Markets
Other
Significant
Measured at
for Identical
Observable
Unobservable
($ in thousands)
Fair Value at
Assets
Inputs
Inputs
Description
9/30/08
(Level 1)
(Level 2)
(Level 3)
$
7,666
7,666
3,020,726
79,197
2,941,529
197,201
197,201
181,839
181,839
18,775
18,775
$
3,426,207
465,903
2,960,304
1
Alternative investments, included in Other investments in the Consolidated Balance
Sheets, are not included in the above table, as they are accounted for under the equity method of
accounting and are not carried at fair value.
Table of Contents
$9.3 million for Third Quarter 2008 and $10.1 million for Nine Months 2008 of RMBS and
CMBS charges. These charges were caused by the mortgage crisis, including increased
delinquency and default rates, which caused widespread market fears, and a slowing of the
U.S. economy, which has driven securities to record wide bid/ask spreads on subordinated
tranches.
$7.4 million for Third Quarter 2008 and $14.7 million for Nine Months 2008 of ABS
charges. These charges related to issuer-specific credit events that revolved around the
performance of the underlying collateral, which had materially deteriorated. In general,
these securities were experiencing increased conditional default rates and expected loss
severities, and as a result, our stress test scenarios were indicating less of a margin to
absorb losses going forward. Although some of these securities were insured or guaranteed
by mono-line bond guarantors, downgrades have reduced our confidence in their ability to
perform in the event of default. In addition, credit support for these securities has also
begun to erode, thereby further increasing the potential for eventual loss.
$8.6 million for Third Quarter 2008 and $10.2 million for Nine Months 2008 of corporate
bond charges. These charges were also due to issuer-specific events, primarily related to
two Icelandic bank debt securities, on which the banks defaulted.
$4.8 million from one equity security related to the sharp sell off in the global equity
markets stemming from the mortgage and credit crisis which led to concerns that both U.S.
and global economic growth would slow in the near future.
$4.8 million on two alternative investments directly related to a security held in their
portfolio that had considerable unrealized losses because of the severe volatility in the
current financial markets and the dramatic market sell off, specifically in commodity
prices.
Unaudited,
Unaudited,
Quarter ended
Nine Months ended
September 30,
September 30,
($ in thousands)
2008
2007
2008
2007
$
455,058
448,541
1,331,623
1,356,914
11,542
17,826
18,789
25,632
(66,059
)
(56,844
)
(172,802
)
(150,915
)
$
400,541
409,523
1,177,610
1,231,631
$
421,036
417,939
1,262,199
1,246,291
6,569
8,305
21,715
24,485
(55,095
)
(47,984
)
(155,042
)
(136,152
)
$
372,510
378,260
1,128,872
1,134,624
$
285,397
253,291
846,290
807,041
4,719
6,025
15,031
18,390
(34,670
)
(12,557
)
(99,045
)
(81,143
)
$
255,446
246,759
762,276
744,288
Table of Contents
Unaudited,
Unaudited,
Quarter ended
Nine Months ended
National Flood Insurance Program
September 30,
September 30,
($ in thousands)
2008
2007
2008
2007
$
(48,083
)
(40,110
)
(129,446
)
(110,211
)
(39,144
)
(33,859
)
(113,209
)
(96,895
)
(31,849
)
(2,871
)
(82,066
)
(47,445
)
Insurance Operations, which are evaluated based on statutory underwriting results (net
premiums earned (NPE), incurred losses and loss expenses, policyholders dividends,
policy acquisition costs, and other underwriting expenses), and statutory combined ratios;
Investments, which are evaluated based on net investment income and net realized gains
and losses; and
Diversified Insurance Services, which, because they are not dependent on insurance
underwriting cycles, are evaluated based on several measures including, but not limited
to, results of operations in accordance with GAAP, with a focus on return on revenues (net
income divided by revenues).
Table of Contents
Unaudited,
Unaudited,
Quarter ended
Nine Months ended
Revenue by segment
September 30,
September 30,
($ in thousands)
2008
2007
2008
2007
$
75,411
79,709
232,393
237,311
78,383
80,037
234,351
243,386
97,861
101,785
301,062
306,848
48,742
48,293
147,253
141,657
14,389
13,106
42,914
38,981
4,732
4,880
14,225
14,257
133
171
462
518
319,651
327,981
972,660
982,958
33,280
32,594
98,827
99,637
17,230
15,612
50,776
46,127
2,349
2,073
6,609
5,902
52,859
50,279
156,212
151,666
372,510
378,260
1,128,872
1,134,624
566
1,390
2,987
4,361
373,076
379,650
1,131,859
1,138,985
36,134
43,674
112,515
124,179
(22,577
)
2,814
(19,139
)
27,205
13,557
46,488
93,376
151,384
12,695
14,048
41,311
45,771
15,213
13,023
41,323
37,089
2,573
2,260
7,710
6,326
30,481
29,331
90,344
89,186
417,114
455,469
1,315,579
1,379,555
2
2
62
$
417,116
455,469
1,315,581
1,379,617
Unaudited,
Unaudited,
Quarter ended
Nine Months ended
Income before federal income tax
September 30,
September 30,
($ in thousands)
2008
2007
2008
2007
$
583
8,950
4,869
28,537
(6,321
)
(3,828
)
(15,310
)
(13,844
)
(5,738
)
5,122
(10,441
)
14,693
101.5
%
98.6
100.9
98.7
97.6
%
96.2
98.2
96.3
36,134
43,674
112,515
124,179
