RTW, Inc. Reports Third Quarter Financial Results

  
    
  
  
    
      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 $1.0 million, or $0.17 per diluted share for the third quarter ended 
      September 30, 2006 compared to net income of $1.5 million, or $0.27 per 
      diluted share for the third quarter of 2005.
    
    
      Premiums earned in the third quarter totaled $10.8 million, down 14.3 
      percent from $12.7 million for the same period in 2005. Premiums in 
      force at quarter end totaled $48.9 million compared to $52.9 million on 
      December 31, 2005 and $55.9 million at September 30, 2005. Service 
      revenue was flat at $1.4 million in the third quarter of 2006 compared 
      to the third quarter of 2005.
    
    
      “We continue to see downward pressure in 
      insurance pricing,” said Jeff Murphy, RTW’s 
      President and CEO. “Competitors continue to 
      price insurance policies below what we believe are profitable rates, 
      chasing growth and cash flow. The decline in premiums earned and 
      premiums in force was the result of our decision to forgo business that 
      did not meet our underwriting profit expectations. We will continue to 
      be conservative in writing insurance business until we see strengthening 
      in insurance rates.
    
    
      “Our service revenue for the quarter also 
      suffered from this soft insurance market as insurers aggressively 
      targeted companies in the Minnesota Assigned Risk Plan (“ARP”), 
      writing this business at rates lower than the ARP. The decreased 
      premiums in the ARP resulted in a 31% decrease in our revenue from that 
      customer compared to the same period in 2005. Excluding the ARP revenue, 
      service revenues grew 89% over the same period in 2005. Our commitment 
      to grow service revenue remains strong and I am excited about the 
      future. We recently added a number of Absentia service customers, 
      including two Fortune 150 companies. These relationships will begin to 
      contribute to revenue in the fourth quarter of 2006.
    
    
      “Our operating teams continue to manage open 
      claims effectively. We are positioning the company for the future, 
      building infrastructure with a view to grow both service and insurance 
      business. We are committed to increasing shareholder value over the long 
      term by doing the right things today with our business.”
    
    
      Nine Month Results and Option Expense 
      Impact
    
    
      Net income for the nine months ended September 30, 2006 totaled $3.4 
      million or $0.62 per diluted share versus $3.9 million or $0.69 per 
      share for the comparable period in 2005. The 2006 third quarter and nine 
      month earnings include after-tax charges totaling $68,000 and $288,000, 
      or $0.01 and $0.05 per diluted share, respectively, attributable to FAS 
      123R, "Share-Based Payment," an accounting pronouncement requiring the 
      expensing of stock-based compensation. Premiums earned decreased 13.9 
      percent to $32.7 million for the nine months ended September 30, 2006 
      compared to $38.0 million for the same period in 2005.
    
    
      Further Operating Results Detail
    
    
      Total revenue decreased to $13.6 million for the quarter ended September 
      30, 2006 compared to $15.2 million for the same period in 2005, and to 
      $41.4 million for the nine months ended September 30, 2006, down from 
      $44.9 million for the same period in 2005. For the quarter ended 
      September 30, 2006, total revenue included investment income of $1.3 
      million compared to $1.2 million for the same period in 2005. For the 
      nine months ended September 30, 2006, total revenue included investment 
      income of $4.0 million compared to investment income of $3.4 million and 
      realized investment gains of $580,000 for the same period in 2005.
    
    
      General and administrative expenses include $76,000 and $308,000 for the 
      three and nine months ended September 30, 2006, respectively, related to 
      stock-based compensation.
    
    
      Increase in Share Repurchase Program
    
    
      RTW resumed its share repurchase program in April 2006. During the third 
      quarter of 2006, RTW repurchased 50,000 shares of common stock under the 
      repurchase program for a total purchase price of $522,000. Common shares 
      repurchased under the $5.0 million repurchase program since 1998 total 
      540,000 at a total purchase price of $4.3 million. On October 25, 2006, 
      the Board of Directors authorized a $1.0 million increase in the program 
      to $6.0 million. The company believes the current share price does not 
      accurately reflect the true value of the company and will continue 
      purchasing shares under the program.
    
    
      Fourth Quarter 2006 Outlook and 
      Guidance
    
    
      
        The company expects to continue to sacrifice historical niche, 
        top-line insurance revenue in the fourth quarter to maintain 
        acceptable levels of profitability in its insurance operations. This 
        decrease will be partially offset by writing small accounts and new 
        niche business under two new programs announced earlier this year. 
        Premiums earned in the third quarter of 2006 were 14.3 percent under 
        the third quarter of 2005. We expect to see a similar trend in the 
        fourth quarter of 2006.
      
