Infinity Property and Casualty Reports 11.6% Growth in Gross Written Premiums and Announces Additional $100 Million Share Repurchase Program
BIRMINGHAM, Ala., Aug. 2, 2007 -- Infinity Property and Casualty Corporation , a national provider of personal automobile insurance, today reported results for the three and six months ended June 30, 2007:
Three Months Ended Six Months Ended June 30, June 30 (in millions, except per share amounts % % and ratios) 2007 2006 Change 2007 2006 Change Gross written premiums $255.6 $229.0 11.6% $560.4 $489.1 14.6% Revenues $280.4 $254.0 10.4% $555.3 $505.7 9.8% Net earnings $14.3 $20.0 (28.5%) $36.1 $49.0 (26.3%) Net earnings per diluted share $0.73 $0.96 (24.0%) $1.83 $2.35 (22.1%) Operating earnings (1) $17.1 $19.7 (13.2%) $37.8 $48.6 (22.2%) Operating earnings per diluted share (1) $0.87 $0.95 (8.4%) $1.92 $2.33 (17.6%) Underwriting income (1) $12.2 $17.2 (29.1%) $31.4 $48.7 (35.5%) Combined ratio 95.4% 92.7% 2.7 pts 94.0% 89.6% 4.4 pts Return on equity 8.4% 12.4% (4.0) pts 10.7% 15.5 (4.8) pts Operating income return on equity (1) 10.0% 12.2% (2.2) pts 11.2% 15.3% (4.1) pts Book value per share $35.17 $31.51 11.6% Debt to total capital 22.6% 23.7% (1.1) 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 for the three and six months ended June 30, 2007, grew 11.6% and 14.6%, respectively, compared with the same periods of 2006 primarily as a result of growth in California, Arizona, Florida and Texas. Personal auto gross written premiums in Infinity's 20 targeted urban zones, which include Los Angeles, Houston, Philadelphia, Phoenix and other metropolitan areas across the nation, grew 20.0% and 24.0% during the second quarter and first six months of 2007, respectively, compared with the same periods of 2006.
Earnings and underwriting income for the three and six months ended June 30, 2006, included $5.6 million, pre-tax, ($0.18 per diluted share after-tax) and $24.6 million, pre-tax ($0.77 per diluted share after-tax), respectively, of favorable development on prior accident period loss and loss adjustment expense reserves compared with $6.1 million, pre-tax ($0.20 per diluted share after-tax) and $7.2 million, pre-tax ($0.24 per diluted share after-tax) of favorable development for the three and six months ended June 30, 2007, respectively. Excluding favorable development, the combined ratio for the second quarter of 2007 was 97.7% compared with 95.1% for the second quarter of 2006. The increase in combined ratio is primarily a result of increasing frequency trends. The combined ratio for the six months ended June 30, 2007 and 2006 was 95.3% and 94.9%, respectively.
Operating earnings, which exclude realized gains and losses, declined 13.2% for the three months ended June 30, 2007 as compared with the same period in 2006. During the second quarter of 2007, Infinity recorded $3.0 million, pre-tax, of realized losses on the sale of securities compared with a loss of $0.1 million, pretax, during the second quarter of 2006.
2007 Earnings Guidance
Infinity is affirming its operating earnings guidance of $3.35- $3.75 per diluted share.
Share Repurchase Program
Infinity repurchased 79,692 common shares during the second quarter of 2007 at an average per share price, excluding commissions, of $48.90. Infinity has approximately $87 million of capacity left under this repurchase program, which expires December 31, 2008.
In addition to the above share repurchase program and as a means to further enhance shareholder value, Infinity's Board of Directors has authorized the Company to repurchase an additional $100 million of shares, which is to be completed over the next 90 days.
California Rate Filings
Effective April 3, 2007, California adopted amended approval regulations, which, among other changes, establishes, for personal auto and most other lines of property and casualty insurance written in California, a maximum permitted after-tax rate of return on invested capital at an insurance company level, currently set at 10.8%. In response to these amended regulations, as well as regulations adopted in October 2006 restricting the use of territory as a rating variable, Infinity has a preliminary agreement with the California Department of Insurance to reduce base rates approximately 11.2%. Approval for the base rate change is expected in the third quarter of 2007 with a fourth quarter 2007 implementation.