Mr. Hayden: Midland grew up as a multi-faceted finance company. It was founded in 1938 as an auto finance company and then expanded into consumer finance in the 1940s and finally into manufactured housing finance in the 1950s. In the 1960s it integrated vertically in the manufactured housing industry, at one point building, selling, financing, and insuring mobile homes. Midland today is primarily focused on its specialty insurance operations, known in the industry as the American Modern Insurance Group (AMIG). We also maintain a lucrative investment in the river transportation industry through our M/G Transport Services operating subsidiary. AMIG is a market leader in manufactured housing insurance. We deliver our highly specialized products and services through a wide variety of distribution partners. Our breadth of distribution is one of our hallmarks. Our business partners include manufactured housing dealers, lenders, and manufacturers, as well as wholesale and specialty retail insurance agents. In addition to manufactured housing insurance, our product offering includes specialty watercraft, dwelling, and auto insurance, warranty and extended service contracts, and in the financial institution sector, forced placed fire or hazard insurance, forced place automobile insurance, and a variety of life, accident, and health- related products. We are headquartered in Cincinnati, Ohio, trade on the NASDAQ national market (ticker symbol MLAN), and currently have about 9.5 million shares outstanding.
TWST: When you look at this part of the insurance industry today, what
strikes you as the key issues or the key trends that are being addressed
and what impact do you feel those trends have on you as you look over
the next two years?
Mr. Hayden: What is most interesting about our company is that we are a
true specialty insurance company that is active in all 50 states. Most
specialty insurers operate on a more limited, regional, or perhaps even
local, basis. We have a high level of entrepreneurial energy in the
organization that enables us to deliver creative product solutions for
our customers across the many markets we serve. Given our operating
track record, we believe our stock, which is currently trading well
below its book value, is dramatically undervalued. Similar specialty
stocks are trading closer to 2 times their book value or even greater in
some cases. Our operating results compare favorably against even the top
performers in our industry, and are worthy of consideration. We see
tremendous consolidation occurring across the insurance industry, both
in the standard lines and specialty lines sectors. Many companies lack
the ability to produce meaningful organic, or internal, growth. We have
been successful in this regard, largely because of the diversity in our
distribution options and the breadth of the markets we serve. We have
created opportunities to sell more of our existing products into
existing markets, new products into existing markets, and existing
products into new markets where we are just beginning to have a
presence. Fortunately, the pressure really isn't on us to invent new
product ideas. Once our producers know and understand our capabilities
in the manufactured housing arena, they bring other product ideas to us.
This is how we entered the watercraft business and various segments of
the dwelling business. It is the key reason why, at a time when the P&C
industry as a whole has been hungry for top-line growth, we have
successfully produced a ten-year compound annual growth rate of nearly
15%. Our long-standing relationships and experience with producers in
virtually every channel of distribution is the primary reason why this
has been the case. As a company, we pride ourselves in the ability to
develop enduring relationships that can withstand competitive market
pressures. It is this that enables us to continue growing, even when a
certain channel of distribution or a particular marketplace is
competitive. We have a good, broad base, which gives us the ability to
move effectively forward, even in a market that is as challenging as the
P&C marketplace we have experienced these last several years.
Tickers included in this excerpt: MLAN
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