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Press release from PR Newswire

Infinity Property and Casualty Reports 9.2% Gross Written Premium Growth for the Fourth Quarter of 2012

Tuesday, February 26, 2013

Infinity Property and Casualty Reports 9.2% Gross Written Premium Growth for the Fourth Quarter of 201208:00 EST Tuesday, February 26, 2013BIRMINGHAM, Ala., Feb. 26, 2013 /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, 2012:Three months ended December 31,Twelve months ended December 31,(in millions, except per share amounts and ratios)20122011Change20122011Change(as adjusted)(1)(as adjusted)(1)Gross written premium (2)$293.7$268.89.2%$1,254.9$1,082.515.9%Revenues$342.5$290.018.1%$1,249.6$1,072.616.5%Net earnings$7.9$18.0(56.1%)$24.3$41.8(41.9%)Net earnings per diluted share$0.67$1.49(55.0%)$2.04$3.37(39.6%)Operating earnings (2)$(3.6)$12.4(129.3%)$9.3$30.0(69.0%)Operating earnings per diluted share (2)$(0.31)$1.02(130.4%)$0.78$2.42(67.8%)Underwriting income (2)$(10.4)$13.0(180.5%)$(8.0)$19.9(140.4%)Combined ratio103.4%95.3%8.1 pts100.7%98.0%2.6 ptsReturn on equity4.8%11.1%(6.3) pts3.7%6.4%(2.7) ptsOperating earnings return on equity (2)(2.2)%7.6%(9.8) pts1.4%4.6%(3.2) ptsBook value per share$56.55$56.050.9%Debt to total capital29.5%22.7%6.8 ptsDebt to tangible capital (2)32.1%24.9%7.2 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.Gross written premium grew 9.2% during the fourth quarter of 2012 compared with the same period in 2011 primarily due to growth in California (5.8%) and Florida (46.1%).  Net and operating earnings declined in the fourth quarter of 2012 compared with the same period in 2011 primarily as a result of a deterioration in the accident year combined ratio, which excludes development from prior accident year loss and loss adjustment expense ("LAE") reserves, from 97.6% in 2011 to 99.3% in 2012. Also contributing to the decline was unfavorable development on prior accident year loss and LAE reserves recognized in the fourth quarter of 2012 of $9.1 million, pre-tax ($0.50 per diluted share after-tax) compared with $0.3 million, pre-tax ($0.02 per diluted share after-tax) of favorable development recognized during the fourth quarter of 2011.  Unfavorable development on prior accident year loss and LAE reserves recognized during the twelve months ended December 31, 2012 was $16.2 million, pre-tax ($0.88 per diluted share after-tax), compared with unfavorable development of $4.5 million, pre-tax ($0.24 per diluted share after-tax) for the twelve months ended December 31, 2011.  The unfavorable development during 2012 primarily relates to accident year 2011 and resulted from increases in average claim severity on both personal injury protection coverage in Florida and bodily injury coverage in California.2013 Earnings GuidanceInfinity expects operating results to improve in 2013 as a result of rate increases in 2012 and planned reductions in unprofitable business in 2013.  As a result, the company's initial guidance for 2013, based on fully diluted operating earnings, is $2.90 to $3.40.  The guidance assumes gross premium growth between 4.0% and 6.0% as compared with the prior year, and an accident year combined ratio, which excludes development on prior accident period loss and loss adjustment expense reserves, between 96.5% and 97.5%.Share and Debt Repurchase ProgramDuring the fourth quarter of 2012, Infinity repurchased 134,316 shares at an average price, excluding commissions, of $54.44.  Infinity has $54.5 million of capacity left under its share and debt repurchase program, which expires December 31, 2014.Forward-Looking StatementsThis press release, notably "2013 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), bodily injury loss cost trends, undesired business mix or risk profile for new business 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 CallInfinity will conduct a conference call and webcast to discuss fourth quarter 2012 results at 11:00 a.m. (ET) today, February 26, 2013. 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 1-888-317-6016. 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)Three months ended December 31,Twelve months ended December 31,2012201120122011(unaudited)(unaudited)(audited)(audited)(as adjusted)(as adjusted)Revenues:    Earned premium$311.4$273.4$1,184.1$1,019.1    Net investment income9.29.437.640.6    Net realized gains on investments(1)21.43.024.18.6Gain on sale of subsidiaries0.04.12.94.1    Other income0.60.11.00.3Total revenues342.5290.01,249.61,072.6Costs and Expenses:    Losses and loss adjustment expenses (2)258.3200.9942.3767.6Commissions and other underwriting expenses63.559.4249.9231.6    Interest expense4.32.712.910.8Corporate general and administrative expenses1.62.07.47.7Loss on redemption of long-term debt13.60.013.60.0    Other expenses0.6(0.1)1.51.3Total costs and expenses341.9265.01,227.51,019.0Earnings before income taxes0.725.022.153.6Provision for income taxes(7.3)7.0(2.2)11.8Net Earnings$7.9$18.0$24.3$41.8Net Earnings per Common Share:Basic$0.68$1.53$2.09$3.45Diluted$0.67$1.49$2.04$3.37Average Number of Common Shares:Basic11.611.811.712.1Diluted11.812.111.912.4Cash Dividends per Common Share$0.225$0.18$0.90$0.72Notes:(1) Net realized gains before impairment losses$21.5$3.2$25.4$10.0Total other-than-temporary impairment ("OTTI") losses(0.2)(0.2)(1.4)(2.3)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(0.1)(0.2)(1.4)(1.4)Total net realized gains on investments$21.4$3.0$24.1$8.6(2) Losses and loss adjustment expenses for the three months ended December 31, 2012 include $9.1 million of unfavorable development on prior accident year loss and loss adjustment expense reserves while the twelve months ended December 31, 2012 include $16.2 million of unfavorable development.  