Infinity Property and Casualty : Reports Earnings for the Fourth Quarter of 2017

Three months ended December 31,

Twelve months ended December 31,

(in millions, except per share amounts and ratios)

2016

Change

2017

2016

Change

Gross written premium ⁽¹⁾⁽²⁾

$340.6

$329.1

3.5%

$1,397.3

$1,401.4

(0.3%)

Revenues

$382.6

$415.3

(7.9%)

$1,518.0

$1,538.7

(1.3%)

Net earnings

$14.7

$21.6

(31.9%)

$45.4

$43.1

5.3%

Net earnings per diluted share

$1.34

$1.95

(31.3%)

$4.10

$3.88

5.7%

Net earnings excluding realized gains ⁽²⁾

$14.5

$20.4

(28.6%)

$43.9

$41.0

7.1%

Net earnings excluding realized gains per diluted share ⁽²⁾

$1.32

$1.84

(28.3%)

$3.97

$3.70

7.3%

Underwriting income ⁽²⁾

$34.2

$25.7

33.1%

$66.1

$46.1

43.4%

Combined ratio

90.1%

93.1%

(3.0) pts

95.2%

96.7%

(1.5) pts

Return on equity ⁽³⁾

8.2%

12.3%

(4.1) pts

6.4%

6.2%

0.2 pt

Return on equity excluding realized gains ⁽²⁾⁽³⁾

8.1%

11.6%

(3.5) pts

6.2%

5.9%

0.3 pt

Book value per share

$65.87

$63.31

4.0%

Debt to total capital

27.6%

28.2%

(0.6) pt

Debt to tangible capital ⁽²⁾

29.9%

30.6%

(0.7) pt

(1)

Infinity's policy is to close the claims and policy systems on the last Friday of the month, resulting in a 14-week quarter during the three months ended December
31, 2016. Excluding the extra week from 2016, gross written premium in 2017 would have increased 9.5% during the quarter and 1.0% for the year.

(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.

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
December 31,

Twelve months ended
December 31,

2017

2016

2017

2016

(unaudited)

(unaudited)

(unaudited)

(audited)

Revenues:

  Earned premium

$345.9

$372.6

$1,371.3

$1,391.7

  Installment and other fee income

26.3

30.2

105.8

107.4

  Net investment income

9.8

10.4

37.3

35.5

  Net realized gains on investments ⁽¹⁾

0.3

1.9

2.2

3.1

  Other income

0.4

0.3

1.4

1.0

Total revenues

382.6

415.3

1,518.0

1,538.7

Costs and Expenses:

  Losses and loss adjustment expenses ⁽²⁾

246.2

287.1

1,053.7

1,096.8

Commissions and other underwriting expenses

91.8

90.0

357.3

356.1

  Interest expense

3.5

3.5

14.0

14.0

Corporate general and administrative expenses

2.9

2.4

9.8

7.9

  Other expenses

0.8

0.3

2.5

1.7

Total costs and expenses

345.2

383.2

1,437.3

1,476.6

Earnings before income taxes

37.4

32.1

80.7

62.1

Provision for income taxes

22.7

10.5

35.3

19.0

Net Earnings

$14.7

$21.6

$45.4

$43.1

Net Earnings per Common Share:

Basic

$1.35

$1.96

$4.13

$3.91

Diluted

$1.34

$1.95

$4.10

$3.88

Average Number of Common Shares:

Basic

10.9

11.0

11.0

11.0

Diluted

11.0

11.1

11.1

11.1

Cash Dividends per Common Share

$0.58

$0.52

$2.32

$2.08

Notes:

(1) Net realized gains on sales

$3.3

$1.9

$5.3

$3.5

Total other-than-temporary impairment (OTTI) losses ⁽³⁾

(2.8)

(0.1)

(2.9)

(0.4)

Non-credit portion in other comprehensive income

0.0

—

0.1

—

OTTI losses reclassified from other comprehensive income

(0.3)

—

(0.3)

—

Net impairment losses recognized in earnings

(3.1)

(0.1)

(3.1)

(0.4)

Total net realized gains on investments

$0.3

$1.9

$2.2

$3.1

(2) Losses and loss adjustment expenses for the three and twelve months ended December 31, 2017, includes $1.3 million and $18.5
million of favorable development on prior accident year loss and loss adjustment expense reserves, respectively. Losses and loss
adjustment expenses for the three and twelve months ended December 31, 2016, includes $5.4 million and $24.0 million of favorable
development on prior accident year loss and loss adjustment expense reserves, respectively.

