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Infinity Property and Casualty Reports 16.8% Return on Equity with Strong Underwriting Results
BIRMINGHAM, Ala. Feb. 7 /PRNewswire-FirstCall/ -- 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, 2007:
(in millions, except Three Months Ended Twelve Months Ended
per share amounts December 31, December 31,
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 $25.0 $22.4 11.2% $78.1 $87.3 (10.5%)
Net earnings per
diluted share $1.52 $1.12 35.7% $4.20 $4.26 (1.4%)
Operating earnings
(1) $25.2 $20.6 22.7% $81.7 $85.9 (4.8%)
Operating earnings
per diluted share
(1) $1.53 $1.03 48.5% $4.39 $4.19 4.8%
Underwriting income
(1) $27.5 $25.2 9.0% $76.3 $87.4 (12.8%)
Combined ratio 89.0% 89.6% (0.6) pts 92.6% 90.8% 1.8 pts
Return on equity 16.8% 13.6% 3.2 pts 12.3% 13.5% (1.2) pts
Operating income
return on equity
(1) 16.9% 12.4% 4.5 pts 12.8% 13.3% (0.5) pts
Book value per
share $37.49 $33.88 10.7%
Debt to total
capital 24.7% 23.1% 1.6 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 $10.4 million, pre-tax, ($0.41 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 $22.9 million, pre-tax, ($0.80 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. Conference Call The Company will hold a conference call to discuss 2007 fourth quarter results at 11:00 a.m. (ET) today, February 7. There are two alternative communication modes available to listen to the call. Telephone access will be available by dialing 1-888-713-4214 and providing the confirmation code 93421225. Please dial 5 to 10 minutes prior to the scheduled start time. A replay of the call will also be available one hour following the completion of the call, at around 1:00 p.m. (ET), and will run until 8:00 p.m. on Thursday, February 14, 2008. To listen to the replay, dial 1-888-286-8010 and provide the confirmation code 73310718. 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.ipacc.com, click on Investor Relations and follow the instructions at the webcast link. The archived webcast will be available on Infinity's website approximately one hour following the completion of the call and will be available for one year.
Infinity Property and Casualty Corporation
Statement of Earnings
(in millions, except EPS)
For the For the
Three Months Twelve Months
Ended December 31, Ended 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) 169.4 163.0 717.8 635.1
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 230.4 228.7 980.1 889.9
Earnings before income taxes 36.7 34.8 118.2 131.4
Provision for income taxes 11.8 12.4 40.1 44.1
Net earnings $25.0 $22.4 $78.1 $87.3
Earnings per common share:
Basic $1.54 $1.13 $4.25 $4.30
Diluted $1.52 $1.12 $4.20 $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 $10.4 million and $22.9 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 28.5 36.9
Prepaid expenses, deferred charges and
other assets 31.7 28.8
Goodwill 75.3 75.3
Total assets $1,913.3 $1,926.1
Liabilities and Shareholders' Equity:
Liabilities:
Unpaid losses and loss adjustment
expenses $608.9 $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 1,305.9 1,342.6
Shareholders' Equity:
Common stock 20.9 20.9
Additional paid-in capital 340.2 338.4
Retained earnings (1) 432.8 409.3
Other comprehensive income 8.4 2.2
Treasury stock, at cost (2) (194.9) (187.2)
Total shareholders' equity 607.4 583.5
Total liabilities and
shareholders' equity $1,913.3 $1,926.1
Shares outstanding 16.200 16.351
Book value per share $37.49 $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 $25.0 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 Months For the Twelve Months
Ended December 31, Ended 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 (169.4) (163.0) (717.8) (635.1)
Commissions and other
underwriting expenses (53.3) (54.4) (237.5) (226.1)
Underwriting income 27.5 25.2 76.3 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 36.8 31.1 121.2 129.5
Provision for income taxes (11.6) (10.5) (39.5) (43.6)
Operating earnings, after-tax 25.2 20.6 81.7 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 $25.0 $22.4 $78.1 $87.3
Operating earnings per share -
diluted $1.53 $1.03 $4.39 $4.19
Realized gains (losses) on
investments, net of tax - 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 $1.52 $1.12 $4.20 $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." Website: http://www.ipacc.com// |
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