Alfa Corporation Reports Second Quarter 2006 Results.MONTGOMERY Montgomery, city, United States Montgomery, city (1990 pop. 187,106), state capital and seat of Montgomery co., E central Ala., near the head of navigation on the Alabama River just below the confluence of the Coosa and Tallapoosa rivers, and in the rich , Ala ALA aminolevulinic acid. Ala alanine. ala (a´lah) pl. a´lae [L.] a winglike process. . -- Alfa Al´fa n. 1. A plant (Macrochloa tenacissima) of North Africa; also, its fiber, used in paper making. Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :ALFA) today announced financial results for the three and six months ended June June: see month. 30, 2006. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the quarter was $24,428,642, or $0.30 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with operating income of $27,332,929, or $0.34 per diluted share, for the second quarter of 2005, a per share decrease of 11.3%. Net income, which includes net realized investment gains, was $25,508,448, or $0.31 per diluted share, for the second quarter of 2006, compared with $28,555,161, or $0.35 per diluted share in 2005, a per share decrease of 11.4%. Premiums and policy charges for the second quarter of 2006 increased 9.5% to $170,853,431. The financial results for the three months ended June 30, 2006, included the write off of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $5,490,000 of loans in Alfa Financial Corporation, a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Alfa Corporation. This write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. reduced net income by approximately $3,568,000, or $0.04 per diluted share, for the second quarter of 2006. As previously announced, during the second quarter the Company detected irregularities in certain loan transactions within Alfa Financial Corporation. As a result of these findings, the Company initiated an intense investigation, the timing of which caused a delay in the previously scheduled earnings release. This investigation was conducted with the assistance of special legal counsel and outside forensic Belonging to courts of justice. forensic 1) adj. from Latin forensis for "belonging to the forum," ancient Rome's site for public debate, and currently meaning pertaining to the courts. accountants, who determined that these fraudulent The description of a willful act commenced with the Specific Intent to deceive or cheat, in order to cause some financial detriment to another and to engender personal financial gain. transactions were limited to the acts of a single agent. Although, there is the potential for a partial insurance recovery and recoveries from civil actions the amount and timing of these cannot be estimated at this time. For the six months ended June 30, 2006, operating income was $44,483,721 compared with operating income of $48,177,076 for the first six months of 2005. On a per share basis, operating income decreased 8.3% to $0.55 per diluted share for the six-month period in 2006 compared with $0.60 per diluted share for the same period in 2005. After net realized investment gains, net income was $45,645,890, or $0.56 per diluted share, for the first six months of 2006, compared with net income of $50,125,505, or $0.62 per diluted share, for the same period in 2005, a per share decrease of 9.5%. Premiums and policy charges increased 9.9% to $339,847,894 for the first six months of 2006. Alfa's Chairman, President and Chief Executive Officer, Jerry Jer·ry n. pl. Jer·ries Chiefly British Slang A German, especially a German soldier. [Alteration of German. A. Newby, said, "With the exception of this unfortunate incident, we posted solid financial results for another quarter. We worked swiftly swift adj. swift·er, swift·est 1. Moving or capable of moving with great speed; fast. See Synonyms at fast1. 2. and diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d to determine the nature and scope of these fraudulent transactions. We committed a great deal of time and resources to the implementation, documentation and testing of our control environment. As a result, I am confident that we have identified the full extent of this activity and taken appropriate measures to ensure that this situation has been remedied. We believe Alfa is made up of an outstanding group of dedicated employees who are committed to excellence, integrity, and exceeding customer expectations. The acts of one individual do not change this." Alfa Corporation will host a conference call on Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , August 4, at 10:30 a.m. Eastern time. Investors and other interested parties may access the teleconference by calling 1-800-475-3716 or via links located on Alfa's web site: www.alfains.com. A 30-day Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the play of the call will also be available from Alfa's web site. Alfa Corporation is engaged in insurance and financial activities through its subsidiaries. The common stock of Alfa Corporation is traded on the NASDAQ Global Select Market under the symbol ALFA. The associated investor supplement package for the second quarter ended June 30, 2006, may be found by clicking on the web cast link in the "Invest in Alfa" section of Alfa's web site and is also available at: http://www.irinfo.com/alfa/2q06fsq.pdf. Investors are cautioned that statements in this press release which relate to the future are, by their nature, uncertain and dependent upon numerous contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. - including political, economic, regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. , climatic, competitive, legal, and technological - any of which could cause actual results and events to differ materially from those indicated in such forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . Additional information regarding these and other risk factors and uncertainties may be found in Alfa Corporation's filings with the Securities and Exchange Commission.
