Infinity Property and Casualty Corporation Announces Litigation Settlement and Adjustment to 2007 Earnings

BIRMINGHAM, Ala., Feb. 11 /PRNewswire-FirstCall/ -- Infinity Property and Casualty Corporation (NASDAQ: IPCC) , a national provider of personal automobile insurance, today announced that it has reached an agreement to settle for $13.0 million a lawsuit brought against one of its insurance company subsidiaries alleging bad faith in the handling of a 1993 Florida personal automobile liability claim.

As a result of this settlement, Infinity will accrue an additional $9.5 million in the fourth quarter of fiscal year 2007. The after-tax impact on earnings per share for the three and twelve months ended December 31, 2007 is $0.37 and $0.33, respectively.

The following amends the press release disclosing results for the three and twelve months ended December 31, 2007 issued on February 7, 2008:

                               Three Months Ended       Twelve Months Ended
                                   December 31,             December 31,
    (in millions, except
     per share amounts                       %                           %
     and ratios)             2007   2006   Change      2007     2006   Change

    Gross written premiums  $221.5 $259.3  (14.6%)  $1,019.0   $986.7    3.3%
    Revenues                $267.1 $263.5    1.3%   $1,098.2 $1,021.3    7.5%
    Net earnings             $18.8  $22.4  (16.2%)     $71.9    $87.3  (17.6%)
    Net earnings per
     diluted share           $1.14  $1.12    1.8%      $3.87    $4.26   (9.2%)

    Operating earnings (1)   $19.1  $20.6   (7.2%)     $75.6    $85.9  (12.0%)
    Operating earnings
      per diluted share (1)  $1.16  $1.03   12.6%      $4.06    $4.19   (3.1%)

    Underwriting income (1)  $18.1  $25.2  (28.5%)     $66.8    $87.4  (23.6%)
    Combined ratio           92.8%  89.6%  3.2 pts     93.5%    90.8%  2.7 pts

    Return on equity         12.7%  13.6%  0.9 pts     11.4%    13.5% (2.1)pts
    Operating income return
     on equity (1)           12.9%  12.4%  0.5 pts     11.9%    13.3% (1.4)pts

    Book value per share                              $37.11   $33.88     9.5%
    Debt to total capital                              24.9%    23.1%  1.8 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 premiums declined 14.6% during the fourth quarter of 2007 as compared with 2006 primarily from a decline in gross premiums in California, Florida and Infinity's Maintenance States, which include states such as South Carolina and Alabama. Partially offsetting premium declines in these states was premium growth in Colorado, Nevada, Tennessee and Texas.

Earnings and underwriting income for the three months ended December 31, 2007 included $0.9 million, pre-tax, ($0.04 per diluted share after-tax) of favorable development on prior accident period loss and loss adjustment expense reserves compared with $6.7 million, pre-tax ($0.22 per diluted share after-tax) of favorable development during the three months ended December 31, 2006.

Earnings and underwriting income for the year ended December 31, 2007 included $13.5 million, pre-tax, ($0.47 per diluted share after-tax) of favorable development on prior accident period loss and loss adjustment expense reserves compared with $31.2 million, pre-tax ($0.99 per diluted share after-tax) of favorable development for the year ended December 31, 2006.

2008 Earnings Guidance

Infinity's initial guidance for 2008, based on fully diluted operating earnings, is $3.25 - $3.65. Included in this guidance is a charge of $0.02, the estimated cost to sublease the remaining vacated space related to the consolidation of back office operations.

Share Repurchase Program

Under the $100 million share repurchase program announced in October 2006, Infinity repurchased 200,000 common shares during the fourth quarter of 2007 at an average per share price, excluding commissions, of $38.60. Infinity has approximately $55.5 million of capacity left under this repurchase program, which expires December 31, 2008.

Forward-Looking Statements

This press release contains certain statements that may be deemed to be "forward-looking statements" that anticipate results based on our 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 that include the words "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. Examples of such forward-looking statements include statements relating to expectations concerning market conditions, premiums, growth, earnings, investment performance, expected losses, rate changes and loss experience.

Actual results could differ materially from those expected by Infinity depending on: changes in economic conditions and financial markets (including interest rates), the adequacy or accuracy of Infinity's pricing methodologies, actions of competitors, the approval of requested form and rate changes, judicial and regulatory developments affecting the automobile insurance industry, the outcome of pending litigation against Infinity, weather conditions (including the severity and frequency of storms, hurricanes, snowfalls, hail and winter conditions), changes in driving patterns and loss trends. 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.

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


                                          For the Three      For the Twelve
                                          Months Ended        Months Ended
                                           December 31,        December 31,
                                          2007     2006      2007      2006
    Revenues:
      Earned premiums                   $250.3   $242.6   $1,031.6    $948.7
      Net investment income               16.2     16.9       67.4      68.4
      Realized gains on investments       (0.1)     3.7       (3.1)      2.0
      Other income                         0.7      0.2        2.4       2.3
         Total revenues                  267.1    263.5    1,098.2   1,021.3

    Costs and Expenses:
      Loss and loss adjustment
       expenses (1)                      178.9    163.0      727.3     635.1
      Commissions and other
       underwriting expenses              53.3     54.4      237.5     226.1
      Interest expense                     2.8      2.8       11.1      11.1
      Corporate general and
       administrative expenses             1.7      1.6        7.8       7.1
      Restructuring charge                 0.6      4.8        1.7       4.8
      Other expenses                       2.5      2.1        4.2       5.7
         Total costs and expenses        239.8    228.7      989.5     889.9

    Earnings before income taxes          27.3     34.8      108.7     131.4
    Provision for income taxes             8.4     12.4       36.8      44.1
    Net earnings                         $18.8    $22.4      $71.9     $87.3

    Earnings per common share:
    Basic                                $1.16    $1.13      $3.91     $4.30
    Diluted                              $1.14    $1.12      $3.87     $4.26

    Average number of common shares:
    Basic                               16.248   19.771     18.390    20.303
    Diluted                             16.464   19.953     18.605    20.475

    Cash dividends per common share     $0.090   $0.075     $0.360    $0.300

        Note:  Columns may not foot due to rounding

    Notes:
    (1)  Loss and loss adjustment expenses for the three and twelve months
         ended December 31, 2007, include $0.9 million and $13.5 million of
         favorable development on prior accident period loss and loss
         adjustment expense reserves, respectively.

