Infinity Property and Casualty Reports 11.2% Gross Written Premium Growth for the Third Quarter of 2011

BIRMINGHAM, Ala., Nov. 3, 2011 /PRNewswire/ -- Infinity Property and Casualty Corporation (NASDAQ:  IPCC), a national provider of personal automobile insurance, today reported results for the three and nine months ended September 30, 2011:



Three months ended September 30,


Nine months ended September 30,


(in millions, except per share amounts and ratios)


2011


2010


Change


2011


2010


Change
















Gross written premium (1)


$271.1


$243.8


11.2%


$813.6


$735.9


10.6%


Revenues


$266.1


$251.7


5.7%


$782.6


$711.9


9.9%
















Net earnings


$6.1


$30.8


(80.1%)


$24.7


$62.7


(60.6%)


Net earnings per diluted share


$0.50


$2.39


(79.1%)


$1.97


$4.72


(58.3%)
















Operating earnings (1)


$5.1


$22.8


(77.4%)


$18.6


$54.9


(66.1%)


Operating earnings per diluted share (1)


$0.42


$1.76


(76.1%)


$1.49


$4.13


(63.9%)
















Underwriting income (1)


$1.7


$26.9


(93.5%)


$8.3


$62.6


(86.7%)


Combined ratio


99.3%


88.4%


10.9

pts

98.9%


90.7%


8.2

pts















Return on equity


3.7%


19.3%


(15.5)

pts

5.0%


13.2%


(8.1)

pts

Operating earnings return on equity (1)


3.1%


14.2%


(11.1)

pts

3.8%


11.5%


(7.8)

pts















Book value per share








$54.83


$51.91


5.6%


Debt to total capital








23.0%


23.0%


-


Debt to tangible capital (1)








25.3%


25.2%


0.1

pts















(1)  Measures used in this release that are not based on generally accepted accounting principles ("non-GAAP") are defined at the end of this release and reconciled to the most comparable GAAP measure.






Gross written premium grew 11.2% during the third quarter of 2011 compared with the same period in 2010 with growth in four of the eight Focus States.  California, Infinity's largest state, grew 8.4% in the third quarter of 2011 compared with the same period in 2010.

Net and operating earnings declined in the third quarter of 2011 compared with the same period in 2010 primarily as a result of unfavorable development on prior accident year loss and loss adjustment expense reserves recognized in the third quarter of 2011 of $4.8 million, pre-tax ($0.25 per diluted share after-tax) compared with $16.8 million, pre-tax ($0.85 per diluted share after-tax) of favorable development recognized during the third quarter of 2010.  The unfavorable development during the third quarter of 2011 primarily relates to accident year 2010 and resulted primarily from increases in severities on PIP in Florida and bodily injury coverage in California.  

Unfavorable development on prior accident year loss and loss adjustment expense reserves recognized during the first nine months of 2011 was $4.8 million, pre-tax ($0.25 per diluted share after-tax), compared with favorable development of $53.8 million, pre-tax ($2.63 per diluted share after-tax) for the first nine months of 2010.  The unfavorable development during the first nine months of 2011 primarily relates to accident year 2010 and resulted primarily from increases in severities on PIP in Florida.  

2011 Earnings Guidance

Infinity is revising its operating earnings guidance to $2.10 - $2.40.  The operating earnings guidance reflects development on prior accident year loss and loss adjustment expense reserves recognized in earnings during the first nine months of 2011 but does not include any additional development in earnings during the remaining three months of the year.  The current guidance assumes gross written premium growth between 10.0% and 11.0% compared with the prior year, and an accident year combined ratio, which excludes development on prior accident year loss and loss adjustment expense reserves, between 97.5% and 98.5%.  Infinity's previously issued operating earnings guidance was $2.00$2.50 and assumed gross written premium growth between 7.5% and 12.5% and an accident year combined ratio between 98.0% and 99.0%.

