Infinity Property & Casualty (IPCC) 10-Q 2005 Q1 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2005

Commission File No. 0-50167

INFINITY PROPERTY AND CASUALTY CORPORATION

Incorporated under the Laws of Ohio IRS Employer Identification Number 03-0483872

3700 Colonnade Parkway, Birmingham, Alabama 35243

(205) 870-4000

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant is an accelerated filer.    Yes  x    No  ¨

As of May 1, 2005, there were 20,688,967 shares of the Registrant’s Common Stock outstanding.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

INDEX

		Page
Part I – FINANCIAL INFORMATION
Item 1-	Financial Statements
	Consolidated Statements of Earnings	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Changes in Shareholders’ Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3-	Quantitative and Qualitative Disclosure of Market Risk	24
Item 4 -	Controls and Procedures	24
Part II – OTHER INFORMATION
Item 6 -	Exhibits	25
	Signature	26
EXHIBIT INDEX
Exhibit 31.1-	Certification of the Chief Executive Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 -	Certification of the Chief Financial Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
Exhibit 32 -	Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

PART I

FINANCIAL INFORMATION

ITEM 1

Financial Statements

INFINITY PROPERTY AND CASUALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(unaudited)

	Three months ended March 31,
	2005		2004		% Change
Income:
Earned premiums	$	230,741	$	210,302	9.7	%
Net investment income		16,610		15,995	3.8	%
Realized gains on investments		12,080		1,610	650.3	%
Other income		1,208		2,283	(47.1	)%
Total revenue		260,639		230,190	13.2	%
Costs and Expenses:
Losses and loss adjustment expenses		161,219		151,071	6.7	%
Commissions and other underwriting expenses		49,122		41,094	19.5	%
Interest expense		2,765		2,403	15.0	%
Corporate general and administrative expenses		1,676		1,692	(1.0	)%
Loss on retirement of long-term debt		—		3,436	—
Other expenses		9,254		5,179	78.7	%
Total expenses		224,036		204,875	9.4	%
Earnings before income taxes		36,603		25,315	44.6	%
Provision for income taxes		12,621		8,375	50.7	%
Net Earnings	$	23,982	$	16,940	41.6	%
Earnings per Common Share:
Basic	$	1.16	$	0.82
Diluted	$	1.15	$	0.81
Average number of Common Shares:
Basic		20,608		20,534
Diluted		20,879		20,864
Cash dividends per Common Share	$	0.060	$	0.055

See Notes to Consolidated Financial Statements

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INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

INFINITY PROPERTY AND CASUALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

	March 31, 2005			December 31, 2004
	(unaudited)
Assets
Investments
Fixed maturities - at market (amortized cost - $1,291,316 and $1,260,836)	$	1,302,457		$	1,304,080
Equity securities - at market (amortized cost - $25,296 and $21,529)		25,833			24,993
Total investments		1,328,290			1,329,073
Cash and cash equivalents		96,761			112,052
Accrued investment income		15,555			16,732
Agents’ balances and premiums receivable, net of allowances for doubtful accounts of $9,771 and $11,524		301,911			264,978
Prepaid reinsurance premiums		13,913			12,858
Recoverables from reinsurers		20,970			20,202
Deferred policy acquisition costs		77,752			68,454
Current and deferred income taxes		12,701			12,656
Prepaid expenses, deferred charges and other assets		35,874			32,658
Goodwill		75,275			75,275
Total assets	$	1,979,002		$	1,944,938
Liabilities and Shareholders’ Equity
Unpaid losses and loss adjustment expenses	$	644,946		$	659,272
Unearned premiums		437,602			387,917
Payable to reinsurers		3,874			3,953
Long term debt (fair value - $195,465 at March 31, 2005 and $198,010 at December 31, 2004)		199,320			199,305
Commissions payable		26,870			25,257
Accounts payable, accrued expenses and other liabilities		118,436			121,813
Total liabilities		1,431,048			1,397,517
Shareholders’ Equity:
Common stock, no par value
-50,000,000 shares authorized
-20,690,042 and 20,670,878 shares issued -20,685,748 and 20,670,878 shares outstanding		20,690			20,671
Additional paid-in capital		330,564			329,994
Retained earnings		189,451			166,710
Unearned compensation (restricted stock)		(209	)		(314	)
Unrealized gain, net		7,591			30,360
Treasury stock, at cost (4,294 and 0 shares)		(133	)		—
Total shareholders’ equity		547,954			547,421
Total liabilities and shareholders’ equity	$	1,979,002		$	1,944,938

See Notes to Consolidated Financial Statements

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INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

INFINITY PROPERTY AND CASUALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands)

(unaudited)

	Common Stock		Treasury Stock			Paid-in Capital		Retained Earnings			Unrealized Gain (Loss) on Securities			Unearned Compensation			Total
Balance at December 31, 2003	$	20,484	$	—		$	324,787	$	74,856		$	36,243		$	(1,000	)	$	455,370
Net earnings		—		—			—		16,940			—			—			16,940
Change in unrealized gain-investments		—		—			—		—			13,296			—			13,296
Change in unrealized gain-derivative		—		—			—		—			(215	)		—			(215	)
Comprehensive income																		30,021
Dividends paid to common stockholders		—		—			—		(1,136	)		—			—			(1,136	)
Issuance of common stock		171		—			4,685		—			—			—			4,856
Amortization of unearned compensation		—		—			—		—			—			239			239
Balance at March 31, 2004	$	20,655	$	—		$	329,472	$	90,660		$	49,324		$	(761	)	$	489,350
Net earnings	$	—	$	—		$	—	$	79,458		$	—		$	—		$	79,458
Change in unrealized gain-investments		—		—			—		—			(18,964	)		—			(18,964	)
Comprehensive income																		60,494
Dividends paid to common stockholders		—		—			—		(3,408	)		—			—			(3,408	)
Employee stock purchases		2		—			63											65
Exercise of stock options		14		—			206		—			—			—			220
Amortization of unearned compensation		—		—			253		—			—			447			700
Balance at December 31, 2004	$	20,671	$	—		$	329,994	$	166,710		$	30,360		$	(314	)	$	547,421
Net earnings	$	—	$	—		$	—	$	23,982		$	—		$	—		$	23,982
Change in unrealized gain-investments		—		—			—		—			(22,769	)		—			(22,769	)
Comprehensive income																		1,213
Dividends paid to common stockholders		—		—			—		(1,241	)		—			—			(1,241	)
Employee stock purchases		2		—			64		—			—			—			66
Exercise of stock options		17		—			252		—			—			—			269
Acquisition of treasury stock		—		(133	)		—		—			—			—			(133	)
Amortization of unearned compensation		—		—			254		—			—			105			359
Balance at March 31, 2005	$	20,690	$	(133	)	$	330,564	$	189,451		$	7,591		$	(209	)	$	547,954

