RTW, Inc. (Nasdaq:RTWI), a leading provider of products and
services to manage insured and self-insured workers� compensation,
disability and absence programs, today reported net income of
$818,000, or $0.15 per diluted share for the second quarter ended
June 30, 2007 compared to net income of $649,000, or $0.12 per
diluted share for the first quarter of 2007 and $1.4 million, or
$0.26 per diluted share for the second quarter of 2006. �Net income
grew 26 percent from the first quarter of 2007,� said Jeff Murphy,
RTW�s President and CEO. �As a result of our net income, our
shareholders� equity grew to $52.5 million or approximately $10.14
per share. We expect the growth trend in net income to continue for
the remainder of 2007. Despite the fact that we have been
profitable for the past five years and have had positive earnings
21 out of the past 22 quarters, our market value lags book value.
We believe that the current market value does not accurately
reflect our intrinsic value. We are committed to doing what is
necessary to increase our market value to a level that better
reflects the company�s current intrinsic value.� Premiums earned in
the second quarter totaled $10.1 million, down 9.0 percent from
$11.0 million for the same period in 2006. Premiums in force
increased to $48.4 million at July 1, 2007 compared to $47.5
million on December 31, 2006. �Overall, I am pleased with the
direction of the Company and satisfied with our results in the
second quarter of 2007,� said Jeff Murphy, RTW�s President and CEO.
�We continued to grow premiums in force in the second quarter,
continuing a trend that began in the first quarter of 2007. We will
continue to maintain our market discipline and only write business
where we believe we can make a profit.� Service revenue was $1.2
million in the second quarter of 2007 compared to $1.8 million in
the second quarter of 2006. �While service revenue has been less
predictable than we would like over the most recent four quarters,
we learned much from our experiences, adjusted our approach and
believe we are on the right track today,� said Murphy. �We made
some tough decisions late in the second quarter and restructured
our Absentia sales and marketing team and process to reflect what
we learned and further fine-tuned our approach. We added a number
of new customers in the past 60 days that will contribute to
revenue on a growing basis well into 2008 including a large
customer that will further expand our reach, new regional TPA
business and tail claim management business. We continue to see
opportunities and will add business that will grow with us on a
long-term basis; On July 1, we increased our ability to deliver
services and can now deliver TPA services in 50 states; and We are
today providing services to customers with operations in over 35
states. We are committed to growing service revenue and remain
excited about the future prospects of the service business.� Other
Three and Six Month Result Information Net income for the six
months ended June 30, 2007 totaled $1.5 million or $0.28 per
diluted share versus $2.5 million or $0.45 per share for the
comparable period in 2006. Premiums earned decreased 7.9 percent to
$20.1 million for the six months ended June 30, 2007 compared to
$21.9 million for the same period in 2006. Total revenue decreased
to $12.7 million for the quarter ended June 30, 2007 compared to
$14.1 million for the same period in 2006, and to $25.4 million for
the six months ended June 30, 2007, down from $27.8 million for the
same period in 2006. For the quarter ended June 30, 2007, total
revenue included investment income of $1.4 million compared to $1.3
million for the same period in 2006. For the six months ended June
30, 2007, total revenue included investment income of $2.7 million
compared to investment income of $2.6 million for the same period
in 2006. The company continued to demonstrate its ability to manage
and close claims. In the second quarter and for six months ended
June 30, 2007, RTW reduced unpaid claim and claim settlement
expenses for 2006 and prior years by $600,000 and $1.1 million,
respectively, and recorded corresponding pre-tax decreases to claim
and claim settlement expenses reflecting this improvement. These
amounts compare to $750,000 and $1.6 million reductions recorded
for the similar periods in 2006. These results reflect our focus
and commitment to continually improve our ability to affect
outcomes for open claims from prior accident years. Other Events In
addition to the organizational changes intended to improve service
revenue, the company implemented a plan to reduce operating
expenses in July and expects that effort to improve profitability
in future quarters. On May 14, 2007, A.M. Best Co. (Best), Oldwick,
New Jersey, reaffirmed the B++ (Very Good) financial strength
ratings of American Compensation Insurance Company and Bloomington
Compensation Insurance Company. In addition, Best reaffirmed the
�positive outlook� associated with the both ratings. Conference
Call Information RTW will host a conference call on Thursday, July
26, 2007, at 1:00 p.m. CDT. To access the conference call,
participants should dial 1-800-366-7449. A replay of the conference
call will be available from July 26, 2007 through July 28, 2007 by
calling 1-800-405-2236 or 1-303-590-3000 and entering the Passcode
11092826#. Forward looking and material information may be
discussed during the conference call. The live audio broadcast of
RTW's quarterly conference call will be available online through a
link at the company's website at
http://www.rtwi.com/investors/investors_main.htm. The online replay
will be available for approximately ninety days. About RTW, Inc.
RTW, Inc., based in Minneapolis, Minnesota, provides disability and
absence management services, primarily directed at workers�
compensation to: (i) employers insured through our wholly-owned
insurance subsidiaries, American Compensation Insurance Company
(ACIC) and Bloomington Compensation Insurance Company (BCIC); (ii)
self-insured employers on a fee-for-service basis; (iii) state
assigned risk plans on a percent of premium basis; (iv) other
insurance companies; and (v) agents and employers on a consulting
basis, charging hourly fees. The company developed two proprietary
systems to manage disability and absence: (i) ID15�, designed to
quickly identify those injured employees who are likely to become
inappropriately dependent on disability system benefits, including
workers� compensation; and (ii) RTW Solution�, designed to lower
employers� disability costs and improve productivity by returning
injured employees to work as soon as safely possible. The company
supports these proprietary management systems with state-of-the-art
technology and talented people dedicated to its vision of
transforming people from absent or idle to present and productive.
