Infinity Property and Casualty Reports Results for the Fourth Quarter of 2015

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Infinity Property and Casualty Corporation

Feb 25, 2016, 08:00 ET

BIRMINGHAM, Ala., Feb. 25, 2016 /PRNewswire/ -- Infinity Property and Casualty Corporation (NASDAQ: IPCC), a national provider of personal automobile insurance, today reported results for the three and twelve months ended December 31, 2015:

	Three months ended December 31,			Twelve months ended December 31,
(in millions, except per share amounts and ratios)	2015	2014	Change	2015	2014	Change

Gross written premium ⁽¹⁾	$310.5	$302.5	2.7%	$1,387.9	$1,360.9	2.0%
Revenues	$369.9	$366.0	1.1%	$1,484.0	$1,461.7	1.5%

Net earnings	$11.1	$21.4	(48.0%)	$51.5	$57.2	(10.0%)
Net earnings per diluted share	$0.99	$1.85	(46.5%)	$4.51	$4.95	(8.9%)

Operating earnings ⁽¹⁾	$9.9	$20.8	(52.5%)	$49.7	$54.4	(8.8%)
Operating earnings per diluted share ⁽¹⁾	$0.88	$1.81	(51.4%)	$4.35	$4.71	(7.6%)

Underwriting income ⁽¹⁾	$11.1	$27.2	(59.1%)	$59.1	$65.0	(9.1%)
Combined ratio	96.7%	91.8%	4.9 pts	95.6%	95.1%	0.5 pt

Return on equity ⁽²⁾	6.4%	12.4%	(6.0) pts	7.4%	8.4%	(1.0) pt
Operating earnings return on equity ⁽¹⁾⁽²⁾	5.7%	12.1%	(6.4) pts	7.2%	8.0%	(0.8) pt

Book value per share				$61.66	$60.75	1.5%
Debt to total capital				28.6%	28.3%	0.3 pt
Debt to tangible capital⁽¹⁾				31.0%	30.6%	0.4 pt

(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.

(2)

Annualized

Net earnings per diluted share decreased 46.5% and 8.9% during the fourth quarter and the twelve months ended December 31, 2015, respectively, compared with the same periods in 2014 primarily due to a decrease in underwriting income as the result of an increase in the accident year combined ratio from 96.4% at December 31, 2014, to 97.8% at December 31, 2015.

James Gober, CEO and Chairman of Infinity, commented, "We took aggressive rate actions, which were nearly 10% countrywide in 2015, to address industry-wide frequency and severity trends. As we move into 2016, our focus will be to continue to work to improve profitability by taking additional rate increases and foregoing growth as needed."

Gross written premium increased 2.7% and 2.0% during the fourth quarter and the twelve months ended December 31, 2015, respectively, compared with the same periods in 2014. The majority of this growth came from California personal auto and countrywide Commercial Vehicle, which grew a combined 7.9% and 10.4% during each of those periods, respectively, compared with the same periods in 2014. Partially offsetting growth in these two areas was premium decline of 39.3% and 42.1% during the fourth quarter and the twelve months ended December 31, 2015, respectively, compared with the same periods in 2014, for the combined states of Georgia, Nevada and Pennsylvania as we discontinued writing new business in these states effective January 1, 2015.

2016 Guidance

The Company's initial guidance assumes gross written premium growth between (2.0%) and 2.0%, as compared with 2015, and an accident year combined ratio, excluding development on prior accident year loss and loss adjustment expense reserves, between 95.5% and 97.5%.

Share and Debt Repurchase Program

During the fourth quarter of 2015, Infinity repurchased 154,271 shares at an average price, excluding commissions, of $82.21. Infinity has $45.4 million of capacity left under its share and debt repurchase program, which expires December 31, 2016.

Forward-Looking Statements

This press release, notably "2016 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), loss cost trends and competitive conditions in our 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

Infinity will conduct a conference call and webcast to discuss fourth quarter 2015 results at 11:00 a.m. (ET) today, February 25, 2016. The webcast can be accessed on the Company's Investor Relations website at http://ir.infinityauto.com. The conference call will be available by dialing 1-877-508-9611. For those unable to attend the live event, a replay of the webcast will be posted on the website shortly after the event ends.