See Notes to Consolidated Financial Statements

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INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

INFINITY PROPERTY AND CASUALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

	Three Months Ended March 31,
	2005			2004
Operating Activities:
Net earnings	$	23,982		$	16,940
Adjustments:
Depreciation and amortization		4,099			4,193
Realized gains on investing activities		(12,080	)		(1,610	)
Change in accrued investment income		1,177			320
Change in agents balances & premiums receivable		(36,933	)		(9,732	)
Change in reinsurance receivables		(1,823	)		16,199
Change in deferred policy acquisition costs		(9,298	)		(10,109	)
Change in other assets		8,032			9,559
Change in insurance claims and reserves		35,359			4,440
Change in payable to reinsurers		(79	)		(10,886	)
Change in other liabilities		(4,742	)		12,717
Other, net		(2	)		—
Net cash provided by operating activities		7,692			32,031
Investing Activities:
Purchases of and additional investments in:
Fixed maturities		(161,795	)		(92,946	)
Equity Securities		(8,741	)		—
Property and equipment		(1,344	)		(1,356	)
Maturities and redemptions of fixed maturity investments		26,105			36,352
Sales:
Fixed maturities		115,746			13,325
Stock in Subsidiary		—			10,380
Equity securities		8,054			—
Property and equipment		31			1,372
Net cash (used in) investing activities		(21,944	)		(32,873	)
Financing Activities:
Repayment of long-term debt		—			(195,500	)
Proceeds from senior notes		—			199,256
Debt issuance costs		—			(2,081	)
Proceeds from issuance of common stock		—			4,856
Proceeds from stock option exercise and employee stock purchase plan		335			—
Acquisition of treasury stock		(133	)		—
Dividends paid to shareholders		(1,241	)		(1,136	)
Net cash (used in) provided by financing activities		(1,039	)		5,395
Net (Decrease) Increase in Cash and Short-Term Investments		(15,291	)		4,553
Cash and short-term investments at beginning of period		112,052			125,042
Cash and short-term investments at end of period	$	96,761		$	129,595

See Notes to Consolidated Financial Statements

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INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1

Basis of Presentation

The accompanying Consolidated Financial Statements are unaudited and should be read in conjunction with Infinity Property and Casualty Corporation’s (“Infinity” or the “Company”) annual report on Form 10-K for the year ended December 31, 2004. This quarterly report on Form 10-Q, including the Notes to the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations, focuses on Infinity’s financial performance since the beginning of the year.

These financial statements reflect certain adjustments necessary for a fair presentation of Infinity’s results of operations and financial position. Such adjustments consist of normal, recurring accruals recorded to accurately match expenses with their related revenue streams and the elimination of all significant inter-company transactions and balances. In addition, certain reclassification adjustments have been made to historical results to achieve consistency in presentation.

Certain accounts and balances within these financial statements are based upon management’s estimates and assumptions. The amount of reserves for claims not yet paid, for example, is an item that can only be recorded by estimation. Unrealized capital gains and losses on investments are subject to market fluctuations and managerial judgment is required in the determination of whether unrealized losses on certain securities are temporary or other-than-temporary. Should actual results differ significantly from these estimates, the effects on Infinity’s results of operations could be material.

The results of operations for the periods presented may not be indicative of the Company’s results for the entire year.

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INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Note 2Stock-Based Compensation

Infinity’s Stock Option Plan and Restricted Stock Plan were established in 2002. There were 2,000,000 and 500,000 shares of Infinity common stock reserved for issuance under the Stock Option Plan and Restricted Stock Plan, respectively. Options generally become exercisable at the rate of 20% per year commencing one year after grant. For restricted stock awards, one-third of the shares vest on each of the first three anniversaries of the date of grant of the award.

Options Outstanding	Number of Options
As of December 31, 2004	603,480
Granted	—
Exercised	16,848
Forfeited	1,600
As of March 31, 2005	585,032

As permitted under SFAS No. 123, “Accounting for Stock-Based Compensation,” Infinity accounts for stock options and other stock-based compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” The fair value of shares issued under Infinity’s Restricted Stock Plan is recorded as unearned compensation and expensed over the vesting periods of the awards. Under Infinity’s Stock Option Plan, options are granted to officers, directors and key employees at exercise prices equal to the fair value of the shares at the dates of grant. No compensation expense is recognized for stock option grants. In December 2004, the Financial Accounting Standards Board issued SFAS 123 (revised), “Share Based Payment” that requires the recognition of compensation expense for employee stock options. The mandatory effective date of this revised standard was delayed on April 14, 2005 by the Securities and Exchange Commission (“SEC”) until the first fiscal year beginning after June 15, 2005. In accordance with SEC requirements, Infinity plans to adopt this new standard prospectively in 2006. Had the standard been effective for the periods presented, Infinity does not believe its actual results would have differed materially from the pro forma results shown below.

