KMG America Reports First Quarter 2006 Net Income of $0.06 Per Share; KMG America Will Host an Investor Web Cast Today, Monday, May 8th at 10:00 A.M. EST.MINNEAPOLIS Minneapolis (mĭn'ēăp`əlĭs), city (1990 pop. 368,383), seat of Hennepin co., E Minn., at the head of navigation on the Mississippi River, at St. Anthony Falls; inc. 1856. -- KMG KMG Kerr-McGee KMG Koi Mil Gaya (Hindi movie) KMG Kunming, China - Kunming (Airport Code) KMG Kent Messenger Group (UK) America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. Corporation -- (the "Company" or "KMG America") (NYSE NYSE See: New York Stock Exchange :KMA KMA Kiss My Ass KMA Korea Meteorological Administration KMA Koninklijke Militaire Academie (Royal Military Academy; Netherlands) KMA Knoxville Museum of Art KMA Kentucky Medical Association KMA Korean Medical Association ) today reported net income for the first quarter ended March 31, 2006 of $1.2 million, or $0.06 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 to net income for the fourth quarter of 2005 of $1.6 million, or $0.07 per diluted share, and first quarter 2005 net income of $1.0 million, or $0.05 per diluted share. KMG America's Chief Executive Officer, Kenneth Kuk KUK Kurukshetra University (India) KUK Kultur- und Kongreßzentrum (German) KUK Krebs Und Kiefer (German consulting engineers) KUK Kaiserlich Und Königlich , commented, "Although slightly below our expectations due to some unanticipated charges that are likely to be one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. in nature, the first quarter earnings and sales results are consistent with the annual guidance KMG America offered recently. The previously announced margin compression compression, external stress applied to an object or substance, tending to cause a decrease in volume (see pressure). Gases can be compressed easily, solids and liquids to a very small degree if at all. was apparent in the quarterly results of our new large case activity and this too was contemplated in the guidance numbers." Mr. Kuk added, "Long term care claims showed significant improvement after several quarters of increases which should reduce concerns about that trend. We also continue to gain momentum in the market as more and more consultants and brokers gain confidence in KMG America's ability to deliver first rate products and administrative services." FIRST QUARTER FINANCIAL RESULTS First quarter 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. (see discussion of non-GAAP financial measures below) decreased to $1.2 million compared to fourth quarter 2005 operating income of $1.5 million, due to the introduction of option expensing and a one-time refund TO REFUND. To pay back by the party who has received it, to the party who has paid it, money which ought not to have been paid. 2. On a deficiency of assets, executors and administrators cum testamento annexo, are entitled to have refunded to them legacies of premiums resulting from a mass cancellation cancellation (See: cancel) CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob. of an older policy form described below. First quarter 2006 operating income increased to $1.2 million, compared to first quarter 2005 operating income of $1.0 million, due primarily to improved results in the Kanawha Kanawha (kənô`wə), principal river of W.Va., 97 mi (156 km) long, formed by the confluence of the New and Gauley rivers, S central W.Va., and flowing NW to the Ohio River at Point Pleasant; Charleston, W.Va. legacy business -- particularly the Senior segment -- driven by higher investment income that more than offset increased expenses associated with the new KMG America sales activity. After-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. attributed to the new KMG America growth initiatives increased to $2.4 million in the first quarter of 2006 from $2.2 million in the fourth quarter of 2005 and $1.6 million in the first quarter of 2005. While incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. direct premiums related to the sales activity from the new KMG America distribution channel increased to $6.2 million (before reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. ceded) compared to $2.3 million in the fourth quarter of 2005, they were more than offset by higher expenses. Expenses (before deferrals of acquisition costs related to voluntary product sales) totaled $5.0 million in the first quarter of 2006 compared to $4.4 million in the fourth quarter of 2005 and $1.1 million in the first quarter of 2005. Excluding the operating results attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to new KMG America growth initiatives, first quarter 2006 operating income was $3.6 million, or $0.16 per diluted share, compared to $3.7 million, or $0.17 per diluted share, in the fourth quarter of 2005, and first quarter 2005 operating income of $2.5 million, or $0.12 per diluted share. This reduction in operating income compared to the fourth quarter of 2005 is due primarily to the unusual items described below. The Company believes that excluding the earnings results of the new KMG America sales activity during the initial period when startup (STARTing UP) "At startup" means when the computer is first turned on or when a program is first