(22,577
)
2,814
(19,139
)
27,205
13,557
46,488
93,376
151,384
5,687
4,661
14,911
15,097
13,506
56,271
97,846
181,174
(5,036
)
(5,832
)
(15,472
)
(18,155
)
(5,904
)
(3,725
)
(17,121
)
(19,319
)
$
2,566
46,714
65,253
143,700
Table of Contents
Retirement Income Plan
Retirement Life Plan
Unaudited,
Unaudited,
Quarter ended September 30,
Quarter ended September 30,
($ in thousands)
2008
2007
2008
2007
$
1,741
1,864
31
80
2,510
2,241
118
124
(2,967
)
(2,773
)
38
38
(44
)
(9
)
34
175
$
1,356
1,545
105
195
Retirement Income Plan
Retirement Life Plan
Unaudited,
Unaudited,
Nine Months ended
Nine Months ended
September 30,
September 30,
($ in thousands)
2008
2007
2008
2007
$
5,258
5,440
192
242
7,391
6,609
387
374
(8,888
)
(8,193
)
113
114
(60
)
(25
)
83
402
900
100
$
3,957
5,272
519
691
Third Quarter 2008
Unaudited
(in thousands)
Gross
Tax
Net
$
2,566
(6,426
)
8,992
(93,834
)
(32,842
)
(60,992
)
22,593
7,908
14,685
(71,241
)
(24,934
)
(46,307
)
34
12
22
(6
)
(2
)
(4
)
28
10
18
$
(68,647
)
(31,350
)
(37,297
)
Table of Contents
Third Quarter 2007
Unaudited
(in thousands)
Gross
Tax
Net
$
46,714
9,595
37,119
23,430
8,201
15,229
(2,814
)
(985
)
(1,829
)
20,616
7,216
13,400
175
61
114
29
10
19
204
71
133
$
67,534
16,882
50,652
Nine Months 2008
Unaudited
(in thousands)
Gross
Tax
Net
$
65,253
7,107
58,146
(189,842
)
(66,445
)
(123,397
)
19,165
6,708
12,457
(170,677
)
(59,737
)
(110,940
)
83
29
54
53
19
34
136
48
88
$
(105,288
)
(52,582
)
(52,706
)
Nine Months 2007
Unaudited
(in thousands)
Gross
Tax
Net
$
143,700
33,442
110,258
6,130
2,146
3,984
(27,205
)
(9,522
)
(17,683
)
(21,075
)
(7,376
)
(13,699
)
402
141
261
89
31
58
491
172
319
$
123,116
26,238
96,878
Table of Contents
Table of Contents
Critical Accounting Policies and Estimates;
Financial Highlights of Results for Third Quarter 2008 and Nine Months 2008;
Results of Operations and Related Information by Segment;
Financial Condition, Liquidity, and Capital Resources;
Off-Balance Sheet Arrangements;
Contractual Obligations and Contingent Liabilities and Commitments; and
Federal Income Taxes.
Table of Contents
Unaudited
Unaudited
Quarter ended
Change
Nine Months ended
Change
Financial Highlights
September 30,
% or
September 30,
% or
($ in thousands, except per share amounts)
2008
2007
Points
2008
2007
Points
$
417,116
455,469
(8
)%
$
1,315,581
1,379,617
(5
)%
8,992
37,119
(76
)
58,146
110,258
(47
)
0.17
0.66
(74
)
1.09
1.92
(43
)
52,994
56,434
(6
)
53,397
58,017
(8
)
101.5
%
98.6
2.9
pts
100.9
%
98.7
2.2
pts
97.6
%
96.2
1.4
98.2
%
96.3
1.9
3.6
%
14.5
(10.9
) pts
7.5
%
13.9
(6.4
) pts
A decrease in pre-tax net realized gains on investment securities of: (i) $25.4
million, to a net loss of $22.6 million, in Third Quarter 2008; and (ii) $46.3 million,
to a net loss of $19.1 million, in Nine Months 2008. These decreases reflect non-cash
OTTI charges of $34.9 million in Third Quarter 2008 and $44.6 million in Nine Months
2008 due to the continuing market volatility and unprecedented collateral deterioration
across the credit markets. For additional information regarding these OTTI charges,
refer to the section below entitled, Investments.
A decrease in pre-tax underwriting results from our Insurance Operations segment of:
(i) $10.9 million, to an underwriting loss of $5.7 million, in Third Quarter 2008, and
(ii) $25.1 million, to an underwriting loss of $10.4 million, in Nine Months 2008.
These deteriorations were primarily driven by increased catastrophe losses of $10.9
million, to $12.8 million, for Third Quarter 2008 and $16.9 million, to $30.9 million,
for Nine Months 2008. These increased catastrophe losses were mainly related to 2008
storm activity in our southern and mid-western states, including an estimated $8.5
million of losses and loss adjustment expenses related to Hurricane Ike. In the
quarter, we had an increase of $2 million, to $7 million, in favorable prior year
development, while in Nine Months 2008, we had a $2 million decrease in favorable prior
year development, to $10 million.
A decrease in pre-tax net investment income of: (i) $7.5 million, to $36.1 million,
in Third Quarter 2008; and (ii) $11.7 million, to $112.5 million, in Nine Months 2008.
These decreases were primarily due to lower returns on our other investments portfolio,
which includes alternative investments, as well as losses on our externally managed
equity trading portfolio. These lower returns, compared to strong returns a year ago,
resulted from falling financial asset values due to the general weakness in the
financial markets and the significant slowdown in merger and acquisition activity
stemming from the current tight credit environment. Our equity trading portfolio has
experienced losses due to the sell off in the equity markets, as well as the collapse
in commodity prices in Third Quarter 2008.
Federal income taxes decreased by: (i) $16.0 million in Third Quarter 2008, to a
benefit of $6.4 million; and (ii) $26.3 million in Nine Months 2008, to an expense of
$7.1 million. These decreases reflect the tax impact of reduced underwriting results
and realized losses recognized mainly due to non-cash OTTI charges.
