The Midland Company Reports Fourth-Quarter and Record Full-Year Results
CINCINNATI, Feb. 21 /PRNewswire-FirstCall/ — The Midland Company , a highly focused provider of specialty insurance products and services, today reported fourth quarter 2007 net income of $13.8 million, or 69 cents per share, which includes six cents in realized capital gains. The fourth quarter results also include 33 cents of merger related expenses. This compares to $21.1 million, or $1.07 per share, which included ten cents in realized capital gains, in the fourth quarter of 2006. All per share amounts are presented on an after-tax, diluted basis.
John W. Hayden, Midland president and chief executive officer, said, “We are pleased to announce another year of achieving record profits while growing our top line at a double-digit pace. This marks the fourth consecutive year The Midland Company has delivered record full year earnings results, further demonstrating our sound business fundamentals.
“We are also gratified by our fourth quarter results which were driven by solid non-catastrophe underwriting. In addition to certain merger related expenses, our fourth quarter results were impacted by higher than normal catastrophe losses, primarily relating to the brush fires in California,” Hayden commented. Catastrophe related losses for the fourth quarter were 38 cents per share, compared to 21 cents per share a year ago.
Midland’s wholly owned insurance subsidiary, American Modern Insurance Group, specializes in providing insurance products and services for specialty markets such as manufactured housing, site-built homes, motorcycles, watercraft, snowmobiles, recreational vehicles, excess and surplus line coverages and credit life and a variety of related financial institution credit insurance products. American Modern’s products and services are offered through diverse distribution channels.
Fourth-Quarter Property and Casualty Premiums Grow 22.6 Percent
American Modern’s total property and casualty gross written premiums grew 22.6 percent to $225.2 million in the fourth quarter, compared to $183.6 million in the prior year. “Strong growth from our mortgage fire, site-built dwelling and collateral protection products continue to drive our growth results. We continue to be pleased by the growth of our manufactured housing premiums, which were up 6.3 percent for the quarter to $83.3 million, compared to $78.3 million in the fourth quarter of last year.
“The growth of our manufactured housing premiums is indicative of the outstanding results our marketplace brand awareness and policyholder retention efforts have delivered. Those efforts, in conjunction with our ability to deliver easy to use technology to our distribution partners are the cornerstone of our organic growth strategies,” Hayden said.
Property and Casualty Combined Ratio Solid at 95.3 Percent
American Modern’s property and casualty combined ratio was 95.3 percent for the quarter, compared to 91.0 percent in last year’s fourth quarter. Excluding catastrophe losses, American Modern’s combined ratio for the quarter was a solid 89.2 percent, slightly higher than the exceptional 87.4 percent recorded a year ago.
“We are pleased with the strong underwriting profits we were able to deliver during the fourth quarter, given higher than normal catastrophe losses. Our mortgage fire and excess and surplus lines products posted combined ratios below 90 percent for the quarter. The manufactured housing combined ratio for the fourth quarter was 95.1 percent, compared to 95.0 percent last year.
“Our consistent results continue to provide evidence of American Modern’s commitment to disciplined underwriting, intelligent product design and pricing and sound claims management,” Hayden commented.
Record Full-Year Results
Net income for the full year was a record $86.2 million, or $4.30 per share, including 47 cents in net realized capital gains. That compares with the previous record of net income of $70.7 million, or $3.60 per share, including 29 cents in net realized capital gains set in 2006.
American Modern’s combined ratio was 93.0 percent for the full year of 2007, compared to 93.8 percent in 2006. Excluding the impact of catastrophe losses, American Modern’s combined ratio was 89.9 percent for the full year 2007, compared to 88.5 percent last year.
American Modern’s property and casualty direct and assumed written premiums grew 16.1 percent to $906.3 million for the full year 2007, compared to $780.8 in 2006. Manufactured housing written premiums grew 4.2 percent to $352.0 million from $337.8 million reported in 2006.