The following table illustrates the effect on net earnings (in thousands) and earnings per share had compensation cost related to stock options been determined and recognized based on “fair values” at grant dates consistent with the method prescribed by SFAS No. 123. For SFAS No. 123 purposes, the “fair values” were calculated using a modified version of the Black-Scholes option pricing model. There is no single reliable method to determine the actual value of options at grant date. Accordingly, the actual value of the option grants may be higher or lower than the SFAS No. 123 “fair value.”

	Three months ended March 31,
	2005			2004
Net earnings, as reported	$	23,982		$	16,940
Pro forma stock option expense		(244	)		(335	)
Adjusted net earnings	$	23,738		$	16,605
Earnings per share (as reported):
Basic	$	1.16		$	0.82
Diluted	$	1.15		$	0.81
Earnings per share (adjusted):
Basic	$	1.15		$	0.81
Diluted	$	1.14		$	0.80

The following table illustrates the assumptions used to obtain the pro forma stock option expense figures.

	As of March 31,
	2005			2004
Assumptions:
Options outstanding		585,032			630,680
Weighted average fair value per option granted	$	n/a	(a)	$	13.88
Weighted average per outstanding option:
Dividend yield		1.1	%		0.7	%
Expected volatility		33.0	%		33.0	%
Risk-free interest rate		4.1	%		4.3	%
Expected option life		7.5 years			7.5 years

(a) No options have been granted in 2005.

For 2005, Infinity’s Board of Directors approved the implementation of a cash-based long-term incentive compensation plan for key management in lieu of the issuance of stock options or other stock-based incentive compensation.

In February 2005, 44,792 shares of restricted stock vested under Infinity’s Restricted Stock Plan. Two executive officers holding restricted shares surrendered a total of 4,294 shares to the Company to satisfy their income tax obligation resulting from this event. As a result, the Company recorded this surrender as an acquisition of treasury stock at its fair market value.

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INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Note 3Computations of Earnings Per Share

The following table illustrates the reconciliation of the denominators in Infinity’s computations of basic and diluted earnings per common share (in thousands, except per share figures):

	For the three months ended March 31,
	2005		2004
Net earnings	$	23,982	$	16,940
Average basic shares outstanding		20,608		20,534
Basic earnings per share	$	1.16	$	0.82
Average basic shares outstanding		20,608		20,534
Restricted stock not yet vested		69		114
Dilutive effect of assumed option exercises		202		216
Average diluted shares outstanding		20,879		20,864
Diluted earnings per share	$	1.15	$	0.81

Note 4Long-Term Debt

In February 2004, Infinity issued $200 million principal of senior notes (the “Senior Notes”) due 2014. The net proceeds of $197.2 million were used to repay and extinguish the $195.5 million balance due on a term loan and for general corporate purposes. Infinity recorded a $3.4 million loss on the term loan extinguishment, which represented the unamortized balance of previously capitalized debt issuance costs. The Senior Notes accrue interest at an effective rate of 5.55% and bear a coupon of 5.5%, payable semiannually. Infinity capitalized $2.1 million of debt issuance costs which are being amortized over the term of the Senior Notes. The fair value of the Senior Notes as of March 31, 2005 ($195.5 million) was calculated using a 135 basis point spread to the ten-year U.S. Treasury Note of 4.48%, which was obtained from Bloomberg, a national broker quotation network.

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INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Note 5Unrealized Gain on Marketable Securities

The change in unrealized gain on marketable securities for the three-month periods ended March 31 included the following (in thousands):

	Pretax
	Fixed Maturities			Equity Securities			Tax Effects			Net
2005
Unrealized holding gains (losses) on securities arising during the period	$	(23,102	)	$	153		$	8,032		$	(14,917	)
Realized (gains) losses included in net income		(9,000	)		(3,080	)		4,228			(7,852	)
Change in unrealized gain on marketable securities, net	$	(32,102	)	$	(2,927	)	$	12,260		$	(22,769	)
2004
Unrealized holding gains (losses) on securities arising during the period	$	19,777		$	2,579		$	(8,022	)	$	14,334
Realized (gains) losses included in net income		(725	)		(1,203	)		675			(1,253	)
Change in unrealized gain on marketable securities, net	$	19,052		$	1,376		$	(7,347	)	$	13,081

Note 6Effective Tax Rate

The following table reconciles Infinity’s statutory federal income tax rate to its effective rates.

	For the three months ended March 31,
	2005		2004
Statutory rate	35.0	%	35.0	%
Adjustments:
Interest income on tax-exempt securities	(1.4	)	(1.7	)
Dividends received deduction	(0.1	)	(0.2	)
Other	1.0		—
Effective tax rate	34.5	%	33.1	%

Note 7Supplemental Cash Flow Information

During the three-month periods ended March 31, 2005 and 2004, the company paid interest on its outstanding debt of $5.5 and $1.1 million, respectively.

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INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Note 8Insurance Reserves

The following table provides an analysis of changes in the liability for losses and loss adjustment expenses on a GAAP basis (in millions):

	Three months ended March 31,
	2005			2004
Gross unpaid losses and LAE at beginning of period	$	659.3		$	713.5
Less: reinsurance recoverables		(17.8	)		(29.5	)
Balance at beginning of period		641.5			684.0
Provision for losses and LAE occurring in the current year		170.2			153.7
Net decrease in provision for claims of prior years		(9.0	)		(2.5	)
Total losses and LAE incurred		161.2			151.2
Payments for losses and LAE of:
Current year		(52.9	)		(45.2	)
Prior years		(123.1	)		(117.0	)
Total payments		(176.0	)		(162.2	)
Balance at end of period		626.7			673
Add back reinsurance recoverables		18.2			27.5
Gross unpaid losses and LAE included in the Balance Sheet	$	644.9		$	700.5

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INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

ITEM 2

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

The information set forth below should be read in conjunction with “Forward-Looking Statements” below.