Table of Contents
Unaudited
Unaudited
Quarter ended
Change
Nine Months ended
Change
All Lines
September 30,
% or
September 30,
% or
($ in thousands)
2008
2007
Points
2008
2007
Points
$
400,541
409,523
(2)
%
1,177,610
1,231,631
(4
)%
372,510
378,260
(2
)
1,128,872
1,134,624
(1
)
255,446
246,759
4
762,276
744,288
2
121,651
124,939
(3
)
373,772
371,694
1
1,151
1,440
(20
)
3,265
3,949
(17
)
$
(5,738
)
5,122
(212
)%
(10,441
)
14,693
(171
)%
68.6
%
65.2
3.4
pts
67.5
%
65.6
1.9
pts
32.6
%
33.0
(0.4
)
33.1
%
32.8
0.3
0.3
%
0.4
(0.1
)
0.3
%
0.3
101.5
%
98.6
2.9
100.9
%
98.7
2.2
67.9
%
64.9
3.0
67.0
%
65.1
1.9
29.4
%
30.9
(1.5
)
30.9
%
30.9
0.3
%
0.4
(0.1
)
0.3
%
0.3
97.6
%
96.2
1.4
pts
98.2
%
96.3
1.9
pts
1
The statutory ratios include the flood line of business, which is included in the
Diversified Insurance Services Segment on a GAAP basis and therefore excluded from the GAAP ratios.
The total statutory combined ratio excluding flood was 98.5% for Third Quarter 2008 and 98.9% for
Nine Months 2008 compared to 96.8% for Third Quarter 2007 and 97.0% for Nine Months 2007.
NPW decreased in Third Quarter and Nine Months 2008 compared to the same periods last
year due to the highly competitive insurance marketplace and the slowing economy. These
factors are evidenced in our new business, which decreased by $8.1 million, to $84.5
million, in Third Quarter 2008 and $36.1 million, to $233.6 million, in Nine Months 2008.
Endorsement and audit activity decreased by $1.6 million, to a net premium return to
policyholders of $0.9 million in Third Quarter 2008 and $23.2 million, to a net premium
return to policyholders of $9.0 million, in Nine Months 2008. In addition, there were
reductions in assumed business from voluntary school board and mandatory commercial
automobile pools in both the quarter and year-to-date periods.
Table of Contents
In addition to the items noted above, we have seen pressure on renewal pricing. Renewal
price decreases, including exposure, were 2.0% in Third Quarter 2008 and 1.2% in Nine Months
2008 compared to renewal prices that remained flat in Third Quarter and Nine Months 2007.
Despite this renewal pricing pressure, net renewals, excluding endorsement activity,
increased by $10.2 million, to $329.4 million, in Third Quarter 2008 and $17.7 million, to
$990.2 million, in Nine Months 2008 compared to the same periods last year. These renewals
include retention that was relatively flat in both the quarter and year-to-date periods. In
response to the highly competitive marketplace, our agents are actively managing our books
of business by renewing accounts as much as 60 days in advance of the policy expiration
date.
As the result of decreased NPW over the last 12 months, NPE declined in Third Quarter
and Nine Months 2008 compared to the same periods last year.
The GAAP loss and loss expense ratio increased 3.4 points in Third Quarter and 1.9
points in Nine Months 2008 compared to same periods last year, reflecting increased
catastrophe losses related to 2008 storm activity primarily in our southern and mid-western
regions. These storms, including Hurricane Ike in Third Quarter 2008, added a total of
$12.8 million, or 3.4 points, to losses in Third Quarter 2008 and $30.9 million, or 2.7
points, in Nine Months 2008. For the comparable periods last year, catastrophe losses
added $1.9 million, or 0.5 points, and $14.0 million, or 1.2 points, respectively.
While this type of loss activity is part of the normal volatility in our property lines of
business, we continue to manage our claims process in an effort to reduce our loss and loss
expense ratio. To that end, we have instituted a number of initiatives that are focused on
best practices in the following areas:
Claims automation;
Claims quality and control;
Litigation management;
Compliance and bill review;
Workers compensation review; and
Salvage and subrogation.
We anticipate that these initiatives will reduce cycle time and improve workflows, resulting
in the quicker establishment of case reserves, thus leading to lower ultimate loss costs
through reduced legal and loss adjustment expenses. The quicker establishment of loss
reserves inflates our severity statistics in the near term, but we expect the longer-term
benefit to be a refined management of the claims process.
The reduction in the GAAP underwriting expense ratio in Third Quarter 2008 compared to
Third Quarter 2007 is primarily driven by lower expected payments of profit-based
incentives to our agents and employees, reflecting lower NPW and underwriting results
during 2008, and benefits realized from our cost containment initiatives including: (i)
targeted changes to our agency commission program implemented in July 2008 and expected to
generate annual savings of $7 million, pre-tax; (ii) the re-domestication of two of our
insurance subsidiaries effective June 30, 2008, to achieve operational efficiencies with an
anticipated pre-tax savings of $2 million annually; and (iii) our workforce reduction in
the first quarter of 2008.
The increase in the GAAP underwriting expense ratio in Nine Months 2008 compared to Nine
Months 2007 is primarily attributable to a pre-tax restructuring charge of $3.6 million, or
0.3 points, in the first quarter of 2008 related to our workforce reduction, coupled with
reductions in NPE as compared to last year. Partially offsetting these increases are the
benefits realized from the cost containment initiatives mentioned above.
In both the quarter and year-to-date periods, the underwriting expense ratio is higher on a
GAAP basis than on a statutory basis. This is due to the fact that the impact of our cost
containment initiatives, while recognized immediately on a statutory basis, is recognized on
a GAAP basis over a 12-month period. However, improvements in the underwriting expense
ratio resulting from these initiatives could potentially be offset by reduced premium
levels.
