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Workers Comp Provider CRM Holdings, Ltd. Announces Q1 Losses, Seeks Strategic Alternatives


Posted on 07 May 2010

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Specialty workers comp provider, CRM Holdings, Ltd. incurred a net loss from continuing operations of $7.7 million, or $(0.46) per diluted share in the first quarter 2010, compared to a net loss from continuing operations of $8.2 million, or $(0.49) per diluted share, for the same period in 2009.

CRM's loss ratio increased to 106% for the first quarter of 2010 from 81% for the first quarter 2009. The higher loss ratio resulted from a higher current accident year loss ratio and unfavorable loss reserve development on prior accident years of $1.5 million for the first quarter of 2010 compared to $1.2 million for the same period in 2009. The higher current accident year loss ratio was due to decreased net earned premiums, the impact of lower ceding commission income on unallocated loss adjustment expenses, and an increase in claims severity trends on primary insurance policies underwritten in California.

Policy acquisition costs decreased $0.9 million, or 23%, to $3.0 million for the first quarter of 2010, from $3.9 million for the first quarter of 2009. This decrease was primarily attributable to lower net earned premiums that resulted in reduced broker commissions and premiums taxes. Other underwriting expenses decreased $2.4 million, or 35%, to $4.4 million in the first quarter of 2010, from $6.9 million in the first quarter of 2009. The decrease reflected a $1.4 million reduction in bad debt expense and reductions totaling approximately $1.0 million in professional fees and other expenses. General and administrative expenses decreased $6.6 million, or 76%, to $2.1 million in the first quarter of 2010, from $8.7 in the first quarter of 2009. The decrease arose primarily from the recognition of $5.3 million of severance expense related to the company's former co-chief executive officers during the first quarter of 2009. The remainder of the decrease was due to various cost cutting measures, including a $0.4 million reduction in workforce, instituted during the first quarter of 2010. The workforce reduction is expected to result in $2.6 million of overall annual cost savings.

Strategic Alternatives

CRM has formed a Special Committee of the Board of Directors and has retained Macquarie Capital to explore strategic alternatives to strengthen its capital position. Alternatives could include, but may not be limited to, a sale, merger or other business combination involving CRM, a sale of shares or other recapitalization, a joint venture arrangement, the sale or spin off of CRM assets, or the continued execution of the CRM's business plan. There can be no assurance that the exploration of strategic alternatives will result in any transaction, or that, if completed, any transaction will be on attractive terms.

About CRM Holdings, Ltd.

CRM Holdings, Ltd. is a specialty provider of workers' compensation insurance products. Through its subsidiaries, CRM Holdings offers workers' compensation insurance coverage, reinsurance, and fee-based management services for self-insured entities.


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