Infinity Property and Casualty Corporation Reports Results for the Second Quarter of 2017

Three months ended June 30,

(in millions, except per share amounts and ratios)   

2017

2016

Change

2017

2016

Change

Gross written premium ⁽¹⁾

$323.8

$337.0

(3.9%)

$694.5

$712.9

(2.6%)

Revenues

$376.9

$375.1

0.5%

$754.7

$745.2

1.3%

Net earnings

$5.0

$11.0

(54.2%)

$15.7

$18.7

(16.2%)

Net earnings per diluted share

$0.46

$0.99

(53.5%)

$1.41

$1.68

(16.1%)

Operating earnings ⁽¹⁾

$3.8

$11.1

(65.7%)

$14.1

$18.7

(24.6%)

Operating earnings per diluted share ⁽¹⁾

$0.34

$1.00

(66.0%)

$1.27

$1.69

(24.9%)

Underwriting income ⁽¹⁾

$1.7

$13.4

(87.0%)

$13.5

$21.2

(36.7%)

Calendar year combined ratio ⁽²⁾

99.5%

96.1%

3.4 pts

98.0%

96.9%

1.1 pts

Return on equity ⁽³⁾

2.8%

6.3%

(3.5) pts

4.4%

5.4%

(1.0) pt

Operating earnings return on equity ^{(1) (3)}

2.2%

6.4%

(4.2) pts

4.0%

5.4%

(1.4) pts

Book value per share

$64.48

$63.54

1.5%

Debt to total capital

27.9%

28.1%

(0.2) pt

Debt to tangible capital ⁽¹⁾

30.2%

30.5%

(0.3) 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)

Premium returned to California policyholders resulted in premium adjustments to written and earned premium of $18.3 million and $12.4 million, respectively, for the three months ended June 30, 2017, and $22.1 million and $16.2 million, respectively, for the six months ended June 30, 2017.  Refer to Note 9 - Commitments and Contingencies of the Form 10-Q for the quarter ended June 30, 2017 for a discussion of the premium adjustments.

(3)

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 June 30,

Six months ended June 30,

2017

2016

2017

2016

Revenues:

(unaudited)

(unaudited)

Earned premium

$339.1

$340.7

$680.5

$676.9

Installment and other fee income

26.5

25.4

53.4

50.9

Net investment income

9.0

8.9

17.7

17.0

Net realized gains (losses) on investments ⁽¹⁾

1.9

(0.2)

2.4

(0.0)

Other income

0.4

0.2

0.7

0.5

Total revenues

376.9

375.1

754.7

745.2

Costs and Expenses:

Losses and loss adjustment expenses ⁽²⁾

273.6

263.5

544.3

528.8

Commissions and other underwriting expenses

90.2

89.2

176.2

177.8

Interest expense

3.5

3.5

7.0

7.0

Corporate general and administrative expenses

2.4

2.1

4.7

3.8

Other expenses

0.5

0.8

0.8

1.1

Total costs and expenses

370.3

359.0

733.0

718.4

Earnings before income taxes

6.6

16.0

21.6

26.8

Provision for income taxes

1.5

5.0

5.9

8.1

Net Earnings    

$5.0

$11.0

$15.7

$18.7

Net Earnings per Common Share:

Basic

$1.00

$1.43

$1.70

Diluted

$0.46

$0.99

$1.41

$1.68

Average Number of Common Shares:

Basic

11.0

11.0

11.0

11.0

Diluted

11.1

11.1

11.1

11.1

Cash Dividends per Common Share

$0.58

$0.52

$1.16

$1.04

Notes:

(1)   Net realized gains on sales

$1.9

$0.0

$2.4

0.3

Total other-than-temporary impairment (OTTI) losses

—

(0.2)

(0.0)

(0.3)

        Non-credit portion in other comprehensive income   

—

—

0.0

—

        Net impairment losses recognized in earnings   

—

(0.2)

(0.0)

(0.3)

        Total net realized gains (losses) on investments

$1.9

$2.4

$0.0

(2) Losses and loss adjustment expenses for the three and six months ended June 30, 2017, include $6.7 million and $13.1 million of favorable
development on prior accident year loss and loss adjustment expense reserves, respectively, compared with $12.2 million and $18.1 million
of favorable development for the three and six months ended June 30, 2016, respectively.

