* Record Setting Third Quarter Earnings Per Share of 88 Cents
* Solid Non-Catastrophe Underwriting Coupled with Mild Weather Drives Results
* Double Digit Property and Casualty Premium Growth
* Raises Full Year Earnings Guidance
CINCINNATI, Oct. 24 /PRNewswire-FirstCall/ -- The Midland Company
(Nasdaq: MLAN), a highly focused provider of specialty insurance products and
services, today reported record results for the third quarter ended September
30, 2006. Net income for the quarter was a record $17.3 million, or 88 cents
per share, exceeding last year's third quarter net income of $3.7 million, or
19 cents per share. All per share amounts are on an after-tax, diluted basis.
Prior period amounts have been restated to reflect the impact of expensing
stock options, which the company implemented December 31, 2005.
Net income before realized capital gains* for the quarter was also a
record $16.6 million, or 85 cents per share compared to the year ago level of
$1.7 million, or 8 cents per share. The increase of 77 cents per share from
the prior year third quarter is primarily the result of 82 cents per share
lower catastrophe losses in the current quarter, offset by a 10 cent per share
increase in base reinsurance costs. The company believes that this non-GAAP
financial measure provides a clearer picture of the underlying operating
activities than the GAAP measure of net income, as it removes potential issues
such as timing of investment gains (or losses) and allows readers to
individually assess these components of net income.
John W. Hayden, Midland president and chief executive officer, commented,
"We are delighted to deliver these record setting third quarter results. They
are the result of solid non-catastrophe underwriting and relatively benign
weather patterns during the third quarter. Disciplined non-catastrophe
underwriting is at the heart of our profit strategy and we continue to
demonstrate our ability to deliver outstanding results across our broad
specialty insurance product platform.
"We are also very pleased with our top line property and casualty premium
growth during the quarter. Growth in our site-built dwelling, mortgage fire
and excess and surplus product lines paved the way for a double digit growth
rate in the third quarter compared to the prior year. Double digit growth
coupled with record earnings is compelling evidence that the fundamentals of
our business are in order, and reinforces our leadership position in the
specialty insurance marketplace," said Hayden.
Midland's wholly owned insurance subsidiary, American Modern Insurance
Group, specializes in providing insurance products and services for niche
markets such as manufactured housing, site-built dwelling, motorcycle,
watercraft, snowmobile, recreational vehicle and credit life and related
products. American Modern's products and services are offered through diverse
distribution channels.
Strong Non-Catastrophe Underwriting Results
American Modern's property and casualty combined ratio was 95.1 percent in
the third quarter, compared to 106.6 percent a year ago. Catastrophe losses
for the quarter impacted the property and casualty combined ratio by 2.5
percentage points in 2006, as compared to 18.5 percentage points in the prior
year. Catastrophe losses reduced earnings per share by 14 cents in the third
quarter, compared to 96 cents in the prior year third quarter, primarily
emanating from Hurricanes Katrina, Rita and Dennis. These amounts compare to
the 30 cents per share that the company considers normal for third quarter
catastrophe losses.
Excluding catastrophe losses, American Modern's third quarter property and
casualty combined ratio was a solid 92.6 percent, compared with 88.1 percent
in the same period of 2005. The increase in the non-catastrophe combined
ratio over the prior period was driven primarily by additional seasonal losses
related to the casualty product lines and an increase in the cost of the
company's reinsurance.
"We continue to be very pleased with the underwriting trends across our
major product lines. Our manufactured housing combined ratio was a solid 91.5
percent during the third quarter. We also experienced very favorable
underwriting trends in our site-built, mortgage fire and excess and surplus
product lines," Hayden said.
"We have again been well-served by our deep specialty product expertise
and proactive risk management disciplines. Our underwriting proficiency and
commitment to rate adequacy have enabled us to deliver record third quarter
results and further positions us to achieve our long-term financial
objectives," Hayden said.
