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Darwin Professional Underwriters, Inc. Reports Record Net Income of $8.4 Million for the Third Quarter

Net income increases 109% and net premiums written increase 21% over the

comparable year-earlier quarterly results.

FARMINGTON, Conn., Nov. 6 /PRNewswire-FirstCall/ -- Darwin Professional Underwriters, Inc. ("Darwin," the "Company," or "Our") (NYSE: DR) today announced its financial results for the third quarter ended September 30, 2007. Highlights include:

-- Gross premiums written for the third quarter are $69.3 million. Third

quarter gross premiums written are 5.9% ahead of our gross premiums for

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

$50.6 million are up 20.7% over the third quarter of 2006.

-- Net income of $8.4 million for the quarter ended September 30, 2007

represents a 108.7% increase over the $4.0 million for the quarter

ended September 30, 2006.

-- Overall, the combined ratio is 85.4% for the third quarter 2007, which

compares favorably to the third quarter 2006 combined ratio of 96.3%.

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

loss ratio (12.1% improvement to 57.1%). The third quarter combined

ratio improvement includes approximately $3.6 million ($2.4 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 September 30,

2007 are $0.49 compared to $0.23 per share for the same period in 2006.

-- Annualized return on average equity is 12.4% for the nine months ended

September 30, 2007 compared to 7.7% for all of 2006. Shareholders'

equity grew $21.9 million during the first nine months of 2007, to

$239.8 million at September 30, 2007 from $217.9 million at December

31, 2006. Book value per share grew 10.2% to $14.08 at September 30,

2007 from $12.78 at December 31, 2006.

(Logo: )

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 $8.4 million represents our best operating result in our four-and-a-half year history. Our loss emergence remains favorable and we were able to grow our book by writing new business, as well as retaining our best accounts in the face of stiffening competition. Darwin recorded an increase in gross premiums written over the third quarter of 2006 of 5.9% and demonstrated our continued commitment to underwriting profitability with a third quarter combined ratio of 85.4 percent. With significant expertise across all of our lines, 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 tomorrow morning, November 7, 2007, at 8:00 a.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 800-599-9816 (International callers may dial 617-847-8705) and enter passcode 12623027.

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 November 7, 2007. To access the telephonic replay, domestic callers may dial 888-286-8010 (International callers may dial 617-801-6888) and enter passcode 69068040. The telephonic replay will be available until November 14, 2007.

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-Q for third quarter 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 D&O liability insurance for public and private companies, 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 which will be filed with the SEC and at

Darwin Professional Underwriters, Inc. and Subsidiaries

Selected Consolidated Statements of Operations Data

Three and Nine Months Ended September 30, 2007 and September 30, 2006


(Dollars in thousands, except per share amounts)

Three Months Ended Nine Months Ended

September 30, September 30,

2007 2006 2007 2006

Gross premiums written $69,306 $65,427 $209,466 $183,375

Net premiums written $50,600 $41,927 $148,574 $115,135


Net premiums earned $45,453 $34,971 $131,828 $94,229

Net investment income 5,812 4,512 16,492 11,635

Net realized

investment gains

(losses) (43) (11) (26) (24)

Total revenues 51,222 39,472 148,294 105,840

Costs and expenses:

Losses and loss

adjustment expenses 25,965 24,205 76,688 65,236

Commissions and

brokerage expenses 5,598 4,166 17,107 10,154

Other underwriting,

acquisition and

operating expenses 7,241 5,305 20,486 15,417

Other expenses 1,412 42 4,226 320

Total costs and

expenses 40,216 33,718 118,507 91,127

Earnings before income

taxes 11,006 5,754 29,787 14,713

Income tax expense 2,645 1,748 8,454 4,542

Net earnings $8,361 $4,006 $21,333 $10,171

Basic earnings per


Net earnings per

share $0.51 $0.25 $1.31 $1.01

Weighted average


outstanding 16,557,816 15,877,995 16,289,911 7,657,449

Diluted earnings per


Net earnings per

share $0.49 $0.23 $1.25 $0.61

Weighted average

shares outstanding 17,060,291 17,049,558 17,072,500 16,693,695

Combined ratio:

Loss ratio 57.1% 69.2% 58.2% 69.2%

Expense ratio 28.3% 27.1% 28.5% 27.2%

Combined ratio 85.4% 96.3% 86.7% 96.4%

Darwin Professional Underwriters, Inc. and Subsidiaries

Selected Consolidated Balance Sheets Data

September 30, 2007 and December 31, 2006


(Dollars in thousands, except per share amounts)

September 30, December 31,

2007 2006


Available for sale securities, at fair value:

Equity securities (cost: 2007, $4,000) $3,936 $-

Fixed maturity securities (amortized cost:

2007, $447,265; 2006, $328,201) 448,130 329,846

Short-term investments, at cost which

approximates fair value 70,059 69,537

Total investments 522,125 399,383

Cash 6,429 26,873

Premiums receivable (net of allowance for

doubtful accounts of $75 as of September 30,

2007 and December 31, 2006) 24,760 31,094

Reinsurance recoverable on paid and unpaid

losses 126,448 96,371

Ceded unearned reinsurance premiums 42,870 44,742

Deferred insurance acquisition costs 14,064 12,724

Property and equipment at cost, less

accumulated depreciation 1,839 1,895

Intangible assets 7,306 7,306

Net deferred income tax asset 14,367 8,720

Other assets 13,362 6,156

Total assets $773,570 $635,264


Loss and loss adjustment expense reserves $357,016 $263,549

Unearned premium reserves 138,670 123,796

Reinsurance payable 18,730 21,385

Current income taxes payable 6,399 865

Accrued expenses and other liabilities 12,952 7,819

Total liabilities 533,767 417,414

Stockholders' equity:

Common stock; $0.01 par value; authorized

50,000,000 shares; issued and outstanding

17,025,501 shares at September 30, 2007 and

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

Additional paid-in capital 204,234 203,095

Retained earnings 34,881 13,548

Accumulated other comprehensive income 518 1,037

Total stockholders' equity 239,803 217,850

Total liabilities and stockholders' equity $773,570 $635,264

September 30, December 31,

2007 2006

Book value per common share:

Book value per common share $14.08 $12.78

Tangible book value per common share $13.66 $12.35

Net income return on average equity(1) 12.4% 7.7%

(1) Return on average equity for 2007 interim period is based on

annualized net earnings.

SOURCE Darwin Professional Underwriters
Copyright©2007 PR Newswire.
All rights reserved

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