Infinity Property and Casualty Reports 22.2% Gross Written Premium Growth for the First Quarter of 2012

BIRMINGHAM, Ala., May 3, 2012 /PRNewswire/ -- Infinity Property and Casualty Corporation (NASDAQ:  IPCC), a national provider of personal automobile insurance, today reported results for the three months ended March 31, 2012:



Three months ended March 31,

(in millions, except per share amounts and ratios)


2012


2011


Change





(as adjusted)(1)










Gross written premium (2)


$345.9



$283.1



22.2

%

Revenues


$287.4



$252.3



13.9

%








Net earnings


$4.3



$10.2



(58.0)

%

Net earnings per diluted share


$0.35



$0.81



(56.8)

%








Operating earnings (2)


$4.3



$7.2



(40.3)

%

Operating earnings per diluted share (2)


$0.36



$0.57



(36.8)

%








Underwriting income (2)


$0.2



$3.8



(93.9)

%

Combined ratio


99.9

%


98.4

%


1.5 pts









Return on equity (3)


2.6

%


6.2

%


(3.7) pts


Operating earnings return on equity (2) (3)


2.6

%


4.4

%


(1.8) pts









Book value per share


$56.61



$52.99



6.8

%

Debt to total capital


22.6

%


22.9

%


(0.3) pts


Debt to tangible capital (2)


24.7

%


25.1

%


(0.3) pts



(1) 2011 has been adjusted for the retrospective adoption of the accounting standards update Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

(2) 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.

(3) Annualized

 

Gross written premium grew 22.2% during the first quarter of 2012 compared with the same period in 2011 with growth in six of the seven Focus States.  California, Infinity's largest state, grew 15.0% in the first quarter of 2012 compared with the same period in 2011.

Operating earnings declined in the first quarter of 2012 compared with the same period in 2011 primarily as a result of favorable development on prior accident year loss and loss adjustment expense reserves recognized in the first quarter of 2012 of $0.1 million, pre-tax ($0.00 per diluted share after-tax) compared with $3.4 million, pre-tax ($0.18 per diluted share after-tax) of favorable development recognized during the first quarter of 2011.  In addition to the decline in favorable development, net earnings in the first quarter of 2012 were impacted by a $2.7 million decline in net realized gains on investments compared to the first quarter of 2011.

Book value per share at March 31, 2012, was $56.61, a 6.8% increase from March 31, 2011.

2012 Earnings Guidance

Infinity is affirming its operating earnings guidance of $2.00 - $2.50.  The guidance assumes gross written premium growth between 7.5% and 10.0% 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%. 

Share and Debt Repurchase Program

During the first quarter of 2012, Infinity repurchased 22,800 shares at an average price, excluding commissions, of $55.97.  Infinity has $45.8 million of capacity left under its share and debt repurchase program, which expires December 31, 2012.

Forward-Looking Statements

This press release, notably "2012 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 that 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 first quarter 2012 results at 11:00 a.m. (ET) today, May 3, 2012.  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 87470460.  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 1:00 p.m. (ET), and will run until Thursday, May 10, 2012.  To listen to the replay, dial 1-888-286-8010 and provide the confirmation code 85456673.  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

March 31,


2012


2011




(as adjusted)

Revenues:




  Earned premium

$277.1



$239.0


  Net investment income

9.7



10.3


  Net realized gains on investments(1)

0.2



2.9


  Other income

0.3



0.1


Total revenues

287.4



252.3






Costs and Expenses:




  Losses and loss adjustment expenses (2)

214.8



179.0


  Commissions and other underwriting expenses

62.1



56.3


  Interest expense

2.7



2.7


  Corporate general and administrative expenses

2.0



1.7


  Other expenses

0.2



0.0


Total costs and expenses

281.9



239.7






Earnings before income taxes

5.5



12.6


Provision for income taxes

1.2



2.4


Net Earnings

$4.3



$10.2






Net Earnings per Common Share:




Basic

$0.37



$0.83


Diluted

$0.35



$0.81






Average Number of Common Shares:




Basic

11.7



12.3


Diluted

12.1



12.7






Cash Dividends per Common Share

$0.225



$0.180


Notes:






(1) Net realized gains before impairment losses

$0.9



$3.5


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

(0.6)



(1.6)


Non-credit portion in other comprehensive income

0.0



1.0


OTTI losses reclassified from other comprehensive income

0.0



0.0


Net impairment losses recognized in earnings

(0.6)



(0.6)


Total net realized gains on investments

$0.2



$2.9



(2) Losses and loss adjustment expenses for the three months ended March 31, 2012 include $0.1 million of favorable development on prior accident year loss and loss adjustment expense reserves.