ACIC writes workers� compensation insurance for employers primarily
in Minnesota, Colorado and Michigan, but is growing in new markets
including Florida, Texas, Kansas, Connecticut, North Carolina and
Iowa. BCIC offers workers� compensation insurance to selected
employers in Minnesota and Colorado. In addition, through its
Absentia� division, RTW has expanded and provides non-insurance
products and service offerings nationally. The company�s services
are effective across many industries. RTW, Inc. is traded on the
Nasdaq Global Market under the symbol RTWI. For more information on
RTW, Inc., please visit www.rtwi.com. Safe Harbor Statement Some of
the statements made in this News Release, as well as statements
made by us in periodic press releases and oral statements made by
us to analysts and shareholders in the course of presentations
about RTW, constitute �forward-looking statements� within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements. Any forward-looking statement
contained herein including statements related to our outlook for
the industry and for our performance for the year 2007 and beyond,
are based upon our historical performance and on current plans,
estimates and expectations. The inclusion of these forward-looking
statements should not be regarded as a representation by us that
the future plans, estimates or expectations contemplated by us will
be achieved. The following important factors, among others, in some
cases have affected and in the future could affect our actual
results and could cause our actual financial performance to differ
materially from that expressed in any forward-looking statement:
(i) our ability to retain renewing policies and write new business
with a B++ (Very Good, Secure) rating from A.M. Best; (ii) adverse
changes in the rating assigned to us by A.M. Best; (iii) our
ability to extend our workers� compensation services to
self-insured employers and other alternative markets and to operate
profitably in providing these services; (iv) changes in the pricing
environment including those due to the cyclical nature of the
property and casualty insurance industry and the effect of
competition; (v) the adequacy of our unpaid claim and claim
settlement expense reserves; (vi) exposure as to coverage for
terrorist acts and our retention under The Terrorism Risk Insurance
Extension Act of 2005 (TRIEA) and the potential expiration of TRIEA
and the unpredictable nature of such events; (vii) our ability to
obtain and retain reinsurance at a reasonable cost; (viii) our
ability to provide our proprietary products and services to
customers successfully and profitably; (ix) competition and the
regulatory environment in which we operate; (x) changes in workers�
compensation regulation by states, including changes in mandated
benefits or insurance company regulation; (xi) investment risk,
including those of our portfolio of fixed income securities and
interest rate changes; (xii) general economic and business
conditions; and (xiii) other factors as noted in our other filings
with the Securities and Exchange Commission. This discussion of
uncertainties is by no means exhaustive but is designed to
highlight important factors that may affect our future performance.
RTW, Inc. CONSOLIDATED STATEMENTS OF INCOME (Unaudited, in 000's,
except share and per share data) � For the three months ended June
30, For the six months ended June 30, � 2007 � � 2006 � � 2007 � �
2006 � REVENUES: � Gross premiums earned $ 12,004 $ 13,193 $ 24,018
$ 26,181 Premiums ceded to excess of loss treaties � (1,954 ) �
(2,150 ) � (3,872 ) � (4,302 ) Premiums earned 10,050 11,043 20,146
21,879 Investment income 1,370 1,324 2,712 2,629 Service revenue �
1,230 � � 1,752 � � 2,548 � � 3,320 � Total revenues 12,650 14,119
25,406 27,828 � EXPENSES: � Claim and claim settlement expenses
6,852 7,323 14,140 14,482 Policy acquisition costs 1,143 1,298
2,368 2,560 General and administrative expenses � 3,501 � � 3,333 �
� 6,822 � � 6,987 � Total expenses � 11,496 � � 11,954 � � 23,330 �
� 24,029 � Income before income taxes 1,154 2,165 2,076 3,799
Income tax expense � 336 � � 731 � � 609 � � 1,311 � Net income $
818 � $ 1,434 � $ 1,467 � $ 2,488 � � Net income per share: Basic $
0.16 � $ 0.27 � $ 0.28 � $ 0.46 � Diluted $ 0.15 � $ 0.26 � $ 0.28
� $ 0.45 � Weighted average shares outstanding: Basic � 5,171,000 �
� 5,346,000 � � 5,168,000 � � 5,397,000 � Diluted � 5,291,000 � �
5,540,000 � � 5,295,000 � � 5,587,000 � RTW, Inc. CONDENSED
CONSOLIDATED BALANCE SHEETS (In 000's) � June 30, December 31, 2007
2006 (Unaudited) (Audited) ASSETS � Available-for-sale investments,
at market value $ 102,895 $ 111,089 Cash and cash equivalents
24,590 13,898 Premiums receivable 2,904 2,367 Reinsurance
recoverable: On unpaid claim and claim settlement expenses 76,130
77,168 On paid claim and claim settlement expenses 436 767 Other
assets � 12,933 � 13,150 � Total assets $ 219,888 $ 218,439 �
LIABILITIES AND SHAREHOLDERS' EQUITY � Unpaid claim and claim
settlement expenses $ 149,384 $ 152,327 Unearned premiums 8,160
7,432 Accrued expenses and other liabilities � 9,854 � 7,325 Total
liabilities 167,398 167,084 � Shareholders' equity � 52,490 �
51,355 � Total liabilities and shareholders' equity $ 219,888 $
218,439
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