Penn-America Posts 2002 Income Gains; Q4 Operating Income up 41.7%

January 23, 2003

Penn-America Group, Inc. reported that its fourth quarter operating income increased 41.7 percent to $2.9 million or $0.24 per share (basic and diluted), compared with operating income of $2.1 million or $0.18 per share (basic and diluted) for the fourth quarter of 2001. Net income for the fourth quarter of 2002 was $3.9 million or $0.32 per share (basic and diluted) and included a net realized investment gain, after taxes, of $1.0 million.

For the year ended December 31, 2002, the company reported operating income of $9.6 million or $0.82 per basic share and $0.81 per diluted share compared with operating income of $5.7 million or $0.50 per share (basic and diluted) for the year ended December 31, 2001. Net income for the year ended December 31, 2002 was $10.5 million or $0.90 per basic share and $0.88 per diluted share and included a net realized investment gain, after taxes, of $0.8 million. Net income for the year ended December 31, 2001 was $4.9 million or $0.43 per share (basic and diluted) and included a net realized investment loss, after taxes, of $0.8 million.

The company also reported that “Gross written premiums increased 42.3 percent to $39.1 million in the fourth quarter of 2002, compared with $27.4 million for the same period of 2001. Net written premiums increased 37.0 percent to $33.1 million in the current quarter, compared with $24.1 million for the same period of 2001. The GAAP combined ratio for the fourth quarter of 2002 was 95.7 compared with 98.9 for the fourth quarter of 2001.”

Jon Saltzman, president and CEO, noted, “The excellent operating results in the fourth quarter capped the fifth consecutive quarter of underwriting profitability for the company. With an infusion of $38 million in new capital during the quarter combined with strong pricing and continuing opportunities in the current hard insurance markets, our financial condition and prospects for the future are solid and exciting.”

Penn-America Posted a 60 percent increase in gross written premiums in 2002 to $157.4 million for the year ended December 31, compared with $98.4 million for the year ended December 31, 2001. Net written premiums increased 54.6 percent to $134.7 million for the year ended December 31, 2002, compared with $87.1 million in 2001.

It also reduced its GAAP combined ratio substantially from 103.1 in 2001 to 97.7 last year.

In the fourth quarter of 2002, the company raised $38 million of additional capital through two separate transactions. It completed the private placement sale of a $15 million thirty-year trust-preferred security through a wholly owned trust subsidiary, which resulted in net proceeds of $14.5 million, and raised $23.5 million from the issuance of 2,990,000 shares of the Company’s common stock.

Th report indicated that “The company contributed virtually all of the net proceeds to its insurance subsidiaries in order to support the business growth of its insurance operations. Combined statutory policyholders’ surplus of the company’s insurance subsidiaries stood at $110.3 million at December 31, 2002, up from $64.7 million at December 31, 2001.”

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