Table of Contents
Table of Contents
Unaudited
Unaudited
Quarter ended
Change
Nine Months ended
Change
Commercial Lines
September 30,
% or
September 30,
% or
($ in thousands)
2008
2007
Points
2008
2007
Points
$
344,309
355,669
(3
)%
1,015,433
1,077,394
(6
)%
319,651
327,981
(3
)
972,660
982,958
(1
)
213,859
209,430
2
643,181
629,753
2
104,058
108,161
(4
)
321,345
320,719
1,151
1,440
(20
)
3,265
3,949
(17
)
$
583
8,950
(93
)%
4,869
28,537
(83
)%
66.9
%
63.9
3.0
pts
66.1
%
64.1
2.0
pts
32.5
%
33.0
(0.5
)
33.1
%
32.6
0.5
0.4
%
0.4
0.3
%
0.4
(0.1
)
99.8
%
97.3
2.5
99.5
%
97.1
2.4
66.5
%
63.4
3.1
65.6
%
63.7
1.9
29.8
%
31.6
(1.8
)
31.5
%
31.0
0.5
0.4
%
0.4
0.3
%
0.4
(0.1
)
96.7
%
95.4
1.3
pts
97.4
%
95.1
2.3
pts
NPW decreased in Third Quarter and Nine Months 2008 compared to the same periods last
year due to the highly competitive insurance marketplace and the slowing economy. These
factors are evidenced in total Commercial Lines new business, which decreased by $8.6
million, to $73.5 million, in Third Quarter 2008 and $41.8 million, to $199.7 million, in
Nine Months 2008. Endorsement and audit activity decreased by $1.5 million, to a net
premium return to policyholders of $1.1 million in Third Quarter 2008 and $23.1 million, to
a net premium return to policyholders of $9.9 million in Nine Months 2008. In addition,
there were reductions in assumed business from voluntary school board and mandatory
commercial automobile pool assumptions in both the quarter and year-to-date periods.
We also have seen pressure on renewal pricing which decreased, including exposure, 2.0% in
Third Quarter 2008 and 1.2% in Nine Months 2008. These renewal prices remained flat in both
Third Quarter and Nine Months 2008. Despite the pricing pressure, net renewals, excluding
endorsement activity, increased by $8.9 million, to $283.4 million, in Third Quarter 2008
and $16.2 million, to $858.8 million, in Nine Months 2008 compared to the same periods last
year. These renewals include retention that was relatively flat in both the quarter and
year-to-date periods. In response to the highly competitive marketplace, our agents are
actively managing our books of business by renewing accounts as much as 60 days in advance
of the policy expiration date.
The GAAP loss and loss expense ratio increased 3.0 points in Third Quarter 2008 and 2.0
points in Nine Months 2008 compared to the same periods last year, reflecting an increase
in catastrophe losses. These losses, which in 2008 are the result of storms in our
southern and mid-west regions, added $10.5 million, or 3.2 points, to the loss and loss
expense ratio in Third Quarter 2008 and $25.5 million, or 2.6 points, in Nine Months 2008.
For the comparable periods last year, catastrophe losses added $1.6 million, or 0.5 points,
and $11.0 million, or 1.1 points, respectively.
The reduction in the GAAP underwriting expense ratio in Third Quarter 2008 compared to
Third Quarter 2007 was primarily driven by lower expected payments of profit-based
incentives to our agents and employees coupled with the benefits realized from our cost
containment initiatives, which are outlined in the Summary of Insurance Operations
section above.
The increase in the GAAP underwriting expense ratio in Nine Months 2008 compared to Nine
Months 2007 was primarily attributable to a pre-tax restructuring charge of $3.1 million, or
0.3 points, in the first quarter of 2008 related to our workforce reduction initiative.
Table of Contents
Unaudited
Unaudited
Quarter ended
Change
Nine Months ended
Change
September 30,
% or
September 30,
% or
($ in thousands)
2008
2007
Points
2008
2007
Points
$
101,922
105,901
(4
)%
318,247
334,940
(5
)%
97,861
101,785
(4
)
301,062
306,848
(2
)
98.5
%
100.9
(2.4
) pts
99.6
%
98.6
1.0
pts
29
%
30
31
%
31
Unaudited
Unaudited
Quarter ended
Change
Nine Months ended
Change
September 30,
% or
September 30,
% or
($ in thousands)
2008
2007
Points
2008
2007
Points
$
86,653
88,977
(3
)%
245,706
272,887
(10
)%
78,383
80,049
(2
)
234,351
243,422
(4
)
91.0
%
99.5
(8.5
) pts
94.6
%
100.0
(5.4
) pts
25
%
25
24
%
25
Table of Contents
Unaudited
Unaudited
Quarter ended
Change
Nine Months ended
Change
September 30,
% or
September 30,
% or
($ in thousands)
2008
2007
Points
2008
2007
Points
$
80,595
85,161
(5
)%
239,277
255,688
(6
)%
75,411
79,709
(5
)
232,393
237,311
(2
)
98.1
%
86.3
11.8
pts
98.1
%
86.1
12.0
pts
23
%
24
23
%
24
Adverse prior year statutory reserve development of approximately $1 million, or 1.3
points, in Third Quarter 2008, and approximately $1 million, or 0.4 points, in Nine Months
2008. This adverse development compares to favorable prior year development of
approximately $6 million, or 7.5 points, in Third Quarter 2007 and approximately $16
million, or 6.7 points in Nine Months 2007 due to lower than anticipated severity in
accident years 2004 through 2006, the trend of which has not continued into 2008.
Physical damage losses that were $4.7 million, or 2.2 points, higher in Nine Months 2008
as compared to last year reflecting normal volatility that is inherent in property line
results.
Renewal price decreases, including exposure, as discussed above.
Unaudited
Unaudited
Quarter ended
Change
Nine Months ended
Change
September 30,
% or
September 30,
% or
($ in thousands)
2008
2007
Points
2008
2007
Points
$
55,152
55,845
(1
)%
152,381
156,344
(3
)%
48,741
48,293
1
147,253
141,657
4
98.8
%
91.0
7.8
pts
96.5
%
92.3
4.2
pts
16
%
16
15
%
14
Table of Contents
Unaudited
Unaudited
Quarter ended
Change
Nine Months ended
Change
September 30,
% or
September 30,
% or
($ in thousands)
2008
2007
Points
2008
2007
Points
$
56,232
53,854
4
%
162,177
154,237
5
%
52,859
50,279
5
156,212
151,666
3
41,587
37,329
11
119,095
114,535
4
17,593
16,778
5
52,427
50,975
3
$
(6,321
)
(3,828
)
(65
)%
(15,310
)
(13,844
)
(11
)%
78.7
%
74.2
4.5
pts
76.2
%
75.5
0.7
pts
33.3
%
33.4
(0.1
)
33.6
%
33.6
112.0
%
107.6
4.4
109.8
%
109.1
0.7
76.9
%
74.1
2.8
75.0
%
74.5
0.5
26.5
%
27.1
(0.6
)
28.0
%
29.6
(1.6
)
103.4
%
101.2
2.2
pts
103.0
%
104.1
(1.1
) pts
1
The statutory ratios include the flood line of business, which is included in the
Diversified Insurance Services Segment on a GAAP basis and therefore excluded from the GAAP ratios.