      
        The company expects that ARP premiums will continue to decrease 
        slightly for the remainder of the year resulting in downward pressure 
        on service revenue; however, we expect revenue from non-ARP customers 
        to grow 60% to 70% over the fourth quarter of 2005, more than 
        off-setting the decrease from the ARP. The company expects a low to 
        mid single digit increase in overall service revenue in the fourth 
        quarter of 2006 compared to the fourth quarter of 2005.
      
    
    
      Conference Call Information
    
    
      RTW will host a conference call on Thursday, October 26, 2006, at 10:00 
      a.m. CDT. To access the conference call, participants should dial 
      1-800-240-6709. A replay of the conference call will be available from 
      October 26, 2006 through October 28, 2006 by calling 1-800-405-2236 or 
      1-303-590-3000 and entering the Passcode 11065078#. 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 and 
      Bloomington Compensation Insurance Company; (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) The 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 and Iowa. BCIC offers workers’ 
      compensation insurance to selected employers in Minnesota. In addition, 
      through its AbsentiaSM 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 
      National 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. The following important factors, among 
      others, 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) ACIC’s 
      and BCIC’s ability to retain renewing 
      policies and write new business with a B++ (Very Good, Secure) rating 
      from A.M. Best; (ii) our ability to continue to extend our workers’ 
      compensation and absence management services to self-insured employers 
      and other alternative markets and to operate profitably in providing 
      these services; (iii) our ability to expand our insurance solutions to 
      new markets and write small accounts and select association business 
      through ACIC; (iv) our ability to maintain profitability and attract 
      sufficient insurance opportunity in our traditional niche business 
      during a soft insurance market cycle as other insurance carriers 
      decrease prices; (v) our ability to maintain or increase rates on 
      insured products in the markets in which we remain or alternatively 
      non-renew or turn away improperly priced business; (vi) the ability of 
      our reinsurers to honor their obligations to us; (vii) our ability to 
      accurately predict claim development; (viii) our ability to provide 
      ID15, The RTW Solution and other proprietary products and services to 
      customers successfully; (ix) our ability to manage both our existing 
      claims and new claims in an efficient and effective manner; (x) our 
      experience with claims frequency and severity; (xi) medical inflation; 
      (xii) competition and the regulatory environment in which we operate; 
      (xiii) general economic and business conditions; (xiv) our ability to 
      obtain and retain reinsurance at a reasonable cost; (xv) changes in 
      workers’ compensation regulation by states, 
      including changes in mandated benefits or insurance company regulation; 
      (xvi) interest rate changes; and (xvii) other factors as noted in our 
      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 pershare data)
        
      
      
        
           
        
      
      
        
        
        
        
        
          
            For the three months endedSept. 30,
          
        
        
        
        
          
            For the nine months endedSept. 30,
          
        
      
      
        
        
        
        
        
          2006 
        
        
        
        
          2005 
        
        
        
        
          2006 
        
        
        
        
          2005 
        
      
      
        
          REVENUES:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Gross premiums earned
        
        
        
        
          $12,949 
        
        
        
        
          $15,261 
        
        
        
        
          $39,130 
        
        
        
        
          $45,993 
        
      
      
        
          Premiums ceded to excess of loss treaties
        
        
        
        
          (2,112)
        
        
        
        
          (2,609)
        
        
        
        
          (6,414)
        
        
        
        
          (7,971)
        
      
      
        
          Premiums earned
        
        
        
        
          10,837 
        
        
        
        
          12,652 
        
        
        
        
          32,716 
        
        
        
        
          38,022 
        
      
      
        
          Investment income
        
        
        
        
          1,336 
        
        
        
        
          1,207 
        
        
        
        
          3,965 
        
        
        
        
          3,369 
        
      
      
        
          Net realized investment gains
        
        
        
        
          - 
        
        
        
        
          - 
        
        
        
        
          - 
        
        
        
        
          580 
        
      
      
        
          Service revenue
        
        
        
        
          1,391 
        
        
        
        
          1,366 
        
        
        
        
          4,711 
        
        
        
        
          2,901 
        
      
      
        
          Total revenues
        
        
        
        
          13,564 
        
        
        
        
          15,225 
        
        
        
        
          41,392 
        
        
        
        
          44,872 
        
      
      
        
          EXPENSES:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Claim and claim settlement expenses
        
        
        
        
          8,029 
        
        
        
        
          8,563 
        
        
        
        
          22,511 
        
        
        
        
          25,981 
        
      
      
        
          Policy acquisition costs
        
        
        
        
          1,291 
        
        
        
        
          1,288 
        
        
        
