Great American Financial Resources Reports Second Quarter Results
01 8월 2007 - 5:04AM
Business Wire
Great American Financial Resources, Inc. ("GAFRI") (NYSE:GFR) today
reported net income of $24.8 million ($0.51 per diluted share) for
the 2007 second quarter compared to $43.6 million ($0.91 per
diluted share) in the 2006 second quarter. GAFRI's net income in
the second quarter of 2006 included an after-tax gain of $31.6
million ($0.66 per diluted share) on the sale of a hotel. Net
income for the first six months of 2007 was $44.8 million ($0.92
per diluted share) compared to $62.2 million ($1.30 per diluted
share) for the first six months of 2006. All periods presented
include certain other items that may not be indicative of GAFRI's
ongoing core operations. The table below identifies such items and
reconciles net income determined in accordance with generally
accepted accounting principles ("GAAP") to "core net operating
earnings from continuing operations," a non-GAAP measure that GAFRI
believes is a useful tool for analysts and investors in analyzing
ongoing operating trends. Core Net Operating Earnings from
Continuing Operations Core net operating earnings from continuing
operations before certain items ("core net operating earnings")
were $19.3 million ($0.40 per diluted share) in the second quarter
of 2007 compared to $18.2 million ($0.38 per diluted share) in the
second quarter of 2006. Core net operating earnings for the first
six months of 2007 were $39.3 million ($0.81 per diluted share)
compared to $37.0 million ($0.77 per diluted share) for the first
six months of 2006. Year-to-date 2006 results included $3.2 million
of net earnings related to a payment received from Palm Beach
County, Florida in exchange for the imposition of certain
limitations on future development of a marina owned by the Company.
The increases in 2007 compared to 2006 reflect improvement in
GAFRI's supplemental insurance and fixed annuity segments, as well
as slightly higher earnings in the Company's variable annuity
business. These increases were partially offset by higher mortality
in GAFRI's runoff life operations. While the results of the
supplemental lines were improved over the comparable period in
2006, increased lapses and lower premiums in the Medicare
Supplement segment, primarily as a result of competition from the
government-subsidized Medicare Advantage program, have negatively
impacted results in 2007 and could adversely impact results in the
future. In millions, except per share amounts Three months
endedJune 30, Six months endedJune 30, 2007 2006 2007 2006 �
Components of net income: Core net operating earnings (before items
below) $19.3 $18.2 $39.3 $37.0 � Discontinued operations: Gain on
sale of hotel 1.9 31.6 1.9 31.6 Operations of hotel sold - (0.1 ) -
(0.6 ) Realized investment gains (losses) 4.9 (5.7 ) 5.6 (3.0 )
Loss on retirement of debt - (0.4 ) (0.7 ) (2.8 ) Charge related to
former manufacturing operations (1.3 ) - � (1.3 ) - � � Net income
$24.8 � $43.6 � $ 44.8 � $62.2 � Components of diluted EPS: Core
net operating earnings (before items below) $0.40 $0.38 $0.81 $0.77
� Discontinued operations: Gain on sale of hotel 0.04 0.66 0.04
0.66 Operations of hotel sold - - - (0.01 ) Realized investment
gains (losses) 0.10 (0.12 ) 0.11 (0.06 ) Loss on retirement of debt
- (0.01 ) (0.01 ) (0.06 ) Charge related to former manufacturing
operations (0.03 ) - � (0.03 ) - � � Net income $0.51 � $0.91 � $
0.92 � $1.30 � Financial Strength and Liquidity GAFRI continued to
achieve record levels of stockholders' equity and book value per
share. In addition, at June 30, 2007, GAFRI's debt to capital ratio
was 19.1%, its lowest level ever. In March 2007, the Company
redeemed all of its 8-7/8% trust preferred securities using funds
borrowed under the Company's bank line of credit. Premiums
Statutory premiums of $541 million in the second quarter of 2007
were nearly 50% higher than the second quarter of 2006. Statutory
premiums of $1.0 billion in the first six months of 2007 were 54%
higher than the comparable 2006 period. These increases reflect
higher fixed indexed annuity premium sales and the acquisition of
Ceres Group, Inc. in August 2006, partially offset by lower sales
of traditional fixed annuities. Items Excluded from Core Net
Operating Earnings Gain on Sale of Hotel In June 2006, GAFRI
completed the sale of Chatham Bars Inn, its resort-hotel property
located on Cape Cod, Massachusetts, for a price of $166 million and
recorded an after-tax gain of $31.6 million. In the second quarter
of 2007, GAFRI received a payment related to funds that the Company
had put in escrow in connection with finalizing the sale of
Chatham. In accordance with GAAP, the gain on sale and the
operations of this hotel have been reported as discontinued.
