Infinity Property and Casualty Corporation (IPCC)

IPCC 
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Infinity Property and Casualty Corporation (IPCC)

Q3 2008 Earnings Call

October 30, 2008 11:00 am ET

Executives

Amy Jordan - Assistant VP, Investor Relations

James Gober – Chairman, President, and CEO

Roger Smith –CFO

Analysts

Joseph DiMarino – Piper Jaffray

Alison Jacobowitz - Merrill Lynch

Presentation

Operator

Good day, ladies and gentlemen and welcome to the quarter 3 2008 Infinity Property and Casualty Corporation earning conference call. My name is Michelle and I will be your operator for today.

At this time all participants are in a listen only mode. We will conduct a question and answer session toward the end of this conference. (Operator Insructions) As a reminder this conference is being recorded for replay purposes. I would now like to turn the call over to Ms Amy Jordan, Assistant Vice President of Investor Relations.

Amy Jordan

Thank you. Good morning and thank you for joining us in Infinity’s third quarter conference call. The live event link on our website does contain the slide presentation for this morning’s call if you would like to follow along. We also have an Excel spreadsheet on our website under the quarterly reports tab that provides more detailed quarterly financial data. Page 10 of this report does contain the definition and reconciliation of any non-GAAP items that we discuss this morning.

Certain statements made during this call may be deemed to be forward looking statements and 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 Security Litigation Reform Act of 1995. All statements in this call not dealing with historical results for current facts are forward looking and are based on estimates, assumptions and projections. Statements that include the words believe, seeks, expects, may, should, intend, likely, targets, plan, anticipates, estimates or the negative version of those words and statements that are future or forward looking nature identify forward looking statements.

Examples of such forward looking statements include statements relating to expectations concerning marketing decisions, premium, growth, earnings, investment performance, expected losses, rate changes and loss experience. Actual results could differ materially from those expected by Infinity depending on changes in economic conditions and financial markets including interest rate, adequacy or accuracy of Infinity’s pricing methodology, actions of competitors, the approval of requested form and rate changes, judicial and regulatory developments affecting the automobile insurance industry, the outcome of pending litigation against Infinity, weather conditions including the severity and frequency of storms, hurricanes, snowfall, hail and winter conditions and changes in driving patterns and loss trends.

Infinity undertakes no obligation to publicly update or revise any of the forward looking statements. For more detailed discussion from the risks and uncertainties which could cause actual results to differ from those contained in the forward looking statements, please see the Infinity filings with the SEC.

With that, let me turn the presentation over to James Gober, our Chairman, President and CEO.

James Gober

Good morning and thanks for joining us this morning for the conference call. Roger Smith, our CFO is also with us this morning and as usual we’ll open the lines for questions after our comments.

Let’s kick it off by beginning on slide 3 and taking a look at our highlights. Operating EPS for the quarter is $1.03 up from the $1.00 we reported in this same period last year and better than expected. Underwriting income fell about $2.2 million pretax for the quarter as a result of lower earned premiums and a slide up tick in combined ratio. Most of this difference was attributable to a decrease in favorable reserve development from the third quarter of last year to the third quarter of this year.

Reserve releases in the third quarter of 2008 were $1.3 million pretax or about $0.05 per share. We had about $5.4 million favorable development in the third quarter of 2007 for about $0.19 per share. In addition we had about $2.8 million of pretax expense accrual releases in the third quarter of this year. If you exclude these items, our 2008 accident year combined ratio is running about 96.5% which is up about a point of that in 2007 but down about a point from a quarter ago.

Net EPS for the quarter were $0.28 as compared to $0.91 in the third quarter of last year. The big difference between operating and net EPS was the losses from other than temporary impairments on investments. During the third quarter of 2008, we booked capital losses of $11.6 million or about $0.75 per share which included $13.8 million of OTTI charges. This compares with capital losses of $1.8 million in the third quarter of 2007 for about $0.09 per share which included $600,000 of OTTI charges. While $13.9 million of OTTI charges is a big number, keep in mind that this represents only 1.2% of our quarter end portfolio and 2.5% of our GAAP book value. Roger will give you more detail of these charges in the overall investment portfolio a little later.

Regarding capital management actions, we purchased 1,084,600 shares for an average price of $43.74 during the third quarter. That represents about 6.7% of the outstanding shares at the beginning of the quarter. We still have approximately $75.4 million of repurchase authority under our current program which expires at the end of 2009.

Read the rest of this transcript for free on seekingalpha.com