OVERVIEW

Infinity’s profitability improved in the first quarter of 2005 over the first quarter of 2004. Diluted earnings per share increased 42% from $0.81 for the three months ended March 31, 2004, to $1.15 for the same period in 2005. Net income also increased substantially from $16.9 million for the three months ended March 31, 2004, to $24.0 million for the same period in 2005.

Increased earnings were substantially a result of continued improvements in underwriting profitability and capital gains from the sale of securities. Underwriting income, defined as earned premiums less loss and loss adjustment expenses, commissions and other underwriting expenses, increased from $18.1 million to $20.4 million for the three-month periods ended March 31, 2004 and 2005, respectively. In the three months ended March 31,2005, Infinity experienced $9.0 million of favorable loss reserve development from prior accident years as compared with $2.5 million of favorable development for the same period in 2004. Excluding the favorable loss reserve development from both periods reveals deterioration in underwriting results. This deterioration resulted from higher claims frequencies in Infinity’s California business as winter weather in 2005 returned to more normal patterns of rainfall, and an increase in claims frequencies and severities in Florida.

Infinity took advantage of relatively low interest rates in the three months ended March 31, 2005 by realizing $12.1 million of capital gains from the sale of securities as compared to $1.6 million of realized capital gains for the same period in 2004.

Investment income increased from $16.0 million for the three months ended March 31, 2004, as compared with $16.6 million for the same period in 2005. This increase was primarily the result of lower interest credited to reinsurers on funds held balances under Infinity’s reinsurance agreement, which was eliminated in 2004. Average investment balances increased 4%, primarily from cash from operations. This increase in average investment balances was offset by lower yields on the portfolio as overall debt market rates remained at historically low levels. Infinity continued to invest over 95% of its available funds in fixed income and cash equivalent securities. The average duration for the fixed income portfolio was 4.1 years, which was comparable to that at December 31, 2004, but down from the 4.6 year duration at March 31, 2004.

Book value per share at March 31, 2005 was essentially unchanged from December 31, 2004. The contribution of earnings in excess of shareholder dividends was offset by a reduction in unrealized gains on the investment portfolio that resulted from the increase in overall market interest rates.

Revenues increased for the three months ended March 31, 2005, to $260.6 million, up 13.2% as compared with the same period in 2004. This increase resulted from a lower utilization of reinsurance in 2005, an increase in investment income for reasons cited earlier, as well as an increase in capital gains from security sales.

Premiums written gross of all reinsurance for the three months ended March 31, 2005 grew 14.3% as compared with that for the same period in 2004. As of March 31, 2005, Infinity had 770,000 policies-in-force, a 6.5% increase from March 31, 2004. In its seventeen Focus States (seeResults of Operations), personal auto insurance written premiums and personal auto insurance policies-in-force increased 19.3% and 9.4%, respectively, for the three months ended March 31, 2005, as compared with the same period in 2004.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Funds

Infinity is organized as a holding company with all of its operations being conducted by its insurance subsidiaries. Accordingly, Infinity has continuing cash needs for administrative expenses, the payment of principal and interest on borrowings, shareholder dividends, share repurchases and taxes. Administrative expenses at the holding company have averaged approximately $6.4 to $6.9 million annually since 2003. Interest payments of $5.5 million are due each February and August through maturity on Infinity’s Senior Notes (Refer to Note 4 of the Consolidated Financial Statements for more information on the Senior Notes). In January 2005, Infinity announced its intent to repurchase up to $50 million of its common stock in the open market or through privately negotiated transactions over the next three years. No stock repurchases have been made to date. In February 2005, Infinity increased its quarterly dividend to $.06 per share. This equates to a common stock dividend of approximately $5.0 million per year.

Funds to meet these obligations come primarily from dividends from the insurance subsidiaries, as well as cash and investments held at the holding company. In 2005, Infinity’s insurance subsidiaries may pay to Infinity up to $62.7 million in ordinary dividends without prior regulatory approval. As of March 31, 2005, Infinity had $82.2 million of cash and investments. Other sources of additional liquidity include an unused line of credit in the amount of $20 million and capital funds that could be supplied by additional debt or equity offerings.

Infinity’s insurance subsidiaries generate liquidity to satisfy their obligations, primarily by collecting and investing premiums in advance of paying claims. Infinity’s insurance subsidiaries had positive cash flow from operations of approximately $14.1 million and $34.6 million for the three-month periods ended March 31, 2005 and 2004, respectively. In addition, to satisfy their obligations, Infinity’s insurance subsidiaries have cash from maturing securities from its $1.3 billion fixed maturity portfolio. Management believes that cash balances, cash flows generated from operations and maturing investments are adequate to meet the future liquidity needs for Infinity and its insurance subsidiaries.

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INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Management’s Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Reinsurance

Infinity has utilized the reinsurance market to manage its capital and surplus levels relative to its reserve liabilities, supporting its capacity for growth. In the first quarter of 2004, Infinity’s insurance subsidiaries (excluding the in-force personal insurance business assumed through a reinsurance contract from Great American Insurance Company) ceded 10% of their personal auto physical damage business on a funds withheld basis to American Re-Insurance Company (“American Re”). Premiums ceded under the American Re agreement were $6.2 million for the three-month period ended March 31, 2004. The American Re agreement was commuted on December 31, 2004 and was not renewed for 2005.

