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Press release from PR Newswire

Infinity Property and Casualty Reports 19.9% Gross Written Premium Growth for the Third Quarter of 2012

Thursday, November 08, 2012

Infinity Property and Casualty Reports 19.9% Gross Written Premium Growth for the Third Quarter of 201208:00 EST Thursday, November 08, 2012BIRMINGHAM, Ala., Nov. 8, 2012 /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, 2012:Three months ended September 30,Nine months ended September 30,(in millions, except per share amounts and ratios)20122011Change20122011Change(as adjusted)(1)(as adjusted)(1)Gross written premium (2)$325.0$271.119.9%$961.2$813.618.1%Revenues$313.7$266.117.9%$907.1$782.615.9%Net earnings$5.2$6.7(23.4%)$16.4$23.8(31.1%)Net earnings per diluted share$0.43$0.55(21.8%)$1.37$1.90(27.9%)Operating earnings (2)$3.2$5.7(44.9%)$12.9$17.7(26.9%)Operating earnings per diluted share (2)$0.27$0.47(42.6%)$1.08$1.41(23.4%)Underwriting income (2)$(0.2)$2.7(105.7%)$2.4$6.9(64.8%)Combined ratio100.0%99.0%1.0 pts99.7%99.1%0.6 ptsReturn on equity (3)3.1%4.1%(1.0) pts3.3%4.9%(1.6) ptsOperating earnings return on equity (2) (3)1.9%3.5%(1.6) pts2.6%3.6%(1.0) ptsBook value per share$57.71$54.236.4%Debt to total capital41.1%23.2%17.8 ptsDebt to tangible capital (2)43.9%25.5%18.4 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)AnnualizedGross written premium grew 19.9% during the third quarter of 2012 compared with the same period in 2011, with growth in four of the seven Focus States.  California, Infinity's largest state, grew 5.7% in the third quarter of 2012 compared with the same period in 2011.Operating earnings declined in the third quarter of 2012 compared with the third quarter of 2011 primarily as a result of unfavorable development on prior accident year loss and loss adjustment expense ("LAE") reserves recognized in the third quarter of 2012 of $5.3 million, pre-tax ($0.29 per diluted share after-tax) and  unfavorable development on loss and LAE reserves from the first six months of 2012 of $2.9 million, pre-tax ($0.16 per diluted share after-tax) compared with unfavorable development on prior accident year loss and LAE reserves of  $4.8 million, pre-tax ($0.25 per diluted share after-tax) and favorable development on loss and LAE reserves from the first six months of 2011 of $3.5 million, pre-tax ($0.18 per diluted share after-tax) recognized during the third quarter of 2011.  Operating earnings declined in the first nine months of 2012 compared with the same period of 2011 as a result of unfavorable development on prior accident year loss and LAE reserves and a decline in investment income. Unfavorable development on prior accident year loss and LAE reserves recognized during the first nine months of 2012 was $7.1 million, pre-tax ($0.39 per diluted share after-tax), compared with unfavorable development of $4.8 million, pre-tax ($0.25 per diluted share after-tax) for the first nine months of 2011. The unfavorable development during the first nine months of 2012 primarily relates to accident year 2011 and resulted primarily from increases in severities on both PIP in Florida and bodily injury coverage in California.Investment income declined $2.8 million, or 8.8%, in the first nine months of 2012 compared with the same period of 2011 as a result of low and declining market interest rates.2012 Earnings GuidanceInfinity is revising its earnings guidance to $0.90 - $1.40.  The operating earnings guidance reflects the $13.6 million, pre-tax ($0.74 per diluted share after-tax) charge Infinity will incur during the fourth quarter of 2012 related to the early redemption of its 2014 bonds.   The guidance assumes gross written premium growth between 14.0% - 17.0% 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 98.0% and 99.0%.  The prior guidance assumed gross written premium growth between 10.0% and 12.5% with an accident year combined ratio between 97.5% and 98.5%.  Share and Debt Repurchase ProgramDuring the third quarter of 2012, Infinity repurchased 47,044 shares at an average price, excluding commissions, of $57.08.  On November 6, 2012, Infinity's Board of Directors increased the authority under its current share and debt repurchase plan by $25.0 million to approximately $60.4 million and extended the date to execute the program to December 31, 2014.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 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 CallInfinity will conduct a conference call and webcast to discuss third quarter 2012 results at 11:00 a.m. (ET) today, November 8, 2012.  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 1-877-317-6789.  