Double Digit Property and Casualty Premium Growth
American Modern's property and casualty gross written premiums for the
third quarter were $212.7 million, compared to $185.8 million in last year's
third quarter, an increase of 14.5 percent. Hayden commented, "We experienced
strong growth across our broad specialty product platform, with mortgage fire,
site-built dwelling and excess and surplus product lines achieving the most
impressive growth. We continue to emphasize the diversification of our
products and distribution channels to achieve a sustainable level of above
average growth. This diversification strategy continues to demonstrate its
value.
"Our manufactured housing premium actually declined 3.1 percent to
$88.0 million, compared to $90.8 million in the third quarter of 2005, due to
the continued run-off of our lender channel business. However, we remain
encouraged by the manufactured housing premium growth we are getting from our
agency and point of sale distribution channels, and believe we are well
positioned to capture future market share opportunities," Hayden said.
Hayden continued, "We continue to execute our strategic growth plan by
emphasizing organic expansion and policyholder retention complemented with
strategic business alliances and strategically appropriate acquisitions. We
believe that these strategies will position us to achieve our objective of
long-term profitable growth."
Record Nine-Month Results
For the nine months ended September 30, 2006, net income was a record
$49.6 million, or $2.53 per share, which includes 18 cents from realized
capital gains, up from last year's previous record net income of
$45.3 million, or $2.34 cents per share, which included 18 cents per share in
net capital gains. Net income before realized capital gains per share* for
the first nine months of 2006 was also a record $46.0 million, compared to the
previous record set last year of $41.8 million, an increase of 10.0 percent.
American Modern's property and casualty combined ratio was 94.7 percent
for the first nine months of both 2006 and 2005. Excluding the impact of
catastrophe losses, American Modern's combined ratio for the first nine months
of 2006 was 88.9 percent, compared to 87.3 percent last year.
American Modern's property and casualty gross written premiums were
$597.2 million for the first nine months of the year, compared to $533.3 in
the same period last year, an increase of 12.0 percent. Manufactured housing
premiums were moderately higher to $259.5 million for the first nine months of
2006, from $256.6 million for the same period in 2005.
Investment Portfolio, Book Value and Market Value Growth
The market value of Midland's investment portfolio increased to
$1.0 billion at September 30, 2006, compared with $966.1 million at September
30, 2005. Net pre-tax investment income (which does not include capital gains
and losses) increased 3.4 percent to $10.5 million for the third quarter
compared with $10.1 million in last year's third quarter. This increase is
driven by the year-over-year growth of the fixed income portfolio and higher
interest rates. The annualized pre-tax equivalent yield, on a cost basis, of
Midland's fixed income portfolio was 5.8 percent in the third quarter of 2006,
up from 5.3 percent in the comparable prior period.
After-tax realized investment gains from Midland's investment portfolio
totaled three cents per share in the third quarter of 2006, compared to
11 cents per share in the last year's third quarter. Pre-tax net unrealized
gains on Midland's fixed income portfolio were $7.4 million at September 30,
2006, down from $10.7 million of pre-tax net unrealized gains at September 30,
2005. Pre-tax net unrealized gains on Midland's equity portfolio were
$99.2 million at September 30, 2006, up from $82.7 million at September 30,
2005.
Midland's shareholders' equity increased to a record $545.7 million, or
$28.50 per share, at September 30, 2006, up from $465.2 million, or $24.56 per
share, at September 30, 2005, an increase of 16.0 percent on a per share
basis. Midland's book value per share has grown at a compound annual rate of
13.1 percent over the last 10 years.
Hayden noted that, "Midland's common stock continues to outperform the
broader equities market and virtually every relevant index for the 1-, 5-,
10-, 15- and 20-year periods ended September 30, 2006. We are extremely proud
of this performance record and believe it is a good indicator of the value we
deliver to our shareholders."
