- Strong Earnings of $1.07 Per Share for Fourth Quarter CINCINNATI,
Feb. 15 /PRNewswire-FirstCall/ -- The Midland Company
(NASDAQ:MLAN), a highly focused provider of specialty insurance
products and services, today reported fourth quarter 2006 net
income of $21.1 million, or $1.07 per share, which included ten
cents in realized capital gains. This compares to $20.0 million, or
$1.03 per share, which included three cents in realized capital
gains, in the fourth quarter of 2005. All per share amounts are
presented on an after-tax, diluted basis. Net income before
realized capital gains* for the quarter was $19.1 million, or 97
cents per share. This compares to net income before realized
capital gains* for the fourth quarter of 2005 of $19.4 million, or
$1.00 per share. 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's president and chief executive
officer, said, "We are pleased to report strong earnings for the
fourth quarter of 2006 in what has been another record year for The
Midland Company. This marks the third consecutive year we have
achieved record earnings. We have sustained outstanding momentum
throughout 2006, driven by the positive fundamentals underlying our
business. Our disciplined underwriting processes coupled with our
specialty product expertise provide us a distinct competitive
advantage in our chosen markets and are the driving force behind
our ability to consistently deliver superior financial results.
"The proven profitability of our business model has enabled us to
focus our efforts on growing premiums across our broad specialty
insurance product platform. To that end, we are very pleased to
report that property and casualty gross written premiums for both
the fourth quarter and the full year grew at a double digit pace
over the levels reported in the prior year, far surpassing industry
results for the period. This outstanding result is driven by growth
in our financial institutions division and excess and surplus lines
and clearly demonstrates the power of our continued emphasis on our
diversified products and distribution channels," Hayden said.
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 lines 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 11.5 Percent In the fourth
quarter, American Modern's total property and casualty gross
written premiums grew 11.5 percent to $183.6 million, compared to
$164.6 million in the prior year. "The impressive increase in
property and casualty written premiums was the result of strong
growth from our mortgage fire, excess and surplus lines and
site-built dwelling products. Our investments in sales, marketing
and technology are yielding significant benefits as they are
driving positive trends in policyholder retention, brand awareness
and quote activity. The fourth quarter marked the third consecutive
quarter that we have delivered double digit property and casualty
written premium growth over the prior year quarter. These results
are gratifying and clearly demonstrate that the persistent focus
and dedication to our strategic growth plan has us well positioned
to sustain long-term profitable growth," Hayden said. "While we are
delighted with the growth from our mortgage fire, excess and
surplus lines and site-built dwelling products, we are especially
pleased by our manufactured housing written premium growth of 4.6
percent for the quarter to $78.3 million, up from last year's
fourth quarter of $74.9 million. For the full year, manufactured
housing written premiums grew 1.9 percent to $337.8 million from
$331.5 million reported in 2005. The growth of our manufactured
housing premiums is a particularly encouraging sign because it most
clearly reflects the value of our diverse distribution channels
along with our business retention and brand awareness efforts.
Premium growth from our agency and point of sale distribution
channels continues to gain momentum and we remain well positioned
for future market share opportunities," Hayden said. Property and
Casualty Combined Ratio Solid at 91.0 Percent American Modern's
property and casualty combined ratio was a solid 91.0 percent for
the quarter, which compares to 91.2 percent in last year's fourth
quarter. "We are very pleased with the strong underwriting profits
we were able to deliver during the fourth quarter. This outstanding
profitability was evident across all of our major product segments.
