Rtw (NASDAQ:RTWI)
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RTW, Inc. (Nasdaq:RTWI), a leading provider of products and services to
manage insured and self-insured workers’
compensation, disability and absence programs, today reported net income
of $818,000, or $0.15 per diluted share for the second quarter ended
June 30, 2007 compared to net income of $649,000, or $0.12 per diluted
share for the first quarter of 2007 and $1.4 million, or $0.26 per
diluted share for the second quarter of 2006.
“Net income grew 26 percent from the first
quarter of 2007,” said Jeff Murphy, RTW’s
President and CEO. “As a result of our net
income, our shareholders’ equity grew to $52.5
million or approximately $10.14 per share. We expect the growth trend in
net income to continue for the remainder of 2007. Despite the fact that
we have been profitable for the past five years and have had positive
earnings 21 out of the past 22 quarters, our market value lags book
value. We believe that the current market value does not accurately
reflect our intrinsic value. We are committed to doing what is necessary
to increase our market value to a level that better reflects the company’s
current intrinsic value.”
Premiums earned in the second quarter totaled $10.1 million, down 9.0
percent from $11.0 million for the same period in 2006. Premiums in
force increased to $48.4 million at July 1, 2007 compared to $47.5
million on December 31, 2006.
“Overall, I am pleased with the direction of
the Company and satisfied with our results in the second quarter of 2007,”
said Jeff Murphy, RTW’s President and CEO. “We
continued to grow premiums in force in the second quarter, continuing a
trend that began in the first quarter of 2007. We will continue to
maintain our market discipline and only write business where we believe
we can make a profit.”
Service revenue was $1.2 million in the second quarter of 2007 compared
to $1.8 million in the second quarter of 2006.
“While service revenue has been less
predictable than we would like over the most recent four quarters, we
learned much from our experiences, adjusted our approach and believe we
are on the right track today,” said Murphy. “We
made some tough decisions late in the second quarter and restructured
our Absentia sales and marketing team and process to reflect what we
learned and further fine-tuned our approach.
We added a number of new customers in the past 60 days that will
contribute to revenue on a growing basis well into 2008 including a
large customer that will further expand our reach, new regional TPA
business and tail claim management business. We continue to see
opportunities and will add business that will grow with us on a
long-term basis;
On July 1, we increased our ability to deliver services and can now
deliver TPA services in 50 states; and
We are today providing services to customers with operations in over
35 states.
We are committed to growing service revenue and remain excited about the
future prospects of the service business.”
Other Three and Six Month Result
Information
Net income for the six months ended June 30, 2007 totaled $1.5 million
or $0.28 per diluted share versus $2.5 million or $0.45 per share for
the comparable period in 2006.
Premiums earned decreased 7.9 percent to $20.1 million for the six
months ended June 30, 2007 compared to $21.9 million for the same period
in 2006.
Total revenue decreased to $12.7 million for the quarter ended June 30,
2007 compared to $14.1 million for the same period in 2006, and to $25.4
million for the six months ended June 30, 2007, down from $27.8 million
for the same period in 2006. For the quarter ended June 30, 2007, total
revenue included investment income of $1.4 million compared to $1.3
million for the same period in 2006. For the six months ended June 30,
2007, total revenue included investment income of $2.7 million compared
to investment income of $2.6 million for the same period in 2006.
The company continued to demonstrate its ability to manage and close
claims. In the second quarter and for six months ended June 30, 2007,
RTW reduced unpaid claim and claim settlement expenses for 2006 and
prior years by $600,000 and $1.1 million, respectively, and recorded
corresponding pre-tax decreases to claim and claim settlement expenses
reflecting this improvement. These amounts compare to $750,000 and $1.6
million reductions recorded for the similar periods in 2006. These
results reflect our focus and commitment to continually improve our
ability to affect outcomes for open claims from prior accident years.
Other Events
In addition to the organizational changes intended to improve service
revenue, the company implemented a plan to reduce operating expenses in
July and expects that effort to improve profitability in future quarters.
On May 14, 2007, A.M. Best Co. (Best), Oldwick, New Jersey, reaffirmed
the B++ (Very Good) financial strength ratings of American Compensation
Insurance Company and Bloomington Compensation Insurance Company. In
addition, Best reaffirmed the “positive
outlook” associated with the both ratings.
Conference Call Information
RTW will host a conference call on Thursday, July 26, 2007, at 1:00 p.m.
CDT. To access the conference call, participants should dial
1-800-366-7449. A replay of the conference call will be available from
July 26, 2007 through July 28, 2007 by calling 1-800-405-2236 or
1-303-590-3000 and entering the Passcode 11092826#. Forward looking and
material information may be discussed during the conference call.
The live audio broadcast of RTW's quarterly conference call will be
available online through a link at the company's website at http://www.rtwi.com/investors/investors_main.htm.
The online replay will be available for approximately ninety days.
About RTW, Inc.