Realized Investment Gains (Losses) Realized investment gains
(losses) represent realized gains and losses on sales of
investments and impairments on securities. Many analysts and
investors consider such items to be non-recurring or non-core.
Accordingly, GAFRI excludes such items from its calculation of Core
Net Operating Earnings. Loss on Retirement of Debt In the first six
months of 2007, GAFRI repurchased $3.0 million principal amount of
the Company's 6-7/8% Senior Notes. In the first six months of 2006,
GAFRI repurchased nearly $64 million principal amount of the
Company's 6-7/8% Senior Notes. In addition, in connection with the
repurchase, GAFRI paid $1.9 million to effectively terminate the
portion of an interest rate swap that covered the repurchased debt.
Charge Related to Former Manufacturing Operations In the second
quarter of 2007, GAFRI conducted its annual review of the
environmental liabilities associated with certain former
manufacturing operations which were discontinued in 1992. This
review resulted in a pretax charge of $2.0 million ($1.3 million
after-tax). Definitive Merger Agreement with American Financial
Group As previously announced, American Financial Group, Inc.
("AFG") (NYSE:AFG) and Great American Financial Resources, Inc.
have entered into a definitive merger agreement by which GAFRI
would acquire the GAFRI shares which AFG does not currently own at
a price of $24.50 per share in cash, for a total purchase price of
approximately $225 million. AFG beneficially owns approximately 81%
of the outstanding shares of GAFRI. GAFRI expects the merger to be
completed in September, and will use excess capital plus borrowings
from AFG to fund the transaction. About GAFRI GAFRI is a
Cincinnati-based insurance holding company with more than $13
billion in assets. The Company's subsidiaries include Great
American Life Insurance Company, Annuity Investors Life Insurance
Company, Central Reserve Life Insurance Company, Continental
General Insurance Company, United Teacher Associates Insurance
Company and Loyal American Life Insurance Company. Through these
companies, GAFRI markets traditional fixed, indexed and variable
annuities and a variety of supplemental insurance products.
Forward-Looking Statements The Private Securities Litigation Reform
Act of 1995 encourages corporations to provide investors with
information about the Company's anticipated performance and
provides protection from liability if future results are not the
same as management's expectations. Documents may contain certain
forward-looking statements that are based on assumptions which
management believes are reasonable but, by their nature, inherently
uncertain. Future results could differ materially from those
projected. Factors that could cause such differences include, but
are not limited to: changes in economic conditions including
interest rates, performance of the capital markets, regulatory
actions and competitive pressures. Forward-looking statements are
made only as of the date of their release and GAFRI does not have
any obligation to update any forward-looking statements to reflect
subsequent events or circumstances. The safe harbor for
forward-looking statements in the Private Securities Litigation
Reform Act of 1995 does not apply to statements with respect to the
pending transaction with AFG. Conference Call GAFRI's results will
be discussed as part of a conference call on Wednesday, August 1 at
11:30 a.m. (EDT) being conducted by American Financial Group, Inc.,
GAFRI's majority shareholder. Toll-free telephone access will be
available by dialing 1-866-203-3436 (International dial in
617-213-8849). Please dial in 5 to 10 minutes prior to the
scheduled start time of the call. A replay of the call will also be
available two hours following the completion of the call, at
approximately 1:30 p.m. and will run until 11:59 p.m. on August 8,
2007. To listen to the replay, dial 1-888-286-8010 (International
dial in 617-801-6888) and provide the confirmation code 17024908.
