KMG America Corporation (the �Company� or �KMG America�) (NYSE:KMA)
today reported net income of $2.9 million, or $0.13 per diluted
share for the fourth quarter of 2006, compared to net income for
the fourth quarter of 2005 of $1.6 million, or $0.07 per diluted
share. The Company reported operating income for the fourth quarter
of $2.4 million, or $0.11 per diluted share, compared to operating
income for the third quarter of 2006 of $2.1 million, or $0.10 per
diluted share, and fourth quarter of 2005 operating income of $1.5
million, or $0.07 per diluted share. On a year-to-date basis, the
Company reported net income of $7.2 million, or $0.33 per diluted
share for the full year of 2006 compared to $4.7 million, or $0.21
per diluted share for the full year of 2005. On an operating income
basis, the Company reported $6.8 million, or $0.31 per diluted
share for the full year of 2006 compared to $4.4 million, or $0.20
per diluted share for the full year of 2005. KMG America�s Chief
Executive Officer, Kenneth Kuk, commented, �Our fourth quarter
operating income of $0.11 per share is above analysts� expectations
as well as our internal forecast. Net income of $.13 per share also
exceeded expectations. This quarter�s results mark the eighth
consecutive profitable quarter since KMA�s IPO with operating
earnings up more than 60% compared to the fourth quarter of 2005,
12% compared to a strong third quarter of 2006 and up 55% for the
full year compared to 2005. All sales and earnings indicators are
steadily progressing in the right direction.� FOURTH QUARTER
FINANCIAL RESULTS Fourth quarter 2006 operating income (see
discussion of non-GAAP financial measures below) improved to $2.4
million compared to third quarter 2006 operating income of $2.1
million. Fourth quarter 2006 earnings results include some largely
offsetting unusual items discussed in the following paragraphs. The
Company experienced favorable results in the Kanawha legacy
business due in part to a lower benefit ratio in its long-term care
business compared to the third quarter of 2006. Amortization of
DAC/VOBA (�deferred acquisition costs�/�value of business
acquired�) also improved by $1.6 million in the fourth quarter of
2006 compared to the third quarter of 2006, due in part to the
impact of improved persistency in the legacy Worksite segment. The
favorable persistency experienced in the fourth quarter followed
somewhat poor persistency in the third quarter of 2006. The fourth
quarter of 2006 also includes a pretax benefit of $1.0 million
related to the discount associated with retiring and replacing the
Company�s $15 million subordinated note with bank debt. Largely
offsetting these favorable items is the Company�s decision to
increase loss reserves on its stop loss business by $2.2 million
pretax in the fourth quarter of 2006 related to claims that
exceeded pro forma pricing expectations on cases written through
2006. The cases giving rise to excess stop loss reserves have since
been re-priced or were not renewed. As a result of the compressed
margins in the stop loss market to-date, the Company has decided to
increase its pro forma loss ratio on its stop loss business
starting in the first quarter of 2007. While the margins available
in the stop loss market have not yet materialized at pricing
expectations, the Company does see signs of the market firming
heading into 2007 which the Company believes should result in more
favorable margins going forward. The discussion of operating
earnings that follows has been segregated into earnings attributed
to the Kanawha legacy business and the earnings of the new large
case activity. The Company believes that segregating the earnings
results of the new large case activity provides a more meaningful
comparison of the underlying strength in the earnings produced by
Kanawha�s legacy business. This earnings derivation is described
later in �Notes on Financial Presentation�. The discussion below
focuses on fourth quarter 2006 results compared to the third
quarter 2006 results. KANAWHA LEGACY ACTIVITY RESULTS Operating
income attributed to the Kanawha legacy business for the fourth
quarter of 2006 was $5.7 million, or $0.26 per diluted share, up
33% compared to $4.3 million, or $0.19 per diluted share, reported
in the third quarter of 2006. The increase was due primarily to the
favorable results in the Company�s long term care book of business
and a turnaround in persistency in the Company�s Worksite segment.
