BIRMINGHAM, Ala.,
April 30, 2018 /PRNewswire/ -- Infinity Property and
Casualty Corporation (NASDAQ: IPCC) today reported results for the
three months ended March 31, 2018:
|
Three months ended
March 31,
|
(in millions, except
per share amounts and ratios)
|
2018
|
|
2017
|
|
Change
|
|
|
|
(as adjusted)
(1)
|
|
|
|
|
|
|
|
|
Gross written premium
(2)
|
$421.6
|
|
$370.7
|
|
13.7%
|
Revenues
|
$388.8
|
|
$377.6
|
|
3.0%
|
|
|
|
|
|
|
Net
earnings
|
$20.1
|
|
$10.5
|
|
91.1%
|
Net earnings per
diluted share
|
$1.82
|
|
$0.94
|
|
93.6%
|
|
|
|
|
|
|
Net earnings
excluding realized gains (2)
|
$22.3
|
|
$10.2
|
|
119.3%
|
Net earnings
excluding realized gains per diluted share
(2)
|
$2.03
|
|
$0.91
|
|
123.1%
|
|
|
|
|
|
|
Underwriting income
(2)
|
$26.3
|
|
$11.5
|
|
128.9%
|
Combined ratio
(3)
|
92.6%
|
|
96.6%
|
|
(4.0)
pts
|
|
|
|
|
|
|
Return on equity
(4)
|
11.2%
|
|
6.0%
|
|
5.2
pts
|
Return on equity
excluding realized gains (2) (4)
|
12.5%
|
|
5.8%
|
|
6.7
pts
|
|
|
|
|
|
|
Book value per
share
|
$65.61
|
|
$63.80
|
|
2.8 %
|
Debt to total
capital
|
27.7%
|
|
28.1%
|
|
(0.4)
pt
|
Debt to tangible
capital (2)
|
30.0%
|
|
30.4%
|
|
(0.4)
pt
|
Notes:
|
(1)
|
2017 has been
adjusted for the retrospective adoption of Accounting Standards
Update 2014-09 Revenue from Contracts with
Customers.
|
(2)
|
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.
|
(3)
|
During the first
quarter of 2017, a $3.8 million adjustment was made to written and
earned premium for premium to be refunded to policyholders in
California. Excluding the adjustment, the GAAP combined ratio for
the first quarter of 2017 would have been 95.6%.
|
(4)
|
Annualized
|
|
|
|
Columns throughout
may not foot due to rounding.
|
Net earnings per diluted share increased 93.6% in the first
three months of 2018 compared with the first three months of 2017,
primarily due to a decrease in the accident year combined ratio
from 98.5% at March 31, 2017, to
95.1% at March 31, 2018, as higher
average earned premiums offset relatively flat loss cost
trends.
Gross written premium grew 13.7% compared with the same period
of 2017. Growth in California,
Texas and Commercial Auto,
primarily as a result of higher average premium, was offset by a
decline in Florida.
Merger with Kemper Corporation
On February 13, 2018, the Company
entered into a definitive agreement and plan of merger (the "Merger
Agreement") with Kemper Corporation, a Delaware corporation ("Kemper") and Vulcan
Sub, Inc., an Ohio corporation and
a wholly owned subsidiary of Kemper ("Kemper Merger Sub"). The
Company expects the closing of the Merger to occur in the third
quarter of 2018. The merger is subject to certain closing
conditions, including, among others, (i) adoption by Infinity
shareholders of the Merger Agreement, (ii) approval by Kemper
stockholders of the issuance of Kemper common stock in connection
with the merger, (iii) the receipt of certain regulatory approvals,
(iv) the absence of any effective order issued by any court of
competent jurisdiction or other legal restraint prohibiting or
preventing the consummation of the merger, and (v) other closing
conditions.
Forward-Looking Statements
This press release contains certain "forward-looking statements"
which 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 report not
dealing with historical results or current facts are
forward-looking and are based on estimates, assumptions and
projections. Statements which 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 what we expect include
determinations with respect to reserve adequacy, realized gains or
losses on the investment portfolio (including other-than-temporary
impairments for credit losses), loss cost trends and competitive
conditions in our 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. For a detailed list of
some of the risks and uncertainties related to the consummation of
the merger, see Infinity's Joint Proxy Statement/Prospectus with
Kemper, filed with the SEC on April 27,
2018.