loaded. See Startup folder. expenses exceed incremental new premiums provides a more meaningful comparison of the trends in earnings produced by Kanawha's legacy business, which serves to fund the initial expenses associated with building the new sales and underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. organization and the infrastructure needed to operate as a public company. The more notable earnings drivers are discussed below where the first quarter 2006 results are compared to the fourth quarter 2005 results. Premium Revenue Premiums for the first quarter of 2006 increased to $29.8 million, compared to $27.5 million in the fourth quarter of 2005. The increase is primarily due to incremental premiums related to the new KMG America sales distribution channel that produced $6.2 million of new direct earned premiums Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. ($4.5 million net of reinsurance) in the first quarter of 2006 compared to $2.3 million of new direct earned premiums ($1.8 million net of reinsurance) in the fourth quarter of 2005. The first quarter 2006 premiums were also adversely affected by an unusual $0.3 million premium refund attributed to a mass cancellation of an older Kanawha policy form in the state of Georgia Georgia, country, Asia Georgia (jôr`jə), Georgian Sakartvelo, Rus. Gruziya, officially Republic of Georgia, republic (2005 est. pop. 4,677,000), c.26,900 sq mi (69,700 sq km), in W Transcaucasia. , which is likely to be one-time in nature. Investment Income Investment income in the first quarter of 2006 was $7.2 million, flat compared to $7.2 million in the fourth quarter of 2005 in spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite an improvement in the investment portfolio yield. Cash and invested assets declined slightly (after removing increasing unrealized capital losses due to rising interest rates) due to the continuing high level of incremental startup expenses and the acquisition costs associated with new business now being written in increasing amounts. The first quarter 2006 investment portfolio yield averaged 4.95%, based on average cash and invested assets excluding FAS115 unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. (losses), an improvement of 7 basis points from the 4.88% average yield reported in the fourth quarter of 2005. Policyholder Policyholder An individual who owns an insurance policy. Benefits Policyholder benefits for the first quarter of 2006 increased to $23.4 million compared to $21.3 million in the fourth quarter of 2005, due primarily to increased benefits related to incremental sales in the new KMG America worksite segment, partially offset by lower claims in the senior segment. The total Company benefit ratio was 78.3% in the first quarter of 2006 compared to 77.7% in the fourth quarter of 2005. The benefit ratio in Kanawha's legacy worksite segment was 75.3% in the first quarter of 2006, compared to 67.3% in the fourth quarter of 2005, reflecting primarily the effect of the unusual one-time premium refund mentioned earlier and other special policy reserve adjustments. The benefit ratio in the senior segment improved to 80.0% in the first quarter of 2006, compared to 88.7% in the fourth quarter of 2005, reflecting lower open claims and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. dispositions of earlier claims. The acquired business segment first quarter 2006 benefit ratio increased to 194.4%, compared to the fourth quarter 2005 benefit ratio of 115.8% due largely to higher claims in three acquired blocks . The acquired segment benefit ratio can experience unusual period-to-period fluctuations due to both claims volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the and experience rated refunds that reduce both premiums and benefits by an equal amount but do not impact earnings. Expenses, Taxes, Licenses and Fees General insurance expenses, taxes, licenses and fees (before deferrals of policy acquisition costs) for the first quarter of 2006 increased to $15.0 million compared to $14.7 million in the fourth quarter of 2005, due primarily to the newly implemented option expensing requirements. Amortization of Deferred Acquisition Costs (DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter )/Value of Business Acquired (VOBA VOBA Value of Business Acquired VOBA Virtual Office Business Administration VOBA Votoms Online Battling Arena VOBA Virtual Office Business Assistant (NetOffice) ) Amortization of DAC/VOBA for the first quarter of 2006 increased to $1.2 million compared to the $0.7 million in the fourth quarter of 2005, reflecting both scheduled or expected increases in DAC and VOBA amortization as well as the impact of delayed approval of long term care rate increases in the senior segment resulting in higher amortization of VOBA. The accelerated VOBA amortization could reverse once the scheduled rate increases are effective. Unusual Items First quarter 2006 financial results contain three unusual items that are likely to be one-time in nature. One was the previously mentioned $0.3 million premium refund attributed to a mass cancellation of an older Kanawha policy form. The second item relates to accelerated VOBA amortization of $0.2 million due to the 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. approval delay in certain long term care rate increase in the legacy senior segment. Some have been recently approved, and others have been filed, with approval expected later this year. The third is a $0.3 million mismatch mismatch 1. in blood transfusions and transplantation immunology, an incompatibility between potential donor and recipient. 