Acceptance Insurance Companies Inc. reported an estimated after-tax net loss of $131 million, or $9.23 per share, for the third quarter of 2002. The figure includes the previously reported loss from crop insurance underwriting and operations of approximately $62.2 million.
The Company reported a net loss of $9.5 million, or $0.66 per share for the quarter, and an estimated after-tax net loss of $140.5 million, or $9.78 per share for the nine-month period ended September 30, 2002, compared to a net loss of $14.2 million, or $0.99 per share for the first nine months of 2001.
Acceptance had originally been scheduled to report earnings on November 15, but had announced a delay. (See companion article in “National News”)
The company said that the “estimated loss is due primarily to a widespread drought and other abnormal growing conditions throughout the Company’s area of operations.” It went on to explain that indemnity amounts on crop insurance products are usually calculated in the fourth quarter of the year, but that it had estimated losses as of the end of the third quarter due to the exceptional nature of the known losses which have occurred this year. It expects to receive virtually no indemnity, and has therefore recorded a loss from crop insurance underwriting and operations for the three months ended September 30, 2002 of approximately $62.2 million.
It indicated that “The anticipated loss will materially reduce the statutory capital of American Growers Insurance Company, the Company’s wholly owned crop insurance subsidiary. Because future profitability also is unlikely, the Company established a 100% valuation allowance against its deferred tax asset in the amount of $68.6 million. In addition, the Company will incur a loss on a multi-year reinsurance agreement of approximately $21.4 million and recognize the impairment of certain intangible assets totaling approximately $5.7 million.” These were all included in the third quarter and estimated year to date results.
Acceptance also announced, in a joint statement with Rain and Hail L.L.C., that the two companies and certain of their affiliates “have signed a nonbinding Letter of Intent setting forth the preliminary terms for the Company’s potential sale of certain crop insurance assets to Rain and Hail and/or its affiliates.”
“The Letter of Intent contemplates transfer by the Company of its MPCI policies, including policies for the 2003 Crop Year, and certain agreements between American Growers Insurance Company and independent crop insurance agents. The proposed sale is contingent upon several conditions, including the negotiation and execution of a definitive agreement, approval by the Boards of Directors of both companies and certain of their affiliates, and receipt of all required governmental approvals,” the bulletin continued.
“While disappointed with the underwriting results triggered by the most severe and widespread drought in at least 50 years, we are even more disappointed that the capital-raising effort we began earlier this year has not resulted in a capital partnership for AmAg,” stated John E. Martin, the Company’s President and CEO.
He indicated that the agreement with Rain and Hail was the result of extensive negotiations and that it represented “the best result possible given this year’s drought, our capital position, current global insurance industry conditions, and the uncertainties inherent in the crop insurance business.”
Topics Profit Loss Agribusiness
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