Losses and loss adjustment expenses for the three months ended December 31, 2011 include $0.3 million of favorable development on prior accident year loss and loss adjustment expense reserves while the twelve months ended December 31, 2011 include $4.5 million of unfavorable development.  Columns may not foot due to rounding. Infinity Property and Casualty CorporationBalance Sheets(in millions, except book value per share)December 31,September 30,December 31,201220122011(audited)(unaudited)(audited)Assets:(as adjusted)Investments:Fixed maturities, at fair value$1,321.8$1,251.9$1,188.0Equity securities, at fair value73.142.436.9Total investments1,394.91,294.31,224.9Cash and cash equivalents165.2126.683.8Restricted cash0.0209.90.0Accrued investment income11.910.810.8Agents' balances and premium receivable427.2445.3382.6Property and equipment (net of depreciation)39.340.738.7Prepaid reinsurance premium2.62.72.1Recoverables from reinsurers14.415.314.7Deferred policy acquisition costs88.392.580.1Current and deferred income taxes25.88.810.7Receivable for securities sold48.50.01.2Other assets10.220.05.5Goodwill75.375.375.3Total assets$2,303.6$2,342.2$1,930.4Liabilities and Shareholders' Equity:Liabilities:Unpaid losses and loss adjustment expenses$572.9$544.3$495.4Unearned premium538.1557.7474.5Payable to reinsurers0.10.00.0Long-term debt275.0469.9194.8Commissions payable18.132.630.6Payable for securities purchased132.44.610.8Other liabilities110.758.562.4Total liabilities1,647.41,667.61,268.6Shareholders' Equity:Common stock21.521.521.4Additional paid-in capital361.8359.9355.9Retained earnings (1)666.2660.9652.4Accumulated other comprehensive income, net of tax29.947.135.3Treasury stock, at cost  (2)(423.2)(414.7)(403.2)Total shareholders' equity656.2674.6661.8Total liabilities and shareholders' equity$2,303.6$2,342.2$1,930.4Shares outstanding11.611.711.8Book value per share$56.55$57.71$56.05Notes:(1)     The change in retained earnings from September 30, 2012 is a result of net income of $7.9 million less shareholder dividends of $2.6 million.  The change in retained earnings from December 31, 2011 is a result of net income of $24.3 million less shareholder dividends of $10.5 million.  (2)     Infinity repurchased 134,316 common shares during the fourth quarter of 2012 at an average per share price, excluding commissions, of $54.44.  Infinity repurchased 318,667 common shares during the twelve months ended December 31, 2012 at an average price, excluding commissions, of $54.93.  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 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)2012201120122011(as adjusted)(as adjusted)Earned premium$311.4$273.4$1,184.1$1,019.1Losses and loss adjustment expenses(258.3)(200.9)(942.3)(767.6)Commissions and other underwriting expenses(63.5)(59.4)(249.9)(231.6)Underwriting income(10.4)13.0(8.0)19.9Net investment income9.29.437.640.6Other income0.60.11.00.3Interest expense(4.3)(2.7)(12.9)(10.8)Corporate general and administrative expenses(1.6)(2.0)(7.4)(7.7)Other expenses(0.6)0.1(1.5)(1.3)Pre-tax operating earnings(7.1)17.98.740.9   Provision for income taxes3.5(5.5)0.6(10.8)Operating earnings, after-tax(3.6)12.49.330.0Realized gains on investments, pre-tax21.43.024.18.6Gain on sale of subsidiaries0.04.12.94.1Loss on redemption of debt(13.6)0.0(13.6)0.0Provision for income taxes(2.8)(2.5)(4.8)(4.5)Decrease in provision for tax valuation allowance6.51.16.43.5Adjustments, net of tax11.55.715.011.8Net earnings$7.9$18.0$24.3$41.8Operating earnings per diluted share(0.31)1.020.782.42Realized gains on investments, net of tax1.180.381.460.67Loss on redemption of debt, net of tax(0.75)0.00(0.74)0.00Decrease in provision for tax valuation allowance0.550.090.540.28Net earnings per diluted share$0.67$1.49$2.04$3.37Note: 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 December 31,Twelve months ended December 31,(in millions)2012201120122011Gross written premium$293.7$268.8$1,254.9$1,082.5Ceded reinsurance(2.0)(1.7)(7.7)(6.5)Net written premium291.7267.21,247.21,076.0Change in unearned premium19.76.2(63.1)(56.9)Earned premium$311.4$273.4$1,184.1$1,019.1Note: 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)December 31,2012December 31, 2011Tangible capital$856.0$781.3Goodwill75.375.3Total capital$931.2$856.6Note: 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 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