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2005 marked a year of record net income
and many operational accomplishments for Meadowbrook.
In a period that has challenged many
insurance organizations with natural catastrophes and
the impact from regulatory scrutiny, Meadowbrook's business
model has continued to produce consistently improved
results.
Our 2005 financial results were excellent.
Here are some of the highlights:
- Record net income of $17.9
million,
up over 27% from 2004
- Earnings increased to $0.60
per share,
up 25% over 2004
- Revenues increased to $304.0
million,
up 12.5% over 2004
- Cash flow from operations
was $81.9 million
- Shareholders' equity increased
to $177.4 million,
or $6.19 per common share
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Return On
Equity and Share Price Appreciation.
What will drive an increase in our
Return-On-Equity going forward?
Several factors will lead us to our
goal of exceeding a 15%
Return-On-Equity:
- Improved productivity through
technology and training, thus lowering our expense
ratio;
- Continued growth of underwriting
profit;
- Growth in our fee-based operations
and an increase in the net margin; and
- Continued growth of investment
income as our multiple of invested assets to
equity grows due to positive cash flow and profitability,
and as interest rates rise.
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Meadowbrook closed 2005 with
a share price at $5.84, an increase of 17% over December
31, 2004. Since our public offering in 2002, our stock
price has risen over 88%, up from $3.10 per share.
Capital Position.
In September 2005, Meadowbrook
raised $20.0 million in a "trust preferred" pooled transaction.
These types of debt instruments have created a new source
of efficient and cost competitive capital for small
and mid-sized insurance companies.
In our insurance company operations,
the previous years' rate increases and tightened underwriting
have contributed to the improved profitability and quality
of our underwritten business. Statutory surplus in our
insurance company subsidiaries increased to $141.1 million
at December 31, 2005, up from $120.7 million at December
31, 2004. The increase was primarily from our insurance
companies' net income and a
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