Bancinsurance (BCIS) 8-K Bancinsurance Corporation Announces Third Quarter Results

Exhibit 99.1

BANCINSURANCE CORPORATION ANNOUNCES
THIRD QUARTER RESULTS

SALE OF AFFILIATE BOOSTS NET INCOME

COLUMBUS, Ohio (October 31, 2006) Bancinsurance Corporation, a specialty property and casualty insurance holding company, today announced its financial results for the three and nine months ended September 30, 2006.

Highlights for the third quarter of 2006 include the following:

• Net income of $2.1 million or $.42 per diluted share.

• Net premiums earned of $12.4 million.

• Combined ratio of 100.9%.

• $2.4 million gain on sale of affiliate.

• Shareholders’ equity of $35.6 million and book value per share of $7.15 at September 30, 2006.

John S. Sokol, President, stated, “The sale of our publishing subsidiary during the third quarter 2006 offset weaker operating results compared to the same period last year. This transaction was an opportunity to unlock value within a non-core business and realize a $2.4 million pre-tax gain. Additionally, it reinforces our focus on the Company’s specialty insurance products. We are committed to these markets which we believe offer long-term growth opportunities.”

Third Quarter Results

Net income increased to $2.1 million, or $0.42 per diluted share, for the third quarter 2006 from $1.5 million, or $0.30 per diluted share, for the same period last year. The most significant factor that influenced the year-over-year comparison was the previously disclosed sale of American Legal Publishing Corporation (“ALPC”) during the third quarter 2006 which generated a $2.4 million net realized gain ($1.6 million after tax or $0.32 per diluted share). Partially offsetting this gain was a $0.8 million increase in underwriting losses from the discontinued bond program during the third quarter 2006 as a result of the previously disclosed Harco arbitration ruling in August 2006.

Net premiums earned declined to $12.4 million for the third quarter 2006 from $13.8 million a year ago primarily due to lower ULTIMATE LOSS INSURANCE^® (“ULI”) premiums as a result of a general agent transferring half of its production to other insurance carriers during the second half of 2005 (the “Transferred Business”) combined with the cancellation of a financial institution customer at the end of second quarter 2006.

Net investment income remained relatively flat at $0.9 million for the third quarter 2006 and 2005.

Management fees from our unemployment compensation (“UC”) product line declined $0.2 million for the third quarter 2006 compared to the prior year due primarily to an increase in unemployment experience for the respective periods.

Discontinued bond program losses and loss adjustment expenses (“LAE”) were $0.7 million and $0.1 million during the third quarter 2006 and 2005, respectively. The loss in third quarter 2006 was primarily attributable to the Harco arbitration ruling. As of September 30, 2006, three of the four arbitrations associated with the discontinued bond program have been resolved; only the Highlands’ arbitration remains outstanding. Losses and LAE on continuing business increased slightly to $6.3 million in the third quarter 2006 from $6.2 million a year ago.

Commission expense declined $0.4 million primarily due to the decrease in ULI commissions associated with the Transferred Business. Other insurance operating expenses and general and administrative expenses were down $0.4 million primarily due to one-time audit and legal expenses in the prior year associated with the withdrawal by the Company’s former independent

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registered public accounting firm. This decrease was partially offset by higher legal expenses associated with the discontinued bond program arbitrations during the third quarter 2006 compared to the prior year combined with an increase in compensation expense. Interest expense increased $0.1 million as a result of rising interest rates associated with the Company’s trust preferred debt.

Combined Ratio

The Company’s specialty insurance products are underwritten by its wholly-owned subsidiary, Ohio Indemnity Company, whose results represent the Company’s combined ratio. For the third quarter 2006, the combined ratio increased to 100.9% from 89.7% a year ago. The loss ratio increased to 56.4% for the third quarter 2006 from 46.1% a year ago partially due to the increase in losses for the discontinued bond program. Excluding the discontinued bond program, the loss ratio was 51.0% for the third quarter 2006 compared to 45.4% a year ago. This increase was primarily attributable to our ULI product line. The expense ratio increased to 44.5% for the third quarter 2006 from 43.6% a year ago primarily due to the decrease in management fees.

Nine Month Results

Net income increased to $5.0 million, or $1.00 per diluted share, for the first nine months of 2006 from $3.2 million, or $0.63 per diluted share, for the same period last year. The most significant factors that influenced the year-over-year comparison was the $2.4 million net realized gain on the sale of ALPC, a decrease in losses and LAE of $2.8 million for the discontinued bond program and a $1.2 million decrease in net realized gains on investments.

