| Document and Entity Information | ||
| 3 Months Ended
Mar. 31, 2010 | Apr. 30, 2010
| |
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | 2010-03-31 | |
| Document Fiscal Year Focus | 2,010 | |
| Document Fiscal Period Focus | Q1 | |
| Trading Symbol | IPCC | |
| Entity Registrant Name | INFINITY PROPERTY & CASUALTY CORP | |
| Entity Central Index Key | 0001195933 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Accelerated Filer | |
| Entity Common Stock, Shares Outstanding | 13,225,159 |
| CONSOLIDATED STATEMENTS OF EARNINGS (USD $) | |||||||||||||||||||
| In Thousands, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | |||||||||||||||||
| Revenues: | |||||||||||||||||||
| Earned premium | $212,066 | $214,667 | |||||||||||||||||
| Net investment income | 11,295 | 13,644 | |||||||||||||||||
| Realized losses on investments | (455) | [1] | (6,127) | [1] | |||||||||||||||
| Other income | 23 | 48 | |||||||||||||||||
| Total revenues | 222,929 | 222,233 | |||||||||||||||||
| Costs and Expenses: | |||||||||||||||||||
| Losses and loss adjustment expenses | 146,643 | 151,269 | |||||||||||||||||
| Commissions and other underwriting expenses | 48,154 | 47,100 | |||||||||||||||||
| Interest expense | 2,700 | 2,768 | |||||||||||||||||
| Corporate general and administrative expenses | 1,872 | 1,671 | |||||||||||||||||
| Restructuring charges | 0 | 10 | |||||||||||||||||
| Other expenses | 732 | 628 | |||||||||||||||||
| Total costs and expenses | 200,101 | 203,446 | |||||||||||||||||
| Earnings before income taxes | 22,828 | 18,787 | |||||||||||||||||
| Provision for income taxes | 7,206 | 7,964 | |||||||||||||||||
| Net Earnings | $15,621 | $10,823 | |||||||||||||||||
| Earnings per Common Share: | |||||||||||||||||||
| Basic | 1.17 | 0.77 | |||||||||||||||||
| Diluted | 1.15 | 0.76 | |||||||||||||||||
| Average number of Common Shares: | |||||||||||||||||||
| Basic | 13,319 | 13,976 | |||||||||||||||||
| Diluted | 13,620 | 14,185 | |||||||||||||||||
| Cash dividends per Common Share | 0.14 | 0.12 | |||||||||||||||||
| [1] Realized gains before impairment losses $ 1,078 $ 1,389 (22.4 )% Total other-than-temporary impairment (OTTI) losses (99 ) (7,516 ) (98.7 )% OTTI losses reclassed from other comprehensive income (1,434 ) 0 0.0 % Net impairment losses recognized in earnings (1,533 ) (7,516 ) (79.6 )% Total realized losses on investments $ (455 ) $ (6,127 ) (92.6 )% | |||||||||||||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS (Parenthetical) (USD $) | |||||||||||||||||||
| In Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | |||||||||||||||||
| Realized gains before impairment losses | $1,078 | $1,389 | |||||||||||||||||
| Total other-than-temporary impairment (OTTI) losses | (99) | (7,516) | |||||||||||||||||
| OTTI losses reclassed from other comprehensive income | (1,434) | 0 | |||||||||||||||||
| Net impairment losses recognized in earnings | (1,533) | (7,516) | |||||||||||||||||
| Total realized losses on investments | ($455) | [1] | ($6,127) | [1] | |||||||||||||||
| [1] Realized gains before impairment losses $ 1,078 $ 1,389 (22.4 )% Total other-than-temporary impairment (OTTI) losses (99 ) (7,516 ) (98.7 )% OTTI losses reclassed from other comprehensive income (1,434 ) 0 0.0 % Net impairment losses recognized in earnings (1,533 ) (7,516 ) (79.6 )% Total realized losses on investments $ (455 ) $ (6,127 ) (92.6 )% | |||||||||||||||||||
| CONSOLIDATED BALANCE SHEETS (USD $) | ||
| In Thousands | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
| Investments: | ||
| Fixed maturities - at fair value (amortized cost $1,155,517 and $1,125,776) | $1,182,586 | $1,146,692 |
| Equity securities - at fair value (cost $31,331 and $31,331) | 41,691 | 39,438 |
| Total investments | 1,224,277 | 1,186,131 |
| Cash and cash equivalents | 57,589 | 99,700 |
| Accrued investment income | 12,219 | 11,237 |
| Agents' balances and premium receivable, net of allowances for doubtful accounts of $10,133 and $10,853 | 330,384 | 295,691 |
| Property, plant and equipment, net of accumulated depreciation of $44,772 and $42,092 | 27,351 | 27,916 |