M/G Transport Group
M/G Transport, Midland's transportation subsidiary, contributed an after-
tax profit of seven cents per share for the third quarter of 2006, compared to
three cents per share for the third quarter of 2005. For the first nine
months, M/G transport has contributed an after-tax profit of 20 cents per
share, which doubles the prior year contribution of 10 cents per share. "M/G
Transport continues to take full advantage of the exceptional current market
conditions through increased pricing power and effective management of its
barge fleet," Hayden said.
Named to Ward's Top 50 Property and Casualty Insurance Companies
American Modern Insurance Group has once again been recognized as one of
Ward's Top 50 Property and Casualty Insurance Companies, balancing financial
safety, consistency and performance. "This marks the eighth consecutive year
American Modern has achieved this distinction," Hayden said. "We are
extremely proud of our track record of being consistently recognized alongside
such an elite group of insurance companies."
Raises Full Year Earnings Guidance
Hayden commented, "As we look toward the final quarter of 2006, we remain
very optimistic about our top line growth and earnings outlook. We believe
that we are on track to meet our previously announced high single-digit to low
double-digit top line growth expectation for the full year 2006. From an
earnings standpoint, we remain optimistic about our full year results and are
raising our previously issued guidance. The first few weeks of October are
off to a good start and we expect our solid non-catastrophe underwriting
results will continue throughout the fourth quarter. Assuming normal weather
for the remainder of the year, we anticipate a full year property and casualty
combined ratio in the range of 93.5 percent to 94.5 percent. Based on this
level of anticipated underwriting profit, we are raising our annual earnings
estimated range to $3.10 to $3.30 per share, assuming no net realized capital
gains or losses, which is ahead of our previously issued guidance of $2.90 to
$3.20 per share."
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 National Market under the symbol MLAN.
Additional information on the company can be found on the Internet at
www.midlandcompany.com.
*Non-GAAP Measure and Reconciliation to GAAP Measure
Net income before realized capital gains is a non-GAAP measure. Items
excluded from this measure are significant components in understanding and
assessing financial performance. The company believes that this non-GAAP
financial measure provides a clearer picture of the underlying operating
activities than the GAAP measure of net income, as it removes potential issues
such as timing of investment gains (or losses) and allows readers to
individually assess these components of net income.
Reconciliation to GAAP:
Third Quarter Nine Months
Dollars in Millions (After-tax): 2006 2005 2006 2005
Net Income Before Realized
Capital Gains* $16.6 $1.7 $46.0 $41.8
Net Realized Capital Gains 0.7 2.0 3.6 3.5
Net Income (GAAP) $17.3 $3.7 $49.6 $45.3
Per Share Amounts (After-tax, 2006 2005 2006 2005
Diluted):
Net Income Before Realized $0.85 $0.08 $2.35 $2.16
Capital Gains*
Net Realized Capital Gains 0.03 0.11 0.18 0.18
Net Income (GAAP) $0.88 $0.19 $2.53 $2.34
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 2006 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
September 30,
2006 2005 % Change
Revenues $204,813 $173,243 18.2%
Net Income $17,345 $3,732
Net Income per Share (Diluted) $0.88 $0.19
Dividends Declared per Share $0.06125 $0.05625 8.9%
Market Value per Share $43.32 $36.03 20.2%
Book Value per Share $28.50 $24.56 16.0%
Shares Outstanding 19,147 18,943
AMIG's Property and Casualty Operations:
Direct and Assumed Written Premium $212,707 $185,778 14.5%
Net Written Premium $185,828 $159,602 16.4%
Combined Ratio (GAAP) 95.1% 106.6%
Combined Ratio (GAAP) -
Excluding Catastrophe Losses 92.6% 88.1%
AMIG's Life Insurance Operations:
Direct and Assumed Written Premium $14,377 $10,126 42.0%
Net Written Premium $5,449 $2,432 124.1%
Combined Ratio (GAAP) 86.1% 93.1%
Note:
Dollar amounts in thousands except per share data.
