EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO    NEWS RELEASE
2108 East South Boulevard    Montgomery, Alabama 36116    Telephone 334-288-3900

 

FINANCIAL CONTACT:    MEDIA CONTACT:
Stephen G. Rutledge    David Rickey
Senior Vice President, CFO    Vice President – Public Relations
and Chief Investment Officer    (334) 613-4034
(334) 613-4500   

ALFA CORPORATION REPORTS THIRD QUARTER 2007 RESULTS

Montgomery, Alabama (October 24, 2007) — Alfa Corporation (NASDAQ:ALFA) today announced financial results for the three and nine months ended September 30, 2007. Operating income for the quarter was $24,977,250, or $0.31 per diluted share, compared with operating income of $26,871,178, or $0.33 per diluted share, for the third quarter of 2006, a per share decrease of 7.6%. Net income, which includes net realized investment gains, was $25,119,350, or $0.31 per diluted share, for the third quarter of 2007, compared with $27,237,673, or $0.34 per diluted share in 2006, a per share decrease of 8.3%. Premiums and policy charges increased 3.7% to $179,386,267 for the third quarter of 2007.

For the nine months ended September 30, 2007, operating income was $73,320,225 compared with operating income of $71,354,899 for the first nine months of 2006. On a per share basis, operating income increased 2.2% to $0.90 per diluted share for the nine-month period in 2007 compared with $0.88 per diluted share for the same period in 2006. After net realized investment gains, net income was $74,729,635, or $0.92 per diluted share, for the first nine months of 2007, compared with net income of $72,883,563, or $0.90 per diluted share, for the same period in 2006, a per share increase of 2.0%. Premiums and policy charges increased 4.7% to $536,949,278 for the first nine months of 2007.

During the third quarter of 2007, Alfa Corporation recorded a non-recurring loss resulting from its 41% ownership in MidCountry Financial Corporation. Alfa Corporation accounts for this investment using the equity method. The loss at MidCountry resulted from loans originated and serviced by an independent mortgage lender headquartered

 

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Alfa Reports Third-Quarter Results

Page 2

October 24, 2007

 

in Florida. MidCountry Financial posted a loss in its mortgage portfolio primarily on loans originated by this mortgage lender, which also defrauded MidCountry Financial by misappropriating large principal payments on construction loans being serviced. The impact on Alfa Corporation of these combined non-recurring losses for the third quarter of 2007 was approximately $3,150,000 after-tax, or $0.04 per diluted share.

Alfa Corporation will host a conference call on Wednesday, October 24, at 10:30 a.m. Eastern time. Investors and other interested parties may access the teleconference by calling 1-800-218-0713 (access code 11097382), or via links located on Alfa’s web site: www.alfains.com. A 30-day Internet 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 third quarter ended September 30, 2007, 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/ALFA3q07tmi.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 - including political, economic, regulatory, 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. Additional information regarding these and other risk factors and uncertainties may be found in Alfa Corporation’s filings with the Securities and Exchange Commission.

 

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ALFA Reports Third-Quarter Results

Page 3

October 24, 2007

ALFA CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(UNAUDITED)

 

    

Nine Months Ended

September 30,

     Statistics   

Three Months Ended

September 30,

     Statistics
     2007    2006    % Change     2007    2006    2007    2006    % Change     2007    2006

Revenues

                            

Premiums - Property and Casualty Insurance

    470,448,180    450,442,275    4.44           157,420,855    152,191,304    3.44       

Premiums - Life Insurance

    37,737,401    34,479,582    9.45           12,556,687    11,639,879    7.88       

Policy Charges - Life Insurance

    28,763,697    27,879,497    3.17           9,408,725    9,122,277    3.14       

Net Investment Income

    75,531,072    67,107,526    12.55           21,833,478    26,306,786    (17.00 )     

Other Income

    21,820,533    20,742,003    5.20           6,298,831    7,337,794    (14.16 )     
                                           

Total Revenues

    634,300,883    600,650,883    5.60           207,518,576    206,598,040    0.45       
                                           

Benefits, Losses and Expenses

                            

Benefits, Claims, Losses and Settlement Expenses

    363,482,099    346,567,600    4.88     57.30    57.70    120,633,444    118,436,125    1.86     58.13    57.33

Dividends to Policyholders

    3,096,847    3,040,848    1.84     0.49    0.51    962,538    954,889    0.80     0.46    0.46

Amortization of Deferred Policy Acquisition Costs

    105,402,501    94,853,824    11.12     16.62    15.79    33,963,655    33,603,764    1.07     16.37    16.26

Other Operating Expenses

    63,535,710    58,639,498    8.35     10.02    9.76    19,284,473    16,873,615    14.29     9.29    8.17
                                                   

Total Benefits, Losses and Expenses

    535,517,157    503,101,770    6.44     84.43    83.76    174,844,110    169,868,393    2.93     84.25    82.22
                                                   

Income Before Income Tax Expense

    98,783,726    97,549,113    1.27     15.57    16.24    32,674,466    36,729,647    (11.04 )   15.75    17.78