The benefit ratio reported for the Kanawha legacy business for the
fourth quarter of 2006 improved to 72.0% compared to 75.3% reported
in the third quarter of 2006 due primarily to the favorable claims
and reduced policy reserve increases in the Senior segment�s long
term care business, including a $0.5 million one-time pretax
correction to certain long term care policy reserve factors in the
fourth quarter. Earned premiums reported in the Kanawha legacy
business for the fourth quarter of 2006 were $24.4 million,
essentially flat compared to the third quarter of 2006 as increases
attributed to the impact of rate increases in the Senior segment
were largely offset by declining premium in the legacy Worksite
segment. It should be noted that reported premium in the legacy
Worksite segment in the third quarter included a one-time $0.3
million benefit related to the indemnification from the previous
owners of Kanawha Insurance Company. Amortization of DAC/VOBA
declined to a negative $0.2 million in the fourth quarter of 2006
compared to an increase of $1.4 million in the third quarter of
2006 due in part to the impact of a turnaround in persistency in
the legacy Worksite segment that reduced the amortization of
DAC/VOBA in the current quarter after accelerated amortization in
the third quarter of 2006. Additionally, amortization of VOBA
relating to long term care policies was reduced by $0.5 million
pretax in the fourth quarter as the result of a one-time correction
to the persistency adjustment. While the Kanawha legacy business
continues to provide a stable earnings pattern, it should be noted
that earnings attributed to this business are generally stronger in
the third and fourth quarters of a calendar year when compared to
the first and second quarters of the year. This is due primarily to
the distribution of long term care policy anniversaries that are
weighted towards the first half of the year and the related impact
of the timing of reserve increases. Also contributing to this
seasonal earnings pattern are worksite sales and related earned
premium revenue which tend to be weighted toward the end of the
year. NEW LARGE CASE ACTIVITY RESULTS Operating losses attributed
to the new large case activity increased to $3.4 million, or $0.15
per diluted share, compared to a loss of $2.2 million, or $0.09 per
diluted share reported in the third quarter of 2006 due primarily
to the $2.2 million increased loss reserves reported in the fourth
quarter of 2006 related to adverse claims development in stop loss
cases written through 2006, compared to the $0.9 million additional
loss reserve added in the third quarter of 2006. Premium revenue
(net of reinsurance) for the fourth quarter of 2006 was $8.8
million compared to $9.8 million reported in the third quarter of
2006. The third quarter of 2006 premium included a $2.7 million
initial reserve transfer related to the acquisition of a small
block of life insurance policies on September 1, 2006. Excluding
the impact of this initial reserve transfer, premium revenue for
the fourth quarter of 2006 would have increased by $1.7 million, or
24% compared to the third quarter of 2006 due to increased sales
activity. Fourth quarter 2006 sales results (as measured by new
annualized issued premiums) attributed to the new large case
activity were $8.4 million, compared to $12.8 million reported in
the third quarter of 2006, which included $5.3 million of
annualized premium related to the small acquisition mentioned
above. Excluding the small acquisition, voluntary benefit life
sales for the fourth quarter of 2006 increased to $2.0 million
compared to third quarter sales of $0.2 million. On a year-to-date
basis, sales improved to $45.3 million compared to full year 2005
sales of $12.2 million. The benefit ratio reported for the new
large case activity in the fourth quarter of 2006 increased to
94.6% compared to the 79.4% reported in the third quarter of 2006.
The benefit ratio for both periods were adversely impacted by
increased loss reserves related to excess stop loss claims
associated with historical cases written through 2006, which
amounted to increased claim reserves of $2.2 million and $0.9
million in the fourth and third quarters of 2006, respectively.
Expenses for the fourth quarter of 2006 were $5.3 compared to $4.1
million reported in the third quarter of 2006, an increase of $1.2
million. Contributing factors include increased litigation expenses
and increased production-related bonus accruals related to full
year sales, which together added $1.1 million pretax to expenses in
the fourth quarter. The Company booked a non-recurring favorable
benefit of $1.0 million pretax in the fourth quarter of 2006
related to the discount associated with retiring and replacing the
Company�s $15 million subordinated note with bank debt. This
discount was recorded in revenue as a gain on the extinguishment of
debt. STATISTICAL SUPPLEMENT AVAILABLE ON COMPANY WEBSITE The
statistical supplement can be accessed on the Company�s website of
www.kmgamerica.com via the �Investor Relations� tab, �Financial
Reports� tab, and found under the �Quarterly & Other Reports�
section. A derivation of �normalized� earnings (a non-GAAP measure)
is provided in the statistical supplement for the current and prior
quarters to identify and remove unusual or temporary items and to
help analysts and investors focus on recurring earnings trends.