2. one or more nucleotides in one of the double strands in a nucleic acid molecule without complementary nucleotides in the same position on the other of a life insurance endowment A transfer, generally as a gift, of money or property to an institution for a particular purpose. The bestowal of money as a permanent fund, the income of which is to be used for the benefit of a charity, college, or other institution. benefit and the associated policy reserve in the legacy worksite segment that could reverse during a later quarter this year. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma operating income as reported this quarter has not been adjusted for these unusual items. NOTES ON FINANCIAL PRESENTATION Non-GAAP Financial Measures --Operating Income -- To supplement the financial statements presented on a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (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) and certain other unusual items that are likely to be one-time in nature, 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 indicative: see mood. 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 Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. 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. FORWARD LOOKING INFORMATION This press release contains 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. that are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause KMG America Corporation'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. KMG America Corporation assumes no obligation to publicly update or revise any forward-looking statements. ABOUT KMG AMERICA CORPORATION KMG America is a holding company that was formed to acquire the Southeastern south·east n. 1. Abbr. SE The direction or point on the mariner's compass halfway between due south and due east, or 135° east of due north. 2. An area or region lying in the southeast. 3. regional insurance company, Kanawha Insurance, and to operate and grow Kanawha's insurance and other related businesses nationwide. KMG offers a broad mix of individual and group insurance products and stop-loss stop-loss, n a general term referring to that category of coverage that provides insurance protection (reinsurance) to an employer for a self-funded plan. coverage along with third-party administration services to employers and to working Americans. For more information visit: www.kmgamerica.com. WEB CAST KMG America will host an investor and analyst web cast today, Monday Monday: see week. , May 8, 2006, at 10:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . 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 Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. ; www.fulldisclosure.com -- for retail investors Retail Investor Individual investors who buy and sell securities for their personal account, and not for another company or organization. Notes: Retail investors buy in much smaller quantities than larger institutional investors. . The replay will be available starting approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 2 hours after the original web cast. The replay will be available through Monday, May 22, 2006.
KMG America Corporation
Consolidated Statements of Income (GAAP basis, unaudited)
(in thousands, except share data and percentages)
Quarter Ended
----------------------------------
3/31/2006 12/31/2005 3/31/2005
---------- ----------- ----------
Insurance premiums, net of
reinsurance $ 29,811 $ 27,450 $ 26,198
Net investment income 7,206 7,203 6,653
Commission and fee income 4,219 3,553 3,568
Realized investment gains 211 34 27
Other income 986 898 792
---------- ----------- ----------
Total revenues 42,433 39,138 37,238
Policyholder benefits 23,354 21,322 20,430
Insurance commissions, net of
deferrals 2,981 2,353 2,666
Expenses, taxes, fees and
depreciation 13,049 12,643 11,476
Amortization of DAC and VOBA (1) 1,178 706 1,085
---------- ----------- ----------
Total benefits and expenses 40,562 37,024 35,657
Income before income taxes 1,871 2,114 1,581
(Provision) for income taxes (635) (702) (561)
---------- ----------- ----------
Net income before accounting
changes 1,236 1,412 1,020
Cumulative accounting changes,
net of tax - 176 -
---------- ----------- ----------
Net income $ 1,236 $ 1,588 $ 1,020
=================================
Net income per share
Basic $ 0.06 $ 0.07 $ 0.05
Diluted $ 0.06 $ 0.07 $ 0.05
Weighted-average shares
outstanding:
Basic 22,133 22,108 22,072
Diluted 22,138 22,110 22,156
Benefit ratio (2) 78.3% 77.7% 78.0%
Expense ratio (3) 50.6% 50.6% 51.2%
Average portfolio yield (4) 4.95% 4.88% 4.60%
Average invested assets $ 519,669 $ 495,358 $ 473,352
Average cash/equivalents & short
terms (4) 62,679 95,232 105,578
---------- ----------- ----------
Total average cash and
invested assets $ 582,348 $ 590,591 $ 578,929
(1) DAC: Deferred Acquisition Costs; VOBA: Value of Business Acquired.
