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ProSight Global, Inc. Reports 2019 Fourth Quarter and Full Year Results

02/24/2020
Fourth Quarter Net Income from Continuing Operations of $14.7 million, $0.33 per Diluted Share and Adjusted Operating Income (1) of $16.0 million, $0.36 per Diluted Share.

MORRISTOWN, N.J., Feb. 24, 2020 /PRNewswire/ -- ProSight Global, Inc. (NYSE: PROS) (ProSight) today reported results for the fourth quarter of 2019. 

(PRNewsfoto/ProSight Specialty Insurance)

Highlights for the three months ended December 31, 2019 include:

  • Gross written premiums ("GWP") for customer segments (2) increased 19.1%, to $249.0 million for the fourth quarter of 2019, as compared to the fourth quarter of 2018, with growth in GWP across all customer segments.  The growth in the fourth quarter of 2019 included $4.4 million of GWP from niches added during 2019.
  • The combined ratio was 97.2% for the fourth quarter of 2019, compared to 95.1% for the fourth quarter of 2018.
  • There were no catastrophe losses for the fourth quarter of 2019, compared to $3.6 million of catastrophe losses (1.8 percentage points) for the fourth quarter of 2018.
  • The loss ratio was 61.9% for the fourth quarter of 2019, compared to 58.6% for the fourth quarter of 2018. The adjusted loss ratio (3) was 61.5% for the fourth quarter of 2019, compared to 58.6% for the fourth quarter of 2018. 
  • The expense ratio was 35.3% for the fourth quarter of 2019, compared to 36.5% for the fourth quarter of 2018.  The adjusted expense ratio (3) was 35.7% for the fourth quarter of 2019, compared to 36.5% for the fourth quarter of 2018. 
  • Net investment income increased 37.1% to $17.4 million for the fourth quarter of 2019, compared to the fourth quarter of 2018.
  • The annualized return on equity ("ROE") was 11.0% for the fourth quarter of 2019 and the annualized adjusted operating return on equity (4) ("adjusted operating ROE") was 11.9% for the fourth quarter of 2019.

Highlights for the year ended December 31, 2019 include:

  • Gross written premiums for customer segments (2) increased 16.7%, to $899.8 million for the full year 2019 compared to the full year 2018, with growth in GWP across all customer segments.  The growth in the year included $21.0 million of GWP from niches added during 2019.
  • The combined ratio was 98.0% for the full year 2019 compared to 96.7% for the full year 2018.
  • There were $3.0 million of catastrophe losses (0.4 percentage points) for the full year 2019 compared to $3.6 million of catastrophe losses (0.5 percentage points) for the full year 2018.
  • The loss ratio was 62.0% for the full year 2019 compared to 59.5% for the full year 2018. The adjusted loss ratio (3) was 61.4% for full year 2019 compared to 59.6% for the full year 2018. 
  • The expense ratio was 36.0% for the full year 2019 compared to 37.2% for the full year 2018.  The adjusted expense ratio (3) was 36.6% for the full year 2019 compared to 37.0% for the full year 2018. 
  • Net investment income increased 23.1% to $68.9 million for the full year 2019 compared to the full year  2018.
  • Fully diluted book value per share grew by 21.6% to $12.01, for the year ended December 31, 2019. 
  • The return on equity was 9.8% for the full year 2019, and the adjusted operating return on equity  (4) was 12.4% for the full year 2019.

From ProSight CEO Larry Hannon:

"I would like to thank all of our employees who contributed to our exceptional fourth quarter and full-year results.  Coupled with the strong support of our distribution partners, the ProSight team delivered excellent financial results consistent with our high expectations, including strong net income from continuing operations, and record-level annual GWP and adjusted operating income.  Our success in 2019 is further evidence that our focus on specific niches and ability to deliver differentiated offerings that are valuable to our customers position us to deliver double-digit top line growth, ROE, and increases in book value over the long term.  As we enter 2020, I believe we are poised to build upon last year's achievements and success."

Results of Operations for the three months ended December 31, 2019

Net income from continuing operations was $14.7 million, or $0.33 per diluted share, for the fourth quarter of 2019 compared to $13.5 million, or $0.34 per diluted share, for the fourth quarter of 2018. Adjusted operating income (1) was $16.0 million, or $0.36 per diluted share, for the fourth quarter of 2019 compared to $15.7 million, or $0.40  per diluted share, for the fourth quarter of 2018.

