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Darwin Professional Underwriters, Inc. Reports Record Net Income of $10.9 Million for the Fourth Quarter

Net income increases 88% and net premiums written increase 22% over the

comparable year-earlier quarterly results

FARMINGTON, Conn., Feb. 27 /PRNewswire-FirstCall/ -- Darwin Professional Underwriters, Inc. ("Darwin," the "Company," or "Our") (NYSE: DR) today announced its financial results for the fourth quarter ended December 31, 2007. Highlights include:
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-- Gross premiums written for the fourth quarter are $70.8 million. Fourth

quarter gross premiums written are 12.6% ahead of our gross premiums

for the same period a year ago. Net premiums written for the quarter of

$51.2 million are up 22.2% over the fourth quarter of 2006.

-- Net income of $10.9 million for the quarter ended December 31, 2007

represents an 88.3% increase over the $5.8 million for the quarter

ended December 31, 2006 and our highest net income in our approximately

five-year operating history.

-- Overall, the combined ratio is 77.2% for the fourth quarter 2007, which

compares favorably to the fourth quarter 2006 combined ratio of 89.2%.

The combined ratio improvement is primarily driven by a decrease in the

loss ratio (11.2% improvement to 50.1%). The fourth quarter combined

ratio improvement includes approximately $6.8 million ($4.4 million,

net of tax) in favorable loss reserve development and the corresponding

ceded premiums, offset by additional incentive compensation and profit

sharing expenses stemming from the favorable development of the 2003

through 2006 accident years.

-- Earnings per diluted share for the three months ended December 31, 2007

are $0.64 compared to $0.34 per share for the same period in 2006. For

the full year, earnings per diluted share are $1.89 compared to $0.95

per diluted share for the full year 2006.

For the year ended December 31, 2007, net income return on average equity was 13.7%, compared to 7.7% for all of 2006. Shareholders' equity grew $36.3 million during the twelve months of 2007, to $254.2 million at December 31, 2007 from $217.9 million at December 31, 2006. Book value per share grew 16.8% to $14.93 at December 31, 2007 from $12.78 at December 31, 2006.

Stephen Sills, Darwin's president and chief executive officer, commented, "We had another excellent quarter and remain pleased with our performance. This quarter's net income of $10.9 million represents our best operating result in our history. Our loss experience for each of our accident years continues to emerge favorably, and we were able to continue to find profitable niches to grow our book of business as well as retain our best accounts in the face of tough competition. Darwin recorded an increase in gross premiums written over the fourth quarter of 2006 of 12.6% and demonstrated our continued commitment to underwriting profitability with a fourth quarter combined ratio of 77.2 percent. We believe we're well positioned to take advantage of the continued opportunities we see in specialty insurance."

Darwin executives will hold a conference call to discuss this press release on February 27, 2008, at 5:00 p.m. Eastern time. The live webcast of Darwin's earnings conference call, as well as our financial supplement, can be accessed through Darwin's website at Analysts and investors interested in participating in the live conference call may dial in to 866-831-6272 (International callers may dial 617-213-8859) and enter passcode 75268580.

The webcast version of the conference call will be archived on Darwin's website following the date of the event. A telephonic replay of the earnings conference call will be available shortly after the conclusion of the call on February 27, 2008. To access the telephonic replay, domestic callers may dial 888-286-8010 (International callers may dial 617-801-6888) and enter passcode 82954710. The telephonic replay will be available until March 5, 2008.

Important Information

Certain matters discussed in this release are forward-looking statements. Such statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include the accuracy of assumptions underlying the Company's outlook and other risks described in the Company's filings with the Securities and Exchange Commission ("SEC"), including the Company's Annual Report on Form 10-K for 2006 and Form 10-K for 2007. These forward-looking statements represent the Company's judgment as of the date of this release. The Company disclaims any intent or obligation to update these forward-looking statements.

About Darwin Professional Underwriters, Inc.

Darwin is a specialty insurance group based in Farmington, Connecticut. The Company is focused on the specialty liability insurance market and underwrites directors and officers ("D&O") liability insurance for public and private companies, errors and omissions ("E&O") liability insurance, medical malpractice liability insurance, and other specialty coverages. Darwin member companies include Darwin Professional Underwriters, Inc., Darwin National Assurance Company ("DNA"), and Darwin Select Insurance Company ("Darwin Select"). DNA and Darwin Select have earned a financial strength rating of "A- (Excellent)" from A.M. Best Company. Darwin is traded on the New York Stock Exchange under the ticker symbol, "DR." For more information about Darwin, visit

Additional information concerning Darwin, its finances, and business operations can be found in the Annual Report on Form 10-K for the year ended December 31, 2007 and at The 2007 Form 10-K will be filed with the SEC on or about February 28, 2008.