ALFA CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended
June 30, Statistics
------------------------- % -------------
2006 2005 Change 2006 2005
----------- ----------- ------ ------ ------
Revenues
Premiums-Property
and Casualty
Insurance 298,250,971 270,950,049 10.08
Premiums-Life
Insurance 22,839,703 20,303,738 12.49
Policy Charges-
Life Insurance 18,757,220 18,023,169 4.07
Net Investment
Income 40,800,741 45,894,589 (11.10)
Other Income 13,404,208 11,935,287 12.31
----------- ----------- ------
Total Revenues 394,052,843 367,106,832 7.34
----------- ----------- ------
Benefits and
Expenses
Benefits &
Settlement
Expenses 228,131,475 213,258,810 6.97 57.90 58.09
Dividends to
Policyholders 2,085,958 2,021,825 3.17 0.53 0.55
Amortization of
Deferred Policy
Acquisition
Costs 61,250,061 53,529,672 14.42 15.54 14.58
Other Operating
Expenses 41,765,883 32,514,038 28.45 10.60 8.86
----------- ----------- ------ ------ ------
Total Expenses 333,233,377 301,324,345 10.59 84.57 82.08
----------- ----------- ------ ------ ------
Income Before
Provision for
Income Taxes 60,819,466 65,782,487 (7.54) 15.43 17.92
Provision For
Income Taxes 16,335,745 17,605,411 (7.21) 26.86 26.76
----------- ----------- ------ ------ ------
Operating Income 44,483,721 48,177,076 (7.67)
Realized Investment
Gains, Net of Tax 1,162,169 1,948,429 (40.35)
----------- ----------- ------
Net Income 45,645,890 50,125,505 (8.94)
=========== =========== ======
Operating Income
Per Share-Basic 0.55 0.60 (7.89)
=========== =========== ======
Operating Income
Per Share-Diluted 0.55 0.60 (8.26)
=========== =========== ======
Net Income Per
Share-Basic 0.57 0.63 (9.15)
=========== =========== ======
Net Income Per
Share-Diluted 0.56 0.62 (9.52)
=========== =========== ======
Dividends Per
Share 0.2100 0.1875 12.00
=========== =========== ======
Average Shares
Outstanding -
Basic 80,315,256 80,124,054 0.24
=========== =========== ======
Average Shares
Outstanding -
Diluted 81,131,983 80,609,351 0.65
=========== =========== ======
Three Months Ended
June 30, Statistics
------------------------- % -------------
2006 2005 Change 2006 2005
----------- ----------- ------ ------ ------
Revenues
Premiums-Property
and Casualty
Insurance 150,835,039 138,169,019 9.17
Premiums-Life
Insurance 11,093,850 9,212,787 20.42
Policy Charges-
Life Insurance 8,924,542 8,693,743 2.65
Net Investment
Income 16,825,077 22,914,262 (26.57)
Other Income 6,034,463 4,846,210 24.52
----------- ----------- ------
Total Revenues 193,712,971 183,836,021 5.37
----------- ----------- ------
Benefits and
Expenses
Benefits &
Settlement
Expenses 109,311,786 101,530,231 7.66 56.43 55.23
Dividends to
Policyholders 970,959 944,351 2.82 0.50 0.51
Amortization of
Deferred Policy
Acquisition
Costs 30,525,438 27,693,546 10.23 15.76 15.06
Other Operating
Expenses 19,728,392 15,217,483 29.64 10.18 8.28
----------- ----------- ------ ------ ------
Total Expenses 160,536,575 145,385,611 10.42 82.87 79.08
----------- ----------- ------ ------ ------
Income Before
Provision for
Income Taxes 33,176,396 38,450,410 (13.72) 17.13 20.92
Provision For
Income Taxes 8,747,754 11,117,481 (21.32) 26.37 28.91
----------- ----------- ------ ------ ------
Operating Income 24,428,642 27,332,929 (10.63)
Realized Investment
Gains, Net of Tax 1,079,806 1,222,232 (11.65)
----------- ----------- ------
Net Income 25,508,448 28,555,161 (10.67)
=========== =========== ======
Operating Income
Per Share-Basic 0.30 0.34 (10.90)
=========== =========== ======
Operating Income
Per Share-Diluted 0.30 0.34 (11.33)
=========== =========== ======
Net Income Per
Share-Basic 0.32 0.36 (10.94)
=========== =========== ======
Net Income
Per Share-Diluted 0.31 0.35 (11.37)
=========== =========== ======
Dividends Per
Share 0.1100 0.1000 10.00
=========== =========== ======
Average Shares
Outstanding -
Basic 80,325,375 80,082,617 0.30
=========== =========== ======
Average Shares
Outstanding -
Diluted 81,179,210 80,538,612 0.80
=========== =========== ======
Management believes that operating income and operating income
per share, non-GAAP financial measures, serve as meaningful tools for
assessing the profitability of the Company's ongoing operations.
Operating income is defined by the Company as net income excluding
realized investment gains and losses, net of applicable taxes.