Infinity Property and Casualty Corporation

Balance Sheets

(in millions, except book value per share)

June 30,

March 31,

December 31,

2017

2017

2016

(unaudited)

(unaudited)

 (audited)

Assets

Investments:

Fixed maturities, at fair value

$1,439.0

$1,425.6

$1,390.2

Equity securities, at fair value

95.5

97.0

90.6

Short-term investments, at fair value

0.4

0.5

2.9

  Total investments

1,535.0

1,523.1

1,483.7

Cash and cash equivalents

87.6

69.4

92.8

Accrued investment income

13.5

12.2

12.5

Agents' balances and premium receivable

498.1

512.3

495.2

Property and equipment (net of depreciation)

87.5

92.9

96.2

Prepaid reinsurance premium

3.2

3.1

3.4

Recoverable from reinsurers

17.9

16.6

17.3

Deferred policy acquisition costs

90.4

94.1

91.1

Current and deferred income taxes

22.5

16.8

21.6

Receivable for securities sold

—

5.2

0.8

Other assets

20.5

18.4

12.8

Goodwill

75.3

75.3

75.3

           Total assets 

$2,451.4

$2,439.3

$2,402.6

Liabilities and Shareholders' Equity

Liabilities:

Unpaid losses and loss adjustment expenses

$701.1

Unearned premium

623.5

Long-term debt

273.6

273.6

Commissions payable

13.8

16.2

Payable for securities purchased

Other liabilities

112.6

107.0

99.9

           Total liabilities  

1,739.3

1,730.1

1,703.4

Shareholders' Equity:

Common stock

21.9

21.8

21.8

Additional paid-in capital

381.5

380.2

378.7

Retained earnings ⁽¹⁾

780.6

781.9

777.7

Accumulated other comprehensive income, net of tax

19.2

14.5

7.9

   Treasury stock, at cost ⁽²⁾

(490.9)

(489.3)

(487.0)

           Total shareholders' equity

712.1

709.2

699.2

               Total liabilities and shareholders' equity

$2,451.4

$2,439.3

$2,402.6

Shares outstanding

11.0

11.1

11.0

Book value per share

$64.48

$64.16

$63.31

Notes:

(1)

The change in retained earnings from March 31, 2017 is primarily as a result of net income of $5.0 million less shareholder dividends of $6.4 million. The change in retained earnings from December 31, 2016 is primarily as a result of net income of $15.7 million less shareholder dividends of $12.8 million.

(2)

Infinity repurchased 17,401 common shares during the second quarter of 2017 at an average price paid per share, excluding commissions, of $94.52. Infinity repurchased 26,157 common shares during the first six months of 2017 at an average price paid per share, excluding commissions, of $92.86.

Infinity Property and Casualty Corporation

Statements of Cash Flows

(in millions)

Three months ended June 30,

2017

2016

Operating Activities:

(unaudited)

(unaudited)

Net earnings

$5.0

$11.0

Adjustments:

Depreciation

4.1

3.4

Amortization

5.7

5.0

Net realized (gains) losses on investments

(1.9)

0.2

(Gain) loss on disposal of property and equipment

(0.0)

0.4

Share-based compensation expense

1.2

0.0

Excess tax benefits from share-based payment arrangements

—

0.2

Activity related to rabbi trust

0.1

0.0

Change in accrued investment income

(1.2)

(0.3)

Change in agents' balances and premium receivable

14.2

6.0

Change in reinsurance receivables

(1.3)

1.7

Change in deferred policy acquisition costs

3.7

1.4

Change in other assets

(8.8)

6.4

Change in unpaid losses and loss adjustment expenses

22.2

(7.3)

Change in unearned premium

(17.8)

(7.1)

Change in other liabilities

5.0

0.3

Net cash provided by operating activities

30.1

21.4

Investing Activities:

Purchases of fixed maturities

(155.0)

(103.6)

Purchases of short-term investments

(0.4)

(5.1)

Purchases of property and equipment

(0.7)

(10.4)

Maturities and redemptions of fixed maturities

65.2

36.8

Maturities and redemptions of short-term investments

0.5

—

Proceeds from sale of fixed maturities

81.5

99.2

Proceeds from sale of equity securities

5.0

—

Proceeds from sale of short-term investments

—

1.1

Proceeds from sale of property and equipment

0.0

0.0

Net cash (used in) provided by investing activities

(4.0)

17.9

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

(1.5)

(1.1)

Dividends paid to shareholders

(6.4)

(5.8)

                       Net cash used in financing activities                 

(7.9)

(6.9)

Net increase in cash and cash equivalents       

18.2

32.4

Cash and cash equivalents at beginning of period       

69.4

43.6

Cash and cash equivalents at end of period      

$87.6

$76.0

Six months ended June 30,

2017

2016

Operating Activities:

(unaudited)

(unaudited)

Net earnings

$15.7

$18.7

Adjustments:

