Bristol West Unveils 2003 Year End Financial Numbers

Florida-based Bristol West Holdings Inc. has issued financial results for the fourth quarter and full year ended Dec. 31, 2003, with results for the comparable periods of 2002.

James Fisher, chairman and CEO, said, “2003 was a very successful year for Bristol West, both financially and operationally. We achieved more than 30 percent growth in premiums, but more importantly, we reported a significant improvement in our combined ratio and solid operating profits, all of which contributed substantially to the success of our initial public offering.”

For the fourth quarter of 2003 Bristol West reported net income of $10.7 million compared to a net loss of $3.6 million for the same period of 2002. Net income per share on a fully diluted basis was $0.41 per share compared to a loss of $0.15 per share in the fourth quarter of 2002.

Gross premiums written for the quarter increased by 29.0 percent to $175.3 million compared to $135.9 million for the fourth quarter of 2002 due to a combination of a 15 percent increase in average policies in force to 444,900 for the fourth quarter of 2003 from 386,700 for the fourth quarter of 2002, and higher average premiums per policy. Net premiums written increased by 5.9 percent to $67.5 million from $63.7 million for the 2002 quarter. The relatively smaller increase in net premiums written as compared to gross premiums written is the result of the company’s decision to increase the percentage of premiums ceded under its quota share reinsurance treaty to 60 percent in 2003 from 50 percent in 2002 in order to manage net retained business in relation to the company’s capital resources. Net premiums and fees earned decreased by 0.9 percent to $81.2 million from $81.9 million in the final quarter of 2002, also due to the higher percentage of premiums ceded to the Company’s quota share treaty.

Net investment income was $1.6 million for the quarter ended Dec. 31, 2003 compared to $1.7 million for the similar period of 2002. Net realized gains/losses on securities sales did not have a significant impact upon results in total or on a per share basis and were $0.1 million during the fourth quarter of 2003 compared to $0.03 million in the comparable 2002 period.

Bristol West’s combined ratio was 77.5 percent for the fourth quarter of 2003, compared to 91.0 percent for the same period last year, an improvement of 13.5 points. The company incurred $1.3 million in loss and loss adjustment expenses related to prior years (“adverse reserve development”) in the fourth quarter of 2003 compared to $3.3 million in the comparable quarter of 2002. All of the fourth quarter, 2003, development was related to unallocated loss adjustment expense reserves. The lower overall development in the quarter accounted for 2.4 points of the improvement in the combined ratio; the remaining improvement was the result of a 6.8 point decrease in the loss ratio for the current accident quarter and a 4.3 point improvement in the expense ratio compared to the fourth quarter of 2002. The principal reason for the lower expense ratio was an increase in the ceding commission percentage for the fourth quarter of 2003 compared to the fourth quarter of 2002 under the terms of the company’s quota share treaty.

Net income before taxes was $17.3 million for the fourth quarter of 2003 compared to a loss of $6.6 million in the 2002 period, an increase of $23.9 million. Litigation expenses incurred during the fourth quarter of 2002, which did not recur in the comparable 2003 period, accounted for $14.2 million of the improvement. Litigation expenses related to two class action lawsuits, which are now settled and fully reflected in the company’s financial statements, were $0.2 million before income taxes ($0.1 million after income taxes) in the fourth quarter of 2003 compared to $14.3 million before income taxes ($9.7 million after income taxes) incurred during the fourth quarter of 2002.

For the year ended Dec. 31, 2003, net income was $33.5 million compared to $11.5 million for 2002. Net income per share on a fully diluted basis was $1.32 per share in 2003 compared to $0.48 per share in 2002.

Gross premiums written increased to $648.2 million, or by 34.5 percent during 2003, compared to $481.8 million in 2002. The increase is primarily attributable to 24.6 percent growth in average policies in force to 437,200 for 2003 from 350,800 for 2002 and a 9.9 percent increase in average premiums per policy. Net premiums written increased by 11.3 percent to $263.0 million from $236.3 million in 2002. The smaller increase in net premiums written as compared to gross premiums written is due to the company’s decision to increase the percentage of premiums ceded under its quota share reinsurance treaty to 60 percent in 2003 from 50 percent in 2002 in order to manage its net retained business in relation to its capital resources. Net premiums and fees earned increased by 18.4 percent to $344.9 million from $291.3 million in 2002, generally in line with the increase in net premiums written.

Net investment income was $6.7 million compared to $6.4 million for 2002. Net realized gains/losses on securities sales were $1.2 million for the year ended Dec. 31, 2003 compared to $0.3 million for previous year.

Bristol West’s combined ratio was 79.9 percent for the 12 months ended Dec. 31, 2003, compared to 89.9 percent for 2002, an improvement of 10.0 points. Adverse reserve development was $9.3 million in 2003 compared to $28.2 million in 2002, a decrease of $18.9 million, which accounted for 7.0 points of the year-to-year improvement in the company’s combined ratio.

Exclusive of the effect of adverse reserve development, the combined ratio was 77.2 percent in 2003 compared to 80.7 percent in 2002. The company’s loss ratio for the 2003 accident year was 55.2 percent compared to 59.2 percent for the 2002 accident year, an improvement of 4.0 points.