The total Personal Lines statutory combined ratio excluding flood is 109.5% for Third Quarter 2008
and 108.3% for Nine Months 2008 compared to 106.2% for Third Quarter 2007 and 109.7% for Nine
Months 2007.
NPW increased in Third Quarter and Nine Months 2008 compared to Third Quarter and Nine
Months 2007 primarily due to:
Rate actions on our personal automobile line of business, including average
renewal rate increases of 7-13% in various states, including a 6.8 % increase in New
Jersey that was effective in May 2008.
Rate actions on our homeowners line of business, including average renewal rate
increases of 4.5% in New Jersey that were effective in April 2007, as well as
increases in various other states of 5-14%.
Policy count increases of 3% in Third Quarter 2008 and 4% in Nine Months 2008
compared to the same periods last year.
The increases in the GAAP loss and loss expense ratios were driven by an increase in
property losses of approximately $5.0 million in both Third Quarter and Nine Months 2008
when compared to Third Quarter and Nine Months 2007. Catastrophe losses, primarily due to
Hurricane Ike and other storms in our mid-western regions, added $2.3 million, or 4.4
points, to the ratios in Third Quarter 2008 and $5.4 million, or 3.4 points, in Nine Months
2008 compared to $0.3 million, or 0.6 points, in Third Quarter 2007 and $3.0 million, or
2.0 points, in Nine Months 2007.
Automobile rate increase of approximately 6.5% in New Jersey, effective in
October 2008. We also have filed territorial changes for all automobile business in
New Jersey effective December 2008 to improve the accuracy of our pricing across the
state. These changes apply to all business in New Jersey. In addition to the New
Jersey increases, we have filed or implemented rate increases in various other
states for our automobile business that range between 5-17%. Some of these
increases apply to all automobile business in such states and some only apply to
automobile business written prior to the implementation of MATRIX
sm
.
Homeowners rate increases of 5.0% in New Jersey, effective in January 2009.
Table of Contents
The per occurrence cap on the second layer was increased to $40.0 million from $22.5
million, bringing the total per occurrence limit for the program to $64.0 million
compared to the $46.5 million limit in the expiring treaty.
The annual aggregate limit for the second $20.0 million in excess of $10.0 million
layer was also increased, by an additional reinstatement, to $80.0 million. The first
layer continues to have unlimited reinstatements.
The first layer was expanded from a workers compensation only layer to now include
all lines, which reduces our net exposure to losses in this layer. This layer provides
coverage up to 65% of $3.0 million in excess of a $2.0 million retention.
The next four layers provide coverage up to 100% of $45.0 million in excess of a
$5.0 million retention.
The sixth layer provides coverage up to 75% of $40.0 million in excess of a $50.0
million retention.
Consistent with the prior year, the Casualty Treaty excludes nuclear, biological,
chemical, and radiological terrorism losses. Annual aggregate terrorism limits, net of
co-participation including a $40.0 million in excess of $50.0 million layer, is $175.8
million for all losses.
Historic Basis
Stochastic Basis
($ in thousands)
Gross
Net Losses
Gross
Net Losses
Occurrence Exceedence
Losses
Net
as a Percent
Losses
Net
as a Percent
Probability
RMS v.8.0
Losses
1
of Equity
2
RMS v.8.0
Losses
1
of Equity
2
$
50,556
26,995
3
%
$
71,471
28,966
3
%
102,670
31,841
3
136,323
34,181
4
191,153
37,995
4
242,024
40,884
4
386,862
70,687
7
466,021
122,140
12
1
Losses are after tax and include applicable reinstatement premium.
2
Equity as of September 30, 2008.
Table of Contents
Unaudited
Unaudited
Quarter ended
Change
Nine Months ended
Change
September 30,
% or
September 30,
% or
($ in thousands)
2008
2007
Points
2008
2007
Points
$
36,134
43,674
(17
)%
112,515
124,179
(9
)%
28,543
33,409
(15
)
87,996
96,354
(9
)
3,617,664
3,629,792
21.0
%
23.5
(2.5
) pts
21.8
%
22.4
(0.6
) pts
3.6
%
3.6
3.2
%
3.6
(0.4
) pts
Table of Contents
Unaudited
September 30,
December 31,
Rating
2008
2007
52
%
69
%
33
%
16
%
9
%
9
%
5
%
6
%
<1
%
<1
%
100
%
100
%
Table of Contents
September 30, 2008 (unaudited)
December 31, 2007 (unaudited)
Fair
Unrealized
Credit
Fair
Unrealized
Credit
($ in millions)
Value
Gain (Loss)
Quality
Value
Gain (Loss)
Quality
$
164.3
6.3
AAA
179.7
6.9
AAA
1,742.9
(20.7
)
AA+
1,611.1
17.6
AA+
378.4
(13.4
)
A
487.1
7.9
A
671.5
(40.6
)
AA+
697.9
(7.3
)
AA+
63.6
(5.2
)
AA
97.7
(1.5
)
AA+
$
3,020.7
(73.6
)
AA+
3,073.5
23.6
AA+
$
580.4
(4.3
)
AA+
521.5
7.3
AA+
1,162.5
(16.4
)
AA+
1,089.6
10.3
AA+
$
1,742.9
(20.7
)
AA+
1,611.1
17.6
AA+
$
108.3
(7.4
)
A+
183.6
1.6
A+
75.7
(0.9
)
A-
86.0
2.0
A-
47.8
(0.7
)
A
49.9
1.5
A
39.9
(0.4
)
A-
46.7
1.4
A-
34.2
(1.4
)
A
36.8
0.1
A+
22.0
A+
26.7
0.7
A+
15.6
(1.3
)
A-
17.1
0.1
A-
14.0
(0.3
)
A-
18.1
0.3
A
11.5
(0.5
)
BBB
12.3
0.3
BBB
9.4
(0.5
)
A-
9.9
(0.1
)
A-
$
378.4
(13.4
)
A
487.1
7.9
A
$
281.0
(15.3
)
AA+
284.4
(4.6
)
AA+
239.5
1.1
AAA
221.8
2.2
AAA
94.6
(12.8
)
AA+
119.4
(1.9
)
AA+
56.4
(13.6
)
AAA
72.3
(3.0
)
AAA
$
671.5
(40.6
)
AA+
697.9
(7.3
)
AA+
$
51.3
(3.3
)
AA-
76.5
(1.3
)
AA+
10.9
(1.8
)
AAA
19.2
(0. 2
)
AAA
1.4
(0.1
)
AA
2.0
AAA
$
63.6
(5.2
)
AA
97.7
(1.5
)
AA+
1
We define sub-prime exposure as exposure to direct and indirect investments in
non-agency residential mortgages with average FICO
®
scores below 650.
