Consolidated Second Quarter 2008 Results Include Operating Income of $3.7 million and Net Income of $2.4 Million.
WASHINGTON,DC,September 11,2008 - ULLICO Inc.,the labor owned multi-line holding company offering insurance and financial services,today reported pre-tax operating income of $3.7 million for the current quarter ended June 30,2008,compared to $5.6 million in the prior year's quarter. Net income for the current quarter was $2.4 million,compared to $5.3 million in the prior year's quarter.
Highlights for the quarter:
- The Property and Casualty Business Unit generated strong pre-tax earnings of $3.4 million,compared to $2.0 million for the same period last year. Core earnings on the Fiduciary Liability line continue to exceed expectations due to sound underwriting. Revenue from continuing lines was $12.6 million,an increase of 52% over the same quarter in 2007. The increase was a result of continued strong sales in the core professional lines of businesses (Fiduciary Liability and Union Liability),a significant increase in Workers' Compensation business,and the continued successful expansion of the Commercial lines program business.
- The Life and Health Unit contributed pre-tax earnings of $0.8 million from continuing operations,compared to $2.1 million for the same period last year. Earnings in the quarter were driven by favorable claim experience from the Stop Loss product,offset by higher incurred claims in the Group Life line and higher expenses related to accelerating marketing campaigns in the Direct Marketing lines. Revenue from continuing lines was $34.0 million in the current quarter and the same quarter in 2007.
- Retirement Services continues its momentum with earnings at $5.6 million,compared to $3.9 million for the same period last year. The earnings were driven by continued growth in assets under management within our flagship,Separate Account J,which grew from $3.1 billion at June 30,2007 to $3.5 billion at June 30,2008. In addition,Retirement Services benefited this quarter from $0.6 million of unexpected investment income from the Company's residual limited partnership investments.
In addition,consolidated operating income was impacted by an increase in general expenses resulting from investments in new product and marketing initiatives and related support infrastructure. The Company recorded federal income tax expense in the amount of $1.3 million for the quarter ending June 30,2008. As of December 31,2007,the Company determined that a valuation allowance was no longer required as a contra-asset to the deferred income tax asset. There was no federal income tax provision recorded for the quarter ending June 30,2007.
Total premium and fee revenue for the quarter was $64.7 million compared to $69.6 million in the prior year's quarter. Revenue on the Company's continuing lines was $56.5 million compared to $51.7 million last year,an increase of 9%. Revenue from the exited lines,which primarily includes the Company's fully insured Group Health business that has not been actively marketed since late 2006,declined to $8.4 million from $17.9 million in the prior year's quarter.
Year-to-Date Consolidated Results
Year-to-date consolidated operating income was $7.7 million compared to $9.0 million in the prior year. The year-to-date variance resulted from higher claim activity in our Group Life business,lower net favorable claims development in the Stop Loss business,and increased expenses related to our investment in growth initiatives discussed above.
Year-to-date consolidated net income was $5.0 million compared to $8.6 million in the prior year. The current year results include federal income tax expense of $2.6 million,whereas,there was no federal income tax provision recorded for the period ending June 30,2007.
Premium and fee revenue for the first six months declined from $135.4 million in 2007 to $129.3 million in 2008. Revenue on the Company's continuing lines of business increased 13% to $111.5 million,despite softening market conditions. The overall decline in revenue from the prior year is attributable to the Company's 2006 decision to no longer actively market fully insured Group Health insurance to the Taft-Hartley marketplace. As a result,our health insurance in force business is declining as customers find more cost effective solutions elsewhere.
Mark Singleton,ULLICO CEO stated,"Our strong operating profit and the continued growth in core lines of business in the face of very competitive market conditions is validating our strategy of investing in the development of a broad and diversified portfolio of products. We believe this will lead to sustained growth for ULLICO for years to come."
Chairman Joseph Hunt stated,"I'm pleased with ULLICO's second quarter results and its continued momentum despite the challenges that face us in our various markets. We appreciate all who actively support ULLICO by continuing to invest in the products and services we provide to organized labor."
Quarterly Financial Results at a Glance
| (In Millions) | 2nd Quarter 2008 | 2nd Quarter 2007 | Variance |
| Total Income | $72.4 | $77.0 | ($4.6) |
| Total Benefits & Expenses | 68.7 | 71.4 | 2.7 |
| Pre-Tax Operating Income before Non-Recurring Transactions | $3.7 | $5.6 | ($1.9) |
| Tax Expense | 1.3 | 0.1 | (1.2) |
| Net Income before Non-Recurring Transactions | $2.4 | $5.5 | ($3.1) |
| Non-Recurring Transactions | - | (0.2) | 0.2 |
| Net Income | $2.4 | $5.3 | ($2.9) |
2008 Year-To-Date Results at a Glance
| (In Millions) | as of June 30,2008 YTD | as of June 30,2007 YTD | Variance |
| Total Income | $144.4 | $150.8 | ($6.4) |
| Total Benefits & Expenses | 136.7 | 141.8 | 5.1 |
| Pre-Tax Operating Income before Non-Recurring Transactions | $7.7 | $9.0 | ($1.3) |
| Tax Expense | 2.7 | 0.1 | (2.6) |
| Net Income before Non-Recurring Transactions | $5.0 | $8.9 | ($3.9) |
| Non-Recurring Transactions | - | (0.3) | 0.3 |
| Net Income | $5.0 | $8.6 | ($3.6) |