Income Tax Expense

    25,463,501    26,194,214    (2.79 )   25.78    26.85    7,697,216    9,858,469    (21.92 )   23.56    26.84
                                           

Operating Income

    73,320,225    71,354,899    2.75           24,977,250    26,871,178    (7.05 )     

Realized Investment Gains, Net of Tax

    1,409,410    1,528,664    (7.80 )         142,100    366,495    (61.23 )     
                                           

Net Income

    74,729,635    72,883,563    2.53           25,119,350    27,237,673    (7.78 )     
                                           

Operating Income Per Share - Basic

    0.91    0.89    2.43           0.31    0.33    (7.45 )     
                                           

Operating Income Per Share - Diluted

    0.90    0.88    2.19           0.31    0.33    (7.58 )     
                                           

Net Income Per Share - Basic

    0.93    0.91    2.21           0.31    0.34    (8.18 )     
                                           

Net Income Per Share - Diluted

    0.92    0.90    1.97           0.31    0.34    (8.31 )     
                                           

Dividends Per Share

    0.3450    0.3200    7.81           0.1175    0.1100    6.82       
                                           

Average Shares Outstanding - Basic

    80,570,574    80,317,604    0.31           80,671,806    80,322,212    0.44       
                                           

Average Shares Outstanding - Diluted

    81,585,629    81,140,033    0.55           81,689,991    81,218,401    0.58       
                                           

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.

 

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ALFA Reports Third-Quarter Results

Page 4

October 24, 2007

ALFA CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

 

     (Unaudited)
September 30,
2007		     December 31,
2006 (1)		     % Change  

Assets

       

Investments:

       

Fixed Maturities Held for Investment, at amortized cost (fair value $34,695 in 2007 and $57,272 in 2006)

    $ 32,722     $ 55,052     -40.56 %

Fixed Maturities Available for Sale, at fair value (amortized cost $1,480,955,226 in 2007 and $1,436,188,473 in 2006)

      1,478,954,757       1,446,693,702     2.23 %

Equity Securities Available for Sale, at fair value (cost $99,370,616 in 2007 and $101,177,606 in 2006)

      108,178,992       111,427,207     -2.92 %

Policy Loans

      67,224,157       64,949,875     3.50 %

Collateral Loans

      123,851,456       128,685,111     -3.76 %

Other Long-Term Investments

      87,298,427       86,823,771     0.55 %

Short-Term Investments

      208,868,201       167,683,154     24.56 %
                      

Total Investments

      2,074,408,712       2,006,317,872     3.39 %

Cash

      31,178,981       37,218,109     -16.23 %

Other Long-Term Investments in Affiliates

      131,183,765       120,819,010     8.58 %

Accrued Investment Income

      18,764,104       17,026,711     10.20 %

Accounts Receivable

      115,743,463       84,100,246     37.63 %

Reinsurance Balances Receivable

      11,486,324       6,015,853     90.93 %

Deferred Policy Acquisition Costs

      234,928,638       224,516,950     4.64 %

Goodwill

      9,576,218       9,576,218     0.00 %

Other Intangible Assets (net of accumulated amortization of $1,879,350 in 2007 and $1,366,800 in 2006)

      7,228,650       7,741,200     -6.62 %

Other Assets

      19,168,796       20,906,925     -8.31 %
                      

Total Assets

    $ 2,653,667,651     $ 2,534,239,094     4.71 %
                      

Liabilities and Stockholders’ Equity

       

Policy Liabilities and Accruals - Property and Casualty Insurance

    $ 185,680,425     $ 172,664,652     7.54 %

Policy Liabilities and Accruals - Life Insurance Interest-Sensitive Products

      680,994,088       646,354,761     5.36 %

Policy Liabilities and Accruals - Life Insurance Other Products

      218,799,651       205,449,027     6.50 %

Unearned Premiums

      253,110,562       236,481,371     7.03 %

Dividends to Policyholders

      11,905,252       11,882,776     0.19 %

Premium Deposit and Retirement Deposit Funds

      4,539,072       4,921,879     -7.78 %

Deferred Income Taxes

      13,802,066       25,547,554     -45.98 %

Other Liabilities

      75,696,120       75,222,398     0.63 %

Due to Affiliates

      33,845,693       24,355,859     38.96 %

Commercial Paper

      201,616,856       206,923,215     -2.56 %

Notes Payable

      70,000,000       70,000,000     0.00 %

Notes Payable to Affiliates

      31,396,118       27,516,459     14.10 %
                      

Total Liabilities

      1,781,385,903       1,707,319,951     4.34 %
                      

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: 80,703,179 in 2007 and 80,459,113 in 2006

       

Capital in Excess of Par Value

      32,370,610       27,502,452     17.70 %

Accumulated Other Comprehensive Income (unrealized gains on securities available for sale, net of tax of $5,932,936 in 2007 and $14,019,988 in 2006; unrealized gains on interest rate swap contract, net of tax of $105,541 in 2006; unrealized gains (losses) on other long-term investments, net of tax of ($106,291) in 2007 and $75,006 in 2006)