Infinity Property
and Casualty Corporation
|
Statements of
Earnings
|
(in millions, except
EPS and dividends)
|
|
(unaudited)
|
|
Three months
ended
March 31,
|
|
|
2018
|
|
2017
|
|
|
|
|
(as
adjusted)
|
Revenues:
|
|
|
|
|
Earned
premium
|
|
$354.0
|
|
$341.4
|
Installment and other
fee income
|
|
27.4
|
|
26.7
|
Net investment
income
|
|
9.8
|
|
8.7
|
Net realized (losses)
gains on investments (1)
|
|
(2.8)
|
|
0.5
|
Other
income
|
|
0.4
|
|
0.3
|
Total
revenues
|
|
388.8
|
|
377.6
|
|
|
|
|
|
Costs and
Expenses:
|
|
|
|
|
Losses and loss
adjustment expenses (2)
|
|
264.6
|
|
270.7
|
Commissions and other
underwriting expenses
|
|
90.5
|
|
85.9
|
Interest
expense
|
|
3.5
|
|
3.5
|
Corporate general and
administrative expenses
|
|
4.7
|
|
2.3
|
Other
expenses
|
|
0.5
|
|
0.3
|
Total costs and
expenses
|
|
363.8
|
|
362.7
|
|
|
|
|
|
Earnings before
income taxes
|
|
24.9
|
|
14.9
|
Provision for income
taxes
|
|
4.9
|
|
4.4
|
Net
Earnings
|
|
$20.1
|
|
$10.5
|
|
|
|
|
|
Net Earnings per
Common Share:
|
|
|
|
|
Basic
|
|
$1.84
|
|
$0.96
|
Diluted
|
|
$1.82
|
|
$0.94
|
|
|
|
|
|
Average Number of
Common Shares:
|
|
|
|
|
Basic
|
|
10.9
|
|
11.0
|
Diluted
|
|
11.0
|
|
11.1
|
|
|
|
|
|
Cash Dividends per
Common Share
|
|
$0.58
|
|
$0.58
|
|
Notes:
|
|
(1)
|
Net realized gains on
sales
|
$
|
1.4
|
|
$
|
0.5
|
|
Net holding period
losses on equity securities
|
(2.6)
|
|
—
|
|
Total
other-than-temporary impairment (OTTI) losses
|
(1.5)
|
|
(0.0)
|
|
Non-credit portion in
other comprehensive income
|
0.2
|
|
0.0
|
|
OTTI losses
reclassified from other comprehensive income
|
(0.3)
|
|
—
|
|
Net impairment losses
recognized in earnings
|
(1.6)
|
|
(0.0)
|
|
Total net realized
(losses) gains on investments
|
($2.8)
|
|
$0.5
|
|
|
|
|
|
(2)
|
Losses and loss
adjustment expenses for the three months ended March 31, 2018,
include $8.9 million of favorable development on prior accident
year loss and loss
adjustment expense reserves compared with $6.4 million of favorable
development
for the three months ended March
31, 2017.