GWP including Other (2), increased 12.7% for the fourth quarter of 2019 when compared to the fourth quarter of 2018. GWP (2) from customer segments was $249.0 million for the fourth quarter of 2019 compared to $209.1 million for the fourth quarter of 2018, an increase of 19.1%. The growth was largest within the Transportation, Real Estate and Consumer Services customer segments.  Other GWP (2) were $0.9 million for the fourth quarter of 2019 compared to $12.7 million for the fourth quarter of 2018, the decrease driven by the exit from excess workers' compensation. 

Underwriting income (1) was $5.7 million for the fourth quarter of 2019 compared to $9.5 million for the fourth quarter of 2018.  The combined ratio for the fourth quarter of 2019 was 97.2% compared to 95.1% for the fourth quarter of 2018.  The decrease in underwriting income (1) was due to changes in:

  • The loss ratio was 61.9% for the fourth quarter of 2019 compared to 58.6% for the fourth quarter of 2018.  Excluding the effect of the whole account quota share reinsurance agreements (the "WAQS"), the adjusted loss ratio (3) was 61.5% for the fourth quarter of 2019 compared to 58.6% for the fourth quarter of 2018.  

    The adjusted loss ratio (3) for the fourth quarter of 2019 included a current accident year loss ratio (excluding catastrophe losses) of 61.5% compared to a current accident year loss ratio (excluding catastrophe losses) of 57.3% in the fourth quarter of 2018.  There were no catastrophe losses in the fourth quarter of 2019 compared to $3.6 million of catastrophe losses (1.8 percentage points) in the fourth quarter of 2018. The adjusted loss ratio (3) for the fourth quarter of 2019 included $0.1 million (0.0 percentage points) of favorable prior accident year loss development compared to $1.0 million (0.5 percentage points) of favorable prior accident year loss development in the fourth quarter of 2018.

  • The expense ratio was 35.3% for the fourth quarter of 2019 compared to 36.5% in the fourth quarter of 2018.   Excluding the effect of the WAQS, the adjusted expense ratio (3) was 35.7% for the fourth quarter of 2019 compared to 36.5% in the fourth quarter of 2018.  Excluding the WAQS, the policy acquisition expense ratio was 23.0% in the fourth quarter of 2019 compared to 23.6% in the fourth quarter of 2018 and general & administrative expense ratio was 12.7% in the fourth quarter of 2019 compared to 12.9% in the fourth quarter of 2018.

Net investment income increased by 37.1% to $17.4 million for the fourth quarter of 2019, from $12.7 million for the fourth quarter of 2018.  The increase in net investment income was driven by an increase in the size of the investment portfolio and improved performance of limited partnerships. The net annualized yield on average invested assets at book value was 3.3% for the fourth quarter of 2019 and 2.7% for the fourth quarter of 2018.  Realized investment gains, net, for the fourth quarter of 2019 were $0.3 million compared to realized investment losses, net, of $2.4 million for the fourth quarter of 2018.

Results of Operations for the year ended December 31, 2019

Net income from continuing operations was $45.5 million, or $1.10 per diluted share, for the full year 2019 compared to $53.7 million, or $1.36 per diluted share, for the full year 2018.  The decrease in net income resulted from an increase in other expenses of $16.2 million, primarily due to vesting of non-recurring grants of restricted stock units in connection with the initial public offering and costs related to the departure of our former CEO.  Adjusted operating income (1) was $57.6 million, or $1.39 per diluted share for the full year 2019 compared to $55.3 million, or $1.40 per diluted share, for the full year 2018.

GWP including Other (2), increased 8.1% for the full year 2019 when compared to the full year 2018. GWP (2) from customer segments was $899.8 million for the full year 2019 compared to $770.9 million for the full year 2018, an increase of 16.7%. The growth was largest within the Real Estate, Consumer Services and Transportation customer segments.  Other GWP (2) were $68.2 million for the full year 2019 compared to $124.2 million for the full year 2018, the decrease driven by the exit from excess workers' compensation.

Underwriting income (1) was $16.4 million for the full year 2019 compared to $24.4 million for the full year 2018.  The combined ratio for the full year 2019 was 98.0% compared to 96.7% for the full year 2018.  The decrease in underwriting income (1) was due to changes in:

  • The loss ratio was 62.0% for the full year 2019 compared to 59.5% for the full year 2018.  Excluding the effect of the WAQS, the adjusted loss ratio (3) was 61.4% for the full year 2019 compared to 59.6% for the full year 2018. 

