Fortegra Financial Corporation Reports Third Quarter 2012 Net Income $4.1 Million; Net Revenues Increase 8.6%

JACKSONVILLE, FL--(Marketwire - Nov 12, 2012) - Fortegra Financial Corporation (NYSE: FRF), an insurance services company providing distribution and administration services and insurance-related products, today reported results for the third quarter ended September 30, 2012.

• Direct and assumed written premiums increased 6.3% year-over-year to a record $100.4 million
  
  

• Net revenues climbed 8.6% compared to prior-year, including the impact from a change in accounting estimate
  
  

• Third quarter net income was $4.1 million ($0.20 per diluted share) with Adjusted Net Income of $4.7 million ($0.23 per diluted share)
  
  

• Third quarter Adjusted EBITDA was $10.9 million ($0.53 per diluted share) with Adjusted EBITDA margin of 34.9%

"I am pleased with the progress we are making at Fortegra. We continued to build strength throughout the organization not only with our current suite of products but also with the launch of additional complementary products," said Richard S. Kahlbaugh, Chairman, President and Chief Executive Officer of Fortegra. "While cross-selling and direct marketing initiatives continue, we recently conducted market tests on SnapBack, a warranty product providing glass protection to mobile devices and tablets. Based on the positive customer feedback, this confirmed SnapBack's market potential. With SnapBack and other product development initiatives underway in our business, I am confident we have the products and programs that allow us to deliver on our long term growth strategy."

Third Quarter Results
Total revenues increased 13.8% to $64.3 million for the third quarter of 2012, compared to $56.5 million for the third quarter of 2011. Net revenues (total revenues less net losses and loss adjustment and commissions expenses) increased 8.6% to $31.3 million for the third quarter of 2012, compared to $28.8 million for the prior-year period. The change in accounting estimate recorded during the three months ended September 30, 2012 increased total revenues and net revenues by $4.0 million and $1.2 million, respectively.

Operating expenses were $20.7 million compared with $18.2 million one year ago. The 2011 acquisition of Pacific Benefits Group contributed $1.4 million of the increase.

Net income for the third quarter 2012 was $4.1 million or $0.20 per diluted share, comparable to $4.1 million, or $0.19 per diluted share in the third quarter 2011. The change in accounting estimate contributed $1.0 million during the quarter. In addition, as previously announced, the company experienced a one-time charge of $0.7 million (pre-tax) during the quarter related to the retirement of the previous debt facility.

Adjusted EBITDA for the third quarter of 2012 was $10.9 million, compared to $10.8 million for the third quarter of 2011. Adjusted EBITDA margin for the third quarter of 2012 was 34.9%, compared to 37.7% for the prior-year period.

Segment Results
Payment Protection
For the three months ended September, 2012, net revenues for the Payment Protection segment were $17.5 million, compared to $15.8 million for the prior-year period. The current period included net revenues of $1.2 million attributable to the change in accounting estimate. EBITDA for the Payment Protection segment was $7.9 million for the third quarter of 2012, compared to $7.3 million for the prior-year period. EBITDA margin for the Payment Protection segment was 45.3% for the third quarter of 2012, compared to 46.4% for the prior-year period. Direct and assumed written premiums increased 6.3% year-over-year to a record $100.4 million.

Business Process Outsourcing (BPO)
Net revenues for the BPO segment increased to $5.0 million for the third quarter of 2012, compared to $3.8 million for the third quarter of 2011, primarily attributable to the PBG acquisition. EBITDA for the BPO segment was essentially flat at $1.1 million for the third quarter of 2012 compared to the prior-year period. EBITDA margin for the BPO segment declined to 22.5% for the third quarter of 2012, compared to 29.1% for the prior-year period. The decline reflects weaker than expected margins from Pacific Benefits Group.

Brokerage
Net revenues for the Brokerage segment declined to $8.8 million for the third quarter of 2012 from $9.2 million in the prior-year period. EBITDA for the Brokerage segment fell modestly to $1.6 million for the third quarter of 2012, compared to $1.7 million for the prior-year period. EBITDA margin for the Brokerage segment declined 80 bps year over year to 17.8%. Bliss & Glennon revenues continued to outpace prior year results, while a soft reinsurance market is impacting eReinsure.