|
Infinity Property
and Casualty Corporation
|
Balance
Sheets
|
(in millions, except
book value per share)
|
|
(unaudited)
|
March 31,
|
|
December
31,
|
|
2018
|
|
2017
|
|
|
|
(as
adjusted)
|
Assets
|
|
|
|
Investments:
|
|
|
|
Fixed maturities, at
fair value
|
$1,497.9
|
|
$1,441.1
|
Equity securities, at
fair value
|
90.5
|
|
96.0
|
Short-term
investments, at fair value
|
—
|
|
2.5
|
Total
investments
|
1,588.4
|
|
1,539.7
|
Cash and cash
equivalents
|
88.8
|
|
107.6
|
Accrued investment
income
|
10.1
|
|
13.1
|
Agents' balances and
premium receivable
|
557.2
|
|
508.0
|
Property and
equipment (net of depreciation)
|
78.7
|
|
82.5
|
Prepaid reinsurance
premium
|
0.5
|
|
1.0
|
Recoverable from
reinsurers
|
22.7
|
|
30.3
|
Deferred policy
acquisition costs
|
98.7
|
|
88.3
|
Current and deferred
income taxes
|
9.1
|
|
10.5
|
Receivable for
securities sold
|
0.1
|
|
1.7
|
Other
assets
|
21.9
|
|
16.6
|
Goodwill
|
75.3
|
|
75.3
|
Total assets
|
$
|
2,551.5
|
|
$2,474.5
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Liabilities:
|
|
|
|
Unpaid losses and
loss adjustment expenses
|
$701.0
|
|
$715.1
|
Unearned
premium
|
691.5
|
|
627.6
|
Long-term
debt
|
273.9
|
|
273.8
|
Commissions
payable
|
15.8
|
|
16.7
|
Payable for
securities purchased
|
40.4
|
|
5.6
|
Other
liabilities
|
111.0
|
|
119.8
|
Total
liabilities
|
1,833.6
|
|
1,758.7
|
|
|
|
|
Shareholders'
Equity:
|
|
|
|
Common
stock
|
21.9
|
|
21.9
|
Additional paid-in
capital
|
385.3
|
|
383.6
|
Retained earnings
(1)
|
824.9
|
|
793.1
|
Accumulated other
comprehensive income, net of tax
|
(11.2)
|
|
19.8
|
Treasury stock, at
cost
|
(503.1)
|
|
(502.5)
|
Total
shareholders' equity
|
717.9
|
|
715.8
|
Total
liabilities and shareholders' equity
|
$2,551.5
|
|
$2,474.5
|
|
|
|
|
Shares
outstanding
|
10.9
|
|
10.9
|
Book value per
share
|
$65.61
|
|
$65.46
|
|
|
|
|
|
Notes:
|
(1)
|
The change in
retained earnings from December 31, 2017, is primarily a result of
a cumulative effect of change in accounting principle of $18.1
million and net income of $20.1 million partially offset by
shareholder dividends of $6.3 million.
|
Infinity Property
and Casualty Corporation
|
Statements of Cash
Flows
|
(in
millions)
|
|
(unaudited)
|
Three months ended
March 31,
|
|
2018
|
|
2017
|
|
|
|
(as
adjusted)
|
|
|
|
|
Operating
Activities:
|
|
|
|
Net
earnings
|
$20.1
|
|
|
$10.5
|
|
Adjustments:
|
|
|
|
Depreciation
|
3.7
|
|
|
4.2
|
|
Amortization
|
4.8
|
|
|
5.3
|
|
Net realized losses
(gains) on investments
|
2.8
|
|
|
(0.5)
|
|
Loss (gain) on
disposal of property and equipment
|
0.0
|
|
|
(0.0)
|
|
Share-based
compensation expense
|
1.7
|
|
|
1.4
|
|
Activity related to
rabbi trust
|
(0.0)
|
|
|
0.1
|
|
Change in accrued
investment income
|
3.0
|
|
|
0.2
|
|
Change in agents'
balances and premium receivable
|
(49.2)
|
|
|
(17.1)
|
|
Change in reinsurance
receivables
|
8.2
|
|
|
0.9
|
|
Change in deferred
policy acquisition costs
|
(10.4)
|
|
|
(3.0)
|
|
Change in other
assets
|
(0.8)
|
|
|
(4.5)
|
|
Change in unpaid
losses and loss adjustment expenses
|
(14.1)
|
|
|
(6.5)
|
|
Change in unearned
premium
|
63.9
|
|
|
26.9
|
|
Change in other
liabilities
|
(9.8)
|
|
|
5.6
|
|
Net cash provided by
operating activities
|
23.9
|
|
|
23.5
|
|
Investing
Activities:
|
|
|
|
Purchases of fixed
maturities
|
(403.5)
|
|
|
(120.8)
|
|
Purchases of equity
securities
|
—
|
|
|
(1.9)
|
|
Purchases of property
and equipment
|
(0.3)
|
|
|
(0.9)
|
|
Maturities and
redemptions of fixed maturities
|
32.5
|
|
|
43.3
|
|
Proceeds from sale of
fixed maturities
|
328.1
|
|
|
37.7
|
|
Proceeds from sale of
equity securities
|
5.0
|
|
|
2.0
|
|
Proceeds from sale of
short-term investments
|
2.5
|
|
|
2.4
|
|
Proceeds from sale of
property and equipment
|
—
|
|
|
0.0
|
|
Net cash used in
investing activities
|
(35.7)
|
|
|
(38.2)
|
|
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
|
(0.6)
|
|
|
(2.3)
|
|
Dividends paid to
shareholders
|
(6.3)
|
|
|
(6.4)
|
|
Net cash used in
financing activities
|
(7.0)
|
|
|
(8.8)
|
|
Net decrease in cash
and cash equivalents
|
(18.8)
|
|
|
(23.4)
|
|
Cash and cash
equivalents at beginning of period
|
107.6
|
|
|
92.8
|
|
Cash and cash
equivalents at end of period
|
$88.8
|
|
|
$69.4
|
|
Definitions of Non-GAAP Financial and Operating
Measures
Net earnings excluding realized gains Management uses net
earnings excluding realized gains as a measure to evaluate the
insurance business. The Company believes that net earnings
excluding realized gains provides investors a valuable measure of
the performance without being obscured by the net effect of
realized capital gains and losses, which can be volatile on a
quarterly basis. Net earnings is the most comparable GAAP
measure.