    The adjusted loss ratio (3) for the full year 2019 included a current accident year loss ratio (excluding catastrophe losses) of 61.2% compared to a current accident year loss ratio (excluding catastrophe losses) of 59.8% for the full year 2018.  There were $3.0 million of catastrophe losses (0.4 percentage points) for the full year 2019 compared to $3.6 million of catastrophe losses (0.5 percentage points) in the full year 2018. The adjusted loss ratio (3) for the full year 2019 also included $1.6 million (0.2 percentage points) of favorable prior accident year loss development compared to $5.0 million (0.7 percentage points) of favorable prior accident year loss development in the full year 2018.

  • The expense ratio was 36.0% for the full year 2019 compared to 37.2% for the full year 2018.   Excluding the effect of the WAQS, the adjusted expense ratio (3) was 36.6% for the full year 2019 compared to 37.0% for the full year 2018.  Excluding the WAQS, the policy acquisition expense ratio was 23.5% for the full year 2019 compared to 23.6% for the full year 2018 and general & administrative expense ratio was 13.1% for the full year 2019 compared to 13.4% for the full year 2018.

Net investment income increased by 23.1% to $68.9 million for the full year 2019, from $56.0 million for the full year 2018.  The increase in net investment income was driven by an increase in the size of the investment portfolio and improved performance of limited partnerships. Total invested assets at book value were $2.2 billion at December 31, 2019, growth of 20.3%, from $1.8 billion at December 31, 2018. The net yield on average invested assets at book value was 3.4% for the full year 2019 and 3.2% for the full year 2018.  Realized investment gains, net, for the full year 2019 were $0.8 million compared to realized investment losses, net, of $1.6 million for the full year 2018.

Total stockholders' equity was $543.0 million as of December 31, 2019, compared to $389.8 million as of December 31, 2018.  Tangible stockholders' equity (5) was $513.8 million as of December 31, 2019, compared $360.6 million as of December 31, 2018. The increases in total stockholders' equity and tangible stockholders' equity (5) were driven by an increase in other comprehensive income of $59.8 million, proceeds from common stock sold in the initial public offering of $50.8 million and net income of $38.9 million for the year ended December 31, 2019.  Fully diluted book value per share grew by 21.6% to $12.01 at December 31, 2019, compared to $9.88 at December 31, 2018. Fully diluted tangible book value per share (5) increased by 24.4% to $11.37 at December 31, 2019, compared to $9.14 at December 31, 2018.

(1). Adjusted operating income and underwriting income are non-GAAP measures. See "Reconciliation of Non-GAAP Measures".

(2). Total GWP for the fourth quarter of 2019 including Other were $249.9 million. Total GWP for the year ended December 31, 2019 including Other were $968.0 million. Other includes GWP from certain niches that are no longer part of our customer segments. "Other" includes GWP from (i) primary and excess workers' compensation coverage for exited Self-Insured Groups (ii) niches exited prior to 2018, many with a concentration in commercial auto, (iii) certain fronting arrangements in which all premium written is ceded to a third party, (iv) participation in industry pools, and (v) emerging new business.

(3). Adjusted loss ratio and adjusted expense ratio are non-GAAP financial measures. We define adjusted loss ratio and adjusted expense ratio as the corresponding ratio excluding the effects of the WAQS. We use these adjusted ratios as internal performance measures in the management of our operations because we believe they give our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Our adjusted loss ratio and adjusted expense ratio should not be viewed as substitutes for our loss ratio, expense ratio and combined ratio, respectively.

(4). Adjusted operating return on equity is a non-GAAP measure   Adjusted operating return on equity is adjusted operating income expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period.

(5). Tangible stockholders' equity and fully diluted tangible book value per share are non-GAAP measures. Tangible stockholders' equity is total common stockholders' equity excluding the value of goodwill and other intangible assets.  Fully diluted tangible book value per share is total common stockholders' equity excluding value of goodwill and other intangible assets divided by the number of common shares outstanding, unvested restricted shares and vested not issued shares. See "Reconciliation of Non-GAAP Measures".

Conference Call

As previously announced, on Tuesday, February 25, 2020 at 10:00 a.m. EST, ProSight senior management will host a conference call to discuss fourth quarter 2019 financial results. The call will be available via webcast at https://investors.prosightspecialty.com or by dialing (866) 497-6416 (within the United States) or (825) 312-2248 (international), using the passcode 2172418.  A replay of the call will be available at 1:00 p.m. on Tuesday, February 25, 2020, until 11:59 p.m. Tuesday, March 3, 2020, and can be accessed by dialing (800) 585-8367 or (416) 621-4642, using the passcode 2172418. The webcast will be available one hour after the call concludes and will be archived on ProSight's website for one year.