Table of Contents
Unaudited
Unaudited
Unaudited
Unaudited
Quarter ended
Quarter ended
Nine Months ended
Nine Months ended
September 30,
September 30,
September 30,
September 30,
($ in thousands)
2008
2007
2008
2007
$
17
27
(1
)
(1
)
26
90
1,084
445
(27,583
)
(1,079
)
(41,881
)
(2,087
)
14,087
12,910
31,784
38,374
(5,694
)
(8,271
)
(6,723
)
(8,691
)
1,356
847
1,356
847
(4,785
)
(1,683
)
(4,785
)
(1,683
)
$
(22,577
)
2,814
(19,139
)
27,205
Table of Contents
$9.3 million for Third Quarter 2008 and $10.1 million for Nine Months 2008 of RMBS and
CMBS charges. These charges were caused by the mortgage crisis, including increased
delinquency and default rates, which caused widespread market fears, and a slowing of the
U.S. economy, which has driven securities to record wide bid/ask spreads on subordinated
tranches.
$7.4 million for Third Quarter 2008 and $14.7 million for Nine Months 2008 of ABS
charges. These charges related to issuer-specific credit events that revolved around the
performance of the underlying collateral, which had materially deteriorated. In general,
these securities were experiencing increased conditional default rates and expected loss
severities, and as a result, our stress test scenarios were indicating less of a margin to
absorb losses going forward. Although some of these securities were insured or guaranteed
by mono-line bond guarantors, downgrades have reduced our confidence in their ability to
perform in the event of default. In addition, credit support for these securities has also
begun to erode, thereby further increasing the potential for eventual loss.
$8.6 million for Third Quarter 2008 and $10.2 million for Nine Months 2008 associated
with corporate bond charges. These charges were also due to issuer-specific events,
primarily related to two Icelandic bank debt securities, on which the banks defaulted.
$4.8 million from one equity security related to the sharp sell off in the global equity
markets stemming from the mortgage and credit crisis, which led to concerns that both U.S.
and global economic growth would slow in the near future.
$4.8 million on two alternative investments directly related to a security held in their
portfolio that had considerable unrealized losses because of the severe volatility in the
current financial markets and the dramatic market sell off, specifically in commodity
prices.
Table of Contents
Unaudited
Unaudited
Quarter ended
Quarter ended
September 30, 2008
September 30, 2007
Period of time in an
Fair
Fair
unrealized loss position
Value on
Realized
Value on
Realized
($ in millions)
Sale Date
Loss
Sale Date
Loss
$
22.7
1.0
15.2
0.5
2.8
0.2
26.3
0.3
7.2
0.8
32.7
2.0
41.5
0.8
2.3
0.8
55.9
8.1
0.7
0.1
0.1
0.1
3.0
0.9
56.0
8.2
5.3
1.7
5.3
1.7
$
35.7
2.9
102.8
10.7
Unaudited
Unaudited
Nine Months ended
Nine Months ended
September 30, 2008
September 30, 2007
Period of time in an
Fair
Fair
unrealized loss position
Value on
Realized
Value on
Realized
($ in millions)
Sale Date
Loss
Sale Date
Loss
$
39.4
1.3
29.0
0.7
11.4
0.6
31.6
0.4
9.4
3.6
10.2
0.2
60.2
5.5
70.8
1.3
5.4
1.3
58.5
8.4
3.8
0.6
0.3
0.2
0.1
0.1
9.2
1.9
58.9
8.7
5.3
1.7
5.3
1.7
$
69.4
7.4
135.0
11.7
Table of Contents
Unaudited
September 30, 2008
December 31, 2007
Period of time in an unrealized loss
Gross
Gross
position
Fair
Unrealized
Fair
Unrealized
($ in millions)
Value
Loss
Value
Loss
$
1,000.9
24.8
219.2
8.0
390.1
40.1
188.6
11.6
233.2
33.2
340.5
5.7
1,624.2
98.1
748.3
25.3
43.0
6.2
25.7
1.1
2.0
1.1
1.1
0.4
45.0
7.3
26.8
1.5
$
1,669.2
105.4
775.1
26.8
Fair Value as a Percentage of Amortized Cost
Unrealized
Fair
($ in millions)
(Loss) Gain
Value
$
(55.1
)
1,506.9
(17.5
)
70.5
(25.5
)
46.8
(98.1
)
1,624.2
24.5
1,396.5
$
(73.6
)
3,020.7
Table of Contents
75% or more
but less than
Less than
85% of
75% of
Duration of Unrealized Loss Position
Amortized
Amortized
($ in millions)
Cost
Cost
$
(8.7
)
(2.8
)
(4.8
)
(1.3
)
(4.0
)
(15.0
)
(6.4
)
$
(17.5
)
(25.5
)
Contractual Maturities
Amortized
Fair
($ in millions)
Cost
Value
$
88.8
84.9
568.5
536.1
941.8
895.8
93.7
84.7
29.5
22.7
$
1,722.3
1,624.2
Table of Contents
Unaudited
Unaudited
Quarter ended
Nine Months ended
September 30,
% Change
September 30,
% Change
($ in thousands)
2008
2007
or Points
2008
2007
or Points
$
12,695
14,048
(10
)%
41,311
45,771
(10
)%
1,090
818
33
2,667
3,417
(22
)
15,213
13,023
17
41,323
37,089
11
3,386
2,715
25
8,428
8,482
(1
)
2,573
2,260
14
7,710
6,326
22
1,211
1,128
7
3,816
3,198
19
30,481
29,331
4
90,344
89,186
1
5,687
4,661
22
14,911
15,097
(1
)
3,740
3,075
22
9,823
9,997
(2
)
12.3
%
10.5
1.8
pts
10.9
11.2
(0.3
) pts
HR Outsourcing revenue declined in Third Quarter and Nine Months 2008 compared to
Third Quarter and Nine Months 2007, primarily as a result of a reduction in worksite
employees resulting from the current economic downturn. As of September 30, 2008, our
worksite employees were down 8%, to 23,709, compared to 25,884 as of September 30,
2007.