Infinity Property and Casualty Corporation
Statements of Earnings
(in millions, except EPS and dividends)

	Three months ended December 31,		Twelve months ended December 31,
	2015	2014	2015	2014
	(unaudited)	(unaudited)	(audited)	(audited)
Revenues:
Earned premium	$335.4	$332.3	$1,346.6	$1,325.9
Installment and other fee income	23.6	23.8	96.8	95.2
Net investment income	8.9	9.0	36.8	35.6
Net realized gains on investments ⁽¹⁾	1.8	0.8	2.8	4.3
Other income	0.2	0.2	1.1	0.6
Total revenues	369.9	366.0	1,484.0	1,461.7

Costs and Expenses:
Losses and loss adjustment expenses ⁽²⁾	261.5	242.5	1,036.0	1,001.6
Commissions and other underwriting expenses	86.3	86.3	348.2	354.6
Interest expense	3.5	3.4	13.8	13.8
Corporate general and administrative expenses	2.1	1.7	7.9	7.7
Other expenses	0.4	0.4	3.3	0.9
Total costs and expenses	353.8	334.4	1,409.2	1,378.6

Earnings before income taxes	16.1	31.6	74.8	83.1
Provision for income taxes	5.0	10.3	23.4	25.9
Net Earnings	$11.1	$21.4	$51.5	$57.2

Net Earnings per Common Share:
Basic	$0.99	$1.87	$4.54	$5.00
Diluted	$0.99	$1.85	$4.51	$4.95

Average Number of Common Shares:
Basic	11.2	11.4	11.3	11.4
Diluted	11.3	11.5	11.4	11.6

Cash Dividends per Common Share	$0.43	$0.36	$1.72	$1.44
Notes:
(1) Net realized gains on sales	$2.4	$0.9	$4.1	$4.4
Total other-than-temporary impairment (OTTI) losses	(0.6)	(0.1)	(1.3)	(1.0)
Non-credit portion in other comprehensive income	—	—	—	0.9
OTTI losses reclassified from other comprehensive income	—	—	—	(0.0)
Net impairment losses recognized in earnings	(0.6)	(0.1)	(1.3)	(0.2)
Total net realized gains on investments	$1.8	$0.8	$2.8	$4.3

(2) Losses and loss adjustment expenses for the three and twelve months ended December 31, 2015, includes $5.0
and $28.9 of favorable development on prior accident year loss and loss adjustment expense reserves, respectively. Losses and loss adjustment expenses for the three and twelve months ended December 31, 2014, includes $8.8 and $17.4 of favorable development on prior accident year loss and loss adjustment expense reserves, respectively.

Infinity Property and Casualty Corporation
Balance Sheets
(in millions, except book value per share)

	December 31,	September 30,	December 31,
	2015	2015	2014
	(audited)	(unaudited)	(audited)
Assets:
Investments:
Fixed maturities, at fair value	$1,381.5	$1,415.1	$1,431.8
Equity securities, at fair value	89.9	90.0	94.4
Short-term investments, at fair value	4.7	5.2	0.8
Total investments	1,476.1	1,510.4	1,527.1
Cash and cash equivalents	62.5	70.6	84.5
Accrued investment income	12.2	12.4	13.0
Agents' balances and premium receivable	511.5	537.7	483.6
Property and equipment (net of depreciation)	89.7	79.6	55.9
Prepaid reinsurance premium	5.4	6.2	4.8
Recoverables from reinsurers	15.1	16.0	14.5
Deferred policy acquisition costs	93.2	98.6	90.4
Current and deferred income taxes	33.9	27.3	20.0
Receivable for securities sold	—	2.7	4.5
Other assets	11.9	16.4	11.1
Goodwill	75.3	75.3	75.3
Total assets	$2,386.8	$2,453.0	$2,384.8

Liabilities and Shareholders' Equity:
Liabilities:
Unpaid losses and loss adjustment expenses	$670.0	$679.0	$668.2
Unearned premium	616.6	645.0	589.3
Long-term debt	275.0	275.0	275.0
Commissions payable	17.4	19.0	18.7
Payable for securities purchased	7.3	13.0	17.2
Other liabilities	112.9	124.9	118.9
Total liabilities	1,699.2	1,755.9	1,687.2