About ProSight

Founded in 2009 and headquartered in Morristown, New Jersey, ProSight Global, Inc. is an innovative property and casualty insurance company that designs unique insurance solutions to help customers improve their business and realize value from their insurance purchasing decision. The company focuses on select niche industries, deploying differentiated underwriting and claims expertise with the goal of enhancing each customer's operating performance.  ProSight's products are sold through a limited and select group of retail and wholesale distribution partners.  Each of ProSight's regulated insurance company subsidiaries are rated "A-" (Excellent) by A.M. Best. ProSight's shares trade on the New York Stock Exchange ("NYSE") under the ticker symbol PROS. To learn more about ProSight visit www.prosightspecialty.com.

Forward-Looking Statements

This release contains forward-looking statements. Forward-looking statements include statements relating to future developments in ProSight business or expectations for ProSight's future financial performance and any statement not involving a historical fact. Forward-looking statements use words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "should," "seek," "continue," and other words and terms of similar meaning.  ProSight's management believes that these forward-looking statements are reasonable as of the time made.  However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made.  Except as required by law, ProSight undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.  Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. ProSight cautions you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes may differ materially from those made in or suggested by the forward-looking statements contained in this release.  For a discussion of some of the risks and important factors that could affect ProSight's future results and financial condition, see our filings with the U.S. Securities and Exchange Commission ("SEC"), including, but not limited to, the risks and uncertainties included under the captions "Risk Factors" in ProSight's Annual Report on Form 10-K for the period ended December 31, 2019 filed on February 24, 2020.  References to "we," "us," "our," the "Company" and "ProSight", refer to ProSight Global, Inc. and its consolidated subsidiaries.

Reorganization

ProSight was incorporated in Delaware in 2010.  Prior to July 25, 2019, ProSight was a wholly-owned subsidiary of ProSight Global Holdings Limited ("PGHL"), a Bermuda holding company.  Effective July 25, 2019, PGHL merged with and into ProSight, with ProSight surviving the merger. As a result of the merger, all shares of PGHL then outstanding were converted into the right to receive, without interest, 6.46 shares of ProSight for each share of PGHL.  The historical share and per share figures contained in this release relating to periods prior to and including June 30, 2019 have been restated to give effect to this conversion, including reclassifying an amount equal to the change in value of common stock to additional paid-in capital, as of the stated period or date.  Further details regarding this merger and related reorganization transactions are included in ProSight's Annual Report on Form 10-K for the period ended December 31, 2019 filed on February 24, 2020.

Non-GAAP Financial Measures

In presenting ProSight Global, Inc.'s results, management has included financial measures that are not calculated under standards or rules that comprise of U.S. generally accepted accounting principles ("GAAP"). Such measures, including underwriting income, adjusted operating income, adjusted operating return on equity, adjusted loss excluding WAQS, adjusted expense ratio excluding WAQS, adjusted combined ratio excluding WAQS and tangible stockholders' equity are referred to as non-GAAP measures. These non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those measures determined in accordance with GAAP.  Reconciliations of these non-GAAP financial measures to the most comparable GAAP figures are included at the end of this press release.






Media: 




Institutional Investors: 

Joe Hathaway




Dean Evans 

JHathaway@prosightspecialty.com




DEvans@prosightspecialty.com

973.532.1706 




973.532.1440

 

PROSIGHT GLOBAL, INC.

CONSOLIDATED BALANCE SHEETS

($ in thousands, except per share amounts)





December 31


December 31



2019


2018

Assets







Investments:







Fixed income securities, available-for-sale at fair value (amortized cost $1,999,403 in 2019 and $1,729,755 in 2018)


$

2,040,682


$

1,693,382

Commercial levered loans at amortized cost (fair value $13,950 in 2019 and $15,858 in 2018)



14,069



16,915

Limited partnerships and limited liability companies at fair value (cost $62,226 in 2019 and $51,903 in 2018)