Pre-tax profit increased in our HR Outsourcing business in Third Quarter 2008
compared to Third Quarter 2007 due to reduced operating expenses, including the impact
of the reduction of our internal workforce in the fourth quarter of 2007 to better
align our expenses with production.
Pre-tax profit year-to-date was 22% below Nine Months 2007 results mainly due to reduced
worksite lives and pricing pressure on our workers compensation product. Workers
compensation rates have been reduced by Florida regulators by 18.4% for 2008, after a
15.7% rate decrease that was effective January 1, 2007 for voluntary industrial classes.
Our Flood revenues are primarily derived from two activities: (i) fees associated
with servicing policy premium; and (ii) fees associated with handling claims. On June
1, 2008, the National Flood Insurance Program (NFIP) revised their fee structure to
provide for fees of 1% of direct premiums written, which are paid even in
non-catastrophe years, coupled with fees equal to 1.5% of all incurred losses. Prior
to June 1, 2008, we received claims handling fees equal to 3.3% of all incurred losses.
Table of Contents
Revenue increases of 17% in Third Quarter 2008 and 11% in Nine Months 2008 compared to
the same periods last year were mainly attributable to: (i) an increase of 16% in
serviced flood premium in-force, to $160.8 million as of September 30, 2008, compared to
September 30, 2007; and (ii) the increase in revenues associated with handling flood
claims of $0.9 million, to $0.9 million, in Third Quarter 2008 and $0.5 million, to $2.0
million, in Nine Months 2008 driven primarily by claims associated with Hurricane Ike and
the mid-western flooding earlier in the year. Partially offsetting these increases in
revenue were: (i) a 0.5-point reduction, to 29.7%, in the expense allowance paid to us
by the NFIP in relation to servicing premium, which was effective June 1, 2008; and (ii)
reduced expectations in Third Quarter and Nine Months 2008 regarding growth-based
commissions compared to the prior year periods.
Pre-tax profit increased $0.7 million, to $3.4 million, in Third Quarter 2008
primarily due to increases in revenues for both flood underwriting and claims activity.
Table of Contents
Table of Contents
S&Ps Insurance Rating Services our A+ financial strength rating was reaffirmed in
Third Quarter 2008 and our outlook was revised from stable to negative. Our financial
strength rating reflects our strong competitive position in the core Mid-Atlantic market,
coupled with our strong operating performance, capitalization and financial flexibility.
Our outlook was revised due to recent lower underwriting results, including results in our
personal lines operations, our capital management strategy, and our geographic
concentration in the Mid-Atlantic region.
Moodys our A2 financial strength rating was reaffirmed in Third Quarter 2008,
citing our strong regional franchise with good independent agency support, along with our
conservative balance sheet, moderate financial leverage, and consistent profitability. At
the same time, Moodys revised our outlook from positive to stable reflecting an
increasingly competitive commercial lines market and continued weakness in our personal
lines book of business.
Fitch Ratings our A+ rating was reaffirmed in the second quarter of 2008, citing our
consistently favorable operating results, disciplined underwriting culture, conservative
balance sheet, strong independent agency relationships, and improved diversification
through our continued efforts to reduce our concentration in New Jersey.
Table of Contents
Table of Contents
Change in Equity Values in Percent
($ in millions)
-30%
-20%
-10%
0%
10%
20%
30%
138.0
157.8
177.5
197.2
216.9
236.6
256.4
(59.2
)
(39.4
)
(19.7)
19.7
39.4
59.2
5.4
6.1
6.9
7.7
8.4
9.2
10.0
(2.3
)
(1.6
)
(0.8
)
0.7
1.5
2.3
Table of Contents
38
39
Total Number of
Maximum Number
Total Number of
Average
Shares Purchased
of Shares that May Yet
Shares
Price Paid
as Part of Publicly
Be Purchased Under the
Period
Purchased
1
per Share
Announced Program
Announced Program
2
11,397
20.48
1,748,766
5,238
23.86
1,748,766
3,424
24.88
1,748,766
20,059
22.11
1
Third Quarter 2008 included 12,363 shares purchased from
employees in connection with the vesting of restricted
stock and 7,696 shares purchased from employees in
connection with stock option exercises. These
repurchases were made in connection with satisfying tax
withholding obligations with respect to those employees.
These shares, which were purchased at the current market
value of Selective Insurance Group, Inc.s common stock
on the dates of purchase, were not purchased as part of
the publicly announced program.
2
On July 24, 2007, the Board of Directors authorized a
stock repurchase program of up to 4 million shares, which
is scheduled to expire on July 26, 2009.
Table of Contents
Exhibit No.