Balance Sheet
Total invested assets and cash and cash equivalents amounted to $129.2 million as of September, 2012 compared to $127.1 million as of December 31, 2011. Unearned premiums were $231.1 million as of September 30, 2012 compared to $227.9 million as of December 31, 2011. Total debt outstanding at September 30, 2012 was $106.2 million compared to $108.0 million as of December 31, 2011. Stockholder's equity increased to $137.3 million as of September, 30, 2012 compared to $127.6 million as of December 31, 2011.

During the quarter Fortegra continued to execute on its share repurchase authorization, repurchasing 147,503 shares at an average price of $8.02 per share. Since inception, the company repurchased 979,634 shares while $3.5 million remains available on the authorization.

Conference Call Information
Fortegra's executive management will host a conference call to discuss its third quarter 2012 results tomorrow, Tuesday, November 13, 2012 at 8:30 a.m. Eastern Time. To participate in the live call, dial (877) 407-3982 within the U.S., or (201) 493-6780 for international callers. A live audio webcast will also be available on the Investors page of the company's website, http://www.fortegra.com. A replay of the call will be available beginning November 13, 2012 at 11:30 a.m. ET and ending on November 20, 2012 11:59 p.m. ET on the company's website, and by dialing (877) 870-5176 in the U.S. or (858) 384-5517 for international callers. The passcode for the replay is 402337.

Statistical Supplement
In addition, the company has provided a statistical supplement which can be accessed through the "Investor Relations" section of Fortegra's website at: http://www.fortegra.com

About Fortegra
Fortegra Financial Corporation is an insurance services company that provides distribution and administration services and insurance-related products to insurance companies, insurance brokers and agents and other financial services companies in the United States. Fortegra's brands include: Life of the South, Consecta, Bliss & Glennon (B&G), eReinsure (eRe), Auto Knight Motor Club, Continental Car Club, United Motor Club, Pacific Benefits Group (PBG), Universal Equipment Recovery Group (UERG), and South Bay Acceptance Corporation (SBAC).

Use of Non-GAAP Financial Information
Fortegra presents certain additional financial measures related to its Business Segments that are "Non-GAAP measures" within the meaning of Regulation G under the Securities Act of 1934. Fortegra presents these Non-GAAP measures to provide investors with additional information to analyze Fortegra's performance from period to period. Management also uses these measures to assess performance for Fortegra's segments and to allocate resources in managing Fortegra's businesses. However, investors should not consider these Non-GAAP measures as a substitute for the financial information that Fortegra reports in accordance with GAAP. These Non-GAAP measures reflect subjective determinations by management, and may differ from similarly titled Non-GAAP measures presented by other companies.

In this Earnings Release, we present EBITDA and Adjusted EBITDA. These financial measures as presented in this Earnings Release are considered Non-GAAP financial measures and are not recognized terms under U.S. GAAP and should not be used as an indicator of, and are not an alternative to, net income as a measure of operating performance. EBITDA as used in this Earnings Release is net income before interest expense, income taxes, non-controlling interest, depreciation and amortization. Adjusted EBITDA as used in this Earnings Release means "Consolidated Adjusted EBITDA" which is defined under our credit facility with Well Fargo Bank, N.A., is generally consolidated net income before consolidated interest expense, consolidated amortization expense, consolidated depreciation expense and consolidated income tax expense. The other items excluded in this calculation may include if applicable, but are not limited to, specified acquisition costs, impairment of goodwill and other non-cash charges, stock-based compensation expense and unusual or non-recurring charges. The calculation below does not give effect to certain additional adjustments permitted under our credit facility, which if included, would increase the amount of Adjusted EBITDA reflected in this table. We believe presenting EBITDA and Adjusted EBITDA provides investors with a supplemental financial measure of our operating performance.