        
          3,851 
        
        
        
        
          4,255 
        
      
      
        
          General and administrative expenses
        
        
        
        
          2,825 
        
        
        
        
          3,093 
        
        
        
        
          9,812 
        
        
        
        
          8,785 
        
      
      
        
          Total expenses
        
        
        
        
          12,145 
        
        
        
        
          12,944 
        
        
        
        
          36,174 
        
        
        
        
          39,021 
        
      
      
        
          Income before income taxes
        
        
        
        
          1,419 
        
        
        
        
          2,281 
        
        
        
        
          5,218 
        
        
        
        
          5,851 
        
      
      
        
          Income tax expense
        
        
        
        
          468 
        
        
        
        
          760 
        
        
        
        
          1,779 
        
        
        
        
          1,960 
        
      
      
        
          Net income
        
        
        
        
          
            $951 
          
        
        
        
        
          
            $1,521 
          
        
        
        
        
          $3,439 
        
        
        
        
          $3,891 
        
      
      
        
          Net income per share:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
          
            $0.18 
          
        
        
        
        
          
            $0.28 
          
        
        
        
        
          $0.64 
        
        
        
        
          $0.72 
        
      
      
        
          Diluted
        
        
        
        
          
            $0.17 
          
        
        
        
        
          
            $0.27 
          
        
        
        
        
          $0.62 
        
        
        
        
          $0.69 
        
      
      
        
          Weighted average shares outstanding:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
          5,277,000 
        
        
        
        
          5,419,000 
        
        
        
        
          5,357,000 
        
        
        
        
          5,388,000 
        
      
      
        
          Diluted
        
        
        
        
          5,459,000 
        
        
        
        
          5,673,000 
        
        
        
        
          5,544,000 
        
        
        
        
          5,652,000 
        
      
    
    
      
        
          RTW, Inc.
        
      
      
        
          CONDENSED CONSOLIDATED BALANCE SHEETS
        
      
      
        
          (In 000's)
        
      
      
        
           
        
      
      
        
        
        
        
        
          September 30,
        
        
        
        
          December 31,
        
      
      
        
        
        
        
        
          2006 
        
        
        
        
          2005 
        
      
      
        
        
        
        
        
          (Unaudited)
        
        
        
        
          (Audited)
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          ASSETS
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Available-for-sale investments, at market value
        
        
        
        
          $113,348 
        
        
        
        
          $107,250 
        
      
      
        
          Cash and cash equivalents
        
        
        
        
          13,183 
        
        
        
        
          21,914 
        
      
      
        
          Premiums receivable
        
        
        
        
          2,595 
        
        
        
        
          3,382 
        
      
      
        
          Reinsurance recoverable:
        
        
        
        
        
        
        
        
        
      
      
        
          On unpaid claim and claim settlement expenses
        
        
        
        
          80,237 
        
        
        
        
          83,318 
        
      
      
        
          On paid claim and claim settlement expenses
        
        
        
        
          667 
        
        
        
        
          751 
        
      
      
        
          Other assets
        
        
        
        
          14,093 
        
        
        
        
          11,856 
        
      
      
        
          Total assets
        
        
        
        
          $224,123 
        
        
        
        
          $228,471 
        
      
      
        
           
        
      
      
        
          LIABILITIES AND SHAREHOLDERS' EQUITY
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Unpaid claim and claim settlement expenses
        
        
        
        
          $155,955 
        
        
        
        
          $160,141 
        
      
      
        
          Unearned premiums
        
        
        
        
          9,081 
        
        
        
        
          8,341 
        
      
      
        
          Accrued expenses and other liabilities
        
        
        
        
          6,975 
        
        
        
        
          9,411 
        
      
      
        
          Total liabilities
        
        
        
        
          172,011 
        
        
        
        
          177,893 
        
      
      
        
          Shareholders' equity
        
        
        
        
          52,112 
        
        
        
        
          50,578 
        
      
      
        
          Total liabilities and shareholders' equity
        
        
        
        
          $224,123 
        
        
        
        
          $228,471 
        
      
    
  
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 $1.0
million, or $0.17 per diluted share for the third quarter ended
September 30, 2006 compared to net income of $1.5 million, or $0.27
per diluted share for the third quarter of 2005.

   Premiums earned in the third quarter totaled $10.8 million, down
14.3 percent from $12.7 million for the same period in 2005. Premiums
in force at quarter end totaled $48.9 million compared to $52.9
million on December 31, 2005 and $55.9 million at September 30, 2005.
Service revenue was flat at $1.4 million in the third quarter of 2006
compared to the third quarter of 2005.