Underwriting income measures the insurer's profit on
insurance sales after all losses and expenses have been paid and is
calculated by deducting losses and loss adjustment expenses and
commissions and other underwriting expenses from earned premium.
Management uses underwriting income to measure the success of its
pricing and underwriting strategies. It is useful for investors to
evaluate the components of our profitability separately from
investments. Net earnings is the most comparable GAAP measure.
Below is a schedule that reconciles operating earnings and
underwriting income to net earnings:
|
|
Three months ended
March 31,
|
|
|
2018
|
|
2017
|
(in millions, except
EPS)
|
|
|
|
(as
adjusted)
|
|
|
|
|
|
Net
earnings
|
|
$20.1
|
|
|
$10.5
|
|
|
|
|
|
|
Less:
|
|
|
|
|
Realized (losses)
gains on investments, pre-tax
|
|
(2.8)
|
|
|
0.5
|
|
Benefit (provision)
for income taxes
|
|
0.6
|
|
|
(0.2)
|
|
Realized (losses)
gains on investments, net of tax
|
|
(2.2)
|
|
|
0.3
|
|
|
|
|
|
|
Net earnings
excluding realized gains, after-tax
|
|
22.3
|
|
|
10.2
|
|
Less: Provision for
income taxes
|
|
(5.4)
|
|
|
(4.2)
|
|
Net earnings
excluding realized gains, pre-tax
|
|
27.8
|
|
|
14.4
|
|
|
|
|
|
|
Less:
|
|
|
|
|
Net investment
income
|
|
9.8
|
|
|
8.7
|
|
Other
income
|
|
0.4
|
|
|
0.3
|
|
Interest
expense
|
|
(3.5)
|
|
|
(3.5)
|
|
Corporate general and
administrative expenses
|
|
(4.7)
|
|
|
(2.3)
|
|
Other
expenses
|
|
(0.5)
|
|
|
(0.3)
|
|
Underwriting
income
|
|
26.3
|
|
|
11.5
|
|
|
|
|
|
|
Net earnings per
diluted share
|
|
$1.82
|
|
|
$0.94
|
|
Less: Realized
(losses) gains on investments, net of tax
|
|
(0.21)
|
|
|
0.03
|
|
Net earnings
excluding realized gains per diluted share
|
|
$2.03
|
|
|
$0.91
|
|
Gross written premium is the amount of premium charged
for policies issued during a fiscal period (including assumed
premium). Management uses gross written premium as a measure of
production levels. Earned premium is the most comparable GAAP
measure.
