Infinity Property and Casualty Reports 14.1% Increase in Book Value and 19.9% Increase in Operating Earnings
BIRMINGHAM, Ala., Feb. 9, 2006 -- Infinity Property and Casualty Corporation , a national provider of personal automobile insurance with an emphasis on nonstandard auto insurance, today reported for the fourth quarter of 2005:
Three Months Ended Twelve Months Ended
December 31, December 31,
(in millions,
except per share % %
amounts and ratios) 2005 2004 Change 2005 2004 Change
Gross written
premiums $221.5 $233.0 (4.9%) $988.7 $940.2 5.2%
Revenues $256.3 $242.7 5.6% $1,053.3 $951.8 10.7%
Net earnings $32.0 $31.7 0.9% $106.3 $96.4 10.3%
Net earnings per
diluted share $1.53 $1.52 0.7% $5.09 $4.62 10.2%
Operating
earnings (1) $31.5 $26.3 19.9% $84.4 $87.2 (3.1%)
Operating earnings
per diluted
share (1) $1.51 $1.26 19.8% $4.04 $4.18 (3.3%)
Underwriting
income (1) $43.3 $29.2 48.1% $109.6 $94.7 15.8%
Combined ratio 81.9% 86.9% (5.0) pts 88.6% 89.1% (0.5) pts
Book value per
share $30.34 $26.60 14.1% $30.34 $26.60 14.1%
Return on equity 21.0% 23.8% (2.8) pts 18.1% 19.2% (1.1) pts
Operating income
return on equity (1) 20.7% 19.7% 1.0 pts 14.4% 17.4% (3.0) pts
Debt to total capital 24.1% 26.7% (2.6) pts 24.1% 26.7% (2.6) 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.
In Infinity's 17 focus states, personal auto gross written premiums increased 8.0% for the twelve months ended December 31, 2005, but declined 4.5% in the fourth quarter of 2005. Personal auto policies-in-force in the 17 focus states increased 5.7% since December 31, 2004. Personal auto premiums in California, Infinity's largest state, were up 2.0% and 5.6% compared to the fourth quarter and twelve months ended December 31, 2004. Personal auto policy counts in California were up 3.1% compared to that at year-end 2004.
Revenues for the three months and twelve months ended December 31, 2005, increased primarily due to an increase in earned premiums of 7.2% and 10.2%, respectively. Realized gains from sales of securities of $22.3 million also contributed to revenue growth for the twelve months ended December 31, 2005.
2006 Earnings Guidance
Infinity's initial guidance for 2006, based on fully diluted operating earnings, is $3.20 - $3.60.
Forward-Looking Statements
This press release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in this press release not dealing with historical results are forward-looking and are based on estimates, assumptions and projections. Statements which include the words "believes," "expects," "may," "should," "intends," "plans," "anticipates," "estimates," or the negative version of these 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 Infinity's expectations concerning market conditions, premium growth, earnings, investment performance, expected losses, rate changes and loss experience.
Actual results could differ materially from those expected by Infinity depending on certain risks and uncertainties including but not limited to changes in economic conditions and financial markets (including interest rates), the adequacy or accuracy of Infinity's pricing methodologies, the actions of our competitors, the time to receive approval for the rollout of new programs and requested 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) and changes in driving patterns and loss trends. Infinity undertakes no obligation to publicly update or revise any of the forward-looking statements. For more detailed discussion of some of the foregoing risks and uncertainties, see Infinity's filings with the Securities and Exchange Commission.
Conference Call
The Company will hold a conference call to discuss 2005 fourth quarter results at 11:00 a.m. (ET) today, February 9. There are two alternative communication modes available to listen to the call. Telephone access will be available by dialing 1-866-578-5771 and providing the confirmation code 73542119. 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 12:00 p.m. (ET), and will run until 8:00 p.m. on Thursday, February 16, 2006. To listen to the replay, dial 1-888-286-8010 and provide the confirmation code 70024452. 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 Three Months For the Twelve Months
Ended December 31, Ended December 31,
2005 2004 2005 2004
Revenues:
Earned premiums $238.8 $222.7 $961.5 $872.3
Net investment income 16.6 16.5 65.5 65.7
Realized gains (1) 0.0 1.0 22.3 6.9
Other income (2) 0.9 2.5 4.0 6.9
Total revenues 256.3 242.7 1,053.3 951.8
Expenses:
Loss and loss adjustment
expenses (3) 143.9 153.6 644.8 603.3
Commissions and other
underwriting expenses 51.6 39.9 207.1 174.3
Interest expense on debt 2.8 2.8 11.1 10.7
Corporate general and
administrative expenses 1.6 1.7 6.6 6.4
Loss on retirement of
long-term debt - - - 3.4
Other expenses (4) 8.8 9.2 34.9 24.1
Total expenses 208.6 207.1 904.5 822.3
Income before taxes 47.7 35.6 148.8 129.5
Income taxes (5) 15.7 4.0 42.5 33.1
Net earnings $32.0 $31.7 $106.3 $96.4
Net earnings per share -
basic $1.55 $1.54 $5.15 $4.69
Weighted average shares -
basic 20.644 20.574 20.640 20.560
Net earnings per share -
diluted $1.53 $1.52 $5.09 $4.62
Weighted average shares -
diluted 20.907 20.872 20.892 20.859
Note: Columns may not foot due to rounding
Notes:
(1) Realized gains for the twelve months ended December 31, 2005, include
$20.3 million of taxable gains from securities sold to utilize a
portion of the available tax loss carry-forward.
