Infinity Property and Casualty Reports 15.4% Gross Written Premium Growth for the Second Quarter of 2010

BIRMINGHAM, Ala., Aug. 5 /PRNewswire-FirstCall/ -- 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, 2010:

Gross written premium grew 15.4% during the second quarter of 2010 compared with the same period in 2009 primarily from growth in Florida, California, Pennsylvania, Texas, Illinois and Arizona.  Premium in California, Infinity's largest state, increased 6.0% during the second quarter of 2010.

Favorable development on prior accident period loss and loss adjustment expense reserves recognized in earnings during the second quarter and first six months of 2010 was $20.3 million, pre-tax ($0.99 per diluted share after-tax) and $37.0 million, pre-tax ($1.78 per diluted share after-tax), respectively.  The favorable development during the second quarter of 2010 primarily resulted from bodily injury coverages in the states of California, Connecticut, Florida, Texas and Georgia related to accident years 2009, 2008 and 2007.  The favorable development during the first six months of 2010 primarily resulted from bodily injury and collision coverages in the states of California, Connecticut, Florida, Georgia and Arizona related to accident years 2009, 2008 and 2007.  

Favorable development for the second quarter and first six months of 2009 was $10.4 million, pre-tax ($0.49 per diluted share after-tax) and $20.2 million pre-tax ($0.94 per diluted share after-tax), respectively.  Excluding the favorable development, Infinity's combined ratio for the first six months of 2010 has increased compared to the first six months of 2009.  The loss ratio has increased primarily due to the 77.6% growth in Florida during the first six months of 2010 as new business typically generates a higher loss ratio compared with renewal business.  In addition, the company has seen an increase in its expense ratio as the overall commission ratio has increased due to higher commission rates paid on new business.

Losses on subleases of $1.4 million and a modest decrease in net investment income due to a decline in overall market yields contributed to the decline in net and operating earnings during the second quarter of 2010 compared with the second quarter of 2009.  Contributing to the increase in net earnings for the first six months of 2010 compared with the same period of the prior year was a decline in other-than-temporary impairment ("OTTI") losses.  OTTI losses for the first six months of 2010 were $1.8 million, pre-tax, compared with $8.3 million, pre-tax, for the first six months of 2009.

James Gober, Infinity's Chairman, President and CEO stated, "During the second quarter, we grew in seven of our eight Focus States and in 18 of our 21 targeted Urban Zones and we are currently running ahead of our premium plan for the first six months of the year.  While we expect to show strong premium growth for all of 2010, our continued focus on underwriting profit will result in a more moderate growth rate in the second half of the year than we have seen during the first half."

2010 Earnings Guidance

Infinity is increasing its operating earnings guidance to $3.35 - $3.75.  The operating earnings guidance reflects favorable development on prior accident period loss and loss adjustment expense reserves recognized in earnings during the first six months of 2010 but does not include any development in earnings during the remaining six months of the year.  In addition, as a result of stronger than expected premium growth during the first six months of the year, Infinity has also revised its gross premium growth and accident year combined ratio guidance.  The revised operating earnings guidance reflects gross premium growth between 7.5% and 10.0% for 2010 compared with the prior year's premium, and an accident year combined ratio, which excludes the $37.0 million of favorable development on prior accident period loss and loss adjustment expense reserves recognized during the first six months of 2010, between 98.5% and 99.5%.  Infinity's previously issued operating earnings guidance of $3.00 - $3.40 reflected gross premium growth between 5.0% and 7.5% and an accident year combined ratio between 97.0% and 98.0%.

Share and Debt Repurchase Program

During the second quarter of 2010, Infinity repurchased 435,100 shares at an average price, excluding commissions, of $46.67.  Following the end of the second quarter, Infinity exhausted the remaining $9.5 million of authority on its existing share and debt repurchase program, repurchasing 197,900 shares at an average price, excluding commissions, of $47.91.  On August 3, 2010, Infinity's Board of Directors increased the authority on the share and debt repurchase program by $50.0 million and extended the program expiration date to December 31, 2011.

Forward-Looking Statements

This press release, notably "2010 Earnings Guidance," contains certain statements that may be deemed to be "forward-looking statements" 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 "assumes," "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.

The primary events or circumstances that could cause actual results to differ materially from those expected by Infinity include determinations with respect to reserve adequacy, realized gains or losses on the investment portfolio (including other-than-temporary impairments for credit losses), rising bodily injury loss cost trends, undesired business mix or risk profile for new business, elevated unemployment rates, and the proliferation of illegal immigration legislation in key focus states. 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 2010 results at 11:00 a.m. (ET) today, August 5.   There are two alternative communication modes available to listen to the call. Telephone access will be available by dialing 1-888-679-8037 and providing the confirmation code 22511857.  Please dial 5 to 10 minutes prior to the scheduled start time. A replay of the call will also be available two hours following the completion of the call, at around 2:00 p.m. (ET), and will run until Thursday, August 12, 2010. To listen to the replay, dial 1-888-286-8010 and provide the confirmation code 25163960.  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.infinityauto.com, click on Investor Relations and follow the instructions at the webcast link. The archived webcast will be available on Infinity's website approximately two hours following the completion of the call and will be available for one year.

Definitions of Non-GAAP Financial and Operating Measures

Operating earnings are defined as net earnings, before realized gains and losses on investments and the cumulative effect of a change in accounting principle, after tax.  Infinity reports this non-GAAP measure because realized gains and losses on investments 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 losses and loss adjustment expenses and underwriting expenses from premiums earned.  Infinity reports this non-GAAP measure to show profitability before inclusion of investment income, holding company expenses or taxes and because it is a measure used often by investors in evaluating insurance companies.  Net earnings are the most comparable GAAP measure.  

Tangible capital is defined as total capital (long-term debt plus total shareholders' equity) less intangible assets.  Infinity reports this non-GAAP measure because it is a measure often used by debt-holders and rating agencies when evaluating financial leverage.  Total capital is the most comparable GAAP measure.

Below is a schedule that reconciles operating earnings and underwriting income, both non-GAAP measures, to net earnings:

Below is a schedule that reconciles tangible capital, a non-GAAP measure, to total capital:

Infinity also makes available an investor supplement on its website.  To access the supplemental financial information, go to www.infinityauto.com and click on "Investor Relations" followed by "Quarterly Reports."  

SOURCE Infinity Property and Casualty Corporation

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