Share and Debt Repurchase Program

During the third quarter of 2011, Infinity repurchased 419,100 shares at an average price, excluding commissions, of $49.46.  Infinity has $51.1 million of capacity left under its share and debt repurchase program, which expires December 31, 2012.

Forward-Looking Statements

This press release, notably "2011 Earnings Guidance," contains certain "forward looking statements" which anticipate results based on estimates, assumptions and plans that are subject to uncertainty.  These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements in this press release not dealing with historical results or current facts are forward-looking and are based on estimates, assumptions, and projections. Statements which include the words "assumes," "believes," "seeks," "expects," "may," "should," "intends," "likely," "targets," "plans," "anticipates," "estimates" or the negative version of those words and similar statements of a future or forward-looking nature identify forward-looking statements.

The primary events or circumstances that could cause actual results to differ materially from those expected by Infinity include determinations with respect to reserve adequacy, realized gains or losses on the investment portfolio (including other-than-temporary impairments for credit losses), rising bodily injury loss cost trends, undesired business mix or risk profile for new business, elevated unemployment rates, and the proliferation of illegal immigration legislation in key focus states. Infinity undertakes no obligation to publicly update or revise any of the forward-looking statements. For a more detailed discussion of some of the foregoing risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see Infinity's filings with the Securities and Exchange Commission.

Conference Call

The Company will hold a conference call to discuss third quarter 2011 results at 11:00 a.m. (ET) today, November 3.   There are two alternative communication modes available to listen to the call. Telephone access will be available by dialing 1-888-713-4205 and providing the confirmation code 28592135.  Please dial 5 to 10 minutes prior to the scheduled start time. A replay of the call will also be available two hours following the completion of the call, at around 2:00 p.m. (ET), and will run until Thursday, November 10, 2011. To listen to the replay, dial 1-888-286-8010 and provide the confirmation code 87102328.  The conference call will also be broadcast live over the Internet. To listen to the call via the Internet, go to Infinity's website, http://www.infinityauto.com, click on Investor Relations and follow the instructions at the webcast link. The archived webcast will be available on Infinity's website approximately two hours following the completion of the call and will be available for one year.

Infinity Property and Casualty Corporation

Statements of Earnings

(in millions, except EPS and dividends)


 (unaudited)

Three months ended

September 30,


Nine months ended

September 30,


2011


2010


2011


2010

Revenues:








  Earned premium

$255.1


$232.5


$745.7


$670.2

  Net investment income

10.2


11.1


31.1


34.0

  Net realized gains on investments(1)

0.7


8.0


5.6


7.6

  Other income

0.1


0.1


0.2


0.2

Total revenues

266.1


251.7


782.6


711.9









Costs and Expenses:








  Losses and loss adjustment expenses (2)

195.3


152.3


566.7


452.2

Commissions and other underwriting expenses

58.1


53.3


170.7


155.4

  Interest expense

2.7


2.7


8.1


8.1

Corporate general and administrative expenses

1.7


2.1


5.7


6.2

  Other expenses

1.0


(0.4)


1.4


2.2

Total costs and expenses

258.9


210.0


752.6


624.0









Earnings before income taxes

7.3


41.6


30.1


87.9

Provision for income taxes

1.1


10.8


5.3


25.2

Net Earnings

$6.1


$30.8


$24.7


$62.7









Earnings per Common Share:








Basic

$0.51


$2.45


$2.02


$4.83

Diluted

$0.50


$2.39


$1.97


$4.72









Average Number of Common Shares:








Basic

12.1


12.6


12.2


13.0

Diluted

12.3


12.9


12.5


13.3









Cash Dividends per Common Share

$0.18


$0.14


$0.54


$0.42









Notes:








(1)

Net realized gains before impairment losses

$1.1


$8.1


$6.9


$9.5


Total other-than-temporary impairment ("OTTI") losses

(0.4)


0.0


(2.1)


(0.2)


Non-credit portion in other comprehensive income

0.0



1.0



OTTI losses reclassified from other comprehensive income

0.0


(0.1)


(0.2)


(1.8)


Net impairment losses recognized in earnings

(0.4)


(0.2)


(1.3)


(2.0)


Total net realized gains on investments

$0.7


$8.0


$5.6


$7.6










(2)

Losses and loss adjustment expenses for the three and nine months ended September 30, 2011 include $4.8 million and $4.8 million of unfavorable development on prior accident year loss and loss adjustment expense reserves, respectively.