   "We continue to see downward pressure in insurance pricing," said
Jeff Murphy, RTW's President and CEO. "Competitors continue to price
insurance policies below what we believe are profitable rates, chasing
growth and cash flow. The decline in premiums earned and premiums in
force was the result of our decision to forgo business that did not
meet our underwriting profit expectations. We will continue to be
conservative in writing insurance business until we see strengthening
in insurance rates.

   "Our service revenue for the quarter also suffered from this soft
insurance market as insurers aggressively targeted companies in the
Minnesota Assigned Risk Plan ("ARP"), writing this business at rates
lower than the ARP. The decreased premiums in the ARP resulted in a
31% decrease in our revenue from that customer compared to the same
period in 2005. Excluding the ARP revenue, service revenues grew 89%
over the same period in 2005. Our commitment to grow service revenue
remains strong and I am excited about the future. We recently added a
number of Absentia service customers, including two Fortune 150
companies. These relationships will begin to contribute to revenue in
the fourth quarter of 2006.

   "Our operating teams continue to manage open claims effectively.
We are positioning the company for the future, building infrastructure
with a view to grow both service and insurance business. We are
committed to increasing shareholder value over the long term by doing
the right things today with our business."

   Nine Month Results and Option Expense Impact

   Net income for the nine months ended September 30, 2006 totaled
$3.4 million or $0.62 per diluted share versus $3.9 million or $0.69
per share for the comparable period in 2005. The 2006 third quarter
and nine month earnings include after-tax charges totaling $68,000 and
$288,000, or $0.01 and $0.05 per diluted share, respectively,
attributable to FAS 123R, "Share-Based Payment," an accounting
pronouncement requiring the expensing of stock-based compensation.
Premiums earned decreased 13.9 percent to $32.7 million for the nine
months ended September 30, 2006 compared to $38.0 million for the same
period in 2005.

   Further Operating Results Detail

   Total revenue decreased to $13.6 million for the quarter ended
September 30, 2006 compared to $15.2 million for the same period in
2005, and to $41.4 million for the nine months ended September 30,
2006, down from $44.9 million for the same period in 2005. For the
quarter ended September 30, 2006, total revenue included investment
income of $1.3 million compared to $1.2 million for the same period in
2005. For the nine months ended September 30, 2006, total revenue
included investment income of $4.0 million compared to investment
income of $3.4 million and realized investment gains of $580,000 for
the same period in 2005.

   General and administrative expenses include $76,000 and $308,000
for the three and nine months ended September 30, 2006, respectively,
related to stock-based compensation.

   Increase in Share Repurchase Program

   RTW resumed its share repurchase program in April 2006. During the
third quarter of 2006, RTW repurchased 50,000 shares of common stock
under the repurchase program for a total purchase price of $522,000.
Common shares repurchased under the $5.0 million repurchase program
since 1998 total 540,000 at a total purchase price of $4.3 million. On
October 25, 2006, the Board of Directors authorized a $1.0 million
increase in the program to $6.0 million. The company believes the
current share price does not accurately reflect the true value of the
company and will continue purchasing shares under the program.

   Fourth Quarter 2006 Outlook and Guidance

   --  The company expects to continue to sacrifice historical niche,
        top-line insurance revenue in the fourth quarter to maintain
        acceptable levels of profitability in its insurance
        operations. This decrease will be partially offset by writing
        small accounts and new niche business under two new programs
        announced earlier this year. Premiums earned in the third
        quarter of 2006 were 14.3 percent under the third quarter of
        2005. We expect to see a similar trend in the fourth quarter
        of 2006.

   --  The company expects that ARP premiums will continue to
        decrease slightly for the remainder of the year resulting in
        downward pressure on service revenue; however, we expect
        revenue from non-ARP customers to grow 60% to 70% over the
        fourth quarter of 2005, more than off-setting the decrease
        from the ARP. The company expects a low to mid single digit
        increase in overall service revenue in the fourth quarter of
        2006 compared to the fourth quarter of 2005.