(2) Other income for the fourth quarter and twelve months ended December
31, 2004, includes $1.1 million pre-tax non-recurring management fee
income. Other income for the twelve months ended December 31, 2004
also includes a $1.1 million pre-tax gain from the sale of real
estate.
(3) Loss and loss adjustment expenses for the three months and twelve
months ended December 31, 2005, includes $13.9 million and $32.8
million, respectively, of favorable development on prior accident
period loss and loss adjustment expense reserves.
Loss and loss adjustment expenses for the three months and twelve
months ended December 31, 2004, includes $7.6 million and $14.5
million, respectively, of favorable development on prior accident
period loss and loss adjustment expense reserves.
(4) Other expenses for the twelve months ended December 31, 2005, include
a $2.6 million pre-tax loss from subleased space. The increase in
other expenses for the twelve months ended December 31, 2005 is also
attributable to higher than average premium receivables charged off
in the second, third and fourth quarters of 2005 from more liberal
credit terms in several states and higher corporate litigation
expenses in the first quarter of 2005.
Other expenses for the twelve months ended December 31, 2004, include
a $0.7 million pre-tax loss related from subleased space.
(5) Income taxes for the twelve months ended December 31, 2005, include a
$7.4 million tax benefit from the utilization of net capital loss
carry-forwards.
Income taxes for the three months and twelve months ended December
31, 2004, include a $4.8 million tax benefit from the utilization of
net capital loss carry-forwards as well as a $3.5 million reduction
in valuation reserves and tax reserves. Income taxes for the twelve
months ended December 31, 2004, also include a $2.1 million tax
benefit from the utilization of Alternative Minimum Tax credits
originating in years prior to 2003.
Infinity Property and Casualty Corporation
Condensed Balance Sheet
(in millions, except book value per share)
For the Period Ended
December 31, September 30,
2005 2005
Assets:
Investments:
Fixed maturities (1) $1,323.0 $1,299.0
Equity securities 59.7 56.0
Total investments 1,382.8 1,355.0
Cash and cash equivalents (1) 64.9 87.9
Accrued investment income 16.8 14.7
Agents' balances and premiums receivable 289.9 295.2
Prepaid reinsurance premiums 9.0 11.0
Amounts recoverable from reinsurers 18.9 22.4
Deferred policy acquisition costs 70.4 76.1
Current and deferred income taxes 29.5 26.5
Prepaid expenses, deferred charges
and other assets 14.3 21.8
Goodwill 75.3 75.3
Total assets $1,971.7 $1,985.9
Liabilities and Shareholders' Equity:
Unpaid losses and loss adjustment expenses $624.6 $640.4
Unearned premium 402.2 423.0
Amounts payable to reinsurers 3.3 4.5
Long-term debt 199.4 199.4
Commissions payable 28.3 29.6
Accounts payable, accrued expenses and
other liabilities 87.4 100.0
Total liabilities 1,345.1 1,396.9
Shareholders' Equity
Common stock 20.7 20.7
Additional paid-in capital 331.5 331.2
Treasury stock (1.1) (1.1)
Retained earnings (2) 279.2 237.3
Unearned compensation (restricted stock) (0.0) (0.1)
Unrealized gains (losses), net (3.6) 1.0
Total shareholders' equity 626.6 589.0
Total liabilities and
shareholders' equity $1,971.7 $1,985.9
Shares outstanding 20.649 20.641
Book value per share $30.34 $28.54
Note: Columns may not foot due to rounding
Notes:
(1) Cash received from sales of securities in the second quarter continued
to be reinvested in longer term securities during the fourth quarter
resulting in the decline in cash and short-term investments.
(2) Net income of $32.0 million, a correction of an immaterial error of
$11.1 million less shareholder dividends of $1.2 million resulted in
the increase in retained earnings from September 2005.
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)
2005 2004 2005 2004
Earned premiums $238.8 $222.7 $961.5 $872.3
Loss and loss adjustment
expenses (143.9) (153.6) (644.8) (603.3)
Commissions and other
underwriting expenses (51.6) (39.9) (207.1) (174.3)
Underwriting income 43.3 29.2 109.6 94.7
Net investment income 16.6 16.5 65.5 65.7
Other income 0.9 2.5 4.0 6.9
Interest expense on debt (2.8) (2.8) (11.1) (10.7)
Corporate general and
administrative expenses (1.6) (1.7) (6.6) (6.4)
Loss on retirement of
long-term debt - - - (3.4)
Other expenses (8.8) (9.2) (34.9) (24.1)
Pre-tax operating income 47.7 34.6 126.5 122.6
Income tax expense 16.2 8.4 42.1 35.4
Operating earnings,
after-tax 31.5 26.3 84.4 87.2
Realized gains 0.0 1.0 22.3 6.9
Income tax expense - (0.4) (7.8) (2.4)
Utilization of capital
loss carry-forward 0.5 4.8 7.4 4.8
Realized gains
(after-tax) 0.5 5.4 21.9 9.2
Net earnings $32.0 $31.7 $106.3 $96.4
Operating earnings per
share - diluted $1.51 $1.26 $4.04 $4.18
Net realized gains - 0.03 0.70 0.21
Utilization of capital
loss carry-forward 0.02 0.23 0.35 0.23
Net earnings per
share - diluted $1.53 $1.52 $5.09 $4.62
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."