(2) Benefit ratio is defined as policyholder benefits (equal to
incurred claims plus increases in policyholder active life
reserves) divided by net premiums.
(3) Expense ratio defined as commissions, expenses and amortization of
DAC/VOBA divided by earned premiums plus commissions/fees.
(4) Average portfolio yield is defined as net investment income
divided by average cash and 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).
KMG America Corporation
Supplemental Financial Information - Unaudited
(in thousands, except share data)
Quarter Ended
---------------------------------
3/31/2006 12/31/2005 3/31/2005
---------- ----------- ----------
Operating income (loss): (1)
Worksite insurance business $ 20 $ 324 $ 95
Senior market insurance 1,141 670 602
Third party administration
business 410 172 181
Acquired business 502 789 729
Corporate and other (847) (491) (604)
---------- ----------- ----------
Total operating income $ 1,227 $ 1,463 $ 1,002
Total excluding KMGA new
activity $ 3,583 $ 3,685 $ 2,592
(see table below)
Operating income per share:
Basic $ 0.06 $ 0.07 $ 0.05
Diluted $ 0.06 $ 0.07 $ 0.05
Diluted - excl. KMGA new
activity $ 0.16 $ 0.17 $ 0.12
Weighted-average shares outstanding:
Basic 22,133 22,108 22,072
Diluted 22,138 22,110 22,156
KMG America new activity:
Insurance premiums, net of
reinsurance $ 4,535 $ 1,824 $ -
Net investment income - - -
---------- ----------- ----------
Total revenues 4,535 1,824 -
Policyholder benefits 3,072 1,137 -
Insurance commissions, net of
deferrals 639 182 -
Expenses, taxes, fees and
depreciation 4,254 3,858 2,446
Amortization of DAC and VOBA 194 65 -
---------- ----------- ----------
Total benefits and expenses 8,159 5,242 2,446
Income (loss) before income taxes (3,624) (3,418) (2,446)
(Provision) for income taxes 1,268 1,196 856
---------- ----------- ----------
Net income (loss) $ (2,356)$ (2,222)$ (1,590)
=================================
(1) 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 and certain unusual
items, net of income taxes.
KMG America Corporation and Subsidiary
Consolidated Balance Sheets
(in thousands, except share data)
March 31, 2006 December 31, 2005
-------------- -----------------
(Unaudited)
Assets:
Cash and cash equivalents $ 11,361 $ 32,583
Investments 549,859 543,307
----------- -------------
Total cash and investments 561,220 575,890
Accrued investment income 5,997 5,917
DAC 17,543 14,032
VOBA 71,761 72,639
Other assets (1) 137,395 128,887
----------- -------------
Total assets $ 793,916 $ 797,365
=========== =============
Liabilities and shareholders' equity:
Total policy and contract
liabilities $ 554,727 $ 547,894
Deferred income taxes 10,822 13,061
Other liabilities (2) 47,284 48,927
----------- -------------
Total liabilities 612,833 609,882
Total shareholders' equity 181,083 187,483
----------- -------------
Total liabilities and
shareholders' equity $ 793,916 $ 797,365
=========== =============
Book value per share:
Basic $ 8.16 $ 8.47
Diluted $ 8.16 $ 8.47
Book value per share: (excl FAS 115)(3)
Basic $ 8.74 $ 8.70
Diluted $ 8.74 $ 8.70
Ending shares outstanding:
Basic 22,201 22,126
Diluted (4) 22,203 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,
$16.0 million of outstanding principal and accrued interest on a
subordinated note as of March 31, 2006, and other miscellaneous
liabilities.
(3) The book values are recalculated excluding $12.9 million of
unrealized capital losses, net of taxes, on March 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.