THE MIDLAND COMPANY
FINANCIAL HIGHLIGHTS
(UNAUDITED)
Nine-Months Ended
September 30,
2006 2005 % Change
Revenues $581,918 $549,947 5.8%
Net Income $49,585 $45,325
Net Income per Share (Diluted) $2.53 $2.34
Dividends Declared per Share $0.18375 $0.16875 8.9%
Market Value per Share $43.32 $36.03 20.2%
Book Value per Share $28.50 $24.56 16.0%
Shares Outstanding 19,147 18,943
AMIG's Property and Casualty Operations:
Direct and Assumed Written Premium $597,172 $533,294 12.0%
Net Written Premium $522,079 $483,419 8.0%
Combined Ratio (GAAP) 94.7% 94.7%
Combined Ratio (GAAP) -
Excluding Catastrophe Losses 88.9% 87.3%
AMIG's Life Insurance Operations:
Direct and Assumed Written Premium $33,676 $27,574 22.1%
Net Written Premium $10,298 $6,363 61.8%
Combined Ratio (GAAP) 91.3% 77.9%
Note:
Dollar amounts in thousands except per share data.
THE MIDLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three-Months Ended Nine-Months Ended
September 30, September 30,
2006 2005 2006 2005
Revenues:
Premiums earned $175,726 $147,946 $497,226 $473,226
Other insurance income 3,284 3,148 9,747 9,542
Net investment income 10,474 10,128 30,978 30,247
Net realized investment gains 1,094 3,162 5,492 5,378
Transportation 14,235 8,859 38,475 31,554
Total $204,813 $173,243 $581,918 $549,947
Costs and Expenses:
Insurance:
Losses and loss adjustment
expenses $81,949 86,742 $234,788 221,452
Commissions and other policy
acquisition costs 56,405 45,539 154,334 147,584
Operating and administrative
expenses 30,194 27,294 88,507 83,320
Transportation operating expenses 11,904 8,019 32,372 28,563
Interest expense 1,281 1,774 4,016 4,853
Total $181,733 $169,368 $514,017 $485,772
Income Before Federal Income Tax 23,080 3,875 67,901 64,175
Provision for Federal Income Tax 5,735 143 18,316 18,850
Net Income $17,345 $3,732 $49,585 $45,325
Basic Earnings per Common Share: $0.91 $0.20 $2.60 $2.40
Diluted Earnings per Common Share: $0.88 $0.19 $2.53 $2.34
Dividends per Common Share $0.06125 $0.05625 $0.18375 $0.16875
Note:
Dollar amounts in thousands except per share data.
Shares used for EPS calculations (000's):
Basic EPS Diluted EPS
Nine months ended September 30
2006 19,050 19,585
2005 18,878 19,369
Three months ended September 30
2006 19,109 19,644
2005 18,914 19,401
THE MIDLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, December 31,
2006 2005
ASSETS
Cash and Marketable Securities $1,005,520 $950,464
Receivables - Net 271,899 269,862
Property, Plant and Equipment - Net 102,679 89,888
Deferred Insurance Policy Acquisition Costs 102,916 88,374
Other 33,896 29,525
Total Assets $1,516,910 $1,428,113
LIABILITIES AND SHAREHOLDERS' EQUITY
Unearned Insurance Premiums $459,961 $395,007
Insurance Loss Reserves 226,248 254,660
Long-Term Debt 90,828 91,766
Short-Term Borrowings 7,654 20,005
Deferred Federal Income Tax 43,397 38,350
Other Payables and Accruals 143,145 143,948
Shareholders' Equity 545,677 484,377
Total Liabilities and
Shareholders' Equity $1,516,910 $1,428,113
Note: Dollar amounts in thousands.
SOURCE: The Midland Company
CONTACT: W. Todd Gray, Executive Vice President and CFO of The Midland
Company, +1-513-943-7100
Web site: http://www.midlandcompany.com |
