WASHINGTON,DC,April 17,2007 - ULLICO Inc.,the labor owned multi-line financial services company offering insurance and investment products and services,today reported net income of $7.0 million for the quarter ended December 31,2006,compared to $15.6 million in the prior year quarter. Pre tax operating income for the current quarter before non-recurring transactions was $6.8 million,up from $2.1 million in the same quarter in 2005.
Highlights for the Quarter:
- Life & Health earnings totaled $6.4 million due to positive prior period claim reserve changes.
- Property & Casualty net earned premium increased 17% over same period last year.
- Solid Investment Services performance resulted in a $4.8 million profit.
- Settlement of claims asserted against third parties netted $4.7 million offset by one-time charges related to Group Health restructuring.
The Life & Health business unit continues its positive earnings momentum despite the significant reduction in health care premiums from the same period last year. The strong earnings for the quarter were led by the Group Life business line of $6.4 million compared to $1.4 million in the same period in 2005 driven primarily by a $5.5 million reduction in waiver of premium reserves related to the adoption of a new actuarial table. Group Health,Medical Stop Loss,and Disability products contributed $3.6 million in earnings for the quarter,including positive prior period reserve development of $3.3 million. Partially offsetting these positive results was a $2.2 million loss for the quarter in our Direct Marketing program due to the write-off of deferred acquisition costs (DAC).
Investment Services (including J for Jobs) contributed $4.8 million for the quarter compared to $2.9 million in the same period last year. J for Jobs continues to produce strong earnings and steady growth with assets under management at an all time high of $2.8 billion compared to $2.5 billion at the end of the same period last year. Trust Fund Advisors (TFA) incurred a modest loss for the quarter from a decrease in assets under management to $1.5 billion vs. $1.7 billion at the end of 2005.
ULLICO Inc. Reports Strong Fourth Quarter 2006 Net Income of $7.0 Million and Full Year Net Income for 2006 of $16.8 Million
Property & Casualty (P&C) lines reported very strong underwriting profits of $3.3 million for the quarter. Gross written premium for our Fiduciary line was up 14% and Union Liability increased by 26% for the quarter. Overall,gross written premium was up 13% and net earned premium was up 17% for the quarter. The P&C Companies also benefited from positive loss development of $2.0 million during the quarter.
During the fourth quarter the Company settled certain claims asserted against third parties in the amount of $4.7 million,net of legal fees. This was offset,however,by a $4.4 million charge related to the restructuring of our Group Health business unit to reflect the Company's decision to no longer actively market new Group health insurance policies. These transactions were classified as non-recurring.
Year-to-Date Consolidated Results
The Company's consolidated net income for the year ending December 31,2006 was $16.8 million,compared to consolidated net income of $35.8 million for the same period in 2005. The 2006 results were lower than the prior year primarily due to a decrease in non-recurring transactions to $3.0 million compared to $29.7 million in 2005. During 2006,legal recoveries net of expenses totaled $10.4 million. Within the Life and Health line,the Company incurred $4.7 million of restructuring expenses related to Group Health and $1.7 million as a result of an increased reserve within Direct Marketing related to issues encountered with a former third party administrator. As previously announced,much of the 2005 net income was due to several onetime transactions which totaled $29.7 million. The largest of these included the sales of Zenith Administrators ($24.3 million gain),Ulico Indemnity ($2.4 million gain),the recovery from the former chairman ($10.5 million gain),the sale of the Union Privilege block of business ($4.3 million loss) and the Company incurred a redemption premium of $1.6 million when it successfully completed the early redemption of its Series A New Preferred Stock originally issued in 2003.
Operating income for 2006 was $13.8 million as compared to $6.1 million for 2005. Included in the operating results for the year was $10.3 million of positive claims development related to our Life,Health,and Annuity lines and $4.0 million related to our Property and Casualty business unit. These improvements were offset by a $3.7 million write-off of previously deferred acquisition costs related to our Direct Marketing and Individual Agency lines.
Premium and fee revenue for the year declined from $350.9 million in 2005 to $287.8 million in 2006. This reflects a decline of $39.3 million in the Life and Health business unit,concentrated in the Group Health,Medical Stop-Loss and Direct Marketing lines as well as the absence of $18.8 million of revenue on units sold in early 2005. However,core revenue on the Company's Group Life,Fiduciary and Union Liability,and J for Jobs products produced solid growth for the period.
"Our decision to no longer actively market new Group Health policies was a difficult but necessary action in the best interests of the Company and our shareholders" said Mark Singleton,ULLICO President and CEO. "Our ability to begin this major transition and still report overall profits and growth in other lines is a strong statement as to the quality of our core businesses."
ULLICO Inc. Reports Strong Fourth Quarter 2006 Net Income of $7.0 Million and Full Year Net Income for 2006 of $16.8 Million
"We are very pleased with the 2006 results for ULLICO" said Chairman Joseph J. Hunt. In addition to continuing to report profitable quarters,the Board of Directors is encouraged with the signs of renewed growth in most of the core lines of business."
| Quarterly Financial Results at a Glance (In Millions) | |||
|---|---|---|---|
| 4th Quarter 2006 | 4th Quarter 2005 | Variance | |
| Total Income | $82.2 | $88.1 | ($5.9) |
| Total Benefits & Expenses | 75.4 | 86.0 | 10.6 |
| Pre-Tax Operating Income before Non-Recurring Transactions and Preferred Stock Dividend | $6.8 | $2.1 | $4.7 |
| Preferred Stock Dividend Expense | - | - | - |
| Tax Expense (benefit) | - | 0.3 | 0.3 |
| Income before Non-Recurring Transactions | $6.8 | $1.8 | $5.0 |
| Net Gain on Non-Recurring Transactions | 0.2 | 13.8 | (13.6) |
| Net Income (Loss) | $7.0 | $15.6 | ($8.6) |
| 2006 Year-To-Date Results at a Glance (In Millions) | |||
|---|---|---|---|
| As of December 31,2006 | As of December 31,2005 YTD | Variance | |
| Total Income | $322.2 | $376.8 | ($54.6) |
| Total Benefits & Expenses | 308.4 | 367.8 | 59.4 |
| Pre-Tax Operating Income before Non-Recurring Transactions and Preferred Stock Dividend | $13.8 | $9.0 | $4.8 |
| Preferred Stock Dividend Expense | - | 2.5 | 2.5 |
| Tax Expense (benefit) | - | 0.4 | 0.4 |
| Income before Non-Recurring Transactions | $13.8 | $6.1 | $7.7 |
| Net Gain on Non-Recurring Transactions | 3.0 | 29.7 | ($26.7) |
| Net Income | $16.8 | $35.8 | ($19.0) |
ULLICO Inc. Reports Strong Fourth Quarter 2006 Net Income of $7.0 Million and Full Year Net Income for 2006 of $16.8 Million