Investments

Infinity’s investment portfolio at March 31, 2005 contained approximately $1.3 billion in fixed maturity securities and $25.8 million in equity securities, all carried at market value with unrealized gains and losses reported as a separate component of shareholders’ equity on an after-tax basis. At March 31, 2005, Infinity had pre-tax net unrealized gains of $11.1 million on fixed maturities and $0.5 million on equity securities. Combined, these figures decreased by $35.0 million for the three-month period ended March 31, 2005, primarily due to an increase in market interest rates during the period, and to a lesser extent, from increased sales of securities with unrealized gain positions in order to take advantage of unused capital loss tax carryforwards.

Approximately 95.4% of Infinity’s investments in fixed maturities at March 31, 2005 were rated “investment grade.” Investment grade securities generally bear lower yields and lower degrees of risk than those that are unrated or non-investment grade. Management believes that a high quality investment portfolio is more likely to generate a stable and predictable investment return.

Since all of these securities are carried at market value in the balance sheet, there is virtually no effect on liquidity or financial condition upon the sale and ultimate realization of unrealized gains and losses.

The average duration of Infinity’s fixed maturity portfolio was 4.1 years at March 31, 2005.

13

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Management’s Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Summarized information for Infinity’s investment portfolio follows (in thousands):

	March 31, 2005
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Market Value		% of Total Market Value
Fixed maturities	$	1,291,316	$	22,327	$	(11,186	)	$	1,302,457	98	%
Equity securities		25,296		992		(455	)		25,833	2	%
Total	$	1,316,612	$	23,319	$	(11,641	)	$	1,328,290	100	%
	December 31, 2004
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Market Value		% of Total Market Value
Fixed maturities	$	1,260,836	$	45,744	$	(2,501	)	$	1,304,080	98	%
Equity securities		21,529		3,597		(133	)		24,993	2	%
Total	$	1,282,365	$	49,341	$	(2,634	)	$	1,329,073	100	%

	March 31, 2005		December 31, 2004
Number of positions held with unrealized:
Gains	284		451
Losses	230		80
Number of positions held that individually exceed unrealized:
gains of $500,000	3		10
losses of $500,000	—		—
Percentage of positions held with unrealized:
gains that were investment grade	88	%	89	%
losses that were investment grade	95	%	97	%

The following table sets forth the amount of unrealized loss by age and severity.

Age of unrealized loss:	Total Gross Unrealized Losses			Less than 5%			5% to 10%			Greater than 10%
Less than or equal to:
Three months	$	(5,286	)	$	(5,286	)	$	0		$	—
Six months		(2,328	)		(2,328	)		0			—
Nine months		(199	)		(199	)		0			—
Twelve months		(2,635	)		(2,635	)		0			—
Twelve months or longer		(1,193	)		(619	)		(574	)		—
Total	$	(11,641	)	$	(11,067	)	$	(574	)	$	—

14

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Management’s Discussion and Analysis

of Financial Condition and Results of Operations - Continued

The table below sets forth the scheduled maturities of fixed maturity securities at March 31, 2005 based on their market values, in thousands. Securities that do not have a single maturity date are reported at average maturity. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid by the issuers.

	Securities with Unrealized Gains		Securities with Unrealized Losses		Securities with No Unrealized Gains or Losses		All Fixed Maturity Securities
Maturity
One year or less	$	56,523	$	1,016	$	1	$	57,540
After one year through five years		198,483		237,210		2,998		438,691
After five years through ten years		182,153		195,248		—		377,401
After ten years		71,821		67,939		—		139,760
Mortgage-backed securities		89,475		185,511		14,079		289,065
Total	$	598,455	$	686,924	$	17,078	$	1,302,457

RESULTS OF OPERATIONS

Underwriting

Infinity’s insurance subsidiaries provide personal automobile insurance products with a concentration on nonstandard auto insurance. While there is no industry-recognized definition of nonstandard auto insurance, it is generally understood to mean coverage to drivers who, due to their driving record, age or vehicle type, represent higher than normal risks and pay higher rates for comparable coverage.

Underwriting profitability is measured by the combined ratio, which is a sum of the ratios of losses, loss adjustment expenses and underwriting expenses to earned premiums. When the combined ratio is under 100%, underwriting results are generally considered profitable; when the ratio is over 100%, underwriting results are generally considered unprofitable. The combined ratio does not reflect investment income, other income or federal income taxes.

15

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Management’s Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Infinity is licensed to write auto insurance in all 50 states, but is committed to growth in 17 Focus States. Management believes that these Focus States offer the greatest opportunity for premium growth and profitability. Infinity classifies the states in which it operates into three categories:

• “Top Five Focus States” – States included in this category are California, Florida, Georgia, Connecticut and Pennsylvania.

• “Remaining Focus States” – States included in this category are Alaska, Alabama, Arizona, Indiana, Mississippi, Missouri, Ohio, South Carolina, Tennessee, Texas, Wisconsin and Virginia.

• “Non-focus States” – Infinity is either maintaining its renewal writings in these 33 states while increasing insurance rates to achieve underwriting profitability or ceasing operations in these states.

Infinity also writes commercial vehicle insurance, insurance for classic collectible automobiles (“Classic Collector”), and a small book of homeowners’ insurance business, which is currently in runoff.

