The Cincinnati-based Midland Company, a provider of specialty insurance products and services, reported an overall loss for the third quarter of $2.6 million, due mainly to increased loss figures in July and August, and realized after tax losses of $3.6 million during the period.
Net operating income (net income excluding capital gains/losses) for the third quarter ended September 30 was “in line with previously announced expectations of $1.0 million, or 6 cents per share, compared with $3.2 million, or 18 cents per share, in 2001,” said the company. Gross revenue actually increased by 7.8 percent during the period to $158.6 million compared with $147.1 million in last year’s third quarter. [Note: Per share figures reflect a two-for-one stock split that became effective July 17, 2002]
“After two record quarters to start the year, the abnormal results during July and August of 2002 coupled with the losses emanating from Hurricane Lili in the start of the fourth quarter of 2002 are making the second half of 2002 a much more significant challenge than would have been expected,” stated John W. Hayden, President and CEO.
“However,” Hayden continued, “we are pleased to note that the company recorded an operating profit of 19 cents per share in the month of September as the fire loss ratio resumed the improving trend that we had been experiencing throughout the first half of 2002. We believe that the results for July and August were an anomaly,”
He indicated that the company’s wholly owned subsidiary, American Modern Insurance Group, which specializes in insurance products and services such as manufactured housing, site-built homes, motorcycles, watercraft, snowmobiles, recreational vehicles and credit life and related products, had been especially affected by hurricane Lili. The storm is likely to reduce fourth quarter results by approximately 25 to 30 cents per share, below the 52 cents a share recorded in the fourth quarter of 2001.
“We would like to emphasize that we remain very optimistic about 2003 as well as the longer-term prospects of our business model,” Hayden stated. The announcement noted that “American Modern’s total property and casualty gross written premiums grew 7.9 percent in the 2002 third quarter to $160.8 million, in spite of a 10.7 percent decrease in manufactured housing gross written premium to $82.2 million.
It also stated that Midland’s “Gross written premium in all other specialty lines — such as motorcycle, site-built dwelling, mortgage fire, recreational vehicle, credit life and collector automobile products — collectively grew 31.7 percent to $90.7 million,” during the period.
Midland’s announcement also indicated that it had reduced American Modern’s dependence on its largest producer, Conseco Agency, a subsidiary of Conseco Inc., which accounted for “less than 10 percent of American Modern’s total direct and assumed written premiums in the first nine months of 2002 as compared to more than 16 percent of total premium for the first nine months of the prior year.”
“Of the premiums that will be written through Conseco in 2002, American Modern expects more than 90 percent of the volume would result from the renewal of policies from existing Conseco Agency policyholders. At September 30, 2002, the company’s outstanding receivable from Conseco for not-yet-paid premium had declined to $14.9 million, all of which is current, compared with $29.6 million at the same time a year ago,” said the bulletin.