SEGMENT RESULTS (Unaudited)
(in thousands)
Quarter Ended
-----------------------------------
3/31/2006 12/31/2005 3/31/2005
---------- ----------- -----------
Worksite insurance business -
Legacy:
Insurance premiums, net of
reinsurance $ 13,972 $ 13,912 $ 14,658
Net investment income 1,595 1,602 1,782
Commissions and fee income - - -
Realized investment gains - - -
Other income 46 42 49
---------- ----------- -----------
Total revenues 15,613 15,556 16,489
Policyholder benefits 10,523 9,367 10,890
Insurance commissions, net of
deferrals 882 833 1,078
Expenses, taxes, fees and
depreciation 2,271 2,539 2,695
Amortization of DAC and VOBA 584 766 820
---------- ----------- -----------
Total benefits and expenses 14,260 13,505 15,483
---------- ----------- -----------
Income before income taxes $ 1,353 $ 2,051 $ 1,006
==================================
Total assets $ 163,955 $ 166,402 $ 168,714
==================================
Worksite insurance business - KMGA:
Insurance premiums, net of
reinsurance $ 4,535 $ 1,824 $ -
Net investment income - - -
Commissions and fee income - - -
Realized investment gains - - -
Other income - - -
---------- ----------- -----------
Total revenues 4,535 1,824 -
Policyholder benefits 3,072 1,137 -
Insurance commissions, net of
deferrals 639 182 -
Expenses, taxes, fees and
depreciation 1,952 1,992 860
Amortization of DAC and VOBA 194 65 -
---------- ----------- -----------
Total benefits and expenses 5,857 3,376 860
---------- ----------- -----------
Income before income taxes $ (1,322)$ (1,552)$ (860)
==================================
Total assets $ 4,738 $ - $ -
==================================
Senior market insurance business:
Insurance premiums, net of
reinsurance $ 10,675 $ 10,135 $ 10,601
Net investment income 1,411 1,297 1,012
Commissions and fee income - - -
Realized investment gains - - -
Other income 809 747 657
---------- ----------- -----------
Total revenues 12,895 12,179 12,270
Policyholder benefits 8,535 8,989 8,345
Insurance commissions, net of
deferrals 1,367 1,240 1,489
Expenses, taxes, fees and
depreciation 765 770 1,139
Amortization of DAC and VOBA 472 150 371
---------- ----------- -----------
Total benefits and expenses 11,139 11,149 11,344
---------- ----------- -----------
Income before income taxes $ 1,756 $ 1,030 $ 926
==================================
Total assets $ 201,603 $ 193,889 $ 168,486
==================================
SEGMENT RESULTS (Unaudited) - Continued
(in thousands)
Quarter Ended
---------------------------------
3/31/2006 12/31/2005 3/31/2005
---------- ----------- -----------
Third party administration
business:
Insurance premiums, net of
reinsurance $ - $ - $ -
Net investment income - - -
Commissions and fee income 4,134 3,502 3,483
Realized investment gains - - -
Other income - 2 1
---------- ----------- -----------
Total revenues 4,134 3,504 3,484
Policyholder benefits - - -
Insurance commissions, net of
deferrals - - -
Expenses, taxes, fees and
depreciation 3,503 3,240 3,206
Amortization of DAC and VOBA - - -
---------- ----------- -----------
Total benefits and expenses 3,503 3,240 3,206
---------- ----------- -----------
Income before income taxes $ 631 $ 264 $ 278
==================================
Total assets $ 10,063 $ 11,103 $ 8,406
==================================
Acquired business:
Insurance premiums, net of
reinsurance $ 629 $ 1,579 $ 938
Net investment income 1,981 1,964 2,063
Commissions and fee income - - -
Realized investment gains - - -
Other income 16 18 13
---------- ----------- -----------
Total revenues 2,626 3,561 3,014
Policyholder benefits 1,223 1,829 1,195
Insurance commissions, net of
deferrals 94 99 99
Expenses, taxes, fees and
depreciation 608 695 704
Amortization of DAC and VOBA (72) (276) (105)
---------- ----------- -----------
Total benefits and expenses 1,853 2,347 1,893
---------- ----------- -----------
Income before income taxes $ 773 $ 1,214 $ 1,121