Below is a discussion of the earned premiums and underwriting results for Infinity (in thousands):

	Three Months Ended March 31,
	2005			2004			Change			%
Net Earned Premiums
Personal Auto Insurance:
Top Five Focus States	$	217,879		$	195,869		$	22,010		11.2	%
Remaining 12 Focus States		43,643			23,402			20,241		86.5	%
Non-Focus States		3,203			11,059			(7,856	)	(71.0	)%
Subtotal	$	264,725		$	230,330		$	34,395		14.9	%
Commercial Vehicle		12,381			11,620			761		6.5	%
Other Lines		4,161			4,219			(58	)	(1.4	)%
Gross Written Premiums	$	281,267		$	246,169		$	35,098		14.3	%
Ceded Reinsurance		(1,896	)		(4,004	)		2,108		(52.7	)%
Net Written Premiums	$	279,371		$	242,165		$	37,206		15.4	%
Change in Unearned Premiums		(48,630	)		(31,863	)		(16,767	)	52.6	%
Net Earned Premiums	$	230,741		$	210,302		$	20,439		9.7	%
Net Earned Premiums excluding the effect of the physical damage quota share agreement	$	230,741		$	233,705		$	2,964		(1.3	)%
	Three Months Ended March 31,
	2005			2004			Change			%
Policies-in-Force
Personal Auto Insurance:
Top Five Focus States		586,523			561,979			24,544		4.4	%
Remaining 12 Focus States		96,384			62,247			34,137		54.8	%
Non-Focus States		14,237			30,638			(16,401	)	(53.5	)%
Subtotal		697,144			654,864			42,280		6.5	%
Commercial Vehicle		14,169			13,951			218		1.6	%
Classic Collector		58,217			53,614			4,603		8.6	%
Total Automobile Lines		769,530			722,429			47,101		6.5	%

16

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Management’s Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Three-month period ended March 31, 2005 versus 2004

The 14.3% increase in gross written premiums over the comparable period in 2004 can be attributed to Infinity’s continued success in appointing additional independent agents and further roll-out of its three-tiered product offering in Focus States. The same factors contributed to the 6.5% growth in policies-in-force. These achievements were not, however, a result of sizeable rate decreases on Infinity’s products.

Growth in personal automobile gross written premiums in California, Infinity’s largest market, was 1.2% and reflective of the highly competitive market conditions in the state. However, Florida and Georgia each experienced strong growth of 67.4% and 19.4%, respectively. Additionally, written premiums in Pennsylvania and Connecticut fell 2.5% and 16.9%, respectively, for the period as new product introductions had yet to make a favorable impact.

The increase in growth in both gross written premiums (86.5%) and policies-in-force (54.8%) in the Remaining Focus States was a sign that the Company’s strategy of rolling out its three-tiered product structure beyond the Top Five Focus States is being met with success. Business written in two of the twelve Remaining Focus States, Texas and Arizona, generated $13.6 million of the growth in gross written premiums. Texas and Arizona were among the first states in which Infinity implemented its current business model that is proving successful in its Top Five Focus States. In only four of the twelve Remaining Focus States (Indiana, Tennessee, Wisconsin, and Virginia) gross written premiums actually declined. In Indiana, Wisconsin and Virginia, the three-tiered product structure and other elements of the business model have yet to be rolled out.

Gross written premiums in commercial vehicle business grew modestly as Infinity has begun to expand its commercial vehicle offering to states such as California. Gross premiums in other lines fell slightly for the quarter, with growth in the Classic Collector line being offset by the runoff of the homeowners’ line of business.

The increase in earned premiums was primarily the result of the elimination of the physical damage quota share agreement on December 31, 2004. Excluding the effect of this, earned premiums fell approximately 1.3%, as the growth in gross written premiums in the fourth quarter of 2004 and the first quarter of 2005 had yet to be earned.

17

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Management’s Discussion and Analysis

of Financial Condition and Results of Operations - Continued

	Three Months Ended March 31,
Combined ratio (GAAP)	2005		2004		Change
Gross of quota share agreement:
Loss and LAE Ratio	69.9	%	70.0	%	(0.1	)%
Underwriting Expense Ratio	21.3	%	22.4	%	(1.1	)%
Combined Ratio	91.2	%	92.4	%	(1.2	)%
Net of quota share agreement:
Loss and LAE Ratio	69.9	%	71.8	%	(1.9	)%
Underwriting Expense Ratio	21.3	%	19.5	%	1.8	%
Combined Ratio	91.2	%	91.3	%	(0.1	)%

Three-month period ended March 31, 2005 versus 2004

Underwriting results continued to improve in the three-month period ended March 31, 2005 as compared with the same period a year ago. Approximately 0.7 points of this improvement was due to a $1.6 million non-recurring reduction in benefit accruals in 2005.

In the first quarter of 2005, Infinity experienced approximately $9.0 million of favorable development on prior accident years’ reserves, primarily on the California book of business, as compared with $2.5 million of favorable development in the first quarter of 2004. Excluding the favorable development from prior accident years in both periods, the loss and LAE ratio for the three-month periods ended March 31, 2005 and 2004 were 73.8% and 71.1%, respectively. This deterioration was a result of increased claims frequency in California from unusually wet weather and increases in Florida during March in both claims frequency and, to a lesser extent, severity.

18

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Management’s Discussion and Analysis

of Financial Condition and Results of Operations – Continued

Investment Income

Investment income is comprised primarily of gross investment revenue, investment management fees and expenses and interest expense incurred on the physical damage quota share agreement (in 2004), as shown in the following table (in thousands):

	Three months ended March 31,
	2005			2004
Gross investment income	$	17,185		$	17,189
Investment expenses		(575	)		(694	)
Interest expense on physical damage quota share agreement		—			(500	)
Net investment income	$	16,610		$	15,995

Changes in investment income reflect fluctuations in market rates and changes in average invested assets. The increase in net investment income for the period was primarily due to the commutation of the physical damage quota share agreement at December 31, 2004.

19

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Management’s Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Infinity recorded impairments for unrealized losses deemed other-than-temporary and realized gains and losses on sales and disposals as follows (before tax, in thousands):

	Three months ended March 31, 2005							Three months ended March 31, 2004
	Impairments on securities held			Realized gains (losses) on sales		Total realized gains (losses)		Impairments on securities held			Realized gains (losses) on sales		Total realized gains (losses)
Fixed maturities	$	(136	)	$	9,136	$	9,000	$	(478	)	$	1,203	$	725
Equities		(60	)		3,140		3,080		—			885		885
Total	$	(196	)	$	12,276	$	12,080	$	(478	)	$	2,088	$	1,610

The other than temporary impairments in the three-month period ended March 31, 2005 were primarily for a fixed income security of a major automobile manufacturer. The impairments in the 2004 period related primarily to fixed income securities from firms in the synthetic fibers industry. Realized gains on equity securities for the three-month period ended March 31, 2004 included a gain on the sale in March 2004 of an inactive insurance subsidiary.

