2008-07-24 07:00:00
Infinity Property and Casualty Reports Second Quarter 2008 Results
BIRMINGHAM, Ala., July 24 /EMWNews/ -- Infinity Property and Casualty Corporation (Nasdaq: IPCC), a national provider of personal automobile insurance, today reported results for the three and six months ended June 30, 2008:
Three Months Ended Six Months Ended June 30, June 30, (in millions, % % except per 2008 2007 Change 2008 2007 Change share amounts and ratios) Gross written premiums $227.5 $255.6 (11.0%) $481.0 $560.4 (14.2%) Revenues $247.9 $280.4 (11.6%) $497.1 $555.3 (10.5%) Net earnings $12.1 $14.3 (15.2%) $26.1 $36.1 (27.5%) Net earnings per diluted share $0.74 $0.73 1.4 % $1.60 $1.83 (12.6%) Operating earnings (1) $14.2 $17.1 (16.7%) $29.3 $37.8 (22.6%) Operating earnings per diluted share (1) $0.87 $0.87 - $1.79 $1.92 (6.8%) Underwriting income (1) $10.5 $12.2 (13.9%) $23.5 $31.4 (25.1%) Combined ratio 95.5 % 95.4 % 0.1 pts 95.0 % 94.0 % 1.0 pts Return on equity 8.0 % 8.4 % (0.4) pts 8.7 % 10.7 % (2.0) pts Operating income return on equity (1) 9.3 % 10.0 % (0.7) pts 9.7 % 11.2 % (1.5) pts Book value per share $37.70 $35.17 7.2 % Debt to total capital 24.8 % 22.6 % 2.2 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 11.0% and 14.2% during the second quarter and first six months of 2008, respectively, as compared with the same periods in 2007 primarily from a decline in gross written premiums in California, Connecticut, Florida and Georgia. Partially offsetting premium declines in these states was premium growth in Illinois, Nevada, and Texas. Earnings and underwriting income for the three and six months ended June 30, 2008, included $6.3 million, pre-tax, ($0.25 per diluted share after-tax) and $12.2 million, pre-tax ($0.49 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. 2008 Earnings Guidance As a result of a decrease in earned premiums and underwriting margins Infinity is adjusting its operating earnings guidance to $2.85 - $3.15 per diluted share down from $3.05 - $3.35 per diluted share. Share Repurchase Program During the second quarter of 2008, Infinity repurchased 144,800 shares at an average price, excluding commissions, of $42.54. Since the end of the second quarter, Infinity has repurchased an additional 531,700 shares at an average price, excluding commissions, of $43.01. As of July 23, Infinity had $25.7 million of authority remaining under its existing repurchase program. Effective as of today, July 24, 2008, Infinity's Board of Directors has increased this authority by $74.3 million to $100 million and extended the date to execute this program to December 31, 2009 from 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 second quarter 2008 at 11:00 a.m. (ET) today, July 24. There are two alternative communication modes available to listen to the call. Telephone access will be available by dialing 1-888-713-4217 and providing the confirmation code 22698131. 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, July 31, 2008. To listen to the replay, dial 1-888-286-8010 and provide the confirmation code 80140767. 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 Six Months Ended Ended June 30, June 30, 2008 2007 2008 2007 Revenues: Earned premiums $233.4 $264.9 $468.4 $520.8 Net investment income 14.8 17.1 30.1 34.0 Realized gains (losses) on investments (1.8) (3.0) (3.2) (1.2) Other income 1.5 1.4 1.6 1.7 Total revenues 247.9 280.4 497.1 555.3 Costs and Expenses: Loss and loss adjustment expenses (1) 165.9 190.5 335.4 367.9 Commissions and other underwriting expenses 57.0 62.2 109.5 121.5 Interest expense 2.8 2.8 5.5 5.5 Corporate general and administrative expenses 1.9 2.1 3.8 4.1 Restructuring charge 0.1 (0.1) 0.4 (0.3) Other expenses 1.3 0.3 2.8 1.0 Total costs and expenses 228.9 257.8 457.4 499.7 Earnings before income taxes 18.9 22.6 39.7 55.6 Provision for income taxes 6.8 8.3 13.5 19.5 Net earnings $12.1 $14.3 $26.1 $36.1 Earnings per common share: Basic $0.75 $0.74 $1.62 $1.85 Diluted $0.74 $0.73 $1.60 $1.83 Average number of common shares: Basic 16.1 19.4 16.1 19.5 Diluted 16.4 19.6 16.4 19.7 Cash dividends per common share $0.11 $0.09 $0.22 $0.18 Note: Columns may not foot due to rounding Notes: (1) Loss and loss adjustment expenses for the three and six months ended June 30, 2008, include $6.3 million and $12.2 million, pre-tax, of favorable development on prior accident period loss and loss adjustment expense reserves, respectively. Loss and loss adjustment expenses for the three and six months ended June 30, 2007, include $6.1 million and $7.2 million, pre-tax, 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 June 30, March 31, 2008 2008 Assets: Investments: Fixed maturities, at fair value $1,207.9 $1,238.3 Equity securities, at fair value 44.4 45.2 Total investments 1,252.3 1,283.5 Cash and cash equivalents 36.6 38.5 Accrued investment income 12.9 12.1 Agents' balances and premiums receivable 335.0 342.7 Prepaid reinsurance premiums 1.8 2.0 Recoverables from reinsurers 25.6 30.2 Deferred policy acquisition costs 78.0 79.2 Current and deferred income taxes 40.6 25.7 Receivable for securities sold - 45.8 Prepaid expenses, deferred charges and other assets 38.2 35.3 Goodwill 75.3 75.3 Total assets $1,896.2 $1,970.4 Liabilities and Shareholders' Equity: Liabilities: Unpaid losses and loss adjustment expenses $581.1 $591.2 Unearned premiums 421.3 428.4 Payable to reinsurers 0.3 0.3 Long-term debt 199.5 199.5 Commissions payable 26.2 27.7 Payable for securities purchased 8.7 63.1 Accounts payable, accrued expenses and other liabilities 53.0 47.6 Total liabilities 1,290.2 1,357.8 Shareholders' Equity: Common stock 21.0 21.0 Additional paid-in capital 341.0 340.6 Retained earnings (1) 449.2 438.9 Other comprehensive income (loss) (4.1) 7.0 Treasury stock, at cost (2) (201.1) (194.9) Total shareholders' equity 606.1 612.5 Total liabilities and shareholders' equity $1,896.2 $1,970.4 Shares outstanding 16.075 16.205 Book value per share $37.70 $37.80 Note: Columns may not foot due to rounding Notes: (1) The change in retained earnings from March 2008 is a result of net income of $12.1 million less shareholder dividends of $1.8 million. (2) Infinity repurchased 144,800 common shares during the second quarter of 2008 at an average per share price, excluding commissions, of $42.54. Definitions of Non-GAAP Financial and Operating Measures Operating earnings are defined as net earnings, 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 Six Months Ended June 30, Ended June 30, (in millions, except EPS) 2008 2007 2008 2007 Earned premiums $233.4 $264.9 $468.4 $520.8 Loss and loss adjustment expenses (165.9) (190.5) (335.4) (367.9) Commissions and other underwriting expenses (57.0) (62.2) (109.5) (121.5) Underwriting income 10.5 12.2 23.5 31.4 Net investment income 14.8 17.1 30.1 34.0 Other income 1.5 1.4 1.6 1.7 Interest expense (2.8) (2.8) (5.5) (5.5) Corporate general and administrative expenses (1.9) (2.1) (3.8) (4.1) Restructuring charge (0.1) 0.1 (0.4) 0.3 Other expenses (1.3) (0.3) (2.8) (1.0) Pre-tax operating earnings 20.7 25.6 42.8 56.8 Provision for income taxes (6.5) (8.5) (13.6) (19.0) Operating earnings, after-tax 14.2 17.1 29.3 37.8 Realized gains (losses) on investments, pre-tax (1.8) (3.0) (3.2) (1.2) Provision for income taxes 0.6 1.0 1.1 0.4 Increase in provision for tax valuation allowance (0.9) (0.8) (1.1) (0.9) Realized gains (losses) on investments, net of tax (2.1) (2.7) (3.1) (1.7) Net earnings $12.1 $14.3 $26.1 $36.1 Operating earnings per share - diluted $0.87 $0.87 $1.79 $1.92 Realized gains (losses) on investments, net of tax (0.07) (0.10) (0.12) (0.04) Increase in provision for tax valuation allowance (0.06) (0.04) (0.07) (0.05) Net earnings per share - diluted $0.74 $0.73 $1.60 $1.83 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 http://www.ipacc.com and click on "Investor Relations" followed by "Quarterly Reports."
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