      5,826,645       14,200,535     -58.97 %

Retained Earnings

      785,695,387       738,811,778     6.35 %

Treasury Stock, at cost (shares, 3,079,845 in 2007 and 3,323,911 in 2006)

      (35,393,918 )     (37,378,646 )   -5.31 %
                      

Total Stockholders’ Equity

      872,281,748       826,919,143     5.49 %
                      

Total Liabilities and Stockholders’ Equity

    $ 2,653,667,651     $ 2,534,239,094     4.71 %
                      

Book Value per share

    $ 10.81     $ 10.28    
                  

 

(1)

Derived from audited financial statements

 

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LOGO

Alfa Corporation

Investor Supplement

Third Quarter 2007

This Investor Supplement is for informational purposes only. The consolidated financial statements and financial exhibits included herein are unaudited. These consolidated financial statements and exhibits should be read in conjunction with the consolidated financial statements and notes thereto included in Form 10-K.

Measures used in these financial statements and exhibits that are not based on generally accepted accounting principles (“non-GAAP”) are denoted with an asterisk (*) the first time they appear. These measures are defined on the page “Definitions of Non-GAAP, GAAP and Operating Measures” and are reconciled to the most directly comparable GAAP measure herein.

ALFA CORPORATION

PROPERTY/CASUALTY SEGMENT (UNAUDITED)

(in thousands, except ratios and per share data)

 

    

Nine Months Ended

September 30,

     Ratios    

Three Months Ended

September 30,

     Ratios  
     2007     2006     % Change     2007     2006     2007     2006     % Change     2007     2006  

INCOME STATEMENT

                     

Revenues

                     

Automobile Premiums

    $ 292,255     $ 283,444     3.1         $ 97,487     $ 95,964     1.6      

Homeowner Premiums

      164,313       155,108     5.9           55,146       52,259     5.5      

Other Premiums

      13,880       11,890     16.7           4,788       3,968     20.7      
                                                    

Total Premiums - Property and Casualty Insurance

      470,448       450,442     4.4     100.0 %   100.0 %     157,421       152,191     3.4     100.0 %   100.0 %

Net Investment Income

      34,543       28,777     20.0           11,699       10,231     14.3      

Other Income

      11,508       10,244     12.3           3,221       3,410     (5.5 )    
                                                    

Total Revenues

      516,499       489,463     5.5           172,341       165,832     3.9      

Benefits, Losses and Expenses

                     

Incurred Losses (Non-storm)

      262,771       249,655     5.3     55.9 %   55.4 %     90,977       89,774     1.3     57.8 %   59.0 %

Incurred Losses (Storm)

      13,919       13,773     1.1     3.0 %   3.1 %     1       (32 )   103.1     0.0 %   0.0 %

Loss Adjustment Expense

      23,984       22,060     8.7     5.1 %   4.9 %     7,701       7,512     2.5     4.9 %   4.9 %
                                                                    

Total Benefits, Claims, Losses and Settlement Expenses

      300,674       285,488     5.3     64.0 %   63.4 %     98,679       97,254     1.5     62.7 %   63.9 %

Amortization of Deferred Policy Acquisition Costs

      93,498       86,829     7.7     19.9 %   19.3 %     30,384       30,686     (1.0 )   19.3 %   20.2 %

Other Operating Expenses

      38,885       37,285     4.3     8.3 %   8.3 %     11,521       10,555     9.2     7.3 %   6.9 %
                                                                    

Total Operating Expenses

      132,383       124,114     6.7     28.2 %   27.6 %     41,905       41,241     1.6     26.6 %   27.1 %
                                                                    

Total Benefits, Losses and Expenses

      433,057       409,602     5.7     92.2 %   91.0 %     140,584       138,495     1.5     89.3 %   91.0 %
                                                                    

Income Before Income Tax Expense

      83,442       79,861     4.5           31,757       27,337     16.2      

Income Tax Expense

      20,615       20,800     (0.9 )         7,571       6,876     10.1      
                                                    

Operating Income *

      62,827       59,061     6.4           24,186       20,461     18.2      

Realized Investment Gains (Losses), Net of Tax

      (1,686 )     (1,864 )   9.5           1,202       (850 )   241.4      
                                                    

Net Income

    $ 61,141     $ 57,197     6.9         $ 25,388     $ 19,611     29.5      
                                                    

Operating Income Per Share - Diluted *

    $ 0.77     $ 0.73     5.8         $ 0.30     $ 0.25     17.5      

Net Income Per Share - Diluted

    $ 0.75     $ 0.70     6.3         $ 0.31     $ 0.24     28.7      
                                                    

Operating Return on Equity*

      17.5 %     17.9 %                
                                

Return on Equity*

      16.9 %     17.2 %                
                                

Other Key Information

                     

Earned Premium by Market

                     

Alabama

    $ 337,597     $ 329,245     2.5     71.8 %   73.1 %   $ 113,187     $ 110,186     2.7     71.9 %   72.4 %