For Infinity’s remaining securities held with unrealized losses, management believes that, based on its analysis (i) that the bulk of evidence indicates that Infinity will recover its cost basis in these securities in a relatively short period of time and (ii) that Infinity has the ability and intent to hold these securities until they mature or recover in value. Should either of these beliefs change with regard to a particular security, a charge for impairment would likely be required. While it is not possible to accurately predict if or when a specific security will become impaired, charges for other than temporary impairments could be material to results of operations in a future period. Management believes it is not likely that future impairment charges will have a significant effect on Infinity’s liquidity.

Had Infinity recorded additional impairment charges on all its unrealized losses that were at least six months old at March 31, 2005, the after tax earnings impact would have been $2.6 million.

Interest Expense

The term loan accrued interest at an average variable rate of 3.6% for the portion of the three-month period in 2004 that it was outstanding. This variable rate was partially hedged by the interest rate swap. The term loan was prepaid in full in February 2004 with proceeds from the issuance of the Senior Notes. The swap position was closed at the same time. Beginning in February 2004, the Senior Notes accrued interest at an effective rate of 5.55%.

Interest expense was (in thousands):

	Three months ended March 31,
	2005		2004
Term loan	$	—	$	938
Interest rate swap		—		182
Senior Notes, issued February 17, 2004		2,750		1,283
Total (a)	$	2,750	$	2.403

(a) Excluding amortization of debt issuance costs of $40,000 and $105,000, which is included in corporate general and administrative expenses for the three-month periods ended March 31, 2005 and 2004, respectfully.

Other Income

(in thousands)	Three months ended March 31,
	2005		2004
Finance charges	$	531	$	822
Gain on sale of property		—		1,142
Other		677		319
Total	$	1,208	$	2,283

The decrease in other income for the three-month period ended March 31, 2005, versus 2004 was primarily the result of a realized gain on the sale of a building that occurred in January 2004. The decrease in finance charges relates to lower levels of assumed books of business.

20

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Management’s Discussion and Analysis

of Financial Condition and Results of Operations – Continued

Other Expenses

(in thousands)	Three months ended March 31,
	2005		2004
Uncollectible agents’ balances and premium receivables	$	3,035	$	2,767
Corporate litigation expenses		5,694		1,227
Loss on sublease		—		735
Other		525		450
Total	$	9,254	$	5,179

The increase in other expenses for the three-month period ended March 31, 2005 versus 2004 was primarily the result of higher corporate litigation expenses in 2005. The increase in corporate litigation expenses was a result of the disposition during the period of several claims related lawsuits that sought damages beyond policy limits.

Effective Tax Rate

Infinity’s effective federal income tax rate for the three-month period ended March 31, 2005 was 34.5% versus 33.1% for the corresponding period of 2004. The primary cause for this increase was an increase in realized capital gains of $10.5 million (taxed at 35%) from security sales for the three-month period ended March 31, 2005 when compared to the corresponding period of 2004 as well as the tax effect of restricted stock that vested in the first quarter of 2005.

RISK FACTORS

Infinity’s ongoing business operations face a number of risks, including, but not limited to those outlined below. These risks should be read and considered with the other information provided in this report.

Infinity may be adversely affected by conditions in the personal automobile insurance business.

Approximately 94% of Infinity’s gross written premiums for the three-month period ended March 31, 2005 were generated from personal automobile insurance policies. Adverse developments in the market for personal automobile insurance, or the personal automobile insurance industry in general, whether related to changes in competition, pricing or regulations, could cause the results of operations to suffer. This industry is also exposed to the risks of severe weather conditions, such as rainstorms, snowstorms, hail and ice storms, hurricanes, tornadoes, earthquakes and, to a lesser degree, explosions, terrorist attacks and riots. The automobile insurance business is also affected by cost trends that impact profitability. Factors which negatively affect cost trends include inflation in automobile repair costs, automobile parts costs, used car prices and medical care. Increased litigation of claims, particularly those involving allegations of bad faith or seeking extra contractual and punitive damages, may also adversely affect loss costs.

Infinity remains highly dependent upon California and several other key states to produce revenues.

For the period ended March 31, 2005, Infinity generated approximately 81% of gross written premiums in its Top Five Focus States. California, Infinity’s largest market, generated approximately 45% of Infinity’s gross written premiums for such period. Revenues and profitability are therefore subject to prevailing regulatory, legal, economic, demographic, competitive and other conditions in these states. Changes in any of these conditions could make it less attractive to do business in those states. Adverse regulatory or judicial developments in any of these states, particularly California, such as reductions in the rates permitted to be charged or a limitation or curtailment of the number of insurance programs offered within a state, restrictions on the type of compensation paid to, or fees charged by, independent brokers, or more fundamental changes in the design or implementation of the automobile insurance regulatory framework, could negatively affect premium revenue or make it more expensive or less profitable to conduct business.

Infinity is vulnerable to a reduction in the amount of business written by independent agents.

Reliance on the independent agency market makes Infinity vulnerable to a reduction in the amount of business written by independent agents. Many competitors share Infinity’s significant reliance on the independent agency market. Approximately two-thirds of all personal automobile insurance sold in the United States is sold direct or through captive agents (agents employed by one company or selling only one company’s products) and approximately one-third is sold by independent agents. A material reduction in the amount of business independent agents sell would negatively impact future revenues. Such a reduction could be the outcome of recent or future regulations seeking to limit the manner in which insurance brokers are compensated.

