Affirmative Insurance Holdings Inc. (AFFM, Financial) filed Quarterly Report for the period ended 2010-03-31.
Affirmative Insurance Holdings Inc. has a market cap of $71.53 million; its shares were traded at around $4.64 with a P/E ratio of 6.44 and P/S ratio of 0.16. AFFM is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Net Investment Income and Other Income. Net investment income for the three months ended March 31, 2010 decreased $1.0 million, or 40.9%, compared with the same period in the prior year. The decrease was primarily due to a reduction in yields and a 12.8% decrease in total average invested assets to $230.6 million during the current quarter from $264.3 million in the prior year. The average investment yield was 2.7% (3.4% on a taxable equivalent basis) in the current quarter, compared with 3.1% (4.3% on a taxable equivalent basis) in the prior year.
As of March 31, 2010, we held $39.1 million, at amortized cost, and $32.5 million fair value of auction-rate tax-exempt securities. Generally, the interest rates for these securities are determined by bidding every 7, 28 or 35 days. When there are more sellers than buyers, an auction fails and bondholders that want to sell are unable to sell the securities. Auctions for these securities began to fail in late January 2008. Issuers remain obligated to pay interest and principal when due when an auction fails. Rates at failed auctions are set at a level established in the terms of the debt. In February 2008, investment banks stopped committing capital to the auctions and there have been widespread auctions failures since that time.
In October 2008, the Companys broker filed a prospectus with the SEC, which published a legally-binding offer to all authorized holders of auction-rate securities to purchase all eligible securities at par (the settlement). The time frames set by the Companys broker for buybacks have different start dates based upon the individual clients size, which is determined by each clients balance of investments held at the Companys broker. In November 2008, the Company elected to participate in its brokers offer to purchase the Companys auction-rate securities at par and classified its portfolio of auction-rate securities as trading. The settlement agreement requires our broker to purchase eligible securities at par, at any time during a two-year period beginning June 30, 2010. All auction-rate securities held at March 31, 2010 are eligible for buyback under the settlement agreements. At March 31, 2010 and December 31, 2009, the fair value of the settlement was $6.5 million and $8.8 million, respectively, which is recorded in other assets in the consolidated balance sheets with changes in fair value recorded in other income (loss) in the consolidated statements of income (loss).
In the first quarter of 2010, we began to reposition our investment portfolio by decreasing our tax-exempt investments. The purpose of the repositioning is to monetize the tax-exempt portion of the investments and to decrease our municipal credit exposure. We expect the repositioning to be completed in the second quarter of 2010. As a result of the repositioning, we sold $54.0 million of available-for-sale securities during the three-month period ended March 31, 2010, for a net realized gain of $1.2 million.
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Affirmative Insurance Holdings Inc. has a market cap of $71.53 million; its shares were traded at around $4.64 with a P/E ratio of 6.44 and P/S ratio of 0.16. AFFM is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
We had a net loss from continuing operations of $3.5 million for the three months ended March 31, 2010, compared with net income from continuing operations of $11.2 million for the comparable period in 2009. Significant items impacting the three months ended March 31, 2009 results were a net pretax gain on extinguishment of debt of $19.4 million, which was partially offset by a loss on interest rate swaps of $4.4 million associated with the discontinuation of hedge accounting.Net Investment Income and Other Income. Net investment income for the three months ended March 31, 2010 decreased $1.0 million, or 40.9%, compared with the same period in the prior year. The decrease was primarily due to a reduction in yields and a 12.8% decrease in total average invested assets to $230.6 million during the current quarter from $264.3 million in the prior year. The average investment yield was 2.7% (3.4% on a taxable equivalent basis) in the current quarter, compared with 3.1% (4.3% on a taxable equivalent basis) in the prior year.
As of March 31, 2010, we held $39.1 million, at amortized cost, and $32.5 million fair value of auction-rate tax-exempt securities. Generally, the interest rates for these securities are determined by bidding every 7, 28 or 35 days. When there are more sellers than buyers, an auction fails and bondholders that want to sell are unable to sell the securities. Auctions for these securities began to fail in late January 2008. Issuers remain obligated to pay interest and principal when due when an auction fails. Rates at failed auctions are set at a level established in the terms of the debt. In February 2008, investment banks stopped committing capital to the auctions and there have been widespread auctions failures since that time.
In October 2008, the Companys broker filed a prospectus with the SEC, which published a legally-binding offer to all authorized holders of auction-rate securities to purchase all eligible securities at par (the settlement). The time frames set by the Companys broker for buybacks have different start dates based upon the individual clients size, which is determined by each clients balance of investments held at the Companys broker. In November 2008, the Company elected to participate in its brokers offer to purchase the Companys auction-rate securities at par and classified its portfolio of auction-rate securities as trading. The settlement agreement requires our broker to purchase eligible securities at par, at any time during a two-year period beginning June 30, 2010. All auction-rate securities held at March 31, 2010 are eligible for buyback under the settlement agreements. At March 31, 2010 and December 31, 2009, the fair value of the settlement was $6.5 million and $8.8 million, respectively, which is recorded in other assets in the consolidated balance sheets with changes in fair value recorded in other income (loss) in the consolidated statements of income (loss).
In the first quarter of 2010, we began to reposition our investment portfolio by decreasing our tax-exempt investments. The purpose of the repositioning is to monetize the tax-exempt portion of the investments and to decrease our municipal credit exposure. We expect the repositioning to be completed in the second quarter of 2010. As a result of the repositioning, we sold $54.0 million of available-for-sale securities during the three-month period ended March 31, 2010, for a net realized gain of $1.2 million.
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