The residential property segment continues to produce positive
results, with a fourth quarter combined ratio of 93.1 percent,
compared to 96.8 percent in the year ago quarter. We are also
experiencing very positive underwriting trends in several of our
other specialty insurance product lines. In particular, our
motorcycle, mortgage fire and excess and surplus lines all posted
combined ratios below 90 percent for the quarter," Hayden
commented. "Excluding the impact of catastrophe losses of 21 cents
per share, an amount we consider "normal" for a fourth quarter, the
property and casualty combined ratio for the fourth quarter was a
solid 87.4 percent, just a few percentage points above the
exceptionally low 83.7 percent reported in the fourth quarter of
the prior year. The manufactured housing non-catastrophe combined
ratio for the fourth quarter was 87.5 percent, while the site-built
dwelling combined ratio remained solid at 85.7 percent. The strong
underwriting profits generated by these lines provide tangible
evidence that our deep knowledge and expertise spans our entire
specialty insurance product platform, and ensures that we remain
true to our key operating principle of consistently producing an
underwriting profit," Hayden said. Record Full Year Results Net
income for the full year was a record $70.7 million, or $3.60 per
share, including 29 cents in net realized capital gains. That
compares with the previous record of net income of $65.3 million,
or $3.37 per share, including 21 cents in net realized capital
gains set in 2005. Net income before net realized capital gains*
for the full year was also a record $65.1 million, or $3.31 per
share, compared to the previous record set last year at $61.3
million, or $3.16 per share. American Modern's combined ratio was
93.8 percent for the full year of both 2006 and 2005. Excluding the
impact of catastrophe losses, American Modern's combined ratio was
a solid 88.5 percent for the full year 2006, compared to 86.4
percent last year. At the same time, American Modern's property and
casualty gross written premiums grew 11.9 percent to $780.8 million
for the full year 2006, compared to $697.9 in 2005. "It is
extremely gratifying to report record earnings for the third
consecutive year while at the same time reporting double digit
property and casualty premium growth. This established track record
of profitability, coupled with the outstanding growth of our
property and casualty written premiums during 2006, further
underscores our leadership position in the specialty insurance
marketplace," Hayden commented. Investment Portfolio Net pre-tax
investment income (excluding capital gains/losses) was $11.2
million for the fourth quarter, up 9.5 percent from $10.3 million
in 2005's fourth quarter. For the full year, net pre-tax investment
income was $42.2 million, up 4.2 percent from $40.5 million in
2005. The market value of Midland's investment portfolio was $1.0
billion at December 31, 2006, compared with $947.1 million at
year-end 2005. The annualized pre-tax equivalent yield, on a cost
basis, of the fixed income portfolio was 5.9 percent in 2006
compared with 5.4 percent in 2005. 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 $574.7 million, resulting in a record book
value per share of $29.90 at December 31, 2006, up 17.1 percent
from $25.54 per share last year. The company's book value per share
has grown at a compounded 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 5-, 10-, 15, and 20-year periods ended December 31,
2006. We are extremely proud of this performance record and believe
it clearly exemplifies the fundamental value we deliver to our
shareholders." M/G Transport Group Posts Strong Year M/G Transport,
Midland's niche river transportation subsidiary, contributed an
after-tax profit of 26 cents per share for the full-year 2006, up
62.5 percent from the 16 cents per share reported in 2005. Full
year return on beginning equity also increased to an outstanding
34.8 percent for 2006, up from an already strong 25.9 percent in
2005. "M/G Transport continues to operate its barge fleet very
effectively. While barge capacity remained limited in the
marketplace, M/G was able to add 75 new barges to its fleet during
2006. These additional barges enabled M/G Transport to take full
advantage of the current favorable freight rate environment and
position it for strong profitability heading into 2007," Hayden
said. 2007 Reinsurance Program The company recently completed the
placement of its catastrophe reinsurance program for 2007. "Our
2007 structure is similar to the 2006 program, but includes an
additional $50 million layer of protection on top of our previous
$150 million cover in order to facilitate our strategic premium
growth. The cost increase of our base catastrophe reinsurance
program, which includes the purchase of the additional cover, will
impact our 2007 earnings by approximately 16 cents per share,"
Hayden commented. "We are proud that our reinsurance program is
comprised of business partners with whom we have forged mutually
beneficial long-term relationships. We are extremely diligent and
deliberate in our reinsurance partner selection as nearly 95
percent of our program is placed with reinsurance partners that are
rated "A-" or higher by A.M. Best. The financial strength of our
partners, combined with our expertly managed reinsurance programs
and exposure discipline provide the foundation for our proactive
risk management approach which is critical in support of our core
profit strategies," Hayden said. 2007 Outlook "The well established
fundamental profitability of our specialty property and casualty
platform gives us great confidence as we move forward into 2007.