Georgia

      24,137       23,745     1.7     5.1 %   5.3 %     8,160       7,885     3.5     5.2 %   5.2 %

Mississippi

      33,380       30,186     10.6     7.1 %   6.7 %     11,291       10,181     10.9     7.2 %   6.7 %

Alliance/VA Mutual

      18,909       16,033     17.9     4.0 %   3.6 %     7,086       5,328     33.0     4.5 %   3.5 %

Nonstandard

      56,425       51,233     10.1     12.0 %   11.4 %     17,697       18,611     (4.9 )   11.2 %   12.2 %
                                                                    

Total Earned Premium

    $ 470,448     $ 450,442     4.4     100.0 %   100.0 %   $ 157,421     $ 152,191     3.4     100.0 %   100.0 %
                                                                    

Incurred Losses by Market (Non-storm)

                     

Alabama

    $ 179,572     $ 179,198     0.2     53.2 %   54.4 %   $ 61,415     $ 63,020     (2.5 )   54.3 %   57.2 %

Georgia

      16,531       15,758     4.9     68.5 %   66.4 %     6,872       5,988     14.8     84.2 %   75.9 %

Mississippi

      18,740       14,293     31.1     56.1 %   47.3 %     6,531       5,417     20.6     57.8 %   53.2 %

Alliance/VA Mutual

      8,332       7,799     6.8     44.1 %   48.6 %     4,020       3,361     19.6     56.7 %   63.1 %

Nonstandard

      39,596       32,607     21.4     70.2 %   63.6 %     12,139       11,988     1.3     68.6 %   64.4 %
                                                                    

Total Incurred Losses

    $ 262,771     $ 249,655     5.3     55.9 %   55.4 %   $ 90,977     $ 89,774     1.3     57.8 %   59.0 %
                                                                    

Lapse Ratio: Preferred and Standard Classes *

      3.31 %     3.44 %           3.45 %     3.64 %      

Net Written Premium by LOB

                     

Automobile

    $ 294,066     $ 299,591     (1.8 )       $ 96,139     $ 96,997     (0.9 )    

Homeowner

      171,245       163,450     4.8           57,003       55,924     1.9      

Other

      14,975       13,330     12.3           4,782       4,051     18.0      
                                                    

Total Net Written Premium

    $ 480,286     $ 476,371     0.8         $ 157,924     $ 156,972     0.6      
                                                    

Net Written Premium by Market

                     

Alabama

    $ 345,916     $ 339,354     1.9         $ 115,801     $ 114,440     1.2      

Georgia

      24,708       24,442     1.1           8,488       8,224     3.2      

Mississippi

      34,765       32,959     5.5           11,303       10,460     8.1      

Alliance/VA Mutual

      20,057       15,417     30.1           7,855       6,028     30.3      

Nonstandard

      54,840       64,199     (14.6 )         14,477       17,820     (18.8 )    
                                                    

Total Net Written Premium

    $ 480,286     $ 476,371     0.8         $ 157,924     $ 156,972     0.6      
                                                    

Data may differ from actual due to rounding.

Market information reflects presentation change for Nonstandard.

ALFA CORPORATION

LIFE SEGMENT (UNAUDITED)

(in thousands, except ratios and per share data)

 

    

Nine Months Ended

September 30,

     Ratios    

Three Months Ended

September 30,

     Ratios  
     2007     2006     % Change     2007     2006     2007     2006     % Change     2007     2006  

INCOME STATEMENT

                     

Revenues

                     

Traditional Life Insurance Premiums

    $ 37,355     $ 33,987     9.9         $ 12,556     $ 11,638     7.9      

Universal Life Policy Charges

      16,843       16,278     3.5           5,696       5,483     3.9      

Universal Life Policy Charges - COLI

      3,370       3,246     3.8           848       768     10.4      

Interest-sensitive Life Policy Charges

      8,548       8,355     2.3           2,864       2,871     (0.2 )    

Annuity Policy Charges

      2       —       100.0           1       —       100.0      

Group Life Insurance Premiums

      529       493     7.3           —         2     (100.0 )    
                                                    

Total Premiums and Policy Charges - Life Insurance

      66,647       62,359     6.9     100.0 %   100.0 %     21,965       20,762     5.8     100.0 %   100.0 %

Net Investment Income

      44,671       41,602     7.4           14,935       14,296     4.5      

Other Income

      —         —       0.0           —         —       0.0      
                                                    

Total Revenues

      111,318       103,961     7.1           36,900       35,058     5.3      

Benefits, Claims, Losses and Settlement Expenses

      63,026       61,432     2.6     94.6 %   98.5 %     22,019       21,184     3.9     100.2 %   102.0 %

Dividends to Policyholders

      3,097       3,041     1.8     4.6 %   4.9 %     963       955     0.8     4.4 %   4.6 %

Amortization of Deferred Policy Acquisition Costs

      11,905       8,812     35.1     17.9 %   14.1 %     3,580       2,918     22.7     16.3 %   14.1 %