If Infinity is not able to attract and retain independent agents, revenues could be negatively affected.

Infinity must compete with other insurance carriers for independent agents’ business. Some competitors offer a larger variety of products, lower prices for insurance coverage, higher commissions, or more attractive non-cash incentives. Although Infinity believes that the products, pricing, commissions and services offered to agents are competitive, it may not be able to continue to attract and retain independent agents to sell Infinity insurance products. Recent or future regulations may also have the affect of limiting the manner in which its producers are compensated or incentivized. Such developments could negatively impact revenues.

21

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Management’s Discussion and Analysis

of Financial Condition and Results of Operations – Continued

New underwriting, claims and compensation issues are continually emerging and could adversely impact revenues or established methods of doing business.

As automobile insurance industry practices and regulatory, judicial and consumer conditions change, new issues that challenge prevailing business practices are likely to emerge. Recent issues have been brought into question:

• the use of an applicant’s credit rating as a factor in making risk selection and pricing decisions;

• established business practices and relationships between insurers and independent brokers;

• claims handling practices that involve the use of automated databases to assist in the adjustment of bodily injury claims.

How or when these issues are ultimately resolved is uncertain. The resolution could, however, adversely impact Infinity’s revenues or its methods of doing business.

Infinity is subject to comprehensive regulation and its ability to earn profits may be restricted by these regulations.

Infinity is subject to comprehensive regulation by government agencies in the states where Infinity insurance company subsidiaries are domiciled (California, Florida, Indiana, Ohio, Oklahoma and Texas) and where these subsidiaries issue policies and handle claims. Infinity is subject to regulations involving:

• the payment of dividends;

• the acquisition or disposition of an insurance company or of any company controlling an insurance company;

• approval or filing of premium rates and policy forms;

• involuntary assignments of high-risk policies, participation in reinsurance facilities and underwriting associations, assessments and other governmental charges;

• minimum amounts of capital and surplus that must be maintained;

• limitations on types and amounts of investments;

• limitation of the right to cancel or non-renew policies;

• regulation of the right to withdraw from markets or terminate involvement with agencies;

• licensing of insurers and agents;

• reporting with respect to financial condition; and

• transactions between an insurance company and any of its affiliates.

In addition, state insurance department examiners perform periodic financial and market conduct examinations of insurance companies. Such regulation is generally intended for the protection of policyholders rather than security holders. Existing insurance-related laws and regulations may become more restrictive in the future, and new restrictive laws may be enacted. New or more restrictive regulations could make it more expensive to conduct business, limit the premiums Infinity is able to charge, restrict the manner in which Infinity compensates its independent agents, or otherwise change the way Infinity does business.

A failure to maintain a commercially acceptable financial strength rating would significantly and negatively affect Infinity’s ability to implement its business strategy successfully.

Financial strength ratings are an important factor in establishing the competitive position of insurance companies and may be expected to have an effect on an insurance company’s sales. In April 2005, A.M. Best affirmed Infinity’s insurance company subsidiaries group financial strength rating of “A (Excellent).” According to A.M. Best, “A” ratings are assigned to insurers which have, on balance, excellent balance sheet strength, operating performance and business profile when compared to the standards established by A.M. Best and, in A.M. Best’s opinion, have a strong ability to meet their ongoing obligations to policyholders. A.M. Best bases its ratings on factors that concern policyholders and not upon factors concerning investor protection. Such ratings are subject to change and are not recommendations to buy, sell or hold securities. There can be no assurance that Infinity’s rating or future changes to its rating will not affect its competitive position.

22

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Management’s Discussion and Analysis

of Financial Condition and Results of Operations - Continued

The performance of Infinity’s investment portfolio is subject to market risk.

Market risk represents the potential economic loss arising from adverse changes in the fair value of financial instruments. Infinity’s exposures to market risk relate primarily to its investment portfolio which is exposed to interest rate risk, credit risk and, to a lesser extent, equity price risk.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain statements that may be deemed “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in this report not dealing with historical results are forward-looking and are based on estimates, assumptions, and projections. Statements which include the words “believes”, “expects”, “may”, “should”, “intends”, “plans”, “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 include statements relating to expectations concerning market conditions, premiums, growth, earnings, investment activities, expected losses, rate changes and loss experience.

Actual results could differ materially from those expected by Infinity depending on certain risks and uncertainties including but not limited to changes in economic conditions and financial markets (including interest rates), the adequacy or accuracy of Infinity’s pricing methodologies, the 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 more detailed discussion of some of the foregoing risks and uncertainties, see Infinity’s Annual Report on Form 10-K for the twelve-month period ended December 31, 2004.

23

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

ITEM 3

Quantitative and Qualitative Disclosure of Market Risk

As of March 31, 2005, there were no material changes to the information provided in Infinity’s Form 10-K for 2004 under the caption “Exposure to Market Risk” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 4

Controls and Procedures

Infinity’s chief executive officer and chief financial officer, with assistance from management, have evaluated Infinity’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15) as of March 31, 2005. Based on that evaluation, they concluded that the controls and procedures are effective. There have been no significant changes in Infinity’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

24

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

PART II

OTHER INFORMATION

ITEM 6

Exhibits

(a	)	Exhibit 31.1 -	Certification of the Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
		Exhibit 31.2 -	Certification of the Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
		Exhibit 32 -	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

25

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Signature

Pursuant to the requirements of the Securities and Exchange Act of 1934, Infinity Property and Casualty Corporation has duly caused this Report to be signed on its behalf by the undersigned duly authorized.

	Infinity Property and Casualty Corporation
	BY:	/s/ Roger Smith
May 9, 2005		Roger Smith
		Senior Vice President and Chief Financial Officer

26