The conference call will also be broadcast live over the Internet.
To listen to the call via the Internet, go to AFG's website,
www.afginc.com, and follow the instructions at the Webcast link in
the Investor Relations section. GREAT AMERICAN FINANCIAL RESOURCES,
INC. Summary of Earnings (In millions, except per share amounts) �
Three months endedJune 30, Six months endedJune 30, 2007 2006 2007
2006 Revenues: Life, accident and health premiums (a)(b) $103.4 $
75.5 $210.0 $152.0 Net investment income 158.0 149.7 316.2 297.6
Realized gains (losses) on: Investments 7.7 (8.7 ) 8.8 (4.6 )
Retirement of debt - (0.6 ) (1.1 ) (4.3 ) Other income (a) 31.8
21.7 � 58.9 � 46.3 � (c) 300.9 237.6 592.8 487.0 Costs and
Expenses: Annuity benefits 90.4 84.0 179.2 166.8 Life, accident and
health benefits (a) 85.5 66.6 170.9 130.9 Insurance acquisition
expenses (a) 40.7 30.3 85.2 62.3 Interest and debt expenses 5.3 5.7
11.0 11.9 Other expenses (a) 44.3 (d) 32.6 � 82.1 � (d) 67.2 �
266.2 219.2 � 528.4 � 439.1 � � Operating earnings before income
taxes 34.7 18.4 64.4 47.9 Provision for income taxes 11.8 6.3 �
21.5 � 16.7 � � � Income from continuing operations 22.9 12.1 42.9
31.2 Discontinued hotel operations, net of tax (e) - (0.1 ) - (0.6
) Gain on sale of discontinued hotel, net of tax (e) 1.9 31.6 � 1.9
� 31.6 � � Net Income $ 24.8 $ 43.6 � $ 44.8 � $ 62.2 � � Average
common shares outstanding - diluted 48.4 48.0 48.5 48.0 � Diluted
earnings per common share: Continuing operations $ 0.47 $ 0.25 $
0.88 $0.65 Discontinued hotel operations (e) - - - (0.01 ) Gain on
sale of discontinued hotel (e) 0.04 0.66 � 0.04 � 0.66 � � Net
income $ 0.51 $ 0.91 � $ 0.92 � $1.30 � � � Supplemental
Information Fixed indexed annuity premiums (b) $292.1 $111.8 $532.1
$165.7 Traditional fixed annuity premiums (b) 127.0 156.9 242.6
301.4 Variable annuity premiums (b) 19.6 23.7 42.6 47.7 Total
statutory premiums, including life, accident and health premiums
$541.1 $369.5 1,025.6 $666.4 � � Book value per share, excluding
unrealized gains (losses) on fixed maturities $23.38 $21.43 Book
value per share, including all unrealized gains (losses) $21.47
$18.83 � (a) The increase in 2007 reflects primarily the
acquisition of Ceres Group, Inc. in August 2006. (b) For GAAP
purposes, annuity premiums are accounted for as deposits rather
than revenues. (c) Other income for the first six months of 2006
includes $4.9 million of pretax income resulting from the March
2006 payment received from Palm Beach County, Florida in exchange
for the imposition of certain limitations on future development of
a marina owned by the Company. (d) Includes $2.0 million charge
related to former manufacturing operations. (e) The operations and
gain on sale of Chatham Bars Inn (sold in June 2006) are reflected
as discontinued operations in accordance with Statement of
Financial Accounting Standards No. 144.
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