Alfa Corporation Reports 2007 Results

Alfa Corporation (NASDAQ:ALFA) today announced financial results for the year ended December 31, 2007. Operating income for the year was $94,225,423, or $1.15 per diluted share, compared with operating income of $103,676,787, or $1.28 per diluted share for 2006, a decrease of 9.6% on a per share basis. Net income, which includes net realized investment gains, was $93,508,467, or $1.15 per diluted share for 2007, compared with $105,888,237, or $1.30 per diluted share in 2006, a per share decrease of 12.2%. Premiums and policy charges increased 4.0% to $714,838,275 for 2007. Operating income for the fourth quarter of 2007 was $20,905,197, or $0.26 per diluted share, compared with fourth quarter 2006 operating income of $32,321,887, or $0.40 per diluted share. After net realized investment gains, net income for the fourth quarter of 2007 was $18,778,831, or $0.23 per diluted share, compared with $33,004,673, or $0.41 per diluted share, in the prior-year period. Premiums and policy charges increased 2.1% to $177,888,996 for the final three months of 2007. Alfa’s results for the fourth quarter were affected by expenses associated with the previously announced definitive merger agreement with Alfa Mutual Insurance Company and Alfa Mutual Fire Insurance Company (referred to collectively as the Alfa Mutual Group) pursuant to which the Alfa Mutual Group, which owns a majority of Alfa Corp.’s common stock, will acquire for $22.00 per share all of the outstanding shares of Alfa Corp.’s common stock that it does not currently own. This transaction will result in Alfa Corp. being delisted with Nasdaq and becoming a privately held corporation owned jointly by the Alfa Mutual Group. Costs associated with this transaction added approximately $6 million of additional expense in the fourth quarter of 2007, resulting in an earnings decline of $0.07 per diluted share during the quarter. Also, during the fourth quarter of 2007, Alfa Corporation recorded a loss of approximately $1,700,000 or $0.02 per diluted share resulting from its 41% ownership in MidCountry Financial Corp.. In the quarter, reserves associated with MidCountry’s loan portfolios were strengthened. In the fourth quarter of 2006, Alfa Corporation released $3,300,000 in reserves previously held for uncertain tax positions. This had a favorable impact on fourth quarter 2006 earnings of $0.04 per diluted share. Full-year 2007 results were also affected when MidCountry Financial Corp. experienced a loss in its mortgage portfolio on loans originated by a company headquartered in Florida and primarily concentrated in Florida. This same entity defrauded MidCountry in the amount of $7,900,000 by misappropriating large principal payments on construction loans being serviced for MidCountry. The impact of this extraordinary loss on Alfa Corporation, resulting from its 41% ownership, was approximately $3,150,000 after-tax, or $0.03 per diluted share. Alfa Corporation is engaged in insurance and financial activities through its subsidiaries. The common stock of Alfa Corporation is traded on the Nasdaq Stock Market's National Market under the symbol ALFA. The associated investor supplement package for the fourth quarter ended December 31, 2007, may be found by clicking on the following link: http://www.irinfo.com/alfa/ALFA4q07mdt.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. ALFA CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)                           Years Ended Three Months Ended December 31,   Statistics December 31,   Statistics 2007     2006   % Change     2007   2006 2007     2006   % Change     2007   2006   Revenues Premiums - Property and Casualty Insurance 625,938,511 604,241,557 3.59 155,490,330 153,799,283 1.10 Premiums - Life Insurance 50,740,513 46,019,117 10.26 13,003,112 11,539,534 12.68 Policy Charges - Life Insurance 38,159,251 36,825,726 3.62 9,395,554 8,946,229 5.02 Net Investment Income 94,804,825 93,262,710 1.65 19,273,753 26,155,184 (26.31 )   Other Income   27,685,404     28,386,795   (2.47 ) 5,864,870     7,644,792   (23.28 )   Total Revenues   837,328,504     808,735,905   3.54   203,027,619     208,085,022   (2.43 ) Benefits, Losses and Expenses Benefits, Claims, Losses and Settlement Expenses 480,548,807 458,175,979 4.88 57.39 56.65 117,066,707 111,608,379 4.89 57.66 53.64 Dividends to Policyholders 4,246,480 4,134,455 2.71 0.51 0.51 1,149,633 1,093,607 5.12 0.57 0.53 Amortization of Deferred Policy Acquisition Costs 134,741,937 130,041,533 3.61 16.09 16.08 29,339,436 35,187,709 (16.62 ) 14.45 16.91   Other Operating Expenses   92,083,066     80,790,556   13.98     11.00   9.99 28,547,357     22,151,058   