In addition to the financial covenant requirements under our credit facility, management uses EBITDA and Adjusted EBITDA as financial measures of operating performance for planning purposes, which may include, but are not limited to, the preparation of budgets and projections, the determination of bonus compensation for executive officers, the analysis of the allocation of resources and the evaluation of the effectiveness of business strategies. Although we use EBITDA and Adjusted EBITDA as financial measures to assess the operating performance of our business, both measures have significant limitations as analytical tools because they exclude certain material expenses. For example, they do not include interest expense and the payment of income taxes, which are both a necessary element of our costs and operations. Since we use property and equipment to generate service revenues, depreciation expense is a necessary element of our costs. In addition, the omission of amortization expense associated with our intangible assets further limits the usefulness of this financial measure. Management believes the inclusion of the adjustments to EBITDA and Adjusted EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. Because EBITDA and Adjusted EBITDA do not account for these expenses, its utility as a financial measure of our operating performance has material limitations. Due to these limitations, management does not view EBITDA and Adjusted EBITDA in isolation or as a primary financial performance measure.

We believe EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of similar companies in similar industries and to measure the company's ability to service its debt and other cash needs. Because the definitions of EBITDA and Adjusted EBITDA (or similar financial measures) may vary among companies and industries, they may not be comparable to other similarly titled financial measures used by other companies.

Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. Such statements are subject to risks and uncertainties. All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "project,'' "plan," "intend," "believe," "may," "should," "can have," "likely" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

The forward-looking statements contained in this press release are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read this press release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. We believe these factors include, but are not limited to, those described under Item 1A. - "Risk Factors" in Fortegra's most current Annual Report on Form 10-K and most current Quarterly Report on Form 10-Q. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking statements.

Any forward-looking statement made by us in this press release speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Further information concerning Fortegra and its business, including factors that potentially could materially affect Fortegra's financial results, is contained in Fortegra's filings with the SEC, which are available free of charge at the SEC's website at http://www.sec.gov and from Fortegra's website in the "Investor Relations" section under "SEC Filings" at http://www.fortegra.com.

FORTEGRA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(All Amounts in Thousands Except Share and Per Share Amounts)
			For the Three Months Ended							For the Nine Months Ended
			September 30, 2012				September 30, 2011			September 30, 2012				September 30, 2011
Revenues:
	Service and administrative fees		$	10,056			$	10,125		$	28,790			$	28,041
	Brokerage commissions and fees			8,411				8,611			27,295				25,686
	Ceding commission			11,122				7,027			25,396				21,428
	Net investment income			744				801			2,219				2,636
	Net realized (losses) gains on the sale of investments			(16	)			1,196			(6	)			2,423
	Net earned premium			33,893				28,673			97,770				84,646
	Other income			52				18			172				138
Total revenues				64,262				56,451			181,636				164,998
	Net losses and loss adjustment expenses			11,430				9,714			32,272				28,338
	Commissions			21,548				17,926			61,479				53,766
Net Revenues				31,284				28,811			87,885				82,894
Expenses:
	Personnel costs			12,503				10,746			36,020				32,825
	Other operating expenses			7,876				7,252			21,425				23,704
	Stock based compensation expense			288				214			657				615
	Depreciation			871				886			2,584				2,283
	Amortization of intangibles			1,127				998			3,775				3,428
	Interest expense			2,025				1,906			5,267				5,862
	Loss on sale of subsidiary			-				477			-				477
Total expenses				24,690				22,479			69,728				69,194
Income before income taxes and non-controlling interest				6,594				6,332			18,157				13,700
	Income taxes			2,455				2,259			6,520				4,847
Income before non-controlling interest				4,139				4,073			11,637				8,853
	Less: net income (loss) attributable to non-controlling interest			29				1			62				(171	)
Net income			$	4,110			$	4,072		$	11,575			$	9,024
Earnings per share:
	Basic		$	0.21			$	0.20		$	0.59			$	0.44
	Diluted		$	0.20			$	0.19		$	0.56			$	0.42
Weighted average common shares outstanding:
	Basic			19,531,694				20,404,441			19,705,105				20,355,057
	Diluted			20,463,238				21,214,365			20,620,084				21,375,184