Other Operating Expenses

      11,426       8,193     39.5     17.1 %   13.1 %     2,935       1,416     107.3     13.4 %   6.8 %
                                                                    

Total Benefits, Losses and Expenses

      89,454       81,478     9.8     134.2 %   130.6 %     29,497       26,473     11.4     134.3 %   127.5 %
                                                                    

Income Before Income Tax Expense

      21,864       22,483     (2.8 )         7,403       8,585     (13.8 )    

Income Tax Expense

      6,896       7,057     (2.3 )         2,258       2,749     (17.9 )    
                                                    

Operating Income

      14,968       15,426     (3.0 )         5,145       5,836     (11.8 )    

Realized Investment Gains (Losses), Net of Tax

      3,120       3,428     (9.0 )         (1,068 )     1,224     (187.3 )    
                                                    

Net Income

    $ 18,088     $ 18,854     (4.1 )       $ 4,077     $ 7,060     (42.3 )    
                                                    

Operating Income Per Share - Diluted

    $ 0.18     $ 0.19     (3.5 )       $ 0.06     $ 0.07     (12.3 )    

Net Income Per Share - Diluted

    $ 0.22     $ 0.23     (4.6 )       $ 0.05     $ 0.09     (42.6 )    
                                                    

Operating Return on Equity

      7.0 %     7.4 %                
                                

Return on Equity

      8.5 %     9.1 %                
                                

Other Key Information (all information presented on a STAT-basis)

                     

Annualized New Business Premium by LOB

                     

Traditional Life

    $ 8,802     $ 9,789     (10.1 )       $ 2,645     $ 2,602     1.7      

Universal Life

      2,663       2,832     (6.0 )         699       919     (23.9 )    

Interest-sensitive Life

      1,665       1,598     4.2           511       548     (6.8 )    
                                                    

Total Issued New Business Premium by LOB

    $ 13,130     $ 14,219     (7.7 )       $ 3,855     $ 4,069     (5.3 )    
                                                    

Annualized New Business Premium by Region

                     

Alabama

    $ 11,271     $ 12,343     (8.7 )       $ 3,361     $ 3,553     (5.4 )    

Georgia

      863       1,016     (15.1 )         225       296     (24.0 )    

Mississippi

      996       860     15.8           269       220     22.3      
                                                    

Total Issued New Business Premium by Region

    $ 13,130     $ 14,219     (7.7 )       $ 3,855     $ 4,069     (5.3 )    
                                                    

Actual vs. Expected Mortality Ratio *

      82 %     103 %           86 %     103 %      

Persistency Ratio *

      90.6 %     91.0 %                
                                

Data may differ from actual due to rounding.

ALFA CORPORATION

NONINSURANCE SEGMENT (UNAUDITED)

(in thousands, except ratios and per share data)

 

    

Nine Months Ended

September 30,

    

Three Months Ended

September 30,

  
     2007     2006     % Change     2007     2006     % Change  

INCOME STATEMENT

             

Revenues

             

Equity Interest in MidCountry Financial (net of expense)

    $ (3,801 )   $ 969     (492.3 )   $ (4,242 )   $ 167     (2,640.1 )

Loan Income (net of expense)

      4,095       (274 )   1,594.5       1,000       3,045     (67.2 )

Other Net Investment Income

      1,209       71     1,602.8       477       65     633.8  
                                            

Total Net Investment Income

      1,503       766     96.2       (2,765 )     3,277     (184.4 )

Fee/Commission Income - Agency Operations

      25,389       27,787     (8.6 )     7,229       9,060     (20.2 )

Other Income

      836       921     (9.2 )     277       258     7.4  
                                            

Total Other Income

      26,225       28,708     (8.6 )     7,506       9,318     (19.4 )
                                            

Total Revenues

      27,728       29,474     (5.9 )     4,741       12,595     (62.4 )

Benefits, Losses and Expenses

             

Claims and Settlement Expenses - Agency Operations

      3,136       2,575     21.8       1,009       952     6.0  

Other Operating Expenses - Loan/Lease Operations

      3,110       3,814     (18.5 )     934       1,470     (36.5 )

Other Operating Expenses - Agency Operations

      19,838       22,049     (10.0 )     6,114       6,824     (10.4 )

Other Operating Expenses - Other Operations

      594       811     (26.8 )     718       445     61.3  
                                            

Total Benefits, Losses and Expenses

      26,678       29,249     (8.8 )     8,775       9,691     (9.5 )
                                            

Income Before Income Tax Expense

      1,050       225     366.7       (4,034 )     2,904     (238.9 )

Income Tax Expense

      600       93     545.2       (1,276 )     968     (231.8 )
                                            

Operating Income (Loss)

      450       132     240.9       (2,758 )     1,936     (242.5 )

Realized Investment Gains (Losses), Net of Tax

      (25 )     (35 )   28.6       8       (7 )   214.3  
                                            

Net Income (Loss)

    $ 425     $ 97     338.1     $ (2,750 )   $ 1,929     (242.6 )
                                            