         Loss and loss adjustment expense for the three and twelve months
         ended December 31, 2006, include $6.7 million and $31.2 million of
         favorable development on prior accident period loss and loss
         adjustment expense reserves, respectively.



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


                                                    For the Period Ended
                                                 December 31,    September 30,
                                                     2007            2007
    Assets:
      Investments:
        Fixed maturities, at fair value             $1,226.8         $1,171.9
        Equity securities, at fair value                49.7             51.6
              Total investments                      1,276.5          1,223.5
      Cash and cash equivalents                         46.8             79.3
      Accrued investment income                         13.4             12.2
      Agents' balances and premiums receivable         334.0            357.7
      Prepaid reinsurance premiums                       1.8              2.1
      Recoverables from reinsurers                      29.5             29.2
      Deferred policy acquisition costs                 75.8             81.0
      Current and deferred income taxes                 31.8             36.9
      Prepaid expenses, deferred charges
       and other assets                                 31.7             28.8
      Goodwill                                          75.3             75.3
            Total assets                            $1,916.6         $1,926.1

    Liabilities and Shareholders' Equity:
    Liabilities:
      Unpaid losses and loss adjustment expenses      $618.4           $610.6
      Unearned premiums                                411.2            441.4
      Payable to reinsurers                              0.2              0.3
      Long-term debt                                   199.5            199.5
      Commissions payable                               26.9             29.4
      Accounts payable, accrued expenses
       and other liabilities                            59.1             61.5
             Total liabilities                       1,315.4          1,342.6

    Shareholders' Equity:
      Common stock                                      20.9             20.9
      Additional paid-in capital                       340.2            338.4
      Retained earnings (1)                            426.6            409.3
      Other comprehensive income                         8.4              2.2
      Treasury stock, at cost (2)                     (194.9)          (187.2)
               Total shareholders' equity              601.2            583.5
               Total liabilities and
                shareholders' equity                $1,916.6         $1,926.1

    Shares outstanding                                16.200           16.351
    Book value per share                              $37.11           $35.69

        Note:  Columns may not foot due to rounding

    Notes:
    (1)  The change in retained earnings from September 2007 is a result of
         net income of $18.8 million less shareholder dividends of $1.5
         million.

    (2)  Infinity repurchased 200,000 shares at an average price per share,
         excluding commissions, of $38.60 during the fourth quarter of 2007.

Definitions of Non-GAAP Financial and Operating Measures

Operating earnings are defined as net income, before realized gains and losses and the cumulative effect of a change in accounting principle, after tax. Infinity reports this non-GAAP measure because realized gains and losses 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 loss and loss adjustment expenses and underwriting expenses from premiums earned. Infinity reports this non-GAAP measure to show profitability before inclusion of investment income or 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, both non-GAAP measures, to net earnings:

                                          For the Three       For the Twelve
                                          Months Ended        Months Ended
                                           December 31,        December 31,

    (in millions, except EPS)             2007     2006        2007      2006

    Earned premiums                     $250.3   $242.6    $1,031.6    $948.7
    Loss and loss adjustment
     expenses                           (178.9)  (163.0)     (727.3)   (635.1)
    Commissions and other
     underwriting expenses               (53.3)   (54.4)     (237.5)   (226.1)

    Underwriting income                   18.1     25.2        66.8     87.4

    Net investment income                 16.2     16.9        67.4     68.4
    Other income                           0.7      0.2         2.4      2.3
    Interest expense                      (2.8)    (2.8)      (11.1)   (11.1)
    Corporate general and
     administrative expenses              (1.7)    (1.6)       (7.8)    (7.1)
    Restructuring charge                  (0.6)    (4.8)       (1.7)    (4.8)
    Other expenses                        (2.5)    (2.1)       (4.2)    (5.7)

    Pre-tax operating earnings            27.3     31.1       111.8    129.5

       Provision for income taxes         (8.3)   (10.5)      (36.2)   (43.6)

    Operating earnings, after-tax         19.1     20.6        75.6     85.9

       Realized gains (losses) on
        investments, pre-tax              (0.1)     3.7        (3.1)     2.0
       Provision for income taxes          0.0     (1.3)        1.1     (0.7)
       Utilization of capital loss
        carry-forward                        -      2.5           -      3.1
       Increase in provision for tax
        valuation allowance               (0.2)    (3.0)       (1.6)    (3.0)
             Realized gains on
              investments, net of tax     (0.3)     1.9        (3.6)     1.4

    Net earnings                         $18.8    $22.4       $71.9    $87.3

    Operating earnings per share -
     diluted                             $1.16    $1.03       $4.06    $4.19
    Realized gains (losses) on
     investments, net of tax             (0.01)    0.12       (0.10)    0.07
    Utilization of capital loss
     carry-forward                           -     0.12           -     0.15
    Increase in provision for tax
     valuation allowance                 (0.01)   (0.15)      (0.09)   (0.15)
    Net earnings per share - diluted     $1.14    $1.12       $3.87    $4.26


        Note: Columns may not foot due to rounding

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