Infinity Property and Casualty Corporation Reports Results for the First Quarter of 2016

Three months ended March 31,

(in millions, except per share amounts and ratios)

2016

2015

Gross written premium ⁽¹⁾

$376.0

$390.6

(3.8%)

Revenues

$370.2

$367.0

0.9%

Net earnings

$7.7

$11.2

(30.9%)

Net earnings per diluted share

$0.69

$0.97

(28.9%)

Operating earnings ⁽¹⁾

$7.6

$10.4

(26.7%)

Operating earnings per diluted share ⁽¹⁾

$0.68

$0.90

(24.4%)

Underwriting income ⁽¹⁾

$7.8

$12.2

(36.0%)

Combined ratio

97.7%

96.3%

1.4 pts

Return on equity ⁽²⁾

4.5%

6.4%

(1.9) pts

Operating earnings return on equity ^{(1) (2)}

4.4%

5.9%

(1.5) pts

Book value per share

$62.60

$61.73

1.4%

Debt to total capital

28.5%

28.0%

0.5 pt

Debt to tangible capital ⁽¹⁾

30.9%

30.3%

0.6 pt

Notes:

(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.

(2)

Annualized

Columns throughout may not foot due to rounding.

Infinity Property and Casualty Corporation

Statements of Earnings

(in millions, except EPS and dividends)

Three months ended
March 31,

2016

2015

(unaudited)

(unaudited)

Revenues:

Earned premium

$336.2

$332.1

Installment and other fee income

25.5

24.6

Net investment income

8.1

8.7

Net realized gains on investments ⁽¹⁾

0.1

1.2

Other income

0.3

0.4

Total revenues

370.2

367.0

Costs and Expenses:

Losses and loss adjustment expenses ⁽²⁾

265.3

255.6

Commissions and other underwriting expenses

88.6

88.8

Interest expense

3.5

3.5

Corporate general and administrative expenses

1.7

1.9

Other expenses

0.3

0.9

Total costs and expenses

359.4

350.7

Earnings before income taxes

10.8

16.2

Provision for income taxes

3.1

5.1

Net Earnings

$7.7

$11.2

Net Earnings per Common Share:

Basic

$0.70

$0.98

Diluted

$0.69

$0.97

Average Number of Common Shares:

Basic

11.0

11.4

Diluted

11.1

11.6

Cash Dividends per Common Share

$0.52

$0.43

Notes:

(1)

Net realized gains on sales

$0.3

$1.6

Total other-than-temporary impairment (OTTI) losses

(0.1)

(0.4)

Total net realized gains on investments

$0.1

$1.2

(2)

Losses and loss adjustment expenses for the three months ended March 31, 2016, include $5.9 million of favorable development on prior accident year loss and loss adjustment expense reserves, compared with $2.1 million of favorable development for the three months ended March 31, 2015.

Infinity Property and Casualty Corporation

Balance Sheets

(in millions, except book value per share)

March 31,
 2016

December 31,
 2015

(unaudited)

   (audited)

Assets

Investments:

Fixed maturities, at fair value

$1,407.4

$1,381.5

Equity securities, at fair value

90.1

89.9

Short-term investments, at fair value

—

4.7

  Total investments

1,497.5

1,476.1

Cash and cash equivalents

43.6

62.5

Accrued investment income

11.4

12.2

Agents' balances and premium receivable

542.6

511.5

Property and equipment (net of depreciation)

91.6

89.7

Prepaid reinsurance premium

5.7

5.4

Recoverable from reinsurers

18.5

15.1

Deferred policy acquisition costs

97.2

93.2

Current and deferred income taxes

25.5

33.9

Receivable for securities sold

2.1

—

Other assets

16.5

10.3

Goodwill

75.3

75.3

         Total assets

$2,427.5

$2,385.1

Liabilities and Shareholders' Equity

Liabilities:

Unpaid losses and loss adjustment expenses

$673.5

$670.0

Unearned premium

652.5

616.6

Long-term debt

273.4

273.4

Commissions payable

15.5

17.4

Payable for securities purchased

10.5

7.3

Other liabilities

110.6

112.9

 Total liabilities

1,736.0

1,697.5

Shareholders' Equity:

Common stock

21.8

21.8

Additional paid-in capital

376.4

376.0

Retained earnings ⁽¹⁾

759.6

757.6

Accumulated other comprehensive income, net of tax

17.8

7.8

Treasury stock, at cost ⁽²⁾

(484.0)

(475.6)

 Total shareholders' equity

691.5

687.6

        Total liabilities and shareholders' equity

$2,427.5

$2,385.1

Shares outstanding

11.0

11.2

$62.60

$61.66

Notes:

(1)

The change in retained earnings from December 31, 2015, is primarily a result of net income of $7.7 million less shareholder dividends of $5.7 million.