Depreciation

8.3

6.5

Amortization

11.0

10.8

Net realized (gains) losses on investments

(2.4)

0.0

(Gain) loss on disposal of property and equipment

(0.0)

0.4

Share-based compensation expense

2.6

0.4

Excess tax benefits from share-based payment arrangements

—

0.2

Activity related to rabbi trust

0.1

0.1

Change in accrued investment income

(1.0)

0.5

Change in agents' balances and premium receivable

(2.9)

(25.0)

Change in reinsurance receivables

(0.4)

(2.1)

Change in deferred policy acquisition costs

0.7

(2.7)

Change in other assets

(13.2)

3.3

Change in unpaid losses and loss adjustment expenses

15.6

(3.8)

Change in unearned premium

9.1

28.7

Change in other liabilities

10.3

(3.7)

                         Net cash provided by operating activities

53.7

32.4

Investing Activities:

Purchases of and additional investments in:

Purchases of fixed maturities

(275.8)

(261.5)

Purchases of equity securities

(1.9)

—

Purchases of short-term investments

(0.4)

(5.1)

Purchases of property and equipment

(1.6)

(15.4)

Maturities and redemptions of fixed maturities

108.5

76.1

Maturities and redemptions of short-term investments

0.5

—

Proceeds from sale of fixed maturities

119.2

203.1

Proceeds from sale of equity securities

7.0

—

Proceeds from sale of short-term investments

2.4

5.7

Proceeds from sale of property and equipment

0.0

0.0

Net cash (used in) provided by investing activities

(42.2)

2.9

Financing Activities:

Proceeds from stock options exercised and employee stock purchases

0.1

0.1

Principal payments under capital lease obligations

(0.3)

(0.2)

Acquisition of treasury stock

(3.7)

(10.1)

Dividends paid to shareholders

(12.8)

(11.5)

                           Net cash used in financing activities      

(16.7)

(21.8)

Net (decrease) increase in cash and cash equivalents 

(5.2)

13.5

Cash and cash equivalents at beginning of period       

92.8

62.5

Cash and cash equivalents at end of period    

$87.6

$76.0

Three months ended June 30, 

Six months ended June 30,

2017

2016

2017

2016

(in millions, except EPS)

Net earnings

Less:

$5.0

$11.0

$15.7

$18.7

Realized gains (losses) on investments, pre-tax

1.9

(0.2)

2.4

(0.0)

Provision for income taxes

(0.7)

0.1

(0.8)

0.0

Realized gains (losses) on investments, net of tax

1.2

(0.1)

1.6

(0.0)

Operating earnings, after-tax

3.8

11.1

14.1

18.7

Less: Provision for income taxes

(0.9)

(5.1)

(5.1)

(8.1)

Pre-tax operating earnings

4.7

16.2

19.2

26.8

Less:

Net investment income

9.0

8.9

17.7

17.0

Other income

0.4

0.2

0.7

0.5

Interest expense

(3.5)

(3.5)

(7.0)

(7.0)

Corporate general and administrative expenses

(2.4)

(2.1)

(4.7)

(3.8)

Other expenses

(0.5)

(0.8)

(0.8)

(1.1)

Underwriting income

1.7

13.4

13.5

21.2

Net earnings per diluted share

$0.46

$0.99

$1.41

$1.68

Less: Realized gains (losses) on investments, net of tax

0.12

(0.01)

0.14

(0.01)

Operating earnings per diluted share       

$0.34

$1.00

$1.27

$1.69

Three months ended June 30, 

Six months ended June 30,

2017

2016

2017

2016

(in millions)

Earned premium   

$339.1

$340.7

$680.5

$676.9

Less: Change in unearned premium

15.3

3.7

(11.4)

(31.8)

Net written premium  

323.8

337.0

691.9

708.7

Less: Ceded reinsurance  

0.0

0.1

(2.6)

(4.2)

Gross written premium      

$323.8

$337.0

$694.5

$712.9

(in millions)

June 30, 2017

June 30, 2016

Total capital        

$987.1

$978.1

Less: Goodwill      

75.3

$75.3

Tangible capital

$911.8

$902.8

Three months ended June 30, 

Six months ended June 30,

2017

2016

2017

2016

Calendar Year Combined Ratio

99.5%

96.1%

98.0%

96.9%

Less: Impact of Premium Adjustments   

3.7%

--%

2.3%

--%

Calendar Year Combined Ratio (excluding premium adjustments)

95.8%

96.1%

95.7%

96.9%

Source:    

Infinity Property and Casualty Corporation

2201 4th Avenue North

Birmingham, AL 35203