USI Reports Profits Up

USI Holdings Corporation reported second-quarter net income at the insurance brokerage more than tripled compared to the period last year, boosted by growth in all segments of its business.

The gains came despite challenges in competitive pricing throughout the country, especially California, its chief executive said during an analyst's conference call.

“We continue to feel very positive about our long-term earnings capability driven through our organic revenue growth, market expansion and our successful show of accretive acquisitions,” said David L. Eslick, chairman, president and chief executive officer of the Briarcliff Manor, N.Y.-based firm.

For the quarter, net income was up 351 percent, or $5.7 million, going from $1.6 million, or 3 cents a share, to $7.3 million, or 13 cents a share.

The results were driven by no loss from continuing operations. Last year, USI sold off seven operations that were either not profitable or displayed earnings volatility. Those operations were counted as a loss from discontinued operations last year.

Excluding the discontinued operations, net income increased 37 percent, or $1.97 million in the quarter.

Revenues in the quarter increased 9 percent, or $11.3 million, going from $122.6 million to $133.9 million.

For the six months, net income increased 480 percent, or $12.4 million, from $2.6 million, or 5 cents a share, to $15 million, or 26 cents a share. Excluding discontinued operations, net income rose 106 percent, or $7.7 million. Revenues increased 11 percent, or $26 million, going from $245 million to $271 million.

Overall organic growth increased by 2.8 percent, but property-casualty stood at a loss of 1.3 percent while benefits lines grew 5.6 percent.

Mr. Eslick said there were two primary reasons for the loss in p-c organic growth. There was the release of 36 producers who were not growing their book of business. However, they have been replaced by 20 new producers whose progress has pleased the company, he said.

The second reason for growth loss is competitive pricing pressures in the p-c business. Mr. Eslick said 20 percent of USI's revenues come from California where pricing is very competitive and workers' compensation prices continue to fall.

“We see California as a very tough environment,” he said.

Mr. Eslick said that if California were excluded from commission and fees, organic growth would be up 4 percent in property-casualty.

In a Securities & Exchange Commission filing today, USI said it paid a total of $39 million for its acquisition of Frederick E. Penn Insurance Agency, based in Needham, Mass. The purchase was for $35.1 million in cash and the assumption of $3.9 million in debt.

During the first six months of this year, USI paid a total of $3.7 million for other acquisitions–$3.4 million in cash and the assumption of $300,000 in debt.

The broker also revealed it paid $2.43 million in cash for its July 11 acquisition of Frank Siddons Insurance Agency in Austin, Texas, and $10 million in cash for its July 27 acquisition of Tandem Benefits Inc., based in Foothill Ranch, Calif.