*10.1
*11
*31.1
*31.2
*32.1
*32.2
*
Filed herewith
Table of Contents
40
October 31, 2008
Chairman of the Board, President and Chief Executive Officer
October 31, 2008
Executive Vice President, Chief Financial Officer and Treasurer
Table of Contents
41
Exhibit No.
*10.1
*11
*31.1
*31.2
*32.1
*32.2
*
Filed herewith
Page | ||||
|
||||
1. Establishment
|
1 | |||
|
||||
2. Purpose and Intent
|
1 | |||
|
||||
3. Unfunded Plan
|
1 | |||
|
||||
4. Effective Date
|
1 | |||
|
||||
5. Pre-2005 Benefits and Post-2004 Benefits
|
1 | |||
|
||||
6. Definitions
|
2 | |||
|
||||
7. Eligibility and Participation
|
5 | |||
|
||||
8. Amount of Accrued Benefit
|
5 | |||
|
||||
9. Early, Disability and Late Retirement Benefits
|
5 | |||
|
||||
10. Vesting
|
6 | |||
|
||||
11. Time and Form of Payment of Plan Benefits
|
6 | |||
|
||||
12. Pre-Retirement Death Benefits
|
8 | |||
|
||||
13. Acceleration of Payments of Post-2004 Benefits Upon Certain Events
|
8 | |||
|
||||
14. Administration
|
10 | |||
|
||||
15. Claim and Appeal Procedure
|
11 | |||
|
||||
16. Establishment of Trusts
|
13 | |||
|
||||
17. Participating Employers
|
13 | |||
|
||||
18. Amendment and Termination of the Plan
|
14 | |||
|
||||
19. General Provisions
|
14 | |||
|
||||
20. Compliance With Section 409A
|
16 |
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
SELECTIVE INSURANCE COMPANY
OF AMERICA |
||||
/s/ Michael H. Lanza | ||||
Name: | Michael H. Lanza | |||
Title: | Executive Vice President and General Counsel |
16
Third Quarter 2008 | Income | Shares | Per Share | |||||||||
(in thousands, except per share amounts) | (Numerator) | (Denominator) | Amount | |||||||||
Basic EPS:
|
||||||||||||
Net income available to common stockholders
|
$ | 8,992 | 51,777 | $ | 0.17 | |||||||
|
||||||||||||
Effect of dilutive securities:
|
||||||||||||
Restricted stock
|
| 724 | ||||||||||
Restricted stock units
|
| 64 | ||||||||||
Stock options
|
| 240 | ||||||||||
Deferred shares
|
| 189 | ||||||||||
|
||||||||||||
Diluted EPS:
|
||||||||||||
Net income available to common stockholders
and assumed conversions
|
$ | 8,992 | 52,994 | $ | 0.17 | |||||||
|
Third Quarter 2007 | Income | Shares | Per Share | |||||||||
(in thousands, except per share amounts) | (Numerator) | (Denominator) | Amount | |||||||||
Basic EPS:
|
||||||||||||
Net income available to common stockholders
|
$ | 37,119 | 51,427 | $ | 0.72 | |||||||
|
||||||||||||
Effect of dilutive securities:
|
||||||||||||
Restricted stock
|
| 1,223 | ||||||||||
Convertible debt
|
332 | 3,288 | ||||||||||
Stock options
|
| 316 | ||||||||||
Deferred shares
|
| 180 | ||||||||||
|
||||||||||||
Diluted EPS:
|
||||||||||||
Net income available to common stockholders
and assumed conversions
|
$ | 37,451 | 56,434 | $ | 0.66 | |||||||
|
Nine Months 2008 | Income | Shares | Per Share | |||||||||
(in thousands, except per share amounts) | (Numerator) | (Denominator) | Amount | |||||||||
Basic EPS:
|
||||||||||||
Net income available to common stockholders
|
$ | 58,146 | 52,157 | $ | 1.11 | |||||||
|
||||||||||||
Effect of dilutive securities:
|
||||||||||||
Restricted stock
|
| 741 | ||||||||||
Restricted stock units
|
| 46 | ||||||||||
Stock options
|
| 266 | ||||||||||
Deferred shares
|
| 187 | ||||||||||
|
||||||||||||
Diluted EPS:
|
||||||||||||
Net income available to common stockholders
and assumed conversions
|
$ | 58,146 | 53,397 | $ | 1.09 | |||||||
|
Nine Months 2007 | Income | Shares | Per Share | |||||||||
(in thousands, except per share amounts) | (Numerator) | (Denominator) | Amount | |||||||||
Basic EPS:
|
||||||||||||
Net income available to common stockholders
|
$ | 110,258 | 52,534 | $ | 2.10 | |||||||
|
||||||||||||
Effect of dilutive securities:
|
||||||||||||
Restricted stock
|
| 1,280 | ||||||||||
Convertible debt
|
1,085 | 3,620 | ||||||||||
Stock options
|
| 404 | ||||||||||
Deferred shares
|
| 179 | ||||||||||
|
||||||||||||
Diluted EPS:
|
||||||||||||
Net income available to common stockholders
and assumed conversions
|
$ | 111,343 | 58,017 | $ | 1.92 | |||||||
|
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrants internal control over financial reporting; and |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: October 31, 2008 | By: | /s/ Gregory E. Murphy | ||
Gregory E. Murphy | ||||
Chairman of the Board,
President and Chief Executive Officer |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrants internal control over financial reporting; and |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: October 31, 2008 | By: | /s/ Dale A. Thatcher | ||
Dale A. Thatcher | ||||
Executive Vice President,
Chief Financial Officer and Treasurer |
Date: October 31, 2008 | By: | /s/ Gregory E. Murphy | ||
Gregory E. Murphy | ||||
Chairman of the Board,
President and Chief Executive Officer |
Date: October 31, 2008 | By: | /s/ Dale A. Thatcher | ||
Dale A. Thatcher | ||||
Executive Vice President of Finance,
Chief Financial Officer and Treasurer |
||||