While this reporting basis requires management�s subjective
judgment, the details are identified and described in detail so the
investors and analysts can form their own opinions. WEB CAST The
Company will host an investor and analyst web cast today, Monday,
March 12, 2006, at 10:00 a.m. EDT. The web cast and replay will be
available via the following links: www.kmgamerica.com,
analyst/investor tab � for all investors; www.streetevents.com �
for institutional investors; www.fulldisclosure.com � for retail
investors. The replay will be available starting approximately 2
hours after the original web cast. The replay will be available
through Monday, March 26, 2006. ABOUT KMG AMERICA CORPORATION KMG
America is a holding company that was formed to acquire the
Southeastern regional insurance company, Kanawha Insurance Company,
and to operate and grow Kanawha's insurance and other related
businesses nationwide. KMG America offers a broad mix of individual
and group insurance products and stop-loss coverage along with
third-party administration services to employers and to working
Americans. For more information visit: www.kmgamerica.com. NOTES ON
FINANCIAL PRESENTATION Non-GAAP Financial Measures: Operating
Income - To supplement the financial statements presented on a GAAP
basis, the Company reported operating income, which is a non-GAAP
measure. Operating income is defined as net income excluding
realized investment gains/losses (except for realized investment
gains/losses that are directly offset by executive deferred
compensation expense), net of income taxes. Management believes
this non-GAAP measure provides investors, potential investors,
securities analysts and others with useful additional information
to evaluate the performance of the business, because it excludes
items that management believes are not indicative of the operating
results of the business. In addition, this non-GAAP measure is used
by management to evaluate the operating performance of the Company.
The presentation of this additional information is not meant to be
considered in isolation or as a substitute for net income
determined in accordance with GAAP. A reconciliation of the
non-GAAP financial measures contained in this release to the most
comparable GAAP measures appears in the attached tables.
Presentation of Earnings Results: During the first two years of
operations, the Company has separated the financial performance of
KMG America into two primary components: �Kanawha legacy activity�
and �new large case activity�. This is done to highlight the
strength of, and trends in, the Kanawha business activity that
existed prior to the acquisition (Kanawha legacy activity), and
segregate these results from the financial performance related to
transforming KMG America into a new public company with a new
national marketing focus (new large case activity). The financial
results in the �new large case activity� include all public company
costs, the cost of the new management team, and all incremental
sales and underwriting costs and product revenues associated with
sales generated by the new national sales organization. FORWARD
LOOKING INFORMATION This press release contains forward-looking
statements that are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. The accuracy
of such statements is subject to a number of risks, uncertainties
and assumptions that may cause the Company�s actual results to
differ materially from those expressed in the forward-looking
statements including, but not limited to: implementation of its
business strategy; hiring and retaining key employees; predicting
and managing claims and other costs; fluctuations in its investment
portfolio; financial strength ratings of its insurance subsidiary;
government regulations, policies and investigations affecting the
insurance industry; competitive insurance products and pricing;
reinsurance costs; fluctuations in demand for insurance products;
possible recessionary trends in the U.S. economy; and other risks