(3) Of the $3.1 million impairments recorded during 2017, $3.0 million were recorded during the fourth quarter as a result of our upcoming
transition to a new investment policy statement and the related repositioning of our portfolio. These securities, impaired as we have an
intent to sell, are expected to be sold between February and May 2018. We also intend to sell other securities that are currently in 
unrealized gain positions.  The overall impact to the portfolio based on current market values, after security sales during the first and
second quarters of  2018, is expected to be immaterial. The actual impact could be different as market values fluctuate over the transition
period.

Infinity Property and Casualty Corporation

Balance Sheets

(in millions, except book value per share)

December 31,

September 30,

December 31,

2017

2016

(unaudited)

(unaudited)

(audited)

Assets:

Investments:

Fixed maturities, at fair value

$1,441.1

$1,448.7

$1,390.2

Equity securities, at fair value

96.0

100.0

90.6

Short-term investments, at fair value

2.5

2.6

2.9

Total investments

1,539.7

1,551.3

1,483.7

Cash and cash equivalents

107.6

102.4

92.8

Accrued investment income

13.1

12.4

12.5

Agents' balances and premium receivable

508.1

509.2

495.2

Property and equipment (net of depreciation)

82.5

84.5

96.2

Prepaid reinsurance premium

1.0

3.0

3.4

Recoverables from reinsurers

30.3

36.4

17.3

Deferred policy acquisition costs

88.3

91.4

91.1

Current and deferred income taxes

9.4

20.1

21.6

Receivable for securities sold

1.7

2.0

0.8

Other assets

16.6

20.0

12.8

Goodwill

75.3

75.3

75.3

Total assets

$2,473.4

$2,507.9

$2,402.6

Liabilities and Shareholders' Equity:

Liabilities:

Unpaid losses and loss adjustment expenses

$715.1

$729.3

$685.5

Unearned premium

627.6

637.5

614.3

Long-term debt

273.8

273.8

273.6

Commissions payable

16.7

15.0

16.2

Payable for securities purchased

5.6

10.2

13.9

Other liabilities

114.3

123.5

99.9

Total liabilities

1,753.1

1,789.3

1,703.4

Shareholders' Equity:

Common stock

21.9

21.9

21.8

Additional paid-in capital

383.6

381.9

378.7

Retained earnings ⁽¹⁾

797.5

789.2

777.7

Accumulated other comprehensive income, net of tax

19.8

23.5

7.9

Treasury stock, at cost  ⁽²⁾

(502.5)

(497.9)

(487.0)

Total shareholders' equity

720.3

718.6

699.2

Total liabilities and shareholders' equity

$2,473.4

$2,507.9

$2,402.6

Shares outstanding

10.9

11.0

11.0

$65.87

$65.52

$63.31

Notes: 

(1)

The change in retained earnings from September 30, 2017, is a result of net income of $14.7 million less shareholder dividends of $6.3 million.
The change in retained earnings from December 31, 2016, is a result of net income of $45.4 million less shareholder dividends of $25.5 million. 

(2)

Infinity repurchased 48,700 common shares during the fourth quarter of 2017 at an average per share price, excluding commissions, of $94.21. 
Infinity repurchased 133,306 common shares during the twelve months ended December 31, 2017, at an average price, excluding commissions,
of $92.54. 

Infinity Property and Casualty Corporation

Statements of Cash Flows

(in millions)

Three months ended December 31,

2017

2016

(unaudited)

(unaudited)

Operating Activities:

Net earnings

$14.7

$21.6

Adjustments:

Depreciation

4.0

4.2

Amortization

5.0

3.9

Net realized gains on investments

(0.3)

(1.9)

Loss on disposal of property and equipment

0.1

0.0

Share-based compensation expense

1.6

0.9

Activity related to rabbi trust

0.0

(0.0)

Change in accrued investment income

(0.7)

(1.2)

Change in agents' balances and premium receivable

1.1

56.8

Change in reinsurance receivables

8.0

1.4

Change in deferred policy acquisition costs

3.1

6.3

Change in other assets

16.8

8.9

Change in unpaid losses and loss adjustment expenses

(14.2)

8.9

Change in unearned premium

(9.9)

(46.0)

Change in other liabilities

(7.6)

(6.8)

Net cash provided by operating activities

21.8

57.0

Investing Activities:

Purchases of fixed maturities

(78.1)

(99.9)

Purchases of equity securities

—

(7.6)

Purchases of short-term investments

—

(1.6)

Purchases of property and equipment

(2.0)

(6.0)

Maturities and redemptions of fixed maturities

36.8

47.9

Maturities and redemptions of short-term investments

—

1.0

Proceeds from sale of fixed maturities

29.0

25.3

Proceeds from sale of equity securities

9.0

10.2

Net cash used in investing activities

(5.2)

(30.8)

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

(4.9)