(2)

Infinity repurchased 106,766 common shares during the first three months of 2016 at an average per share price, excluding commissions, of $78.59.

Infinity Property and Casualty Corporation

Statements of Cash Flows

(in millions)

Three months ended March 31,

2016

2015

(unaudited)

(unaudited)

Operating Activities:

Net earnings

$7.7

$11.2

Adjustments:

Depreciation

3.1

3.0

Amortization

5.8

5.9

Net realized gains on investments

(0.1)

(1.2)

Loss on disposal of property and equipment

0.0

0.1

Share-based compensation expense

0.3

0.7

Activity related to rabbi trust

0.0

0.0

Change in accrued investment income

0.8

0.9

Change in agents' balances and premium receivable

(31.1)

(46.3)

Change in reinsurance receivables

(3.7)

(0.8)

Change in deferred policy acquisition costs

(4.1)

(7.7)

Change in other assets

(3.1)

1.7

Change in unpaid losses and loss adjustment expenses

3.5

7.6

Change in unearned premium

35.8

55.2

Change in other liabilities

(4.0)

(2.8)

Net cash provided by operating activities

11.0

27.5

Investing Activities:

Purchases of fixed maturities

(157.9)

(150.2)

Purchases of equity securities

—

(2.0)

Purchases of short-term investments

—

(1.0)

Purchases of property and equipment

(4.9)

(2.1)

Maturities and redemptions of fixed maturities

39.3

46.7

Proceeds from sale of fixed maturities

103.9

95.4

Proceeds from sale of equity securities

—

4.5

Proceeds from sale of short-term investments

4.6

—

Net cash used in investing activities

(15.0)

(8.7)

Financing Activities:

Proceeds from stock options exercised and employee stock purchases

0.1

0.1

Principal payments under capital lease obligations

(0.1)

(0.1)

Acquisition of treasury stock

(9.0)

(1.9)

Dividends paid to shareholders

(5.7)

(4.9)

Net cash used in financing activities

(14.8)

(6.9)

Net (decrease) increase in cash and cash equivalents

(18.9)

11.9

Cash and cash equivalents at beginning of period

62.5

84.5

Cash and cash equivalents at end of period

$43.6

$96.4

Three months ended March 31,

2016

2015

(in millions, except EPS)

Earned premium

$336.2

$332.1

Losses and loss adjustment expenses

(265.3)

(255.6)

Commissions and other underwriting expenses

(88.6)

(88.8)

Installment and other fee income

25.5

24.6

Underwriting income

7.8

12.2

Net investment income

8.1

8.7

Other income

0.3

0.4

Interest expense

(3.5)

(3.5)

Corporate general and administrative expenses

(1.7)

(1.9)

Other expenses

(0.3)

(0.9)

Pre-tax operating earnings

10.6

15.1

   Provision for income taxes

(3.0)

(4.7)

Operating earnings, after-tax

7.6

10.4

Realized gains on investments, pre-tax

0.1

1.2

Provision for income taxes on capital gains

(0.0)

(0.4)

Realized gains on investments, net of tax

0.1

0.8

Net earnings

$7.7

$11.2

Operating earnings per diluted share

$0.68

$0.90

Realized gains on investments, net of tax

0.01

0.07

Net earnings per diluted share

$0.69

$0.97

Three months ended March 31,

(in millions)

2016

2015

Gross written premium

$376.0

$390.6

Ceded reinsurance

(4.3)

(3.6)

Net written premium

371.7

387.1

Change in unearned premium

(35.5)

(55.0)

Earned premium

$336.2

$332.1

(in millions)

March 31,
2016

March 31,
2015

Tangible capital

$891.2

$907.1

Goodwill

75.3

$75.3

Total capital

$966.5

$982.3