Infinity Property and Casualty Corporation (IPCC)

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Infinity Property and Casualty Corp. (IPCC)

Q4 2008 Earnings Call

February 05, 2009; 11:00 am ET


Amy Jordan - Assistant Vice President, Investor Relations

James Gober - Chairman, President & Chief Executive Officer

Roger Smith - Chief Financial Officer


Mike Grasher - Piper Jaffray

Caroline Steers - FPK

Doug McGregor - RBC Capital Markets

John Gwynn - Unidentified Company



Good day, ladies and gentlemen and welcome to the Q4 2008 Infinity Property and Casualty Corporation Earning Conference Call. My name is Antwone 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 towards the end of this conference. (Operator Instructions) I would now like to turn the call over to Amy Jordan, AVP of Investor Relations. Please proceed ma’am

Amy Jordan

Thank you. Good morning and thank you for joining us in Infinity’s fourth quarter earnings 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 and 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 that 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 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 similar statements of a future or forward looking nature identify forward-looking statements. Examples of such forward-looking statements includes statements relating to expectations concerning market conditions, 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 the economic conditions and financial markets including interest rate, the 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, snowfalls, 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 a 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 Jim Gober, our Chairman, President and CEO.

James Gober

Good morning everyone and welcome to our conference call and webcast for the fourth quarter of 2008. 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 begin with the highlights on slide three. Operating EPS for the quarter were $1.78 up from the $1.16 we reported for the same period last year and better than expected. Underwriting income climbed about $12.3 million pretax for the quarter as a result of an improved accident year combined ratio and reserve redundancy releases from prior accident years.

Reserve releases in the fourth quarter of ‘08 were $15.9 million pretax were about $0.71 per share. Those releases were partially offset by approximately $1.5 million of strengthening on the first three quarters of 2008. We booked about $900,000 of favorable development in the fourth quarter of ‘07 for about $0.04 per share.

In addition, we had about $4 million pretax of expense accrual releases in the fourth quarter of this year. If you exclude these items, our 2008 accident year combined ratio was running about 96% which is about 60 basis points up from that in ’07, but down about half a point from a quarter ago.

We had a net loss of $0.77 for the quarter as compared income of $1.14 in the fourth quarter of last year. The big difference between operating and net EPS was the losses from other than the temporary impairments on investments. During the fourth quarter of ‘08, we booked capital losses of $36.6 million for about $2.52 per share, which included $40.3 million of OTTI charges. Roger will give you more details on these charges and the overall investment portfolio a little later.

Regarding capital management actions, we purchased 858,500 shares for an average price of $39.63 during the fourth quarter. Those purchases represent about 5.7% of the outstanding shares at the beginning of that quarter. Since the beginning of 2008, we have repurchased $2.1 million shares of our own stock, which represented 12.9% of a number of outstanding shares at the start of the year. We still have approximately, $41.4 million of repurchase authority under our current program, which expires at the end of this year; and we do plan to continue to repurchase shares opportunistically throughout 2009.

As for our capital, in spite of the loss for the quarter, our capital position remains very strong. Lastly, on Tuesday, our Board increased the annual dividend to $0.48, a 9.1% increase over the annual dividend paid in 2008. Now, let’s take a deeper dive into our operating results.

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