RTW, Inc., based in Minneapolis, Minnesota, provides disability and
absence management services, primarily directed at workers’
compensation to: (i) employers insured through our wholly-owned
insurance subsidiaries, American Compensation Insurance Company (ACIC)
and Bloomington Compensation Insurance Company (BCIC); (ii) self-insured
employers on a fee-for-service basis; (iii) state assigned risk plans on
a percent of premium basis; (iv) other insurance companies; and (v)
agents and employers on a consulting basis, charging hourly fees. The
company developed two proprietary systems to manage disability and
absence: (i) ID15®,
designed to quickly identify those injured employees who are likely to
become inappropriately dependent on disability system benefits,
including workers’ compensation; and (ii) RTW
Solution®, designed
to lower employers’ disability costs and
improve productivity by returning injured employees to work as soon as
safely possible. The company supports these proprietary management
systems with state-of-the-art technology and talented people dedicated
to its vision of transforming people from absent or idle to present and
productive. ACIC writes workers’ compensation
insurance for employers primarily in Minnesota, Colorado and Michigan,
but is growing in new markets including Florida, Texas, Kansas,
Connecticut, North Carolina and Iowa. BCIC offers workers’
compensation insurance to selected employers in Minnesota and Colorado.
In addition, through its Absentia®
division, RTW has expanded and provides non-insurance products and
service offerings nationally. The company’s
services are effective across many industries. RTW, Inc. is traded on
the Nasdaq Global Market under the symbol RTWI. For more information on
RTW, Inc., please visit www.rtwi.com.
Safe Harbor Statement
Some of the statements made in this News Release, as well as statements
made by us in periodic press releases and oral statements made by us to
analysts and shareholders in the course of presentations about RTW,
constitute “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by the
forward-looking statements. Any forward-looking statement contained
herein including statements related to our outlook for the industry and
for our performance for the year 2007 and beyond, are based upon our
historical performance and on current plans, estimates and expectations.
The inclusion of these forward-looking statements should not be regarded
as a representation by us that the future plans, estimates or
expectations contemplated by us will be achieved. The following
important factors, among others, in some cases have affected and in the
future could affect our actual results and could cause our actual
financial performance to differ materially from that expressed in any
forward-looking statement: (i) our ability to retain renewing policies
and write new business with a B++ (Very Good, Secure) rating from A.M.
Best; (ii) adverse changes in the rating assigned to us by A.M. Best;
(iii) our ability to extend our workers’
compensation services to self-insured employers and other alternative
markets and to operate profitably in providing these services; (iv)
changes in the pricing environment including those due to the cyclical
nature of the property and casualty insurance industry and the effect of
competition; (v) the adequacy of our unpaid claim and claim settlement
expense reserves; (vi) exposure as to coverage for terrorist acts and
our retention under The Terrorism Risk Insurance Extension Act of 2005
(TRIEA) and the potential expiration of TRIEA and the unpredictable
nature of such events; (vii) our ability to obtain and retain
reinsurance at a reasonable cost; (viii) our ability to provide our
proprietary products and services to customers successfully and
profitably; (ix) competition and the regulatory environment in which we
operate; (x) changes in workers’ compensation
regulation by states, including changes in mandated benefits or
insurance company regulation; (xi) investment risk, including those of
our portfolio of fixed income securities and interest rate changes;
(xii) general economic and business conditions; and (xiii) other factors
as noted in our other filings with the Securities and Exchange
Commission. This discussion of uncertainties is by no means exhaustive
but is designed to highlight important factors that may affect our
future performance.
RTW, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in 000's, except share and per share data)
For the three months ended June 30,
For the six months ended June 30,
2007
2006
2007
2006
REVENUES:
Gross premiums earned
$
12,004
$
13,193
$
24,018
$
26,181
Premiums ceded to excess of loss treaties
(1,954
)
(2,150
)
(3,872
)
(4,302
)
Premiums earned
10,050
11,043
20,146
21,879
Investment income
1,370
1,324
2,712
2,629
Service revenue
1,230
1,752
2,548
3,320
Total revenues
12,650
14,119
25,406
27,828
EXPENSES:
Claim and claim settlement expenses
6,852
7,323
14,140
14,482
Policy acquisition costs
1,143
1,298
2,368
2,560
General and administrative expenses
3,501
3,333
6,822
6,987
Total expenses
11,496
11,954
23,330
24,029
Income before income taxes
1,154
2,165
2,076
3,799
Income tax expense
336
731
609
1,311
Net income
$
818
$
1,434
$
1,467
$
2,488
Net income per share:
Basic
$
0.16
$
0.27
$
0.28
$
0.46
Diluted
$
0.15
$
0.26
$
0.28
$
0.45
Weighted average shares outstanding:
Basic
5,171,000
5,346,000
5,168,000
5,397,000
Diluted
5,291,000
5,540,000
5,295,000
5,587,000
RTW, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In 000's)
June 30,
December 31,
2007
2006
(Unaudited)
(Audited)
ASSETS
Available-for-sale investments, at market value
$
102,895
$
111,089
Cash and cash equivalents
24,590
13,898
Premiums receivable
2,904
2,367
Reinsurance recoverable:
On unpaid claim and claim settlement expenses
76,130
77,168
On paid claim and claim settlement expenses
436
767
Other assets
12,933
13,150
Total assets
$
219,888
$
218,439
LIABILITIES AND SHAREHOLDERS' EQUITY
Unpaid claim and claim settlement expenses
$
149,384
$
152,327
Unearned premiums
8,160
7,432
Accrued expenses and other liabilities
9,854
7,325
Total liabilities
167,398
167,084
Shareholders' equity
52,490
51,355
Total liabilities and shareholders' equity
$
219,888
$
218,439