Losses and loss adjustment expenses for the three and nine months ended September 30, 2010 include $16.8 million and $53.8 million of favorable development on prior accident year loss and loss adjustment expense reserves, respectively.  


Columns may not foot due to rounding.



Infinity Property and Casualty Corporation

Balance Sheets

(in millions, except book value per share)



September 30,
2011


June 30,
2011


December 31,
2010


(unaudited)


(unaudited)


(audited)

Assets:






Investments:






Fixed maturities, at fair value

$1,177.3


$1,190.5


$1,177.7

Equity securities, at fair value

33.1


36.8


42.3

  Total investments

1,210.4


1,227.3


1,220.0

Cash and cash equivalents

52.2


36.5


63.6

Accrued investment income

11.2


11.2


12.0

Agents' balances and premium receivable

389.7


374.8


336.7

Property and equipment (net of depreciation)

39.0


38.3


25.1

Prepaid reinsurance premium

2.3


2.2


1.9

Recoverable from reinsurers

14.8


15.0


16.8

Deferred policy acquisition costs

92.0


90.5


79.4

Current and deferred income taxes

15.9


17.5


14.9

Receivable for securities sold

5.5


0.9


Other assets

5.4


10.1


6.7

Goodwill

75.3


75.3


75.3

  Total assets

$1,913.7


$1,899.6


$1,852.4







Liabilities and Shareholders' Equity:






Liabilities:






Unpaid losses and loss adjustment expenses

$493.5


$483.1


$477.8

Unearned premium

480.7


466.3


417.4

Payable to reinsurers



0.0

Long-term debt

194.8


194.8


194.7

Commissions payable

22.0


21.3


19.0

Payable for securities purchased

12.8


1.9


0.4

Other liabilities

58.5


65.1


81.8

  Total liabilities

1,262.4


1,232.5


1,191.2







Shareholders' Equity:






Common stock

21.3


21.3


21.2

Additional paid-in capital

354.0


352.8


349.7

Retained earnings (1)

643.6


639.6


625.5

Accumulated other comprehensive income, net of tax

31.5


30.2


24.5

Treasury stock, at cost  (2)

(399.2)


(376.9)


(359.8)

  Total shareholders' equity

651.3


667.1


661.2

  Total liabilities and shareholders' equity

$1,913.7


$1,899.6


$1,852.4







Shares outstanding

11.9


12.3


12.5

Book value per share

$54.83


$54.44


$53.03



Notes:

(1)

The change in retained earnings from June 30, 2011 is a result of net income of $6.1 million less shareholder dividends of $2.2 million. The change in retained earnings from December 31, 2010 is a result of net income of $24.7 million less shareholder dividends of $6.6 million.

(2)

Infinity repurchased 419,100 common shares during the third quarter of 2011 at an average per share price, excluding commissions, of $49.46. Infinity repurchased 706,800 common shares during the first nine months of 2011 at an average price, excluding commissions, of $52.26.


Columns may not foot due to rounding.



Definitions of Non-GAAP Financial and Operating Measures

Operating earnings are defined as net earnings, before realized gains and losses on investments and the cumulative effect of a change in accounting principle, after tax.  Infinity reports this non-GAAP measure because realized gains and losses on investments can be volatile and because it is a measure used often by investors in evaluating insurance companies.  Net earnings are the most comparable GAAP measure.  