==================================
Total assets $ 201,880 $ 204,288 $ 212,188
==================================
Corporate & other:
Insurance premiums, net of
reinsurance $ - $ - $ -
Net investment income 2,219 2,340 1,797
Commissions and fee income 85 50 85
Realized investment gains - - -
Other income 115 89 71
---------- ----------- -----------
Total revenues 2,419 2,479 1,953
Policyholder benefits - - -
Insurance commissions, net of
deferrals - - -
Expenses, taxes, fees and
depreciation
- Kanawha legacy 1,450 1,427 1,284
- KMG America (KMGA) new
activity 2,302 1,866 1,586
Amortization of DAC and VOBA - - -
---------- ----------- -----------
Total benefits and expenses 3,752 3,293 2,870
---------- ----------- -----------
Income (loss) before income
taxes $ (1,333)$ (814)$ (917)
==================================
Income before income taxes
excluding KMGA new activity $ 969 $ 1,052 $ 669
Total assets $ 211,677 $ 221,683 $ 210,366
==================================
KMG America Corporation
Reconciliation of Operating Income Consolidated Statements of Income
(Unaudited)
(in thousands)
KMG America Corporation: Quarter Ended
----------------------------------
3/31/2006 12/31/2005 3/31/2005
---------- ----------- ----------
Net income as reported $ 1,236 $ 1,588 $ 1,020
Reconciliation to operating income:
Exclude realized investment
gains/losses, (211) (34) (27)
Exclude offsetting deferred
compensation expense (1) 197 113 -
Exclude cumulative accounting
changes - (271) -
Taxes on the above 5 67 9
---------- ----------- ----------
Operating income $ 1,227 $ 1,463 $ 1,002
=================================
Corporate and Other Segment:
Quarter Ended
----------------------------------
3/31/2006 12/31/2005 3/31/2005
---------- ----------- ----------
Pretax income as reported $ (1,324)$ (689)$ (899)
Reconciliation to operating income:
Exclude realized investment
gains/losses, (211) (34) (27)
Exclude offsetting deferred
compensation expense (1) 197 113 -
Exclude cumulative accounting
changes - (271) -
Taxes on the above 5 67 9
---------- ----------- ----------
Operating income $ (1,333)$ (814)$ (917)
=================================
(1) Offsetting expense for realized gains(losses) related to executive
deferred compensation trading activity
KMG America Corporation
Statistical and Operating Data at or for the
Periods Indicated
(in thousands, except percentages)
OTHER FINANCIAL DATA
Unaudited
Quarter Ended
----------------------------------
3/31/2006 12/31/2005 3/31/2005
---------- ----------- ----------
Sales - issued and paid for annualized
premiums:
Worksite insurance segment - Kanawha Legacy
Life $ 402 $ 448 $ 619
Cancer 486 504 508
Disability income 633 1,249 1,311
Other A&H 210 1,098 659
---------- ----------- ----------
Total worksite - Kanawha Legacy 1,731 3,299 3,097
Worksite insurance segment - KMG America (KMGA)
New Activity
Core Group Products:
Life $ 1,151 $ - $ -
Stop loss 12,776 4,124 -
Disability income 149 - -
Other A&H - - -
Voluntary Benefit Products:
Life 122 167 -
Cancer 41 125 -
Disability income 1,278 1,331 -
Other A&H 336 244 -
---------- ----------- ----------
Total worksite - KMGA New Activity 15,853 5,991 -
Senior market insurance segment
Long term care 303 260 447
---------- ----------- ----------
Total senior market insurance 303 260 447
Total sales $ 17,887 $ 9,550 $ 3,544
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Quarter Ended
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3/31/2006 12/31/2005 3/31/2005
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Segment benefit ratios: (1)
Worksite insurance - Kanawha legacy 75.3% 67.3% 74.3%
Worksite insurance - KMGA new
activity 67.7% 62.3% n/a
Senior market insurance 80.0% 88.7% 78.7%
Acquired business 194.4% 115.8% 127.4%
Total company 78.3% 77.7% 78.0%
(1) benefit ratio is defined as total policyholder benefits divided by
total net premiums.
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