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 CorporationStatements of Earnings(in millions, except EPS and dividends)   (unaudited)Three months ended September 30,Nine months ended September 30,2012201120122011(as adjusted)(as adjusted)Revenues:  Earned premium301.5255.1872.7745.7  Net investment income9.010.228.431.1  Net realized gains on investments(1)0.30.72.75.6  Net realized gain on sale of subsidiary2.90.02.90.0  Other income0.10.10.40.2Total revenues313.7266.1907.1782.6Costs and Expenses:  Losses and loss adjustment expenses (2)238.3195.3683.9566.7  Commissions and other underwriting expenses63.457.2186.4172.1  Interest expense3.22.78.68.1  Corporate general and administrative expenses1.71.75.85.7  Other expenses0.61.00.91.4Total costs and expenses307.1257.9885.7754.0Earnings before income taxes6.68.221.428.6Provision for income taxes1.41.55.04.8Net Earnings5.26.716.423.8Net Earnings per Common Share:Basic0.440.561.401.95Diluted0.430.551.371.90Average Number of Common Shares:Basic11.612.111.712.2Diluted11.912.312.012.5Cash Dividends per Common Share0.2250.1800.6750.540Notes:(1) Net realized gains before impairment losses0.51.13.96.9Total other-than-temporary impairment ("OTTI") losses(0.2)(0.4)(1.2)(2.1)Non-credit portion in other comprehensive income0.00.00.01.0OTTI losses reclassified from other comprehensive income0.00.00.0(0.2)Net impairment losses recognized in earnings(0.2)(0.4)(1.3)(1.3)Total net realized gains on investments0.30.72.75.6(2)Losses and loss adjustment expenses for the three and nine months ended September 30, 2012 include $5.3 million and $7.1 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, 2011 include $4.8 million and $4.8 million of unfavorable development on prior accident year loss and loss adjustment expense reserves, respectively.  Columns may not foot due to rounding. Infinity Property and Casualty CorporationBalance Sheets(in millions, except book value per share)(unaudited)September 30, 2012June 30, 2012December 31, 2011(as adjusted)Assets:Investments:Fixed maturities, at fair value$1,251.9$1,238.2$1,188.0Equity securities, at fair value42.440.136.9Total investments1,294.31,278.31,224.9Cash and cash equivalents126.669.383.8Restricted cash209.90.00.0Accrued investment income10.810.910.8Agents' balances and premium receivable445.3427.1382.6Property and equipment (net of depreciation)40.742.238.7Prepaid reinsurance premium2.72.52.1Recoverable from reinsurers15.314.314.7Deferred policy acquisition costs92.590.080.1Current and deferred income taxes8.89.910.7Receivable for securities sold0.00.01.2Other assets20.09.05.5Goodwill75.375.375.3Total assets$2,342.2$2,028.8$1,930.4Liabilities and Shareholders' Equity:Liabilities:Unpaid losses and loss adjustment expenses$544.3$530.9$495.4Unearned premium557.7536.1474.5Payable to reinsurers0.00.00.0Long-term debt469.9194.9194.8Commissions payable32.630.430.6Payable for securities purchased4.67.710.8Other liabilities58.561.862.4Total liabilities1,667.61,361.61,268.6Shareholders' Equity:Common stock21.521.421.4Additional paid-in capital359.9358.8355.9Retained earnings (1)660.9658.4652.4Accumulated other comprehensive income, net of tax47.140.335.3Treasury stock, at cost  (2)(414.7)(411.8)(403.2)Total shareholders' equity674.6667.2661.8Total liabilities and shareholders' equity$2,342.2$2,028.8$1,930.4Shares outstanding11.711.711.8Book value per share$57.71$56.92$56.05Notes: (1)The change in retained earnings from June 30, 2012 is a result of net income of $5.2 million less shareholder dividends of $2.6 million.  The change in retained earnings from December 31, 2011 is a result of net income of $16.4 million less shareholder dividends of $7.9 million.  (2)Infinity repurchased 47,044 common shares during the third quarter of 2012 at an average per share price, excluding commissions, of $57.08.  Infinity repurchased 184,351 common shares during the first nine months of 2012 at an average per share price, excluding commissions, of $55.28.Columns may not foot due to rounding.Definitions of Non-GAAP Financial and Operating MeasuresOperating earnings are defined as net earnings, before realized gains and losses on investments and sale of subsidiary 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 30,2012201120122011(in millions, except EPS)(as adjusted)(as adjusted)Earned premium301.5255.1872.7745.7Losses and loss adjustment expenses(238.3)(195.3)(683.9)(566.7)Commissions and other underwriting expenses(63.4)(57.2)(186.4)(172.1)Underwriting income(0.2)2.72.46.9Net investment income9.010.228.431.1Other income0.10.10.40.2Interest expense(3.2)(2.7)(8.6)(8.1)Corporate general and administrative expenses(1.7)(1.7)(5.8)(5.7)Other expenses(0.6)(1.0)(0.9)(1.4)Pre-tax operating earnings3.47.515.823.0   Provision for income taxes(0.2)(1.7)(2.9)(5.3)Operating earnings, after-tax3.25.712.917.7Realized gains on investments, pre-tax0.30.72.75.6Realized gain on sale of subsidiary, pre-tax2.90.02.90.0Provision for income taxes(1.2)(0.3)(2.0)(2.0)Decrease (increase) in provision for tax valuation allowance0.00.5(0.1)2.5Realized gains on investments, net of tax2.01.03.56.1Net earnings5.26.716.423.8Operating earnings per diluted share0.270.471.081.41Realized gains on investments and sale of subsidiary, net of tax0.160.040.300.29Decrease (increase) in provision for tax valuation allowance0.000.04(0.01)0.20Net earnings per diluted share0.430.551.371.90Note: Columns may not foot due to roundingGross 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)2012201120122011Gross written premium325.0271.1961.2813.6Ceded reinsurance(2.0)(1.6)(5.7)(4.8)Net written premium323.0269.6955.5808.8Change in unearned premium(21.5)(14.4)(82.8)(63.1)Earned premium$301.5255.1872.7745.7 Note: Columns may not foot due to roundingTangible 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, 2012September 30, 2011Tangible capital1,069.2763.7Goodwill75.375.3Total capital1,144.5839.0Note: Columns may not foot due to roundingInfinity 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."  SOURCE Infinity Property and Casualty CorporationFor further information: Elise Billings, Investor Relations, +1-205-803-8991, elise.billings@ipacc.com