FORTEGRA FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(All Amounts in Thousands Except Share and Per Share Amounts)
					September 30, 2012				June 30, 2012(1)				March 31, 2012(1)				December 31, 2011
Assets:
Investments:
	Fixed maturity securities available-for-sale at fair value (amortized cost of $107,150 at September 30, 2012 and $92,311 at December 31, 2011)				$	110,833			$	88,021			$	92,843			$	93,509
	Equity securities available-for-sale at fair value (cost of $5,882 at September 30, 2012 and $1,203 at December 31, 2011)					6,085				5,653				3,793				1,219
	Short-term investments					970				970				970				1,070
		Total investments				117,888				94,644				97,606				95,798
Cash and cash equivalents						11,284				28,350				18,676				31,339
Restricted cash						21,232				23,659				18,959				14,180
Accrued investment income						1,115				985				927				929
Notes receivable, net						4,281				3,783				3,802				3,603
Accounts and premiums receivable, net						25,056				27,384				31,184				20,172
Other receivables						15,708				14,505				16,798				9,103
Reinsurance receivables						197,184				191,671				186,421				194,740
Deferred acquisition costs						56,903				55,983				52,517				55,467
Property and equipment, net						17,227				16,915				15,728				14,666
Goodwill						104,668				104,668				104,500				104,500
Other intangibles, net						50,803				51,930				52,928				54,410
Other assets						6,452				6,702				5,836				6,070
			Total assets		$	629,801			$	621,179			$	605,882			$	604,977
Liabilities:
Unpaid claims					$	32,041			$	31,618			$	32,497			$	32,583
Unearned premiums						231,114				228,991				221,059				227,929
Policyholder account balances						26,223				26,942				27,565				28,040
Accrued expenses, accounts payable, income taxes and other liabilities						51,785				49,347				42,348				35,446
Deferred revenue						19,164				18,386				17,617				20,781
Note payable						71,168				72,000				74,700				73,000
Preferred trust securities						35,000				35,000				35,000				35,000
Deferred income taxes, net						26,023				25,691				24,815				24,614
		Total liabilities				492,518				487,975				475,601				477,393
Stockholders' Equity:
Preferred stock, par value $0.01; 10,000,000 shares authorized; none issued						-				-				-				-
Common stock, par value $0.01; 150,000,000 shares authorized; 20,681,252 and 20,561,328 shares issued at September 30, 2012 and December 31, 2011, respectively, including shares in treasury						207				207				206				206
Treasury stock, at cost; 1,024,212 shares and 516,132 shares at September 30, 2012 and December 31, 2011, respectively						(6,651	)			(5,468	)			(4,122	)			(2,728	)
Additional paid-in capital						97,095				96,785				96,378				96,199
Accumulated other comprehensive loss, net of tax						(673	)			(1,480	)			(1,324	)			(1,754	)
Retained earnings						46,725				42,615				38,613				35,150
Stockholders' equity before non-controlling interest						136,703				132,659				129,751				127,073
Non-controlling interest						580				545				530				511
		Total stockholders' equity				137,283				133,204				130,281				127,584
			Total liabilities and stockholders' equity		$	629,801			$	621,179			$	605,882			$	604,977
(1) The balance sheets for March 31, 2012 and June 30, 2012 have been recast to reflect prior period adjustments related to business combination valuation adjustments

FORTEGRA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME- Segments (Unaudited)
(All Amounts in Thousands)
				For the Three Months Ended							For the Nine Months Ended
				September 30, 2012			September 30, 2011				September 30, 2012			September 30, 2011
Segment Net Revenue
	Payment Protection			$	17,494		$	15,770			$	45,676		$	43,871
	BPO				4,951			3,833				13,565			11,088
	Brokerage				8,839			9,208				28,644			27,935
	Corporate				-			-				-			-
	Segment net revenues				31,284			28,811				87,885			82,894
	Net losses and loss adjustment expenses				11,430			9,714				32,272			28,338
	Commissions				21,548			17,926				61,479			53,766
		Total segment revenue			64,262			56,451				181,636			164,998
Operating Expenses
	Payment Protection				9,563			8,445				26,205			25,857
	BPO				3,836			2,717				10,320			8,164
	Brokerage				7,268			7,491				21,577			21,837
	Corporate				-			36				-			1,763
	Total operating expenses				20,667			18,689				58,102			57,621
	Net losses and loss adjustment expenses				11,430			9,714				32,272			28,338
	Commissions				21,548			17,926				61,479			53,766
		Total operating expenses before depreciation, amortization and interest expense			53,645			46,329				151,853			139,725
EBITDA
	Payment Protection				7,931			7,325				19,471			18,014
	BPO				1,115			1,116				3,245			2,924
	Brokerage				1,571			1,717				7,067			6,098
	Corporate				-			(36	)			-			(1,763	)
		Total EBITDA			10,617			10,122				29,783			25,273
Depreciation and amortization
	Payment Protection				863			927				2,577			3,204
	BPO				494			307				1,495			824
	Brokerage				641			650				2,287			1,683
	Corporate				-			-				-			-
		Total depreciation and amortization			1,998			1,884				6,359			5,711
Interest Expense
	Payment Protection				1,359			1,053				3,342			3,622
	BPO				294			96				820			258
	Brokerage				372			757				1,105			1,982
	Corporate				-			-				-			-
		Total interest expense			2,025			1,906				5,267			5,862
Income before income taxes and non-controlling interest
	Payment Protection				5,709			5,345				13,552			11,188
	BPO				327			713				930			1,842
	Brokerage				558			310				3,675			2,433
	Corporate				-			(36	)			-			(1,763	)
Total income before income taxes and non-controlling interest					6,594			6,332				18,157			13,700
	Income taxes				2,455			2,259				6,520			4,847
	Less: net income (loss) attributable to non-controlling interest				29			1				62			(171	)
Net income				$	4,110		$	4,072			$	11,575		$	9,024

