The Midland Co. Notes Record-Setting Q1

The Midland Company, a Cincinnati-based provider of specialty insurance products and services, announced record results for the first quarter ended March 31, 2005.

Net income for the quarter was a record $21.5 million, or $1.10 per
share. This compares to the previous record in last year’s first quarter of $16.8 million, or $0.90 per share. (All per share amounts are on an after- tax, diluted basis.) Net income before realized capital gains was a record $21.0 million, or $1.08 per share for the first quarter, up 46 percent (on a per share basis) over the year ago level of $13.8 million, or $0.74 per share.

John Hayden, Midland president and chief executive officer said, “We
are delighted to deliver record setting results that are well ahead of the
previous record results from last year’s first quarter. Our record results
were largely driven by our strong underwriting results. Our first quarter
property and casualty combined ratio was an outstanding 88.6 percent, bettering last year’s strong result of 94.3 percent by 5.7 points. Manufactured housing, in particular, had a terrific quarter but we were also pleased with the underwriting trends and results from our other specialty product lines.”

For the first quarter, American Modern’s property and casualty combined ratio (losses and expenses as a percent of earned premium) was 88.6 percent, compared with 94.3 percent a year ago. This positive trend reflects solid underwriting results from manufactured housing as well as strong underwriting results in several specialty lines such as motorcycle, mortgage fire and
watercraft. Excluding catastrophe losses, American Modern’s combined ratio was 86.6 percent, compared with 92.4 percent in the same period of 2004.

Hayden added, “We continue to see positive underwriting trends in the
motorcycle line. The combined ratio for motorcycle improved over 15 points compared to the year ago quarter, reflecting the benefit of our higher rate levels as well as our corrective underwriting actions. We continue to refine our tiered pricing for the motorcycle line to ensure we get the right rate for every risk.

“For the quarter, the after-tax net profit from the motorcycle line, which includes service fees and investment income, was 15 cents per
share, up 50 percent from 10 cents per share last year. We remain well ahead of our original plan for motorcycle and we believe that we are on track to produce our intended full-year objective of a break even or better underwriting result from this line.”

With respect to the previously exited commercial liability lines, Hayden added, “In the latter half of 2004, we experienced favorable loss development from these lines. I am pleased to say that the trend has continued into the first quarter of 2005 as this development favorably impacted earnings per share by approximately 5 cents in the quarter, which compares to a negative impact of 4 cents per share in last year’s first quarter.”

For the first quarter, American Modern’s property and casualty gross
written premiums grew 2.3 percent to $164.1 million. Hayden said, “For the first quarter, we experienced double digit growth rates in several of our less developed specialty lines categories, including excess and surplus, mortgage fire, collateral protection and recreational vehicle,” Hayden said.

The growth in property and casualty premiums was tempered by slowing premiums from manufactured housing, motorcycle and watercraft. Manufactured housing gross written premiums actually declined by 3.4 percent, to $77.9 million from $80.6 million in last year’s first quarter.