Underwriting income measures the insurer's profit on insurance sales after all losses and expenses have been paid.  It is calculated by deducting losses and loss adjustment expenses and underwriting expenses from premiums earned.  Infinity reports this non-GAAP measure to show profitability before inclusion of net investment income, other income, interest expense, corporate general and administrative expenses, other expenses and taxes and because it is a measure used often by investors in evaluating insurance companies.  Net earnings are the most comparable GAAP measure.  

Below is a schedule that reconciles operating earnings and underwriting income to net earnings:



Three months ended

September 30,


Nine months ended

September 30,

(in millions, except EPS)


2011


2010


2011


2010










Earned premium


$255.1


$232.5


$745.7


$670.2

Losses and loss adjustment expenses


(195.3)


(152.3)


(566.7)


(452.2)

Commissions and other underwriting expenses


(58.1)


(53.3)


(170.7)


(155.4)










Underwriting income


1.7


26.9


8.3


62.6










Net investment income


10.2


11.1


31.1


34.0

Other income


0.1


0.1


0.2


0.2

Interest expense


(2.7)


(2.7)


(8.1)


(8.1)

Corporate general and administrative expenses


(1.7)


(2.1)


(5.7)


(6.2)

Other expenses


(1.0)


0.4


(1.4)


(2.2)










Pre-tax operating earnings


6.5


33.7


24.5


80.3










   Provision for income taxes


(1.4)


(10.9)


(5.8)


(25.4)










Operating earnings, after-tax


5.1


22.8


18.6


54.9










Realized gains on investments, pre-tax


0.7


8.0


5.6


7.6

Provision for income taxes


(0.3)


(2.8)


(2.0)


(2.7)

Decrease in provision for tax valuation allowance


0.5


2.8


2.5


2.9

Realized gains on investments, net of tax


1.0


8.0


6.1


7.8










Net earnings


$6.1


$30.8


$24.7


$62.7










Operating earnings per diluted share


$0.42


$1.76


$1.49


$4.13

Realized gains on investments, net of tax


0.04


0.41


0.28


0.37

Decrease in provision for tax valuation allowance


0.04


0.22


0.20


0.22

Net earnings per diluted share


$0.50


$2.39


$1.97


$4.72










Note: Columns may not foot due to rounding



Gross written premium is the amount of premium charged for policies issued during a fiscal period.  Earned premium is a GAAP measure and represents the portion of gross written premium (after cessions to reinsurers) that has been recognized in income in the financial statements for the periods presented as earned on a pro-rata basis over the term of the policies.

Below is a schedule that reconciles gross written premium to earned premium:


Three months ended September 30,


Nine months ended September 30,

(in millions)

2011


2010


2011


2010









Gross written premium

$271.1


$243.8


$813.6


$735.9

Ceded reinsurance

(1.6)


(1.4)


(4.8)


(4.1)

Net written premium

269.6


242.4


808.8


731.8

Change in unearned premium

(14.4)


(9.9)


(63.1)


(61.7)

Earned premium

$255.1


$232.5


$745.7


$670.2


Note: Columns may not foot due to rounding



Tangible capital is defined as total capital (long-term debt plus total shareholders' equity) less intangible assets.  Infinity reports this non-GAAP measure because it is a measure often used by debt-holders and rating agencies when evaluating financial leverage.  Total capital is the most comparable GAAP measure.

Below is a schedule that reconciles tangible capital to total capital:

(in millions)

September 30,

2011


September 30,
2010





Tangible capital

$770.8


$771.2

Goodwill

75.3


75.3

Total capital

$846.1


$846.4





         Note: Columns may not foot due to rounding



Infinity also makes available an investor supplement on its website.  To access the supplemental financial information, go to www.infinityauto.com and click on "Investor Relations" followed by "Quarterly Reports."  

SOURCE Infinity Property and Casualty Corporation



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