Investment Portfolio
Net pre-tax investment income (excluding capital gains/losses) was $12.3 million for the fourth quarter, up 9.8 percent from $11.2 million in the fourth quarter of 2006. For the full year, net pre-tax investment income was $47.4 million, up 12.3 percent from $42.2 million in 2006. The market value of Midland’s investment portfolio was $1.1 billion at December 31, 2007, compared with $1.0 billion at year-end 2006. The annualized pre-tax equivalent yield, on a cost basis, of the fixed income portfolio was six percent in 2007 compared with 5.9 percent in 2006. The company’s fixed income portfolio has an average credit quality rating of ‘AA.’
Record Profit Leads to Record Book Value Per Share
Midland’s shareholders’ equity increased to $649.9 million, resulting in a record book value per share of $33.45 at December 31, 2007, up 11.9 percent from $29.90 per share last year. The company’s book value per share has grown at a compounded annual rate of 12.2 percent over the last 10 years.
M/G Transport Group Posts Strong Year
M/G Transport, Midland’s niche river transportation subsidiary, contributed an after-tax profit of 69 cents per share for the full-year 2007, compared with 26 cents per share reported in 2006. Due to the pending sale of the transportation business, these results have been classified as discontinued operations.
About the Company
Midland, which is headquartered in Cincinnati, Ohio, is a provider of specialty insurance products and services through its wholly owned subsidiary, American Modern Insurance Group, which accounts for approximately 95 percent of Midland’s consolidated revenue. American Modern specializes in writing physical damage insurance and related coverages on manufactured housing and has expanded to other specialty insurance products including coverage for site-built homes, motorcycles, watercraft, snowmobiles, recreational vehicles, physical damage on long-haul trucks, extended service contracts, excess and surplus lines coverages, credit life and related products as well as collateral protection and mortgage fire products sold to financial institutions and their customers. Midland also owns a niche transportation business, M/G Transport Group, which operates a fleet of dry cargo barges for the movement of dry bulk commodities on the inland waterways. Midland’s common stock is traded on the Nasdaq Global Select Market under the symbol MLAN. Additional information on the company can be found on the Internet at http://www.midlandcompany.com/.
Forward-Looking Statements Disclosure
Certain statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These statements include certain discussions relating to underwriting, premium and investment income volume, business strategies, profitability and business relationships, as well as any other statements concerning the year 2008 and beyond. The forward-looking statements involve risks, uncertainties and other factors that may cause results to differ materially from those anticipated in those statements. Factors that might cause results to differ from those anticipated include, without limitation, adverse weather conditions, changes in underwriting results affected by adverse economic conditions, fluctuations in the investment markets, changes in the retail marketplace, changes in the laws or regulations affecting the operations of the company or its subsidiaries, changes in the business tactics or strategies of the company, its subsidiaries or its current or anticipated business partners, the financial condition of the company’s business partners, acquisitions or divestitures, changes in market forces, litigation and the other risk factors that have been identified in the company’s filings with the SEC, any one of which might materially affect the operations of the company or its subsidiaries. Any forward-looking statements speak only as of the date made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they are made.
