Infinity P&C Happy with 4thQ, Year 2002 Results

Infinity Property and Casualty Corporation of Birmingham, Ala. today reported earnings of its operations for the 2002 fourth quarter and full year as well as pro forma earnings as though Infinity had been a public company for all of 2001 and 2002. Infinity was formed from several subsidiaries and part of a division of American Financial Group Inc. and last month completed an initial public offering of 61 percent of its common stock.

The company’s nonstandard auto insurance subsidiaries (NSA Group) earned $14.5 million in the fourth quarter of 2002 and $45.9 million for the full year, compared to $15.1 million and $9.7 million for those periods in 2001.

The Assumed Agency Business, formerly operated by AFG’s Great American Insurance Company, had underwriting losses of $1.7 million in the fourth quarter of 2002 and $10.0 million for the full year, compared to losses of $7.4 million and $14.7 million for those periods in 2001. Because this business was not a separate entity, there was no discrete investment portfolio and no identifiable investment income related to it. However, in connection with the transfer of the business, on January 1, 2003, Infinity received $125.3 million of cash and investments, which had a market yield of 4.4 percent.

“Combining the separate results discussed above and adjusting to reflect the transactions as though they occurred at the beginning of 2001,” Roger Smith, CFO, said “we can show what Infinity might have looked like for 2001 and 2002. Adjustments have been made for the following items: (1) investment income on the $125.3 million portfolio transferred for the Assumed Agency Business at its market yield; (2) interest expense on the $55 million note issued in December 2002; and (3) income tax effects on applicable items.” Details of pro forma results are on an accompanying schedule.

Pro forma earnings for the fourth quarter of 2002 were $13.5 million or $.66 per share, compared to $10.4 million or $.51 per share for the same period of 2001. For the full year, pro forma earnings were $39.9 million or $1.96 per share, compared to $0.7 million or $.03 per share a year earlier.

Combined underwriting profit for the fourth quarter of 2002 was $15.2 million, an increase of $11.0 million over the same quarter of 2001. For the full year, combined underwriting profit was $29.0 million, an improvement of $81.7 million over 2001’s loss of $52.7 million.

Underwriting results for the NSA Group improved for the quarter and the year, driven primarily by rate increases. Offsetting this improvement in underwriting results were decreases in investment income from a smaller investment portfolio and marginally lower yields, and an increase in extra-contractual charges.

NSA Group net written premiums decreased as a result of reduced writing in a number of non-focus states as well as the impact of rate increases and a full year’s usage of the Inter Ocean reinsurance facility. However, in 2002 in Infinity’s top five focus states, premiums grew almost 10 percent.

The decreases in underwriting losses on the Assumed Agency Business in both the fourth quarter of 2002 and the full year are the result of rate increases taken to improve the profitability of the business.

The Assumed Agency Business net written premium for the fourth quarter of 2002 was $19.5 million, a 52 percent decline from that in the fourth quarter of 2001. For the year 2002, net written premiums for the business were $74.3 million, down 55 percent. These decreases were largely the result of the expansion in the third quarter of 2002 of the Inter-Ocean reinsurance agreement to include the Assumed Agency Business. Excluding the effect of this reinsurance, net written premiums fell 11 percent for the fourth quarter and 8 percent for the year.

Infinity Property and Casualty Corporation is a national provider of personal automobile insurance with an emphasis on nonstandard auto insurance.