Shareholders' Equity:
Common stock	21.8	21.8	21.7
Additional paid-in capital	376.0	374.7	372.4
Retained earnings ⁽¹⁾	757.6	751.3	725.7
Accumulated other comprehensive income, net of tax	7.8	12.3	23.5
Treasury stock, at cost ⁽²⁾	(475.6)	(463.0)	(445.6)
Total shareholders' equity	687.6	697.1	697.7
Total liabilities and shareholders' equity	$2,386.8	$2,453.0	$2,384.8

Shares outstanding	11.2	11.3	11.5
Book value per share	$61.66	$61.71	$60.75


Notes:
(1)	The change in retained earnings from September 30, 2015, is a result of net income of $11.1 less shareholder dividends of $4.8. The change in retained earnings from December 31, 2014, is a result of net income of $51.5 less shareholder dividends of $19.5.
(2)	Infinity repurchased 154,271 common shares during the fourth quarter of 2015 at an average per share price, excluding commissions, of $82.21. Infinity repurchased 361,749 common shares during the twelve months ended December 31, 2015, at an average price, excluding commissions, of $79.32.

Infinity Property and Casualty Corporation
Statements of Cash Flows
(in millions)

	Three months ended December 31,
	2015	2014
	(unaudited)	(unaudited)
Operating Activities:
Net earnings	$11.1	$21.4
Adjustments:
Depreciation	3.2	2.8
Amortization	5.9	5.2
Net realized gains on investments	(1.8)	(0.8)
Loss on disposal of property and equipment	0.0	0.0
Share-based compensation expense	1.3	0.2
Excess tax benefits from share-based payment arrangements	—	0.1
Activity related to rabbi trust	0.0	0.0
Change in accrued investment income	0.1	(0.8)
Change in agents' balances and premium receivable	26.2	24.1
Change in reinsurance receivables	1.7	(0.2)
Change in deferred policy acquisition costs	5.4	4.9
Change in other assets	0.5	2.4
Change in unpaid losses and loss adjustment expenses	(9.1)	(5.0)
Change in unearned premium	(28.4)	(33.0)
Change in other liabilities	(13.6)	(3.1)
Net cash provided by operating activities	2.7	18.3
Investing Activities:
Purchases of fixed maturities	(138.2)	(119.6)
Purchases of equity securities	—	(4.0)
Purchases of short-term investments	—	—
Purchases of property and equipment	(13.3)	(2.6)
Maturities and redemptions of fixed maturities	48.9	43.1
Maturities and redemptions of short-term investments	0.5	—
Proceeds from sale of fixed maturities	104.7	60.6
Proceeds from sale of equity securities	4.0	—
Proceeds from sale of short-term investments	—	—
Proceeds from sale of property and equipment	—	—
Net cash provided by (used in) investing activities	6.6	(22.5)
Financing Activities:
Proceeds from stock options exercised and employee stock purchases	0.1	0.1
Excess tax benefits from share-based payment arrangements	—	(0.1)
Principal payments under capital lease obligations	(0.1)	(0.4)
Acquisition of treasury stock	(12.5)	(1.4)
Dividends paid to shareholders	(4.8)	(4.1)
Net cash used in financing activities	(17.4)	(5.9)
Net decrease in cash and cash equivalents	(8.1)	(10.1)
Cash and cash equivalents at beginning of period	70.6	94.7
Cash and cash equivalents at end of period	$62.5	$84.5

Infinity Property and Casualty Corporation
Statements of Cash Flows
(in millions)