The month of January is off to a solid start and, while our
thoughts are with those whose lives were affected by the recent
tornadoes in Florida, we are pleased to report a very minimal
impact to American Modern's policyholders. The strong start to 2007
leaves us on track with our previously issued annual guidance. More
specifically, we are anticipating a full year 2007 property and
casualty combined ratio in the range of 93.0 percent to 94.5
percent, assuming normal weather patterns," Hayden said. "Based on
these levels of underwriting profit, we anticipate full-year 2007
(diluted) earnings per share in the range of $3.25 to $3.55,
assuming no net realized capital gains or losses. "With respect to
the top-line, we look for our positive premium momentum to carry
into 2007. We should exceed industry expectations for growth as we
anticipate mid-single digit premium growth (on a percentage basis)
in 2007, over the 2006 levels. As always, we must balance our
growth and profit objectives by being very deliberate in managing
our exposures in coastal territories as these areas continue to
experience unprecedented insurance market volatility. We will not
sacrifice profit for the sake of growth as our primary objective is
to sustain long-term profitable growth." 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/. *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: Fourth Quarter Full-Year
Dollars in Millions (After-tax): 2006 2005 2006 2005 Net Income
Before Realized Capital Gains* $19.1 $19.4 $65.1 $61.3 Net Realized
Capital Gains 2.0 0.6 5.6 4.0 Net Income (GAAP) $21.1 $20.0 $70.7
$65.3 Per Share Amounts (After-tax, Diluted): 2006 2005 2006 2005
Net Income Before Realized Capital Gains* $0.97 $1.00 $3.31 $3.16
Net Realized Capital Gains 0.10 0.03 0.29 0.21 Net Income (GAAP)
$1.07 $1.03 $3.60 $3.37 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 2007 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,
2006 2005 % Change 2006 2005 % Change Revenues $207,350 $183,483
13.0% $789,268 $733,430 7.6% Net Income $21,110 $20,001 $70,695
$65,326 Net Income per Share (Diluted) $1.07 $1.03 $3.60 $3.37
Dividends Declared per Share $0.06125 $0.05625 8.9% $0.24500
$0.22500 8.9% Market Value per Share $41.95 $36.04 16.4% $41.95
$36.04 16.4% Book Value per Share $29.90 $25.54 17.1% $29.90 $25.54
17.1% Shares Outstanding 19,224 18,964 19,224 18,964 AMIG's
Property and Casualty Operations: Direct and Assumed Written
Premium $183,623 $164,636 11.5% $780,795 $697,930 11.9% Net Written
Premium $156,028 $135,848 14.9% $678,107 $619,267 9.5% Combined
Ratio (GAAP) 91.0% 91.2% 93.8% 93.8% Combined Ratio (GAAP) -
Excluding Catastrophe Losses 87.4% 83.7% 88.5% 86.4% AMIG's Life
Insurance Operations: Direct and Assumed Written Premium $17,327
$8,976 93.0% $51,003 $36,550 39.5% Net Written Premium $5,855
$1,739 236.7% $16,153 $8,102 99.4% Note: Dollar amounts in
thousands except per share data. THE MIDLAND COMPANY CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three-Months Ended
Twelve-Months Ended December 31, December 31, 2006 2005 2006 2005
Revenues: Premiums earned $178,638 $158,638 $675,864 $631,864 Other
insurance income 3,182 3,058 12,929 12,600 Net investment income
11,245 10,272 42,223 40,519 Net realized investment gains 2,953 884
8,445 6,262 Transportation 11,332 10,631 49,807 42,185 Total
$207,350 $183,483 $789,268 $733,430 Costs and Expenses: Losses and
loss adjustment expenses $72,715 65,210 $307,503 286,662
Commissions and other policy acquisition costs 55,385 51,001
209,719 198,585 Operating and administrative expenses 38,729 29,009
127,236 112,329 Transportation operating expenses 9,420 8,423
41,792 36,986 Interest expense 1,148 1,114 5,164 5,967 Total
$177,397 $154,757 $691,414 $640,529 Income Before Federal Income
Tax 29,953 28,726 97,854 92,901 Provision for Federal Income Tax
8,843 8,725 27,159 27,575 Net Income $21,110 $20,001 $70,695
$65,326 Basic Earnings per Common Share: $1.10 $1.06 $3.70 $3.46
Diluted Earnings per Common Share: $1.07 $1.03 $3.60 $3.37
Dividends per Common Share $0.06125 $0.05625 $0.24500 $0.22500
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 2006 19,081 19,658 2005 18,894 19,407
Three months ended December 31 2006 19,173 19,729 2005 18,944
19,446 THE MIDLAND COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) December 31, December 31, 2006 2005 ASSETS Cash and
Marketable Securities $1,036,436 $950,464 Receivables - Net 276,710
269,862 Property, Plant and Equipment - Net 118,879 89,888 Deferred
Insurance Policy Acquisition Costs 99,277 88,374 Other 38,226
29,525 Total Assets $1,569,528 $1,428,113 LIABILITIES AND
SHAREHOLDERS' EQUITY Unearned Insurance Premiums $445,324 $395,007
Insurance Loss Reserves 221,639 254,660 Long-Term Debt 90,508
91,766 Short-Term Borrowings 17,937 20,005 Deferred Federal Income
Tax 47,197 38,350 Other Payables and Accruals 172,177 143,948
Shareholders' Equity 574,746 484,377 Total Liabilities and
Shareholders' Equity $1,569,528 $1,428,113 Note: Dollar amounts in
thousands. DATASOURCE: The Midland Company CONTACT: W. Todd Gray,
Executive Vice President and CFO of The Midland Company,
+1-513-943-7100
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