Darwin Professional Underwriters, Inc. and Subsidiaries

Selected Consolidated Statements of Operations Data

Three and Twelve Months Ended December 31, 2007 and December 31, 2006

(Dollars in thousands, except per share amounts)

Three Months Ended Twelve Months Ended

December 31, December 31,


2007 2006 2007 2006

Gross premiums written $70,817 $62,877 $280,283 $246,252

Net premiums written $51,155 $41,869 $199,729 $157,004


Net premiums earned $49,072 $38,149 $180,900 $132,378

Net investment income 6,082 4,807 22,574 16,442

Net realized investment

gains (losses) (2) 36 (28) 12

Total revenues 55,152 42,992 203,446 148,832

Costs and expenses:

Losses and loss adjustment

expenses 24,590 23,383 101,278 88,619

Commissions and brokerage

expenses 5,511 4,455 22,618 14,609

Other underwriting,

acquisition and operating

expenses 7,800 6,186 28,286 21,603

Other expenses 1,631 430 5,857 750

Total costs and expenses 39,532 34,454 158,039 125,581

Earnings before income taxes 15,620 8,538 45,407 23,251

Income tax expense 4,711 2,744 13,165 7,286

Net earnings $10,909 $5,794 $32,242 $15,965

Basic earnings per share:

Net earnings per share $0.65 $0.36 $1.96 $1.38

Weighted average shares

outstanding 16,828,059 16,108,723 16,424,448 9,770,268

Diluted earnings per share:

Net earnings per share $0.64 $0.34 $1.89 $0.95

Weighted average shares

outstanding 17,067,990 17,060,920 17,071,505 16,785,721

Combined ratio:

Loss ratio 50.1% 61.3% 56.0% 66.9%

Expense ratio 27.1% 27.9% 28.1% 27.4%

Combined ratio 77.2% 89.2% 84.1% 94.3%

Darwin Professional Underwriters, Inc. and Subsidiaries

Selected Consolidated Balance Sheets Data

December 31, 2007 and 2006

(Dollars in thousands, except per share amounts)

December 31, December 31,

2007 2006


Available for sale securities, at

fair value:

Equity securities (cost: 2007, $4,000) $3,680 $ -

Fixed maturity securities (amortized

cost: 2007, $439,748; 2006, $328,201) 445,661 329,846

Short-term investments, at cost which

approximates fair value 107,597 69,537

Total investments 556,938 399,383

Cash 7,469 26,873

Premiums receivable (net of allowance for

doubtful accounts of $75 as of

December 31, 2007 and 2006) 30,986 31,094

Reinsurance recoverable on paid and unpaid

losses 136,370 96,371

Ceded unearned reinsurance premiums 43,244 44,742

Deferred insurance acquisition costs 13,814 12,724

Property and equipment at cost, less accumulated

depreciation 1,783 1,895

Intangible assets 7,455 7,306

Net deferred income tax asset 13,546 8,720

Other assets 15,530 6,156

Total assets $827,135 $635,264


Loss and loss adjustment expense reserves $387,865 $263,549

Unearned premium reserves 141,126 123,796

Reinsurance payable 20,999 21,385

Debt 5,000 -

Current income taxes payable 1,155 865

Accrued expenses and other liabilities 16,817 7,819

Total liabilities 572,962 417,414

Stockholders' equity:

Common stock; $0.01 par value; authorized

50,000,000 shares; issued and outstanding

17,025,501 shares at December 31, 2007 and

17,047,222 shares at December 31, 2006 170 170

Additional paid-in capital 204,583 203,095

Retained earnings 45,790 13,548

Accumulated other comprehensive income 3,630 1,037

Total stockholders' equity 254,173 217,850

Total liabilities and stockholders' equity $827,135 $635,264

December 31, December 31,

2007 2006

Book value per common share:

Book value per common share $14.93 $12.78

Tangible book value per common share $14.49 $12.35

Net income return on average equity 13.7% 7.7%

SOURCE Darwin Professional Underwriters, Inc.
Copyright©2008 PR Newswire.
All rights reserved

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