Notes

The Midland Company (MLAN) is a provider of specialty insurance products and services through its American Modern Insurance Group subsidiary (American Modern) subsidiary, which contributes approximately 94% of the companyG‚…s revenues. The Company also maintains an investment in a niche river transportation business, M/G Transport Services Inc. The Company has divided its insurance products into four distinct groups: residential property, recreational casualty, financial institutions, and all other insurance products. American Modern controls eight property and casualty insurance companies, seven credit life insurance companies, three licensed insurance agencies and three service companies. American Modern is licensed, through its subsidiaries, to write insurance premiums in all 50 states and the District of Columbia.

13May07

Schwab rating: C

Quarterly Report
Management expects "organic growth will drive a solid full year growth result in excess of industry expectations for 2007"
Midland's largest investment, 2.5 million shares of U.S. Bancorp....about $85 million. Subprime loans at USB less than 3% of loans (that's good).

The equity/assets ratio is 33% (that's good: 5% is a standard minimum for financial stocks like banks and insurance companies).
PE:12
PEG (5 yr est.): 1.15
PS: 1
PB: 1.4
Revenue & earnings growth: positive

Small insider buy at $43 in FEB (more selling)

Growth: estimates are utterly flat.
Earnings
jun07, -11%
2008, -2%
next 5 yrs, 9%

Thoughts: Some of its insured items are very discretionary items (snowmobiles, collector cars). Will MLAN's business decline if sales of these items decline? Property insurers have been lucky since Hurricane Katrina: no major catastrophes. That won't continue. In general, MLAN is a good defensive pick: very solid financial condition. Consider it a buy at the price of the last insider buy: $43.

20JUL07 $49

I sold my personal position in MLAN. Reasoning: It's specialty insurance depends on consumer discretionary items, and consumer spending is slowing. Property and casualty insurers have unusually goood historica numbers due to lack of catostrophes recently, but that isn't sustainable. I'm not bullish on the markets, and all insurance companies depend on investments for profit. Future guidance from the company and analysts is mundane.

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