Net premiums earned declined to $36.3 million for the first nine months of 2006 from $39.5 million a year ago primarily due to a decrease in premiums for ULI, creditor placed insurance (“CPI”), waste industry products (“WIP”) and the discontinued bond program. ULI experienced the largest decline ($3.4 million) caused primarily by the Transferred Business, lower lending volumes for certain financial institution customers and the cancellation of a customer in the current year. This decrease in premiums was partially offset by a $1.2 million increase for our guaranteed auto protection (“GAP”) product line due primarily to pricing actions and new customers added. Net premiums earned for our UC product line remained relatively flat compared to a year ago.

Net investment income was $2.8 million for the first nine months of 2006, an increase of 19% from $2.3 million the prior year. This improvement was primarily due to growth in fixed income investments combined with higher yields compared to a year ago. Net realized gains on investments were $0.1 million for the first nine months of 2006 compared to $1.3 million a year ago due to the timing of sales of equity securities.

Management fees from our UC product line were $0.6 million for the first nine months of 2006 compared to $0.5 million the prior year.

Discontinued bond program losses and LAE were $1.0 million and $3.8 million during the first nine months of 2006 and 2005, respectively. The loss for the first nine months of 2006 was primarily attributable to the Harco arbitration ruling. The most significant factor contributing to the net loss for the first nine months of 2005 was the increase in reserves for this program during that period. Losses and LAE on continuing business increased $0.6 million for the first nine months of 2006 primarily due to favorable loss development for the ULI product line in the first nine months of 2005 and an increase in GAP losses due to the increase in business.

Commission expense declined $1.5 million for the first nine months of 2006 compared to the same period last year primarily due to the Transferred Business. Other insurance operating expenses and general and administrative expenses were down $1.0 million primarily due to one-time audit and legal expenses in the prior year associated with the withdrawal by the Company’s former independent registered public accounting firm. This decrease was partially offset by higher legal expenses associated with the discontinued bond program arbitrations in the first nine months of 2006 compared to the prior year combined with an increase in compensation expense. Interest expense increased $0.2 million for the first nine months of 2006 versus a year ago as a result of rising interest rates associated with the Company’s trust preferred debt.

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Combined Ratio

For the first nine months of 2006, the combined ratio improved to 94.3% from 98.6% a year ago. The loss ratio improved to 50.7% for the first nine months of 2006 from 52.1% a year ago principally due to the decline in losses and LAE for the discontinued bond program. Excluding the discontinued bond program, the loss ratio was 48.1% for the first nine months of 2006 compared to 42.5% a year ago. This increase was primarily attributable to the prior year favorable loss development for the ULI product line. The expense ratio improved to 43.7% for the first nine months of 2006 from 46.5% a year ago primarily due to the decrease in other insurance operating expenses and the decline in ULI commissions associated with the Transferred Business.

About Bancinsurance Corporation

Bancinsurance Corporation, headquartered in Columbus, Ohio, is principally engaged through its property and casualty insurance subsidiary, Ohio Indemnity Company, in underwriting specialty insurance. Automobile lender/dealer insurance products include our ULTIMATE LOSS INSURANCE^®, creditor placed insurance and guaranteed auto protection insurance products. These products protect banks and other lenders against risk arising from theft or damage to certain loan collateral where the borrower has failed to secure or maintain adequate insurance coverage. Unemployment compensation products are utilized by qualified entities that elect not to pay the unemployment compensation taxes and instead reimburse state unemployment agencies for benefits paid by the agencies to the entities’ former employees. Our waste industry products consists of surety bonds produced and administered by a general insurance agent whereby the Company both assumes and cedes business through quota share reinsurance arrangements. Other specialty products consist of contract surety bonds, service contracts and run off of the discontinued bond program.

Forward-Looking Statements

Certain statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, we may make other written or oral communications from time to time that contain forward-looking statements. Forward-looking statements convey our current expectations or forecast future events. All statements contained in this press release, other than statements of historical fact, are forward-looking statements. Forward-looking statements include statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations. The words “may,” “continue,” “estimate,” “intend,” “plan,” “will,” “believe,” “project,” “expect,” “anticipate” and similar expressions generally identify forward-looking statements but the absence of these words does not necessarily mean that a statement is not forward-looking. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause actual results to differ materially from those statements. Risk factors that might cause actual results to differ from those statements include, without limitation, changes in underwriting results affected by adverse economic conditions, fluctuations in the investment markets, changes in the retail marketplace, changes in the laws or regulations affecting the operations of the Company, changes in the business tactics or strategies of the Company, the financial condition of the Company’s business partners, changes in market forces, litigation, developments in the discontinued bond program and the related Highlands arbitration, the ongoing SEC private investigation and the concentrations of ownership of the Company’s common shares by members of the Sokol family, and other risk factors identified in our filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2005, any one of which might materially affect our financial condition and/or results of operations. Any forward-looking statements speak only as of the date made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they are made.