that are detailed from time to time in reports filed by the Company
with the Securities and Exchange Commission. The Company assumes no
obligation to publicly update or revise any forward-looking
statements. KMG America Corporation Consolidated Statements of
Income (unaudited) (in thousands, except share data and
percentages) � � Quarter Ended Year-to-Date 12/31/06� 9/30/06�
12/31/05� 12/31/06� 12/31/05� Operating income (1): � Insurance
premiums, net of reinsurance $ 33,261� $ 34,235� $ 27,450� $
127,969� $ 106,888� Net investment income 7,668� 7,453� 7,203�
29,946� 27,745� Commission and fee income 4,151� 4,018� 3,553�
16,505� 14,565� Gain on extinguishment of debt 1,021� -� -� 1,021�
-� Other income 1,267� 1,275� 898� 4,451� 3,868� Total revenues
47,368� 46,981� 39,104� 179,892� 153,066� � Policyholder benefits
25,929� 26,186� 21,322� 99,842� 84,288� Insurance commissions, net
of deferrals 3,574� 3,246� 2,353� 12,725� 9,635� Expenses, taxes,
fees and depreciation, net of deferrals 14,085� 12,578� 12,530�
52,789� 49,167� Amortization of DAC and VOBA (2) 91� 1,682� 706�
4,106� 3,468� Total benefits and expenses 43,679� 43,692� 36,911�
169,462� 146,558� � Operating income before income taxes 3,689�
3,289� 2,193� 10,430� 6,508� (Provision) for income taxes (1,303)
(1,150) (730) (3,625) (2,092) Operating income 2,386� 2,139� 1,463�
6,805� 4,416� � Operating income per share - diluted $ 0.11� $
0.10� $ 0.07� $ 0.31� $ 0.20� � Items excluded from operating
income: Realized investment gains (losses) 1,115� 7� 34� 1,218�
358� Deferred compensation expense adjustment (3) (264) (181) (113)
(581) (254) Cumulative effect of accounting changes -� -� 271� -�
271� Total items excluded from operating income, before tax 851�
(174) 192� 637� 375� Income taxes, not applicable to operating
income (298) 61� (67) (223) (131) Total items excluded from
operating income, after tax 553� (113) 125� 414� 244� Net income $
2,939� � $ 2,026� � $ 1,588� � $ 7,219� � $ 4,660� � Net income per
share - diluted $ 0.13� $ 0.09� $ 0.07� $ 0.33� $ 0.21� �
Weighted-average shares outstanding - diluted: 22,213� 22,208�
22,110� 22,202� 22,091� � Operating income split: Kanawha legacy $
5,747� $ 4,293� $ 3,685� $ 17,179� $ 13,039� New large case
activity (3,361) (2,153) (2,222) (10,374) (8,623) Total company $
2,386� $ 2,139� $ 1,463� $ 6,805� $ 4,416� � Operating income per
share - diluted Kanawha legacy $ 0.26� $ 0.19� $ 0.17� $ 0.77� $
0.59� New large case activity $ (0.15) $ (0.09) $ (0.10) $ (0.46) $
(0.39) Total company $ 0.11� $ 0.10� $ 0.07� $ 0.31� $ 0.20� �
Annualized operating return on average equity: Kanawha legacy
activity (4) 12.6% 9.7% 8.9% 9.7% 8.1% Total company 4.8% 4.4% 3.1%
3.5% 2.3% � (1) Operating income is a non-GAAP measure, and is
defined as net income excluding realized gains (losses), except for
realized gains (losses) that are directly offset by executive
deferred compensation expense, net of income taxes. � (2) DAC:
deferred acquisition costs; VOBA: value of business acquired. � (3)
Offsetting expense for realized gains (losses) related to executive
deferred compensation trading activity. � (4) Equity attributed to
Kanawha legacy consists of the initial allocation of IPO proceeds
of $155 million increased by retained earnings from the Kanawha
legacy business. KMG America Corporation and Subsidiary
Consolidated Balance Sheets (in thousands, except share data) � � �
December 31, 2006 December 31, 2005 (Unaudited) Assets: Cash and
cash equivalents $ 21,744� $ 32,583� Investments 558,336� 543,307�
Total cash and investments 580,080� 575,890� Accrued investment
income 6,503� 5,917� DAC 28,454� 14,032� VOBA 70,766� 72,639� Other
assets (1) 145,911� 128,887� Total assets $ 831,714� $ 797,365� �
Liabilities and shareholders' equity: Total policy and contract
liabilities $ 572,364� $ 547,894� Deferred income taxes 14,735�
13,061� Other liabilities (2) 52,563� 48,927� Total liabilities
639,662� 609,882� Total shareholders' equity 192,052� 187,483�
Total liabilities and shareholders' equity $ 831,714� $ 797,365� �
Book value per share: Basic $ 8.65� $ 8.47� Diluted $ 8.61� $ 8.47�
� Book value per share: (excl FAS 115) (3) Basic $ 8.96� $ 8.70�
Diluted $ 8.93� $ 8.70� � Ending shares outstanding: Basic 22,212�
22,126� Diluted (4) 22,299� 22,131� � � (1) Other assets include
reinsurance balances recoverable, real estate and equipment,
federal income tax recoverable and other assets. � (2) Other
liabilities include accounts payable and accrued expenses, $14.1
million of outstanding bank debt. � (3) The book values are
recalculated excluding $7.0 million of unrealized capital losses,
net of taxes, on December 31, 2006. Unrealized capital losses were
$5.0 million, net of taxes, on December 31, 2005. � (4) Diluted
shares were calculated using the treasury stock method. KMG America
Corporation Statistical and Operating Data at or for the Periods
Indicated - Unaudited (in thousands, except percentages) � Quarter
Ended Year-to-Date 12/31/06� 9/30/06� 12/31/05� 12/31/06� 12/31/05�
SALES RESULTS (issued and paid for annualized premiums): � Worksite
insurance segment - Kanawha legacy: Life $ 1,088� $ 448� $ 448� � $
2,561� $ 2,453� Cancer 487� 360� 504� � 1,774� 1,984� Disability
income 790� 545� 1,249� � 2,601� 4,314� Other A&H 1,113� 263�
1,098� � 1,862� 2,400� Total worksite - Kanawha Legacy 3,478�
1,616� 3,299� � 8,798� 11,151� � Worksite insurance segment - New
large case activity: Core Group Products: Life $ 58� $ 339� $ -� �
$ 1,728� $ -� Stop loss 4,626� 5,502� 4,124� � 28,391� 8,245�
Disability income 3� 269� -� � 461� -� Other A&H -� -� -� � -�
-� Voluntary Benefit Products: Life (1) 2,026� 5,519� 167� � 8,602�
395� Cancer 260� 20� 125� � 385� 223� Disability income 899� 695�
1,331� � 4,037� 2,758� Other A&H 516� 443� 244� � 1,660� 544�
Total worksite - New large case activity 8,387� 12,787� 5,991� �
45,263� 12,165� � Other Kanawha legacy sales: Long term care 45�
60� 260� � 460� 1,616� � Total sales $ 11,910� � $ 14,463� � $
9,550� � $ 54,522� � $ 24,932� � OTHER KMG AMERICA KEY FINANCIAL
INDICATORS: � Effective tax rate 35.3% 34.9% 33.4% 34.8% 32.3% �
Benefit ratio - total company (2): 78.0% 76.5% 77.7% 78.0% 78.9%
Kanawha legacy only 72.0% 75.3% 78.8% 77.5% 79.3% New large case
activity only 94.6% 79.4% 62.3% 79.8% 62.5% � Expense ratio - total
company (3): 47.4% 45.8% 50.3% 48.2% 51.3% Kanawha legacy only
38.0% 42.8% 39.4% 40.2% 40.4% New large case activity only 78.0%
54.3% 225.1% 80.8% 490.4% � Average portfolio yield (4) 5.19% 5.11%
4.88% 5.12% 4.75% � Average invested assets $ 552,980� $ 544,679� $
495,358� $ 536,738� $ 484,763� Average cash/equivalents & short
terms (4) 37,946� 38,813� 95,232� 48,390� 99,406� Total average
cash and invested assets $ 590,925� $ 583,492� $ 590,591� $
585,129� $ 584,169� � Earned premiums and fees - total company: $
37,412� $ 38,253� $ 31,003� $ 144,474� $ 121,453� Kanawha legacy
only 28,599� 28,419� 29,179� 116,125� 118,524� New large case
activity only 8,813� 9,834� 1,824� 28,349� 2,929� � (1) Life sales
for the third quarter 2006 and twelve months year-to-date 2006
include $5.3 million of life sales related to a small block
acquisition effective September 1, 2006 (primarily voluntary term
life policies). � (2) Benefit ratio is defined as total
policyholder benefits divided by total net premiums. � (3) Expense
ratio is defined as commissions, expenses and amortization of
DAC/VOBA (on operating income basis) divided by earned premiums
plus commissions/fees. � (4) Average portfolio yield is defined as
net investment income divided by average invested assets, excluding
the impact of FAS115 unrealized gains (losses) plus average cash
and equivalents. Average cash/equivalents and short term assets
include the portion of initial public offering proceeds that are
invested short (less than 2 year maturities).
Grafico Azioni Kmg America (NYSE:KMA)
Storico
Da Ago 2024 a Set 2024
Grafico Azioni Kmg America (NYSE:KMA)
Storico
Da Set 2023 a Set 2024