Below is a schedule that reconciles gross written premium to
earned premium:
|
|
Three months
ended
March 31,
|
(in
millions)
|
|
2018
|
|
2017
|
|
|
|
|
|
Earned
premium
|
|
$354.0
|
|
|
$341.4
|
|
Less: Change in
unearned premium
|
|
(63.9)
|
|
|
(26.7)
|
|
Net written
premium
|
|
417.9
|
|
|
368.1
|
|
Less: Ceded
reinsurance
|
|
(3.7)
|
|
|
(2.6)
|
|
Gross written
premium
|
|
$421.6
|
|
|
$370.7
|
|
Tangible capital is defined as total capital (face value
of 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 tangible capital to total
capital:
(in
millions)
|
March 31,
2018
|
|
March 31,
2017
|
|
|
|
(as
adjusted)
|
|
|
|
|
Total
capital
|
$992.9
|
|
$980.2
|
Less:
Goodwill
|
75.3
|
|
$75.3
|
Tangible
capital
|
$917.6
|
|
$904.9
|
Infinity also makes available an investor supplement on its
website. To access the supplemental financial information, go to
http://ir.infinityauto.com and click on "Annual &
Quarterly Reports."
About Infinity
Infinity Property and Casualty Corporation (NASDAQ: IPCC) is a
provider of personal and commercial automobile insurance primarily
meeting the needs and choices of urban and Hispanic customers. Its
products are offered through a network of approximately 10,600
independent agencies and brokers. For more information about
Infinity, please visit http://www.infinityauto.com.
Additional Information Regarding the Merger and Where to Find
It
This communication does not constitute an offer to sell
or the solicitation of an offer to buy any securities or a
solicitation of any vote or approval. This communication is
being made in respect of the proposed merger transaction involving
Kemper, a wholly-owned subsidiary of Kemper and Infinity, among
other things. The proposed issuance of shares of Kemper common
stock in connection with the proposed merger transaction will be
submitted to the stockholders of Kemper for their consideration,
and the proposed merger transaction will be submitted to the
shareholders of Infinity for their consideration. In connection
therewith, Kemper filed with the SEC on April 4, 2018 a
Registration Statement on Form S-4 that included a preliminary
joint proxy statement/prospectus (as amended on Form S-4/A, filed
with the SEC on April 27, 2018), and
each of Kemper and Infinity may be filing with the SEC other
documents regarding the proposed merger transaction. Kemper and
Infinity will mail the definitive joint proxy statement/prospectus
to the stockholders of Kemper and the shareholders of Infinity when
it is available. BEFORE MAKING ANY VOTING OR ANY INVESTMENT
DECISION, INVESTORS AND SECURITYHOLDERS OF KEMPER AND/OR
INFINITY ARE URGED TO READ THE DEFINITIVE JOINT PROXY
STATEMENT/PROSPECTUS REGARDING THE PROPOSED MERGER TRANSACTION AND
ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC
CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER
TRANSACTION. Investors and security holders may obtain free copies
of the definitive joint proxy statement/prospectus, any amendments
or supplements thereto and other documents containing important
information about each of the Company and Infinity, once such
documents are filed with the SEC, through the website maintained by
the SEC at www.sec.gov. Copies of the documents filed with the SEC
by Kemper will be available free of charge under the "Investors"
section of Kemper's website located at
http://www.kemper.com or by contacting Kemper's Investor
Relations Department at 312.661.4930 or investors@kemper.com.
Copies of the documents filed with the SEC by Infinity will be
available free of charge under the "Investor Relations" section of
Infinity's website located at http://www.infinityauto.com or
by contacting Infinity's Investor Relations Department at
205.803.8186 or investor.relations@infinityauto.com
Participants in the Solicitation
Kemper and Infinity,
and their respective directors and executive officers, certain
other members of their respective management and certain of their
respective employees, may be deemed to be participants in the
solicitation of proxies in connection with the proposed merger
transaction. Information about the directors and executive officers
of Kemper is set forth in its annual report on Form 10-K for
the fiscal year ended December 31, 2017, which was filed with
the SEC on February 13, 2018 and in the Joint
Proxy Statement/Prospectus, which was filed with the SEC on
April 27, 2018, and information about
the directors and executive officers of Infinity is set forth
in its annual report on Form 10-K for the fiscal year ended
December 31, 2017, which was filed with the SEC on
February 15, 2018 (as amended on Form 10-K/A, filed with the
SEC on April 23, 2018), each of which
can be obtained free of charge from the sources indicated above.
Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the definitive joint proxy statement/prospectus and other relevant
materials to be filed with the SEC when they become
available.
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content:http://www.prnewswire.com/news-releases/infinity-property-and-casualty-corporation-reports-earnings-for-the-first-quarter-of-2018-300638461.html
SOURCE Infinity Property and Casualty Corporation