Operating income per share represents operating income divided by the
weighted average shares outstanding for the reporting period.
Management uses operating income and operating income per share as
measures of the Company's ongoing profitability since they eliminate
the effect of securities market volatility from earnings.
ALFA CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
June 30, December 31, %
2006 2005 (1) Change
Assets -------------- -------------- ------
Investments:
Fixed Maturities Held
for Investment, at
amortized cost $ 78,525 $ 88,330 -11.10%
(fair value $82,106 in
2006 and $93,578 in 2005)
Fixed Maturities Available
for Sale, at fair value 1,434,502,184 1,419,708,095 1.04%
(amortized cost
$1,450,244,708 in 2006
and $1,394,823,078
in 2005)
Equity Securities Available
for Sale, at fair value 110,639,970 107,020,104 3.38%
(cost $105,310,910
in 2006 and $96,668,040
in 2005)
Policy Loans 63,370,356 62,101,204 2.04%
Collateral Loans 129,945,844 124,667,449 4.23%
Commercial Leases 1,758,334 2,515,084 -30.09%
Other Long-Term
Investments 86,157,287 61,961,072 39.05%
Other Long-Term Investments
in Affiliates 129,918,602 138,457,224 -6.17%
Short-Term Investments 85,512,290 84,861,880 0.77%
-------------- -------------- -------
Total Investments 2,041,883,392 2,001,380,442 2.02%
Cash 31,296,647 37,228,639 -15.93%
Accrued Investment Income 17,362,196 16,858,408 2.99%
Accounts Receivable 88,188,127 72,622,465 21.43%
Reinsurance Balances
Receivable 6,375,002 6,648,204 -4.11%
Deferred Policy Acquisition
Costs 221,649,127 204,253,919 8.52%
Goodwill 13,924,306 13,924,306 0.00%
Other Intangible Assets 8,082,900 8,424,600 -4.06%
(net of accumulated
amortization of
$1,025,100 in 2006
and $683,400 in 2005)
Other Assets 21,983,684 20,478,836 7.35%
-------------- -------------- -------
Total Assets $2,450,745,381 $2,381,819,819 2.89%
============== ============== =======
Liabilities and Stockholders' Equity
Policy Liabilities and
Accruals - Property and
Casualty Insurance $ 162,696,323 $ 159,639,886 1.91%
Policy Liabilities and
Accruals - Life Insurance
Interest-Sensitive
Products 631,593,992 600,994,074 5.09%
Policy Liabilities and
Accruals - Life Insurance
Other Products 201,989,039 197,140,294 2.46%
Unearned Premiums 244,001,163 220,456,047 10.68%
Dividends to Policyholders 11,566,567 11,662,085 -0.82%
Premium Deposit and
Retirement Deposit Funds 5,353,533 5,741,071 -6.75%
Deferred Income Taxes 14,781,872 29,118,958 -49.24%
Other Liabilities 82,503,896 74,147,175 11.27%
Due to Affiliates 16,313,672 22,249,975 -26.68%
Commercial Paper 215,762,599 213,790,443 0.92%
Notes Payable 70,000,000 70,000,000 0.00%
Notes Payable to Affiliates 32,395,419 20,887,635 55.09%
-------------- -------------- -------
Total Liabilities 1,688,958,075 1,625,827,643 3.88%
-------------- -------------- -------
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock,
$1 par value -- -- 0.00%
Shares authorized:
1,000,000
Issued: None
Common Stock,
$1 par value 83,783,024 83,783,024 0.00%
Shares authorized:
110,000,000
Issued: 83,783,024
Outstanding:
80,273,355 in
2006 and 80,284,018
in 2005
Capital in Excess of
Par Value 25,204,499 21,171,462 19.05%
Accumulated Other
Comprehensive Income (4,585,930) 21,699,859 -121.13%
(unrealized gains
(losses) on securities
available for sale,
net of tax of
($4,066,294) in 2006
and $22,105,684
in 2005; unrealized
gains (losses) on
interest rate swap
contract, net of tax
of $308,116 in 2006
and ($11,265) in 2005;
unrealized (losses)
on other long-term
investments, net of
tax of ($827,752)
in 2006 and ($394,560)
in 2005)
Retained Earnings 696,282,867 667,535,056 4.31%
Treasury Stock, at cost (38,897,154) (38,197,225) 1.83%
(shares, 3,509,669
in 2006 and 3,499,006
in 2005)
-------------- -------------- -------
Total Stockholders'
Equity 761,787,306 755,992,176 0.77%
-------------- -------------- -------
Total Liabilities and
Stockholders' Equity $2,450,745,381 $2,381,819,819 2.89%
============== ============== =======
Book Value per share $ 9.49 $ 9.42
============== ==============
(1) Derived from audited financial statements
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