Operating Income (Loss) Per Share - Diluted

    $ 0.01     $ 0.00     239.0     $ (0.03 )   $ 0.02     (241.6 )

Net Income (Loss) Per Share - Diluted

    $ 0.01     $ 0.00     335.8     $ (0.03 )   $ 0.02     (241.7 )
                                            

Operating Return on Equity

      0.8 %     0.4 %        
                        

Return on Equity

      0.7 %     0.3 %        
                        

Other Key Information

             
     9/30/07     9/30/06     % Change                    

Alfa Financial Corporation:

             

Loan Portfolio

    $ 123,486     $ 129,927     (5.0 )      

Loan Portfolio Yield *

      8.09 %     7.79 %        

Loan Gross Charge-offs

    $ (357 )   $ 4,177          

Loan Net Charge-offs

    $ (434 )   $ 4,114          

Loan Delinquency Ratio *

      2.26 %     1.87 %        

MidCountry Financial Corporation:

             

Carrying Value (41% and 42% ownership at 9/30/07 and 9/30/06, respectively)

    $ 81,659     $ 55,888     46.1        

Equity in Net Earnings

    $ (3,801 )   $ 969     (492.3 )      

Return on Carried Value *

      -5.5 %     1.8 %        

Data may differ from actual due to rounding.

 

8

ALFA CORPORATION

CORPORATE SEGMENT AND ELIMINATIONS (UNAUDITED)

(in thousands, except ratios and per share data)

 

    

Nine Months Ended

September 30,

     Three Months Ended
September 30,		  
     2007     2006     % Change     2007     2006     % Change  

INCOME STATEMENT

             

Revenues

             

Premiums - Life Insurance

    $ (146 )   $ —       (100.0 )   $ —       $ —       0.0  

Investment Loss

      (1,117 )     (608 )   (83.7 )     (735 )     (134 )   (448.5 )

Interest Expense

      (4,069 )     (3,431 )   (18.6 )     (1,301 )     (1,363 )   4.5  
                                            

Total Net Investment Loss

      (5,186 )     (4,039 )   (28.4 )     (2,036 )     (1,497 )   (36.0 )

Other Income

      (15,913 )     (18,210 )   12.6       (4,428 )     (5,391 )   17.9  
                                            

Total Revenues

      (21,245 )     (22,249 )   4.5       (6,464 )     (6,888 )   6.2  

Benefits, Losses and Expenses

             

Claims and Settlement Expenses

      (3,353 )     (2,927 )   (14.6 )     (1,073 )     (953 )   (12.6 )

Amortization of Deferred Policy Acquisition Costs

      —         (787 )   100.0       —         —       0.0  

Other Operating Expenses

      (10,317 )     (13,513 )   23.7       (2,937 )     (3,836 )   23.4  
                                            

Total Benefits, Claims, Losses and Settlement Expenses

      (13,670 )     (17,227 )   20.6       (4,010 )     (4,789 )   16.3  
                                            

Loss Before Income Tax Expense (Benefit)

      (7,575 )     (5,022 )   (50.8 )     (2,454 )     (2,099 )   (16.9 )

Income Tax Expense (Benefit)

      (2,648 )     (1,757 )   (50.7 )     (856 )     (734 )   (16.6 )
                                            

Operating Income (Loss)

      (4,927 )     (3,265 )   (50.9 )     (1,598 )     (1,365 )   (17.1 )

Realized Investment Gains (Losses), Net of Tax

      —         —       0.0       —         —       0.0  
                                            

Net Income (Loss)

    $ (4,927 )   $ (3,265 )   (50.9 )   $ (1,598 )   $ (1,365 )   (17.1 )
                                            

Operating Income (Loss) Per Share - Diluted

    $ (0.06 )   $ (0.04 )   (50.1 )   $ (0.02 )   $ (0.02 )   (16.4 )

Net Income (Loss) Per Share - Diluted

    $ (0.06 )   $ (0.04 )   (50.1 )   $ (0.02 )   $ (0.02 )   (16.4 )
                                            

Data may differ from actual due to rounding.

ALFA CORPORATION

INVESTMENT PORTFOLIO

(in thousands, except ratios and per share data)

 

         

Nine Months Ended

September 30,

                

Three Months Ended

September 30,

              
          2007     2006     % Change                 2007     2006     % Change              

Alfa Corporation Consolidated Investment Portfolio - Other Key Information

 

                
                            Yields                       Yields  
                            2007     2006                       2007     2006  

Net Investment Income and Pre-tax Yield:

                        

Fixed Income Securities

       $ 64,393     $ 59,693     7.9     5.9 %   5.7 % 1   $ 21,381     $ 20,741     3.1     5.8 %   5.9 % 1

Equity Securities

         2,676       2,927     (8.6 )   3.1 %   3.3 %     715       650     10.0     2.5 %   2.2 %

Collateral Loans

         7,696       7,539     2.1           2,611       2,607     0.2      

Commercial Leases

         89       153     (41.8 )         15       59     (74.6 )    

