Citing higher-than-normal fire losses, ongoing challenges in its manufactured housing sector, and higher non-catastrophe weather related losses, Cincinnati-based specialty insurance products and services provider, The Midland Company, reported lower operating income for the fourth quarter and year ended Dec. 31, 2001.
For the year, net operating income was $25.9 million, or $2.88 per share (diluted), compared with $31.8 million, or $3.39 per share (diluted), a year ago. Revenue was a record $586.5 million, up 9.8 percent from $534.4 million in 2000. Net income was $27.2 million, or $3.03 per share (diluted), compared with $35.5 million, or $3.78 per share (diluted), for 2000.
The company reported net operating income for the fourth quarter of $1.03 per share (diluted) compared with $1.14 per share (diluted) in the fourth quarter of 2000. Fourth quarter revenues were a record $155.6 million, up 13.2 percent from $137.4 million in the same period last year. Net income for the quarter was $1.08 per share (diluted) compared with $1.20 per share (diluted) in the comparable prior period.
Midland saw growth in other specialty property and casualty lines of insurance and credit life operations, which it said were important contributors to the company’s record top-line performance. However, the company experienced losses in its commercial liability lines and chose to cease offering those coverages in September. It expressed belief that actions including exiting the commercial liability lines, and continued emphasis on rate adequacy and risk, will return the company to double-digit earnings growth and return-on-equity objectives in the long term.
Midland’s American Modern Insurance Group, is a wholly owned subsidiary that offers specialty insurance products and services such as manufactured home, motor home, watercraft, motorcycle, snowmobile, specialty auto, dwelling fire, credit life and physical damage commercial lines. American Modern products and services are offered through diverse distribution channels.
American Modern’s property and casualty direct and assumed written premiums grew 10.9 percent for the year to $555.5 million, with manufactured housing direct and assumed written premium essentially unchanged from the prior year at $336.5 million. Direct and assumed written premium in all other property and casualty lines-such as motorsports, recreational vehicle, watercraft, collector auto, site-built dwelling and mortgage fire products-collectively grew 34.8 percent to $219 million.
As anticipated, the combined ratio for Midland’s property and casualty companies for 2001 again came in below 100 percent but was an uncharacteristically high 99.8 percent compared with 96.2 percent in 2000. Catastrophe losses were lower than normal in both periods, contributing 4.3 points to the combined ratio in 2001 vs. 2.6 points last year. Losses from these commercial liability lines contributed 2.3 percentage points to the combined ratio for the year, compared with 1.9 points a year ago. The above normal fire loss ratio added approximately 2.9 percentage points in 2001, compared to only 1.3 percentage points in 2000.
For the fourth quarter, the combined ratio was 96.2 percent, including 2.7 percentage points due to catastrophes, compared with 93.3 percent, including 2.6 points in catastrophe losses, in last year’s fourth quarter.
M/G Transport, Midland’s transportation subsidiary, reported 8.6 percent growth in revenue for the year. M/G’s pre-tax contribution to operating earnings was $1.7 million for 2001, compared with $2.8 million for 2000.
Changes in shipping patterns have continued to negatively impact operating profits for M/G.
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