66,660



53,432

Short-term investments



43,873



36,661

Total investments



2,165,284



1,800,390








Cash and cash equivalents



17,284



22,279

Restricted cash



10,213



7,621

Accrued investment income



13,610



12,279

Premiums and other receivables, net



190,004



200,347

Receivable from reinsurers on paid losses



3,481



12,428

Reinsurance receivables on unpaid losses



193,952



185,295

Deferred policy acquisition costs



98,812



93,613

Prepaid reinsurance premiums



42,861



44,626

Net deferred income taxes



4,803



33,239

Goodwill and net intangible assets



29,189



29,219

Fixed assets and capitalized software, net



37,167



39,001

Funds withheld related to sale of affiliate



19,453



19,397

Other assets



29,537



57,653

Assets of discontinued operations



21,584



19,719

Total assets


$

2,877,234


$

2,577,106








Liabilities







Reserve for unpaid losses and loss adjustment expenses


$

1,521,648


$

1,396,812

Reserve for unearned premiums



483,223



435,933

Ceded reinsurance payable



17,768



13,281

Notes payable, net of debt issuance costs



164,693



182,355

Funds held under reinsurance agreements



58,855



63,165

Other liabilities



56,438



73,474

Liabilities of discontinued operations



31,578



22,256

Total liabilities



2,334,203



2,187,276








Stockholders' equity







Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued or outstanding





Common stock, $0.01 par value; 200,000,000 shares authorized; 43,071,186 and 38,864,289 shares issued,
43,058,266 and 38,851,369 shares outstanding in 2019 and 2018, respectively



431



389

Paid-in capital



661,761



607,260

Accumulated other comprehensive income (loss)



37,453



(22,315)

Retained deficit



(156,414)



(195,304)

Treasury shares - at cost (12,920 shares)



(200)



(200)

Total stockholders' equity



543,031



389,830

Total liabilities and stockholders' equity


$

2,877,234


$

2,577,106

 

 

PROSIGHT GLOBAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands)





(Unaudited)










Three Months Ended December 31


Years Ended December 31




2019


2018


2019


2018
















Gross written premiums


$

249,945


$

221,841


$

968,011


$

895,112
















Revenues:














Net earned premiums



207,311



193,098



807,854



730,785


Net investment income



17,367



12,670



68,897



55,971


Realized investment gains (losses), net



275



(2,362)



770



(1,557)


Other income



152



169



538



673


Total revenues



225,105



203,575



878,059



785,872
















Expenses:














Net losses and loss adjustment expenses incurred



128,381



113,067



501,025



434,830


Policy acquisition expenses



46,712



45,610



184,771



171,429


General and administrative expenses



26,497



24,965



105,686



100,118


Interest expense



3,070



3,170



12,795



12,377


Other expense



1,819





16,151




Total expenses



206,479



186,812



820,428



718,754
















Income from continuing operations before income taxes



18,626



16,763



57,631



67,118
















Income tax provision:














Current



(554)



(633)



(185)



(853)


Deferred



4,438



3,932



12,322



14,242


Total income tax expense



3,884



3,299



12,137



13,389
















Net income from continuing operations



14,742



13,464



45,494



53,729


Discontinued operations:














Net (loss) income from discontinued operations



(6,222)



656



(6,604)



814


Net income


$

8,520


$

14,120


$

38,890


$

54,543
















Return on equity (1)



11.0

%


13.9

%


9.8

%


14.0

%















Adjusted operating income (2)


$

15,953


$

15,657


$

57,636


$

55,286
















Adjusted operating return on equity (3)



11.9

%


16.2

%


12.4

%


14.4

%















(1). Return on equity is net income from continuing operations expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period.

(2). Adjusted operating income is a non-GAAP measure. See "Reconciliation of Non-GAAP Measures".

(3). Adjusted operating return on equity is a non-GAAP measure.   Adjusted operating return on equity is adjusted operating income expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period.

 

 

PROSIGHT GLOBAL, INC.

FACTORS AFFECTING THE RESULTS OF OPERATIONS (WAQS) (UNAUDITED)

($ in thousands)





Three Months Ended December 31, 2019


Three Months Ended December 31, 2018




Including


Effect   of


Excluding


Including


Effect   of


Excluding




WAQS


WAQS


WAQS


WAQS


WAQS


WAQS


Gross written premiums


$

249,945


$


$

249,945


$

221,841


$


$

221,841


Ceded written premiums



(27,749)





(27,749)



(25,670)



(9,888)



(15,782)


Net written premiums


$

222,196


$


$

222,196


$

196,171


$

(9,888)


$

206,059


Net retention(1)



88.9

%




88.9

%


88.4

%




92.9

%

Net earned premiums


$

207,311


$


$

207,311


$

193,098


$

40


$

193,058


Losses and LAE(4)



128,381



907



127,474



113,067



(92)



113,159


Underwriting, acquisition and insurance expenses



73,209



(906)



74,115



70,575



128



70,447


Underwriting income (loss)(2)


$

5,721


$

(1)