THE MIDLAND COMPANY FINANCIAL HIGHLIGHTS (UNAUDITED) Three-Months Ended Twelve-Months Ended December 31, December 31, % % 2007 2006 Change 2007 2006 Change Revenues from Continuing Operations $214,982 $196,018 9.7% $834,445 $739,461 12.8% Net Income From Continuing Operations $9,652 $19,835 $72,393 $65,587 Gain From Discontinued Operations $4,191 $1,275 $13,767 $5,108 Net Income $13,843 $21,110 $86,160 $70,695 Net Income per Share (Diluted) $0.69 $1.07 $4.30 $3.60 Dividends Declared per Share $0.10000 $0.06125 63.3% $0.40000 $0.24500 63.3% Market Value per Share $64.69 $41.95 54.2% $64.69 $41.95 54.2% Book Value per Share $33.45 $29.90 11.9% $33.45 $29.90 11.9% Shares Outstanding 19,429 19,224 19,429 19,224 AMIG’s Property and Casualty Operations: Direct and Assumed Written Premium $225,190 $183,623 22.6% $906,342 $780,795 16.1% Net Written Premium $192,057 $156,028 23.1% $782,199 $678,107 15.4% Combined Ratio (GAAP) 95.3% 91.0% 93.0% 93.8% Combined Ratio (GAAP) – Excluding Catastrophe Losses 89.2% 87.4% 89.9% 88.5% Note: Amounts in thousands except per share data. THE MIDLAND COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three-Months Ended December 31, 2007 2006 Revenue: Premiums earned $197,584 $178,638 Other insurance income 3,473 3,182 Net investment income 12,347 11,245 Net realized investment gains 1,578 2,953 Total 214,982 196,018 Costs and Expenses: Losses and loss adjustment expenses 85,706 72,715 Commissions and other policy acquisition costs 66,187 55,385 Operating and administrative expenses 48,432 38,834 Interest expense 1,203 1,066 Total 201,528 168,000 Income Before Federal Income Tax 13,454 28,018 Provision for Federal Income Tax 3,802 8,183 Net Income From Continuing Operations 9,652 19,835 Discontinued Operations: Gain from discontinued operations 6,456 1,935 Provision for federal income tax 2,265 660 Gain from discontinued operations 4,191 1,275 Net Income $13,843 $21,110 Basic Earnings per Common Share: Continuing operations $0.50 $1.03 Discontinued operations 0.21 0.07 Total $0.71 $1.10 Diluted Earnings per Common Share: Continuing operations $0.48 $1.01 Discontinued operations 0.21 0.06 Total $0.69 $1.07 Dividends per Common Share $0.10000 $0.06125 THE MIDLAND COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Twelve-Months Ended December 31, 2007 2006 Revenues: Premiums earned $759,822 $675,864 Other insurance income 13,469 12,929 Net investment income 47,425 42,223 Net realized investment gains 13,729 8,445 Total 834,445 739,461 Costs and Expenses: Losses and loss adjustment expenses 328,896 307,503 Commissions and other policy acquisition costs 248,882 209,719 Operating and administrative expenses 151,372 127,682 Interest expense 4,084 4,545 Total 733,234 649,449 Income Before Federal Income Tax 101,211 90,012 Provision for Federal Income Tax 28,818 24,425 Net Income From Continuing Operations 72,393 65,587 Discontinued Operations: Gain from discontinued operations 21,209 7,842 Provision for federal income tax 7,442 2,734 Gain from discontinued operations 13,767 5,108 Net Income $86,160 $70,695 Basic Earnings per Common Share: Continuing operations $3.74 $3.44 Discontinued operations 0.72 0.26 Total $4.46 $3.70 Diluted Earnings per Common Share: Continuing operations $3.62 $3.34 Discontinued operations 0.68 0.26 Total $4.30 $3.60 Dividends per Common Share $0.40000 $0.24500 Note: Dollar amounts in thousands except per share data. Shares used for EPS calculations (000′s): Basic EPS Diluted EPS Twelve months ended December 31 2007 19,340 20,017 2006 19,081 19,658 Three months ended December 31 2007 19,401 20,156 2006 19,173 19,729 THE MIDLAND COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) December 31, December 31, 2007 2006 ASSETS Cash and Marketable Securities $1,106,465 $1,036,427 Receivables – Net 280,172 269,656 Property, Plant and Equipment – Net 115,895 91,661 Deferred Insurance Policy Acquisition Costs 111,571 99,277 Other 37,074 36,997 Assets of Subsidiary Held For Sale 50,807 35,510 Total Assets $1,701,984 $1,569,528 LIABILITIES AND SHAREHOLDERS’ EQUITY Unearned Insurance Premiums $490,367 $445,324 Insurance Loss Reserves 230,230 221,639 Long-Term Debt 83,590 84,093 Short-Term Borrowings 8,270 17,937 Deferred Federal Income Tax 35,432 41,711 Other Payables and Accruals 181,975 164,434 Liabilities of Subsidiary Held For Sale 22,207 19,644 Shareholders’ Equity 649,913 574,746 Total Liabilities and Shareholders’ Equity $1,701,984 $1,569,528 Note: Dollar amounts in thousands.
The Midland Company
CONTACT: W. Todd Gray, Executive Vice President and CFO of The MidlandCompany, +1-513-943-7100
Web site: http://www.midlandcompany.com/