	Twelve months ended December 31,
	2015	2014
	(audited)	(audited)
Operating Activities:
Net earnings	$51.5	$57.2
Adjustments:
Depreciation	12.3	10.8
Amortization	22.2	22.0
Net realized gains on investments	(2.8)	(4.3)
Loss (gain) on disposal of property and equipment	1.2	(0.0)
Share-based compensation expense	3.1	2.6
Excess tax benefits from share-based payment arrangements	(0.3)	(0.1)
Activity related to rabbi trust	(0.0)	0.0
Change in accrued investment income	0.7	(0.2)
Change in agents' balances and premium receivable	(27.9)	(32.3)
Change in reinsurance receivables	(1.1)	(1.7)
Change in deferred policy acquisition costs	(2.7)	(2.2)
Change in other assets	(5.7)	4.3
Change in unpaid losses and loss adjustment expenses	1.8	21.6
Change in unearned premium	27.4	23.3
Change in other liabilities	(7.1)	5.1
Net cash provided by operating activities	72.5	106.0
Investing Activities:
Purchases of fixed maturities	(523.5)	(516.5)
Purchases of equity securities	(7.0)	(6.6)
Purchases of short-term investments	(8.4)	(7.9)
Purchases of property and equipment	(47.3)	(18.6)
Maturities and redemptions of fixed maturities	198.0	167.0
Maturities and redemptions of short-term investments	1.3	2.8
Proceeds from sale of fixed maturities	329.7	238.9
Proceeds from sale of equity securities	8.5	5.0
Proceeds from sale of short-term investments	3.1	6.9
Proceeds from sale of property and equipment	—	0.0
Net cash used in investing activities	(45.6)	(129.1)
Financing Activities:
Proceeds from stock options exercised and employee stock purchases	0.3	0.8
Excess tax benefits from share-based payment arrangements	0.3	0.1
Principal payments under capital lease obligations	(0.5)	(0.8)
Acquisition of treasury stock	(29.5)	(10.1)
Dividends paid to shareholders	(19.5)	(16.6)
Net cash used in financing activities	(48.9)	(26.6)
Net decrease in cash and cash equivalents	(22.1)	(49.7)
Cash and cash equivalents at beginning of period	84.5	134.2
Cash and cash equivalents at end of period	$62.5	$84.5

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 December 31,		Twelve months ended December 31,
(in millions, except EPS)	2015	2014	2015	2014

Earned premium	$335.4	$332.3	$1,346.6	$1,325.9
Losses and loss adjustment expenses	(261.5)	(242.5)	(1,036.0)	(1,001.6)
Commissions and other underwriting expenses	(86.3)	(86.3)	(348.2)	(354.6)
Installment and other fee income	23.6	23.8	96.8	95.2

Underwriting income	11.1	27.2	59.1	65.0

Net investment income	8.9	9.0	36.8	35.6
Other income	0.2	0.2	1.1	0.6
Interest expense	(3.5)	(3.4)	(13.8)	(13.8)
Corporate general and administrative expenses	(2.1)	(1.7)	(7.9)	(7.7)
Other expenses	(0.4)	(0.4)	(3.3)	(0.9)

Pre-tax operating earnings	14.3	30.8	72.0	78.9

Provision for income taxes	(4.4)	(10.0)	(22.4)	(24.4)

Operating earnings, after-tax	9.9	20.8	49.7	54.4

Realized gains on investments, pre-tax	1.8	0.8	2.8	4.3
Provision for income taxes on capital gains	(0.6)	(0.3)	(1.0)	(1.5)
Realized gains on investments, net of tax	1.2	0.5	1.8	2.8

Net earnings	$11.1	$21.4	$51.5	$57.2

Operating earnings per diluted share	$0.88	$1.81	$4.35	$4.71
Realized gains on investments and sale of subsidiary, net of tax	0.11	0.04	0.16	0.24
Net earnings per diluted share	$0.99	$1.85	$4.51	$4.95

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 December 31,		Twelve months ended December 31,
(in millions)	2015	2014	2015	2014

Gross written premium	$310.5	$302.5	$1,387.9	$1,360.9
Ceded reinsurance	(3.6)	(3.3)	(14.6)	(13.3)
Net written premium	307.0	299.1	1,373.3	1,347.6
Change in unearned premium	28.4	33.1	(26.7)	(21.7)
Earned premium	$335.4	$332.3	$1,346.6	$1,325.9

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)	December 31, 2015	December 31, 2014

Tangible capital	$887.3	$897.4
Goodwill	75.3	75.3
Total capital	$962.6	$972.7

Infinity also makes available an investor supplement on its website. To access the supplemental financial information, go to http://ir.infinityauto.com and click on "Annual & Quarterly Reports."

About Infinity

Infinity Property and Casualty Corporation (NASDAQ: IPCC) is a national provider of personal automobile insurance with a concentration on nonstandard auto insurance. Its products are offered through a network of approximately 11,200 independent agencies and brokers. For more information about Infinity, please visit http://www.infinityauto.com.

SOURCE Infinity Property and Casualty Corporation