$

5,722


$

9,456


$

4


$

9,452


Loss and LAE ratio



61.9

%






58.6

%





Expense ratio



35.3

%






36.5

%





Combined ratio



97.2

%






95.1

%





Adjusted loss and LAE ratio(3)







61.5

%






58.6

%

Adjusted expense ratio(3)







35.7

%






36.5

%

Adjusted combined ratio(3)







97.2

%






95.1

%





















Effect of prior year development
unfavorable(favorable) (4)


S

787


S

907


S

(120)


S

(970)


$


S

(970)












































Years Ended December 31, 2019


Years Ended December 31, 2018




Including


Effect   of


Excluding


Including


Effect   of


Excluding




WAQS


WAQS


WAQS


WAQS


WAQS


WAQS


Gross written premiums


$

968,011


$


$

968,011


$

895,112


$


$

895,112


Ceded written premiums



(115,871)



3



(115,874)



(45,038)



58,857



(103,895)


Net written premiums


$

852,140


$

3


$

852,137


$

850,074


$

58,857


$

791,217


Net retention(1)



88.0

%




88.0

%


95.0

%




88.4

%

Net earned premiums


$

807,854


$

3


$

807,851


$

730,785


$

(14,560)


$

745,345


Losses and LAE(4)



501,025



4,746



496,279



434,830



(9,514)



444,344


Underwriting, acquisition and insurance expenses



290,457



(4,743)



295,200



271,547



(3,955)



275,502


Underwriting income (loss)(2)


$

16,372


$


$

16,372


$

24,409


$

(1,091)


$

25,499


Loss and LAE ratio



62.0

%






59.5

%


65.3

%



Expense ratio



36.0

%






37.2

%


27.2

%



Combined ratio



98.0

%






96.7

%


92.5

%



Adjusted loss and LAE ratio(3)







61.4

%






59.6

%

Adjusted expense ratio(3)







36.6

%






37.0

%

Adjusted combined ratio(3)







98.0

%






96.6

%





















Effect of prior year development
unfavorable(favorable) (4)


S

3,154


S

4,746


S

(1,592)


S

(5,017)


$


S

(5,017)



(1). Net retention is a non-GAAP measure. We define net retention as the ratio of net written premiums to gross written premiums.

(2). Underwriting income is a non-GAAP measure.  See "Reconciliation of Non-GAAP Financial Measures".

(3). Adjusted loss ratio and adjusted expense ratio are non-GAAP financial measures. We define adjusted loss ratio and adjusted expense ratio as the corresponding ratio  excluding the effects of the WAQS. We use these adjusted ratios as internal performance measures in the management of our operations because we believe they give our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Our adjusted loss and LAE ratio, adjusted expense ratio and adjusted combined ratio should not be viewed as substitutes for our loss and LAE ratio, expense ratio and combined ratio, respectively.

(4). The effect of prior year development is included within losses and LAE.

 

 


PROSIGHT GLOBAL, INC.

SUPPLEMENTARY UNDERWRITING INFORMATION (EXCLUDING WAQS) (UNAUDITED)

($ in thousands)





Three Months Ended December 31


Years Ended December 31




2019


2018


2019


2018
















Gross written premiums


$

249,945


$

221,841


$

968,011


$

895,112


Net written premiums



222,196



206,059



852,137



791,217


Net earned premiums



207,311



193,058



807,851



745,345
















Net losses and LAE



127,474



113,159



496,279



444,344


Catastrophe loss and LAE





3,560



3,000



3,560


Favorable prior period reserve development



(120)



(970)



(1,592)



(5,017)


Underwriting, acquisition, and insurance expenses



74,115



70,447



295,200



275,502


Policy acquisition expenses



47,618



45,482



189,514



175,384


General and administrative expenses



26,497



24,965



105,686



100,118
















Underwriting income


$

5,722


$

9,452


$

16,372


$

25,499
















Adjusted underwriting ratios




























Ex-cat current accident year loss and LAE ratio



61.5

%


57.3

%


61.2

%


59.8

%

Catastrophe loss and LAE ratio



-

%


1.8

%


0.4

%


0.5

%

Favorable prior period reserve development ratio



-

%


(0.5)

%


(0.2)

%


(0.7)

%

Adjusted loss and LAE ratio



61.5

%


58.6

%


61.4

%


59.6

%















Policy acquisition expense ratio



23.0

%


23.6

%


23.5

%


23.6

%

General and administrative expense ratio



12.7

%


12.9

%


13.1

%


13.4

%

Adjusted expense ratio



35.7

%


36.5

%


36.6

%


37.0

%















Adjusted combined ratio



97.2

%


95.1

%


98.0

%


96.6

%

 

 

PROSIGHT GLOBAL, INC.