FORTEGRA FINANCIAL CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION - ADJUSTED EBITDA (Unaudited)
(All Amounts in Thousands, except for percentages)
				For the Three Months Ended								For the Nine Months Ended
				September 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011
Net income				$	4,110			$	4,072			$	11,575			$	9,024
	Depreciation				871				886				2,584				2,283
	Amortization of intangibles				1,127				998				3,775				3,428
	Interest expense				2,025				1,906				5,267				5,862
	Income taxes				2,455				2,259				6,520				4,847
	Net income (loss) attributable to non-controlling interest				29				1				62				(171	)
EBITDA					10,617				10,122				29,783				25,273
		Transaction costs (a)			5				36				139				829
		Stock-based compensation expense			288				214				657				615
		Corporate governance study			-				-				-				248
		Relocation expenses			-				-				-				207
		Statutory audits			-				-				-				98
		Loss on sale of subsidiary			-				477				-				477
Adjusted EBITDA				$	10,910			$	10,849			$	30,579			$	27,747
EBITDA Margin					33.9	%			35.1	%			33.9	%			30.5	%
Adjusted EBITDA Margin					34.9	%			37.7	%			34.8	%			33.5	%
(a) Represents transaction costs associated with acquisitions.

FORTEGRA FINANCIAL CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION - NET INCOME (Unaudited)
(All Amounts in Thousands Except Share and Per Share Amounts)
				For the Three Months Ended						For the Nine Months Ended
				September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Net income				$	4,110		$	4,072		$	11,575		$	9,024
	Non-GAAP Adjustments, net of tax
		Transaction costs associated with acquisitions (1)			5			36			139			829
		Stock-based compensation			186			138			425			398
		Corporate governance study			-			-			-			156
		Relocation expenses			-			-			-			130
		Statutory audits			-			-			-			62
		Loss on sale of subsidiary			-			300			-			300
		Retirement of debt (2)			439			-			439			560
	Total Non-GAAP adjustments, net of tax				630			474			1,003			2,435
Net income - Non-GAAP basis				$	4,740		$	4,546		$	12,578		$	11,459
GAAP Earnings per share - basic				$	0.21		$	0.20		$	0.59		$	0.44
	Non-GAAP adjustments, net of tax				0.03			0.02			0.05			0.12
Non-GAAP Earnings per common share - basic				$	0.24		$	0.22		$	0.64		$	0.56
GAAP Earnings per share - diluted				$	0.20		$	0.19		$	0.56		$	0.42
	Non-GAAP adjustments, net of tax				0.03			0.02			0.05			0.12
Non-GAAP Earnings per common share - diluted				$	0.23		$	0.21		$	0.61		$	0.54
Weighted average common shares outstanding:
	Basic				19,531,694			20,404,441			19,705,105			20,355,057
	Diluted				20,463,238			21,214,365			20,620,084			21,375,184
(1) Adjustments not tax effected.
(2) Adjustments not tax effected for the 2011 periods presented. 2012 amounts represent the write off of $678 in previously capitalized transactions costs on the termination of the SunTrust Bank, N.A., revolving credit line, net of tax.