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

Three months ended September 30,

Nine months ended September 30,

(in millions, except per share amounts and ratios)

2015

Change

2016

2015

Gross written premium ⁽¹⁾

$359.4

$334.2

7.5%

$1,072.3

$1,077.4

(0.5%)

Revenues

$378.1

$372.4

1.5%

$1,123.4

$1,114.1

0.8%

Net earnings

$2.8

$15.7

(82.5%)

$21.5

$40.4

(46.8%)

Net earnings per diluted share

$0.25

$1.38

(81.9%)

$1.93

$3.52

(45.2%)

Operating earnings ⁽¹⁾

$1.9

$16.0

(88.0%)

$20.7

$39.8

(48.0%)

Operating earnings per diluted share ⁽¹⁾

$0.17

$1.41

(87.9%)

$1.86

$3.46

(46.2%)

Underwriting (loss) income ⁽¹⁾

($0.8)

$19.7

(104.1%)

$20.4

$47.9

(57.4%)

Combined ratio

100.2%

94.2%

6.0pts

98.0%

95.3%

2.7pts

Return on equity ⁽²⁾

1.6%

9.0%

(7.4)pts

4.1%

7.7%

(3.6)pts

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

1.1%

9.1%

(8.0)pts

4.0%

7.6%

(3.6)pts

Book value per share

$63.56

$61.71

3.0%

Debt to total capital

28.1%

28.3%

(0.2)pt

Debt to tangible capital ⁽¹⁾

30.5%

30.7%

(0.2)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
Balance Sheets
(in millions, except book value per share)

September 30,
 2016

June 30,
 2016

December 31,
 2015

(unaudited)

(unaudited)

   (audited)

Assets

Investments:

Fixed maturities, at fair value

$1,404.6

$1,383.8

$1,381.5

Equity securities, at fair value

92.8

90.7

89.9

Short-term investments, at fair value

2.3

4.1

4.7

  Total investments

1,499.7

1,478.6

1,476.1

Cash and cash equivalents

73.6

76.0

62.5

Accrued investment income

11.3

11.7

12.2

Agents' balances and premium receivable

551.9

536.6

511.5

Property and equipment (net of depreciation)

94.4

98.2

89.7

Prepaid reinsurance premium

3.4

3.8

5.4

Recoverable from reinsurers

18.7

18.7

15.1

Deferred policy acquisition costs

97.4

95.8

93.2

Current and deferred income taxes

21.8

20.3

33.9

Receivable for securities sold

1.7

—

—

Other assets

11.1

11.4

10.3

Goodwill

75.3

75.3

75.3

         Total assets

$2,460.2

$2,426.4

$2,385.1

Liabilities and Shareholders' Equity

Liabilities:

Unpaid losses and loss adjustment expenses

$676.5

$666.2

$670.0

Unearned premium

660.3

645.4

616.6

Long-term debt

273.5

273.5

273.4

Commissions payable

16.7

15.2

17.4

Payable for securities purchased

24.1

11.9

7.3

Other liabilities

106.2

111.2

112.9

 Total liabilities

1,757.4

1,723.4

1,697.5

Shareholders' Equity:

Common stock

21.8

21.8

21.8

Additional paid-in capital

377.8

376.7

376.0

Retained earnings ⁽¹⁾

761.8

764.8

757.6

Accumulated other comprehensive income, net of tax

27.1

24.9

7.8

Treasury stock, at cost ⁽²⁾

(485.7)

(485.1)

(475.6)

 Total shareholders' equity

702.8

703.1

687.6

        Total liabilities and shareholders' equity

$2,460.2

$2,426.4

$2,385.1

Shares outstanding

11.1

11.1

11.2

$63.56

$63.54

$61.66

Notes:

(1)

The change in retained earnings from June 30, 2016, is primarily a result of net income of $2.8 million less shareholder dividends of $5.8 million. The change in retained earnings from December 31, 2015, is primarily a result of net income of $21.5 million less shareholder dividends of $17.2 million.

(2)

Infinity repurchased 7,100 common shares during the third quarter of 2016 at an average per share price, excluding commissions, of $83.13. Infinity repurchased 116,666 common shares during the first nine months of 2016 at an average per share price, excluding commissions, of $78.86.

Infinity Property and Casualty Corporation
Statements of Cash Flows
(in millions)

Three months ended September 30,

2016

2015

(unaudited)

(unaudited)

Operating Activities:

Net earnings

$2.8

$15.7

Adjustments:

Depreciation

3.9

3.2

Amortization

5.6

5.3

Net realized (gains) losses on investments

(1.3)

0.4

Loss on disposal of property and equipment

0.1

0.9

Share-based compensation expense

1.1

0.1

Activity related to rabbi trust

0.0

(0.1)

Change in accrued investment income

0.5

1.1

Change in agents' balances and premium receivable

(15.4)

3.8

Change in reinsurance receivables

0.5

(1.3)

Change in deferred policy acquisition costs

(1.6)

0.8

Change in other assets

(2.4)

(2.9)

Change in unpaid losses and loss adjustment expenses

10.3

(2.0)

Change in unearned premium

14.9

(7.9)

Change in other liabilities

(3.2)

1.3

Net cash provided by operating activities

15.9

18.5

Investing Activities:

Purchases of fixed maturities

(117.6)

(97.6)

Purchases of equity securities

—

(5.0)

Purchases of short-term investments

(3.1)