SUPPLEMENTARY UNDERWRITING INFORMATION (UNAUDITED)

($ in thousands)





Three Months Ended December 31


Years Ended December 31




2019


2018


2019


2018
















Gross written premiums


$

249,945


$

221,841


$

968,011


$

895,112


Net written premiums



222,196



196,171



852,140



850,074


Net earned premiums



207,311



193,098



807,854



730,785
















Net losses and LAE



128,381



113,067



501,025



434,830


Catastrophe loss and LAE





3,560



3,000



3,560


Unfavorable(favorable) prior period reserve development



787



(970)



3,154



(5,017)


Underwriting, acquisition, and insurance expenses



73,209



70,575



290,457



271,547


Policy acquisition expenses



46,712



45,610



184,771



171,429


General and administrative expenses



26,497



24,965



105,686



100,118
















Underwriting income


$

5,721


$

9,456


$

16,372


$

24,409
















Underwriting ratios




























Ex-Cat current accident year loss and LAE ratio



61.5

%


57.2

%


61.2

%


59.7

%

Catastrophe loss and LAE ratio



-

%


1.8

%


0.4

%


0.5

%

Unfavorable(favorable) prior period reserve development ratio



0.4

%


(0.5)

%


0.4

%


(0.7)

%

Loss and LAE ratio



61.9

%


58.6

%


62.0

%


59.5

%















Policy acquisition expense ratio



22.5

%


23.6

%


22.9

%


23.5

%

General and administrative expense ratio



12.8

%


12.9

%


13.1

%


13.7

%

Expense ratio



35.3

%


36.5

%


36.0

%


37.2

%















Combined ratio



97.2

%


95.1

%


98.0

%


96.7

%

 

 

PROSIGHT GLOBAL, INC.

SHARE AND PER SHARE INFORMATION (UNAUDITED)











(Unaudited)












December 31


December 31










2019


2018


Shares outstanding









43,058,266



38,851,369


Fully diluted shares outstanding









45,196,716



39,454,929
















Book value per share(1)








$

12.61


$

10.03


Book value per share (fully diluted)(1)








$

12.01


$

9.88


Tangible book value per share(1)








$

11.93


$

9.28


Tangible book value per share (fully diluted)(1)








$

11.37


$

9.14



(share amounts in thousands)


Three Months Ended December 31


Years Ended December 31




2019


2018


2019


2018


Weighted average basic shares outstanding



43,978



38,785



41,095



38,753


Weighted average diluted shares outstanding



44,340



39,447



41,523



39,441
















Earnings per share - basic:














Net income from continuing operations


$

0.34


$

0.35


$

1.11


$

1.39


Adjusted operating income(2)


$

0.36


$

0.40


$

1.40


$

1.43
















Earnings per share - diluted:














Net income from continuing operations


$

0.33


$

0.34


$

1.10


$

1.36


Adjusted operating income(2)


$

0.36


$

0.40


$

1.39


$

1.40
















Adjusted operating return on equity (ROE)(3)



11.9

%


16.2

%


12.4

%


14.4

%

Adjusted operating return on tangible equity (ROTE)(3)



12.6

%


17.5

%


13.2

%


15.6

%


(1). Book value per share is total common stockholders' equity divided by the number of common shares outstanding. Tangible book value per share is total common stockholders' equity excluding value of goodwill and other intangible assets divided by the number of common shares outstanding.  Fully diluted book value per share is total common stockholders' equity divided by the number of common shares outstanding, unvested restricted shares and vested not issued shares.  Fully diluted tangible book value per share is total common stockholders' equity excluding the after-tax value of goodwill and other intangible assets divided by the number of common shares outstanding, unvested restricted shares, and vested not issued shares.

(2). Adjusted operating income is a non-GAAP measure. See "Reconciliation of Non-GAAP Financial Measures".

(3). Adjusted operating return on equity (a non-GAAP measure) is the annualized value of adjusted operating income divided by average total stockholders' equity for the two most recent sequential periods.  Adjusted operating return on tangible equity is the annualized value of adjusted operating income divided by average total stockholders' equity excluding goodwill and other intangible assets for the two most recent sequential periods.

 

 


PROSIGHT GLOBAL, INC.