Other Investment Income

         17,719       16,717     6.0           3,803       6,089     (37.5 )    

Interest Expense

         (12,122 )     (11,467 )   (5.7 )         (4,217 )     (4,199 )   (0.4 )    

Investment Expenses

         (4,919 )     (8,454 )   41.8           (2,474 )     361     (785.3 )    
                                                       

Total Net Investment Income

       $ 75,532     $ 67,108     12.6         $ 21,834     $ 26,308     (17.0 )    
                                                       

Investment Portfolio Composition:

         9/30/07       12/31/06                  
                                   

Fixed Income Securities, by Rating:

    2                     

NAIC Rated

    Moody’s Rated                     
1                Aaa/Aa/A    $ 1,390,707     $ 1,353,897     2.7                
2                Baa      81,328       83,338     (2.4 )              
3                Ba      2,000       2,060     (2.9 )              
4                B      1,953       4,454     (56.2 )              
5                Caa      —         —       0.0                
6                In or near default      —         —       0.0                

Not Rated

         3,000       3,000     0.0                
                                       

Total Fixed Income Securities

         1,478,988       1,446,749     2.2                

Equity Securities

         108,179       111,427     (2.9 )              

Collateral Loans

         123,851       128,685     (3.8 )              

Other Invested Assets

         363,391       319,457     13.8                
                                       

Total Investments

         2,074,409       2,006,318     3.4                

Investment In Affiliates

         131,184       120,819     8.6                
                                       

Total

       $ 2,205,593     $ 2,127,137     3.7                
                                       

 

1

Yield on Fixed Income Securities is calculated as annualized income divided by the average of the beginning and end of period amortized investment balances for the same 12-month period, which exclude unrealized investment gains and losses.

 

2

Investment Portfolio Composition values for Fixed Income Securities are based on fair value for available for sale securities and amortized value for held for investment securities.

Data may differ from actual due to rounding.

ALFA CORPORATION

QUARTERLY FINANCIAL SUPPLEMENT

September 30, 2007

(Unaudited)

 

Additional Information               
     03:1Q    03:2Q    03:3Q    03:4Q    2003

Pretax P&C Net Investment Income

    6,910,185    7,653,547    7,423,546    6,516,131    28,503,409

Pretax P&C Operating Income

    20,276,043    16,813,874    16,415,815    16,120,258    69,625,990

P&C Statutory Invested Assets

    619,015,221    626,103,044    640,677,141    643,775,395   

P&C Statutory Surplus

    300,514,053    308,384,829    314,946,117    323,362,342   

P&C Loss & LAE Reserves (1)

    144,689,722    145,691,012    147,585,697    139,589,753   

Pretax Life Net Investment Income

    11,534,769    10,948,305    10,843,170    11,408,366    44,734,610

Pretax Life Operating Income

    5,630,299    6,071,633    5,514,256    9,528,981    26,745,169

Life Statutory Invested Assets

    771,143,631    809,472,299    808,833,684    823,345,514   

Life Statutory Surplus

    127,075,494    130,374,293    133,237,013    144,834,065   
     04:1Q    04:2Q    04:3Q    04:4Q    2004

Pretax P&C Net Investment Income

    7,422,200    7,529,905    8,148,041    11,646,118    34,746,264

Pretax P&C Operating Income

    26,792,114    19,926,490    21,346,862    22,743,798    90,809,264

P&C Statutory Invested Assets (2)

    663,386,315    668,080,084    722,795,981    716,630,234   

P&C Statutory Surplus

    335,394,591    343,130,340    340,815,304    369,838,232   

P&C Loss & LAE Reserves (1)

    144,839,184    144,417,593    151,118,973    150,856,684   

Pretax Life Net Investment Income

    11,464,207    12,070,627    13,044,596    12,549,202    49,128,632

Pretax Life Operating Income

    6,101,031    4,881,196    5,704,300    8,778,931    25,465,458

Life Statutory Invested Assets

    850,439,601    865,246,778    876,301,256    890,441,591   

Life Statutory Surplus

    147,078,186    149,627,085    151,079,986    161,992,039   
     05:1Q    05:2Q    05:3Q    05:4Q    2005

Pretax P&C Net Investment Income

    9,310,764    8,926,932    11,232,799    10,729,178    40,199,673

Pretax P&C Operating Income

    19,002,266    33,255,773    29,255,953    24,178,448    105,692,440

P&C Statutory Invested Assets (2)

    705,855,331    715,563,873    720,574,977    733,114,630   

P&C Statutory Surplus

    372,285,887    385,401,304    398,052,284    407,475,146   

P&C Loss & LAE Reserves (1)

    145,569,327    141,926,723    149,282,527    157,988,560   

Pretax Life Net Investment Income

    12,226,938    13,061,800    12,661,842    13,012,004    50,962,584

Pretax Life Operating Income

    7,722,260    7,001,604    6,004,445    9,749,301    30,477,610

Life Statutory Invested Assets

    923,042,022    932,889,527    957,943,993    957,658,384   

Life Statutory Surplus

    163,786,697    167,102,347    171,890,971    177,189,239   
     06:1Q    06:2Q    06:3Q    06:4Q    2006

Pretax P&C Net Investment Income

    9,678,917    8,867,842    10,230,689    10,639,827    39,417,275

Pretax P&C Operating Income

    19,996,255    32,528,491    27,338,061    29,125,239    108,988,046

P&C Statutory Invested Assets (2)