CONTACT:
John S. Sokol
President
jsokol@bancins.com
614-220-5200

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BANCINSURANCE CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Operations
(Unaudited)

			��
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2006		2005		2006		2005
Revenues:
Net premiums earned	$	12,420,099	$	13,771,082	$	36,251,226	$	39,497,536
Net investment income		914,325		895,603		2,779,790		2,342,545
Net realized gains on investments		1,690		26,140		83,469		1,283,589
Net realized gain on sale of affiliate		2,449,391		—		2,449,391		—
Codification and subscription fees		485,642		776,950		2,255,558		2,502,998
Management fees		14,063		231,399		556,274		511,685
Other income		8,818		18,158		19,860		90,896
Total revenues		16,294,028		15,719,332		44,395,568		46,229,249
Expenses:
Losses and loss adjustment expenses (“LAE”)		6,288,788		6,177,129		17,172,750		16,534,986
Discontinued bond program losses and LAE		664,594		103,415		952,570		3,763,591
Commission expense		3,219,171		3,652,612		8,941,535		10,398,203
Other insurance operating expenses		2,143,234		2,356,173		6,862,167		7,831,927
Codification and subscription expenses		460,723		682,057		1,936,384		2,111,446
General and administrative expenses		309,105		490,023		725,964		763,094
Interest expense		376,268		297,698		1,060,536		833,594
Total expenses		13,461,883		13,759,107		37,651,906		42,236,841
Income before federal income taxes		2,832,145		1,960,225		6,743,662		3,992,408
Federal income tax expense		727,614		458,594		1,705,142		812,068
Net income	$	2,104,531	$	1,501,631	$	5,038,520	$	3,180,340
Net income per common share:
Basic	$	.42	$	.30	$	1.01	$	.64
Diluted	$	.42	$	.30	$	1.00	$	.63

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BANCINSURANCE CORPORATION
AND SUBSIDIARIES

Consolidated Balance Sheet Data
(Unaudited)

	September 30,			December 31,
	2006			2005
Assets
Investments:
Held to maturity:
Fixed maturities	$	4,291,019		$	4,821,629
Available for sale:
Fixed maturities		65,495,744			73,012,240
Equity securities		9,080,951			8,043,299
Short-term investments		8,871,398			8,964,738
Other invested assets		715,000			715,000
Total investments		88,454,112			95,556,906
Cash		2,772,418			4,528,875
Premiums receivable		4,744,567			5,403,960
Accounts receivable, net		—			674,357
Reinsurance recoverables		1,372,999			1,235,043
Prepaid reinsurance premiums		8,368,598			6,011,496
Deferred policy acquisition costs		9,897,014			9,678,821
Costs and estimated earnings in excess of billings on uncompleted codification contracts		—			248,035
Loans to affiliates		963,814			892,523
Intangible assets, net		—			771,013
Accrued investment income		972,532			1,128,104
Current federal income tax recoverable		39,636			—
Net deferred tax asset		—			485,461
Other assets		2,449,549			1,721,241
Total assets		120,035,239			128,335,835
Liabilities and Shareholders’ Equity
Reserve for unpaid losses and loss adjustment expenses		6,466,391			7,678,094
Discontinued bond program reserve for unpaid losses and loss adjustment expenses		5,551,251			19,626,129
Unearned premiums		37,683,495			35,579,349
Ceded reinsurance premiums payable		1,793,794			3,605,394
Experience rating adjustments payable		3,146,194			2,302,850
Retrospective premium adjustments payable		3,264,896			2,201,706
Funds held under reinsurance treaties		462,754			735,341
Contract funds on deposit		3,485,443			3,201,124
Taxes, licenses and fees payable		311,560			386,936
Current federal income tax payable		—			570,078
Net deferred tax liability		688,362			—
Deferred ceded commissions		1,554,924			1,337,098
Commissions payable		2,351,715			2,710,582
Billings in excess of estimated earnings on uncompleted codification contracts		—			75,108
Notes payable		—			27,119
Other liabilities		2,184,425			2,754,301
Trust preferred debt issued to affiliates		15,465,000			15,465,000
Total liabilities		84,410,204			98,256,209
Shareholders’ equity:
Common shares		1,794,141			1,794,141
Additional paid-in capital		1,482,239			1,336,073
Accumulated other comprehensive income		910,870			588,703
Retained earnings		37,171,306			32,132,786
		41,358,556			35,851,703
Less: Treasury shares		(5,733,521	)		(5,772,077	)
Total shareholders’ equity		35,625,035			30,079,626
Total liabilities and shareholders’ equity	$	120,035,239		$	128,335,835

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