   Conference Call Information

   RTW will host a conference call on Thursday, October 26, 2006, at
10:00 a.m. CDT. To access the conference call, participants should
dial 1-800-240-6709. A replay of the conference call will be available
from October 26, 2006 through October 28, 2006 by calling
1-800-405-2236 or 1-303-590-3000 and entering the Passcode 11065078#.
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 and
Bloomington Compensation Insurance Company; (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)
The 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
and Iowa. BCIC offers workers' compensation insurance to selected
employers in Minnesota. In addition, through its Absentia(SM)
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 National
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. The following important factors, among
others, 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)
ACIC's and BCIC's ability to retain renewing policies and write new
business with a B++ (Very Good, Secure) rating from A.M. Best; (ii)
our ability to continue to extend our workers' compensation and
absence management services to self-insured employers and other
alternative markets and to operate profitably in providing these
services; (iii) our ability to expand our insurance solutions to new
markets and write small accounts and select association business
through ACIC; (iv) our ability to maintain profitability and attract
sufficient insurance opportunity in our traditional niche business
during a soft insurance market cycle as other insurance carriers
decrease prices; (v) our ability to maintain or increase rates on
insured products in the markets in which we remain or alternatively
non-renew or turn away improperly priced business; (vi) the ability of
our reinsurers to honor their obligations to us; (vii) our ability to
accurately predict claim development; (viii) our ability to provide
ID15, The RTW Solution and other proprietary products and services to
customers successfully; (ix) our ability to manage both our existing
claims and new claims in an efficient and effective manner; (x) our
experience with claims frequency and severity; (xi) medical inflation;
(xii) competition and the regulatory environment in which we operate;
(xiii) general economic and business conditions; (xiv) our ability to
obtain and retain reinsurance at a reasonable cost; (xv) changes in
workers' compensation regulation by states, including changes in
mandated benefits or insurance company regulation; (xvi) interest rate
changes; and (xvii) other factors as noted in our 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.


-0-
*T
                              RTW, Inc.
                  CONSOLIDATED STATEMENTS OF INCOME
        (Unaudited, in 000's, except share and pershare data)

                  For the three months ended For the nine months ended
                          Sept. 30,                  Sept. 30,
                  -------------------------- -------------------------
                      2006         2005         2006         2005
                  ------------- ------------ ------------ ------------
REVENUES:
  Gross premiums
   earned              $12,949      $15,261      $39,130      $45,993
  Premiums ceded
   to excess of
   loss treaties        (2,112)      (2,609)      (6,414)      (7,971)
                  ------------- ------------ ------------ ------------
    Premiums
     earned             10,837       12,652       32,716       38,022
  Investment
   income                1,336        1,207        3,965        3,369
  Net realized
   investment
   gains                     -            -            -          580
  Service revenue        1,391        1,366        4,711        2,901
                  ------------- ------------ ------------ ------------
    Total
     revenues           13,564       15,225       41,392       44,872
EXPENSES:
  Claim and claim
   settlement
   expenses              8,029        8,563       22,511       25,981
  Policy
   acquisition
   costs                 1,291        1,288        3,851        4,255
  General and
   administrative
   expenses              2,825        3,093        9,812        8,785
                  ------------- ------------ ------------ ------------
      Total
       expenses         12,145       12,944       36,174       39,021
                  ------------- ------------ ------------ ------------
    Income before
     income taxes        1,419        2,281        5,218        5,851
  Income tax
   expense                 468          760        1,779        1,960
                  ------------- ------------ ------------ ------------
    Net income            $951       $1,521       $3,439       $3,891
                  ============= ============ ============ ============
  Net income per
   share:
    Basic                $0.18        $0.28        $0.64        $0.72
                  ============= ============ ============ ============
    Diluted              $0.17        $0.27        $0.62        $0.69
                  ============= ============ ============ ============
  Weighted
   average shares
   outstanding:
    Basic            5,277,000    5,419,000    5,357,000    5,388,000
                  ============= ============ ============ ============
    Diluted          5,459,000    5,673,000    5,544,000    5,652,000
                  ============= ============ ============ ============
*T

-0-
*T
                              RTW, Inc.
                CONDENSED CONSOLIDATED BALANCE SHEETS
                              (In 000's)

                                            September 30, December 31,
                                                2006         2005
                                            ------------- ------------
                                             (Unaudited)   (Audited)

                                ASSETS

Available-for-sale investments, at market
 value                                          $113,348     $107,250
Cash and cash equivalents                         13,183       21,914
Premiums receivable                                2,595        3,382
Reinsurance recoverable:
     On unpaid claim and claim settlement
      expenses                                    80,237       83,318
     On paid claim and claim settlement
      expenses                                       667          751
Other assets                                      14,093       11,856
                                            ------------- ------------
     Total assets                               $224,123     $228,471
                                            ============= ============

                 LIABILITIES AND SHAREHOLDERS' EQUITY

Unpaid claim and claim settlement expenses      $155,955     $160,141
Unearned premiums                                  9,081        8,341
Accrued expenses and other liabilities             6,975        9,411
                                            ------------- ------------
     Total liabilities                           172,011      177,893
Shareholders' equity                              52,112       50,578
                                            ------------- ------------
     Total liabilities and shareholders'
      equity                                    $224,123     $228,471
                                            ============= ============
*T