(1.3)

Dividends paid to shareholders

(6.3)

(5.7)

Net cash used in financing activities

(11.3)

(7.1)

Net increase in cash and cash equivalents

5.2

19.2

Cash and cash equivalents at beginning of period

102.4

73.6

Cash and cash equivalents at end of period

$107.6

$92.8

Infinity Property and Casualty Corporation

Statements of Cash Flows

(in millions)

Twelve months ended December 31,

2017

2016

(unaudited)

(audited)

Operating Activities:

Net earnings

$45.4

$43.1

Adjustments:

Depreciation

16.3

14.6

Amortization

21.5

20.4

Net realized gains on investments

(2.2)

(3.1)

Loss on disposal of property and equipment

0.0

0.6

Share-based compensation expense

4.6

2.3

Excess tax benefits from share-based payment arrangements

—

0.2

Activity related to rabbi trust

0.2

0.1

Change in accrued investment income

(0.6)

(0.2)

Change in agents' balances and premium receivable

(12.9)

16.4

Change in reinsurance receivables

(10.7)

(0.2)

Change in deferred policy acquisition costs

2.8

2.0

Change in other assets

3.9

9.8

Change in unpaid losses and loss adjustment expenses

29.6

15.5

Change in unearned premium

13.2

(2.3)

Change in other liabilities

14.8

(13.7)

Net cash provided by operating activities

126.0

105.4

Investing Activities:

Purchases of fixed maturities

(490.7)

(479.0)

Purchases of equity securities

(1.9)

(7.6)

Purchases of short-term investments

(3.0)

(9.9)

Purchases of property and equipment

(4.6)

(21.7)

Maturities and redemptions of fixed maturities

218.6

163.8

Maturities and redemptions of short-term investments

0.9

2.3

Proceeds from sale of fixed maturities

192.4

290.9

Proceeds from sale of equity securities

16.0

12.2

Proceeds from sale of short-term investments

2.4

9.3

Proceeds from sale of property and equipment

0.0

0.0

Net cash used in investing activities

(69.8)

(39.9)

Financing Activities:

Proceeds from stock options exercised and employee stock purchases

0.3

0.3

Principal payments under capital lease obligations

(0.5)

(0.5)

Acquisition of treasury stock

(15.5)

(12.0)

Dividends paid to shareholders

(25.5)

(23.0)

Net cash used in financing activities

(41.3)

(35.2)

Net increase in cash and cash equivalents

14.8

30.3

Cash and cash equivalents at beginning of period

92.8

62.5

Cash and cash equivalents at end of period

$107.6

$92.8

Three months ended
December 31,

Twelve months ended
December 31,

(in millions, except EPS)

2017

2016

2017

2016

Net earnings

$

14.7

$

21.6

$

45.4

$

43.1

Less:

Realized gains on investments, pre-tax

0.3

1.9

2.2

3.1

Provision for income taxes on capital gains

(0.1)

(0.7)

(0.8)

(1.1)

Realized gains on investments, net of tax

0.2

1.2

1.4

2.0

Net earnings excluding realized gains, after-tax

14.5

20.4

43.9

41.0

Less: Provision for income taxes

(22.6)

(9.9)

(34.6)

(17.9)

Net earnings excluding realized gains, pre-tax

37.2

30.2

78.5

59.0

Less:

Net investment income

9.8

10.4

37.3

35.5

Other income

0.4

0.3

1.4

1.0

Interest expense

(3.5)

(3.5)

(14.0)

(14.0)

Corporate general and administrative expenses

(2.9)

(2.4)

(9.8)

(7.9)

Other expenses

(0.8)

(0.3)

(2.5)

(1.7)

Underwriting income

$

34.2

$

25.7

$

66.1

$

46.1

Net earnings per diluted share

$

1.34

$

1.95

$

4.10

$

3.88

Less: Realized gains on investments, net of tax

0.02

0.11

0.13

0.18

Net earnings excluding realized gains per diluted share

$

1.32

$

1.84

$

3.97

$

3.70

Three months ended
December 31,

Twelve months ended
December 31,

(in millions)

2017

2016

2017

2016

Earned premium

$345.9

$372.6

$1,371.3

$1,391.7

Less: Change in unearned premium

9.9

45.9

(15.5)

(0.8)

Net written premium

335.9

326.7

1,386.9

1,392.5

Less: Ceded reinsurance

(4.7)

(2.4)

(10.4)

(9.0)

Gross written premium

$340.6

$329.1

$1,397.3

$1,401.4

(in millions)

December 31, 2017

December 31, 2016

Total capital

$995.3

$974.2

Less: Goodwill

75.3

75.3

Tangible capital

$920.0

$898.9