Losses and loss adjustment expenses for the three months ended March 31, 2011 include $3.4 million of favorable development on prior accident year loss and loss adjustment expense reserves.

Columns may not foot due to rounding.

    

 

Infinity Property and Casualty Corporation

Balance Sheets

(in millions, except book value per share)

(unaudited)

March 31,
2012


December 31,
2011




(as adjusted)

Assets:




Investments:




Fixed maturities, at fair value

$1,225.8


$1,188.0

Equity securities, at fair value

41.5


36.9

Total investments

1,267.4


1,224.9

Cash and cash equivalents

61.3


83.8

Accrued investment income

11.4


10.8

Agents' balances and premium receivable

435.2


382.6

Property and equipment (net of depreciation)

41.0


38.7

Prepaid reinsurance premium

2.2


2.1

Recoverable from reinsurers

15.8


14.7

Deferred policy acquisition costs

91.1


80.1

Current and deferred income taxes

7.4


10.7

Receivable for securities sold

0.1


1.2

Other assets

7.8


5.5

Goodwill

75.3


75.3

Total assets

2,015.9


1,930.4





Liabilities and Shareholders' Equity:




Liabilities:




Unpaid losses and loss adjustment expenses

$513.9


$495.4

Unearned premium

541.6


474.5

Payable to reinsurers

0.2


0.0

Long-term debt

194.8


194.8

Commissions payable

34.5


30.6

Payable for securities purchased

7.7


10.8

Other liabilities

55.2


62.4

Total liabilities

1,348.0


1,268.6





Shareholders' Equity:




Common stock

21.4


21.4

Additional paid-in capital

357.5


355.9

Retained earnings (1)

654.1


652.4

Accumulated other comprehensive income, net of tax

39.5


35.3

Treasury stock, at cost  (2)

(404.5)


(403.2)

Total shareholders' equity

668.0


661.8

Total liabilities and shareholders' equity

2,015.9


1,930.4





Shares outstanding

11.8


11.8

Book value per share

$56.61


$56.05

Notes:

(1) The change in retained earnings from December 31, 2011 is a result of net income of $4.3 million less shareholder dividends of $2.7 million.

(2) Infinity repurchased 22,800 common shares during the first quarter of 2012 at an average per share price, excluding commissions, of $55.97.

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

March 31,



2012


2011

(in millions, except EPS)




(as adjusted)






Earned premium


$277.1



$239.0


Losses and loss adjustment expenses


(214.8)



(179.0)


Commissions and other underwriting expenses


(62.1)



(56.3)







Underwriting income


0.2



3.8







Net investment income


9.7



10.3


Other income


0.3



0.1


Interest expense


(2.7)



(2.7)


Corporate general and administrative expenses


(2.0)



(1.7)


Other expenses


(0.2)



0.0







Pre-tax operating earnings


5.3



9.7







   Provision for income taxes


(1.0)



(2.5)







Operating earnings, after-tax


4.3



7.2







Realized gains on investments, pre-tax


0.2



2.9


Provision for income taxes


(0.1)



(1.0)


(Increase) decrease in provision for tax valuation allowance


(0.2)



1.1


Realized gains on investments, net of tax


0.0



3.0







Net earnings


$4.3



$10.2







Operating earnings per diluted share


$0.36



$0.57


Realized gains on investments, net of tax


0.00



0.15


(Increase) decrease in provision for tax valuation allowance


(0.01)



0.09


Net earnings per diluted share


$0.35



$0.81







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 March 31,


(in millions)

2012


2011







Gross written premium

$345.9



$283.1



Ceded reinsurance

(1.8)



(1.6)



Net written premium

344.2



281.5



Change in unearned premium

(67.0)



(42.6)



Earned premium

$277.1



$239.0








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)

March 31,

2012


March 31,

2011





Tangible capital

$787.5



$776.7


Goodwill

75.3



75.3


Total capital

$862.8



$852.0



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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