28.88     14.06   10.65   Total Benefits, Losses and Expenses   711,620,290     673,142,523   5.72     84.99   83.23 176,103,133     170,040,753   3.57     86.74   81.72   Income Before Income Tax Expense 125,708,214 135,593,382 (7.29 ) 15.01 16.77 26,924,486 38,044,269 (29.23 ) 13.26 18.28 Income Tax Expense   31,482,791     31,916,595   (1.36 ) 25.04 23.54 6,019,289     5,722,382   5.19   22.36 15.04   Operating Income 94,225,423 103,676,787 (9.12 ) 20,905,197 32,321,887 (35.32 )   Realized Investment Gains/(Losses), Net of Tax   (716,956 )   2,211,450   (132.42 ) (2,126,366 )   682,786   (411.42 )   Net Income   93,508,467     105,888,237   (11.69 ) 18,778,831     33,004,673   (43.10 )   Operating Income Per Share - Basic   1.17     1.29   (9.42 ) 0.26     0.40   (35.56 )   Operating Income Per Share - Diluted   1.15     1.28   (9.62 ) 0.26     0.40   (35.69 )   Net Income Per Share - Basic   1.16     1.32   (11.98 ) 0.23     0.41   (43.32 )   Net Income Per Share - Diluted   1.15     1.30   (12.18 ) 0.23     0.41   (43.43 )   Dividends Per Share   0.4625     0.4300   7.56   0.1175     0.1100   6.82     Average Shares Outstanding - Basic   80,611,623     80,345,906   0.33   80,733,196     80,429,796   0.38     Average Shares Outstanding - Diluted   81,663,529     81,211,111   0.56   81,947,785     81,482,882   0.57     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           December 31, December 31,   2007     2006   % Change   Assets Investments: Fixed Maturities Held for Investment, at amortized cost (fair value $32,336 in 2007 and $57,272 in 2006) $ 30,217 $ 55,052 -45.11 % Fixed Maturities Available for Sale, at fair value (amortized cost $1,307,168,345 in 2007 and $1,436,188,473 in 2006) 1,306,366,704 1,446,693,702 -9.70 % Equity Securities Available for Sale, at fair value (cost $92,812,252 in 2007 and $101,177,606 in 2006) 90,042,579 111,427,207 -19.19 % Policy Loans 67,697,107 64,949,875 4.23 % Collateral Loans 121,505,553 128,685,111 -5.58 % Other Long-Term Investments 85,966,116 86,823,771 -0.99 % Short-Term Investments, at fair value (amortized cost $412,967,736 in 2007 and $167,683,154 in 2006)   413,003,223     167,683,154   146.30 % Total Investments 2,084,611,499 2,006,317,872 3.90 % Cash 35,059,563 37,218,109 -5.80 % Other Long-Term Investments in Affiliates 126,753,594 120,819,010 4.91 % Accrued Investment Income 15,800,561 17,026,711 -7.20 % Accounts Receivable 98,749,778 84,100,246 17.42 % Reinsurance Balances Receivable 10,004,929 6,015,853 66.31 % Deferred Policy Acquisition Costs 235,137,674 224,516,950 4.73 % Goodwill 9,576,218 9,576,218 0.00 % Other Intangible Assets (net of accumulated amortization of $2,050,200 in 2007 and $1,366,800 in 2006) 7,057,800 7,741,200 -8.83 % Other Assets   19,001,569     20,906,925   -9.11 % Total Assets $ 2,641,753,185   $ 2,534,239,094   4.24 % Liabilities and Stockholders' Equity Policy Liabilities and Accruals - Property and Casualty Insurance $ 187,701,565 $ 172,664,652 8.71 % Policy Liabilities and Accruals - Life Insurance Interest-Sensitive Products 687,237,890 646,354,761 6.33 % Policy Liabilities and Accruals - Life Insurance Other Products 221,835,651 205,449,027 7.98 % Unearned Premiums 240,275,755 236,481,371 1.60 % Dividends to Policyholders 12,190,719 11,882,776 2.59 % Premium Deposit and Retirement Deposit Funds 4,534,402 4,921,879 -7.87 % Deferred Income Taxes 3,171,775 25,547,554 -87.58 % Other Liabilities 80,051,500 75,222,398 6.42 % Due to Affiliates 27,621,447 24,355,859 13.41 % Commercial Paper 197,367,051 206,923,215 -4.62 % Notes Payable 70,000,000 70,000,000 0.00 % Notes Payable to Affiliates   31,402,470     27,516,459   14.12 % Total Liabilities   1,763,390,225     1,707,319,951   3.28 % 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: 80,761,779 in 2007 and 80,459,113 in 2006 Capital in Excess of Par Value 34,169,542 27,502,452 24.24 % Accumulated Other Comprehensive Income 347,259 14,200,535 -97.55 % (unrealized gains/(losses) on securities available for sale, net of tax, of ($662,496) in 2007 and $14,019,988 in 2006; pension liability adjustment, net of tax, of $703,495 in 2007; unrealized gains on interest rate swap contract, net of tax, of $105,541 in 2006; unrealized gains on other long-term investments, net of tax, of $306,260 in 2007 and $75,006 in 2006) Retained Earnings 794,972,513 738,811,778 7.60 % Treasury Stock, at cost (34,909,378 ) (37,378,646 ) -6.61 % (shares, 3,021,245 in 2007 and 3,323,911 in 2006)       Total Stockholders' Equity   878,362,960     826,919,143   6.22 % Total Liabilities and Stockholders' Equity $ 2,641,753,185   $ 2,534,239,094   4.24 %   Book Value per share $ 10.88   $ 10.28