GROSS WRITTEN PREMIUM BY CUSTOMER SEGMENT (UNAUDITED)

($ in millions)





Three Months Ended December 31




Years Ended December 31






2019


2018


%   Change


2019


2018


%   Change


Construction


$

34.9


$

30.0


16.3


$

117.9


$

101.9


15.7


Consumer Services



32.8



26.9


21.9



133.7



107.1


24.8


Marine and Energy



22.8



21.1


8.1



94.1



83.0


13.4


Media and Entertainment



34.2



32.1


6.5



124.9



119.9


4.2


Professional Services



33.6



28.3


18.7



119.3



110.5


8.0


Real Estate



50.7



41.1


23.4



167.6



132.7


26.3


Sports



7.2



5.0


44.0



30.1



23.6


27.5


Transportation



32.8



24.6


33.3



112.2



92.2


21.7


Customer segments subtotal



249.0



209.1


19.1



899.8



770.9


16.7


Other



0.9



12.7


(92.9)



68.2



124.2


(45.1)


Total


$

249.9


$

221.8


12.7


$

968.0


$

895.1


8.1


 

Reconciliation of Non-GAAP Financial Measures

Underwriting income is a non-GAAP financial measure that we believe is useful in evaluating our underwriting performance without regard to investment income. Underwriting income represents the pre-tax profitability of our insurance operations and is derived by subtracting losses and LAE, and underwriting, acquisition and insurance expenses from net earned premiums. We use underwriting income as an internal performance measure in the management of our operations because we believe it gives us and users of our financial information useful insight into our results of operations and our underlying business performance. Underwriting income should not be considered in isolation or viewed as a substitute for net income calculated in accordance with GAAP. Other companies may calculate underwriting income differently.

Net income for the three months and years ended December 31, 2019 and 2018 reconciles to underwriting income as follows:
















Three Months Ended December 31


Years Ended December 31

($ in thousands)


2019


2018


2019


2018

Net income from continuing operations


$

14,742


$

13,464


$

45,494


$

53,729

Income tax expense



3,884



3,299



12,137



13,389

Income from continuing operations before taxes



18,626



16,763



57,631



67,118














Net investment income



17,367



12,670



68,897



55,971

Realized investment gains (losses), net



275



(2,362)



770



(1,557)

Interest and other expense, net



4,737



3,001



28,408



11,704

Underwriting income


$

5,721


$

9,456


$

16,372


$

24,409

Adjusted operating income is a non-GAAP financial measure that we use as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and underlying business performance, by excluding items that are not part of our underlying profitability drivers or likely to re-occur in the foreseeable future. Adjusted operating income should not be considered in isolation or viewed as a substitute for our net income calculated in accordance with GAAP. Other companies may calculate adjusted operating income differently.

Net income for the three months and years ended December 31, 2019 and 2018 reconciles to adjusted operating income as follows:
















Three Months Ended December 31


Years Ended December 31

($ in thousands)


2019


2018


2019


2018

Net income from continuing operations


$

14,742


$

13,464


$

45,494


$

53,729

Income tax expense



3,884



3,299



12,137



13,389

Income from continuing operations before taxes



18,626



16,763



57,631



67,118














Other expense (1)



1,819





16,151



Realized investment (gains)



(275)



2,362



(770)



1,557

Adjusted operating income before taxes



20,170



19,125



73,012



68,675

Less: income tax expense on adjusted operating income



4,217



3,468



15,376



13,389

Adjusted operating income


$

15,953


$

15,657


$

57,636


$

55,286



(1)

Other expense within the adjusted operating income includes non-recurring grants of restricted stock units in connection with the initial public offering and costs associated with the transition of our former Chief Executive Officer.

Tangible stockholders' equity is a non-GAAP financial measure. We define tangible stockholders' equity as stockholders' equity less goodwill and net intangible assets. Our definition of tangible stockholders' equity may not be comparable to that of other companies and it should not be viewed as a substitute for stockholders' equity calculated in accordance with GAAP. We use tangible stockholders' equity internally to evaluate the strength of our balance sheet and to compare returns relative to this measure.

Stockholders' equity at December 31, 2019 and 2018 reconciles to tangible stockholders' equity as follows:










December 31, 2019


December 31, 2018

($ in thousands)




Stockholders' equity


$

543,031


$

389,830

Less: goodwill and net intangible assets



29,189



29,219

Tangible stockholders' equity 


$

513,842


$

360,611

Book value per share


$

12.61


$

10.03

Book value per share (fully diluted)


$

12.01


$

9.88

Tangible book value per share 


$

11.93


$

9.28

Tangible book value per share (fully diluted)


$

11.37


$

9.14

 

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SOURCE ProSight Global, Inc.

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