(4.8)

Purchases of property and equipment

(0.3)

(5.7)

Maturities and redemptions of fixed maturities

39.7

42.6

Maturities and redemptions of short-term investments

1.3

0.5

Proceeds from sale of fixed maturities

62.4

72.8

Proceeds from sale of equity securities

2.0

—

Proceeds from sale of short-term investments

3.6

3.1

Net cash (used in) provided by investing activities

(12.0)

5.9

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

(0.5)

(9.3)

Dividends paid to shareholders

(5.8)

(4.9)

Net cash used in financing activities

(6.4)

(14.2)

Net (decrease) increase in cash and cash equivalents

(2.4)

10.1

Cash and cash equivalents at beginning of period

76.0

60.5

Cash and cash equivalents at end of period

$73.6

$70.6

Nine months ended September 30,

2016

2015

(unaudited)

(unaudited)

Operating Activities:

Net earnings

$21.5

$40.4

Adjustments:

Depreciation

10.5

9.1

Amortization

16.5

16.5

Net realized gains on investments

(1.3)

(1.0)

Loss on disposal of property and equipment

0.5

1.2

Share-based compensation expense

1.4

1.9

Excess tax benefits from share-based payment arrangements

(0.2)

(0.3)

Activity related to rabbi trust

0.1

(0.1)

Change in accrued investment income

1.0

0.6

Change in agents' balances and premium receivable

(40.4)

(54.1)

Change in reinsurance receivables

(1.6)

(2.8)

Change in deferred policy acquisition costs

(4.3)

(8.1)

Change in other assets

1.1

(6.4)

Change in unpaid losses and loss adjustment expenses

6.6

10.8

Change in unearned premium

43.7

55.8

Change in other liabilities

(6.9)

6.4

Net cash provided by operating activities

48.2

69.8

Investing Activities:

Purchases of fixed maturities

(379.1)

(385.3)

Purchases of equity securities

—

(7.0)

Purchases of short-term investments

(8.2)

(8.4)

Purchases of property and equipment

(15.6)

(34.0)

Maturities and redemptions of fixed maturities

115.8

149.1

Maturities and redemptions of short-term investments

1.3

0.8

Proceeds from sale of fixed maturities

265.5

225.0

Proceeds from sale of equity securities

2.0

4.5

Proceeds from sale of short-term investments

9.3

3.1

Proceeds from sale of property and equipment

0.0

—

Net cash used in investing activities

(9.1)

(52.2)

Financing Activities:

Proceeds from stock options exercised and employee stock purchases

0.2

0.2

Excess tax benefits from share-based payment arrangements

0.2

0.3

Principal payments under capital lease obligations

(0.4)

(0.4)

Acquisition of treasury stock

(10.7)

(16.9)

Dividends paid to shareholders

(17.2)

(14.7)

Net cash used in financing activities

(31.5)

Net increase (decrease) in cash and cash equivalents

11.1

(13.9)

Cash and cash equivalents at beginning of period

62.5

84.5

Cash and cash equivalents at end of period

$73.6

$70.6

Three months ended

September 30,

Nine months ended

September 30,

2016

2015

2016

2015

(in millions, except EPS)

Earned premium

$342.2

$338.6

$1,019.1

$1,011.2

Losses and loss adjustment expenses

(280.9)

(256.1)

(809.7)

(774.5)

Commissions and other underwriting expenses

(88.4)

(86.8)

(266.2)

(261.9)

Installment and other fee income

26.3

24.0

77.2

73.1

Underwriting (loss) income

(0.8)

19.7

20.4

47.9

Net investment income

8.1

10.0

25.1

27.9

Other income

0.2

0.2

0.7

0.9

Interest expense

(3.5)

(3.5)

(10.5)

(10.5)

Corporate general and administrative expenses

(1.8)

(1.7)

(5.5)

(5.6)

Other expenses

(0.4)

(1.5)

(1.5)

(2.9)

Pre-tax operating earnings

1.9

23.2

28.8

57.7

Provision for income taxes

0.0

(7.2)

(8.1)

(18.0)

Operating earnings, after-tax

1.9

16.0

20.7

39.8

Realized gains (losses) on investments, pre-tax

1.3

(0.4)

1.3

1.0

(Provision) benefit for income taxes on capital gains

(0.4)

0.1

(0.4)

(0.3)

Realized gains (losses) on investments, net of tax

0.8

(0.3)

0.8

0.6

Net earnings

$2.8

$15.7

$21.5

$40.4

Operating earnings per diluted share

$0.17

$1.41

$1.86

$3.46

Realized gains (losses) on investments, net of tax

0.08

(0.03)

0.07

0.06

Net earnings per diluted share

$0.25

$1.38

$1.93

$3.52

Three months ended September 30,

Nine months ended September 30,

(in millions)

2016

2015

2016

2015

Gross written premium

$359.4

$334.2

$1,072.3

$1,077.4

Ceded reinsurance

(2.3)

(3.6)

(6.5)

(11.0)

Net written premium

357.1

330.6

1,065.8

1,066.3

Change in unearned premium

(14.9)

7.9

(46.7)

(55.1)

Earned premium

$342.2

$338.6

$1,019.1

$1,011.2

(in millions)

September 30, 2016

September 30, 2015

Tangible capital

$902.5

$896.8

Goodwill

75.3

$75.3

Total capital

$977.8

$972.1