    781,525,886    792,053,522    789,965,735    815,633,254   

P&C Statutory Surplus

    410,789,564    430,367,018    424,266,223    450,690,007   

P&C Loss & LAE Reserves (1)

    163,390,031    161,008,518    164,960,736    170,675,884   

Pretax Life Net Investment Income

    13,590,101    13,716,250    14,296,140    14,924,804    56,527,295

Pretax Life Operating Income

    7,113,633    6,783,319    8,585,952    11,599,737    34,082,641

Life Statutory Invested Assets

    1,002,957,159    999,648,875    1,017,945,275    1,031,591,536   

Life Statutory Surplus

    182,409,009    179,808,669    184,518,325    202,198,338   
     07:1Q    07:2Q    07:3Q    07:4Q    2007

Pretax P&C Net Investment Income

    11,561,426    11,282,501    11,699,476       34,543,403

Pretax P&C Operating Income

    13,742,157    37,943,043    31,757,920       83,443,120

P&C Statutory Invested Assets (2)

    858,199,394    868,459,544    871,242,094      

P&C Statutory Surplus

    458,720,955    468,199,817    481,907,743      

P&C Loss & LAE Reserves (1)

    186,168,206    184,182,945    183,219,117      

Pretax Life Net Investment Income

    14,638,077    15,097,218    14,935,394       44,670,689

Pretax Life Operating Income

    4,685,844    9,774,858    7,404,663       21,865,365

Life Statutory Invested Assets

    1,066,821,010    1,078,632,782    1,085,646,785      

Life Statutory Surplus

    206,159,735    215,767,284    220,258,634      

 

(1) P&C Loss & LAE Reserves for fourth quarter 2003, fourth quarter 2004 and periods beginning in 2005 include salvage and subrogation receivables.

 

(2) P&C Statutory Invested Assets for fourth quarter 2004 and periods beginning in 2005 reflect a reclassification of premium installment plan receivables into Accounts Receivable.

Definitions of Non-GAAP, GAAP and Operating Measures

Management believes that disclosure of the following non-GAAP financial measures provides investors with meaningful tools to assess the Company’s ongoing operations. Our methods of calculating these measures may differ from those used by other companies, thereby limiting comparability.

Operating Income is defined as net income excluding realized investment gains and losses, net of applicable taxes. Management uses operating income as a measure of the Company’s ongoing profitability since it eliminates the effect of securities market volatility from earnings.

Operating Income per Share is defined as operating income divided by the weighted average shares outstanding for the reporting period. Management uses operating income per share as a measure of the Company’s ongoing profitability since it eliminates the effect of securities market volatility from earnings.

Operating Return on Equity (Current Period) is defined as operating income for the trailing 12-month period divided by the simple average of the beginning and ending stockholders’ equity of the same 12-month period.

Operating Return on Equity (Prior Period) is defined as operating income for the prior year divided by the simple average of the beginning and ending stockholders’ equity of the same 12-month period.

Return on Equity (Current Period) is defined as net income for the trailing 12-month period divided by the simple average of the beginning and ending stockholders’ equity of the same 12-month period.

Return on Equity (Prior Period) is defined as net income for the prior year divided by the simple average of the beginning and ending stockholders’ equity of the same 12-month period.

Management uses the following GAAP ratios to measure the Company’s ongoing operations. They are calculated as follows:

Loss Ratio is defined as incurred losses divided by earned premiums.

Loss Adjustment Expense Ratio is defined as loss adjustment expenses divided by earned premiums.

Operating Expense Ratio is defined as total operating expenses divided by earned premiums.

Combined Ratio is defined as the sum of the loss ratio, the loss adjustment expense ratio and the expense ratio or the sum of incurred losses, loss adjustment expenses and total operating expenses divided by earned premiums.

Management uses the following operating statistics to measure components of the Company’s ongoing operations. They are calculated as follows:

Lapse Ratio is defined as the number of policies lapsing as a percentage of billings produced during a stated time period.

Actual vs. Expected Mortality Ratio is defined as benefit payments divided by the actuarially estimated benefit payments for the stated time period.

Persistency Ratio is defined as the annualized premium of policies in force at the end of the period as a percentage of the annualized premium paid at the end of the period.

Loan Portfolio Yield is defined as annualized interest income divided by the loan portfolio balance.

Loan Delinquency Ratio is defined as the amount of loans 30 or more days past due divided by the loan portfolio balance.

Return on Carried Value is defined as equity in net earnings divided by the simple average of beginning and end of period carrying value.

Certain amounts in prior periods have been reclassified to conform to the presentation adopted in the current period. Such reclassifications did not impact earnings.