| Prepaid reinsurance premium | 1,861 | 1,536 |
| Recoverables from reinsurers (includes $479 and $316 on paid losses and loss adjustment expenses) | 19,214 | 18,031 |
| Deferred policy acquisition costs | 75,757 | 68,839 |
| Current and deferred income taxes | 5,670 | 10,258 |
| Receivable for securities sold | 525 | 0 |
| Other assets | 9,664 | 9,057 |
| Goodwill | 75,275 | 75,275 |
| Total assets | 1,839,786 | 1,803,671 |
| Liabilities: | ||
| Unpaid losses and loss adjustment expenses | 505,225 | 509,114 |
| Unearned premium | 419,258 | 376,068 |
| Payable to reinsurers | 0 | 58 |
| Long-term debt (fair value $192,740 and $192,309) | 194,670 | 194,651 |
| Commissions payable | 19,937 | 18,012 |
| Payable for securities purchased | 5,909 | 17,576 |
| Other liabilities | 66,526 | 70,032 |
| Total liabilities | 1,211,526 | 1,185,511 |
| Commitments and contingencies (See Note 10) | ||
| Shareholders' equity: | ||
| Common stock, no par value 50,000,000 shares authorized 21,110,026 and 21,082,139 shares issued | 21,108 | 21,064 |
| Additional paid-in capital | 345,296 | 344,031 |
| Retained earnings | 554,925 | 541,167 |
| Accumulated other comprehensive income, net of tax | 24,945 | 19,500 |
| Treasury stock, at cost (7,836,662 and 7,584,762 shares) | (318,014) | (307,602) |
| Total shareholders' equity | 628,260 | 618,160 |
| Total liabilities and shareholders' equity | $1,839,786 | $1,803,671 |
| CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
| In Thousands, except Share data | Mar. 31, 2010
| Dec. 31, 2009
|
| Fixed maturities, amortized cost | $1,155,517 | $1,125,776 |
| Equity securities, cost | 31,331 | 31,331 |
| Agents' balances and premium receivable, allowances for doubtful accounts | 10,133 | 10,853 |
| Property, plant and equipment, accumulated depreciation | 44,772 | 42,092 |
| Recoverables from reinsurers, paid losses and loss adjustment expenses | 479 | 316 |
| Long-term debt, fair value | $192,740 | $192,309 |
| Common stock, no par value | $0 | $0 |
| Common stock, shares authorized | 50,000,000 | 50,000,000 |
| Common stock, shares issued | 21,110,026 | 21,082,139 |
| Treasury stock, shares | 7,836,662 | 7,584,762 |
| CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (USD $) | ||||||
| In Thousands | Common Stock
| Additional Paid-in Capital
| Retained Earnings
| Accumulated Other Comprehensive Income (Loss), net of tax
| Treasury Stock
| Total
|
| Beginning Balance at Dec. 31, 2008 | $20,999 | $341,889 | $439,051 | $5,987 | ($282,594) | $525,331 |
| Net earnings | 10,823 | 10,823 | ||||
| Net change in postretirement benefit liability | (24) | (24) | ||||
| Change in unrealized gain on investments | 5,225 | 5,225 | ||||
| Comprehensive income | 16,024 | |||||
| Dividends paid to common shareholders | (1,687) | (1,687) | ||||
| Shares issued and share-based compensation expense | 10 | 364 | 374 | |||
| Acquisition of treasury stock | (10,403) | (10,403) | ||||
| Ending Balance at Mar. 31, 2009 | 21,009 | 342,254 | 448,186 | 11,187 | (292,998) | 529,638 |
| Net earnings | 59,771 | 59,771 | ||||
| Net change in postretirement benefit liability | (53) | (53) | ||||
| Change in unrealized gain on investments | 16,300 | 16,300 | ||||
| Change in non-credit component of impairment losses on fixed maturities | 16,834 | 16,834 | ||||
| Comprehensive income | 92,852 | |||||
| Reclassification of non-credit component of previously recognized impairment losses on fixed maturities | 38,107 | (38,107) | 0 | |||
| Tax benefit on reclassification | 13,338 | 13,338 | ||||
| Dividends paid to common shareholders | (4,898) | (4,898) | ||||
| Shares issued and share-based compensation expense | 55 | 1,778 | 1,833 | |||
| Acquisition of treasury stock | (14,605) | (14,605) | ||||
| Ending Balance at Dec. 31, 2009 | 21,064 | 344,031 | 541,167 | 19,500 | (307,602) | 618,160 |
| Net earnings | 15,621 | 15,621 | ||||
| Net change in postretirement benefit liability | (17) | (17) | ||||
| Change in unrealized gain on investments | 3,702 | 3,702 | ||||
| Change in non-credit component of impairment losses on fixed maturities | 1,761 | 1,761 | ||||
| Comprehensive income | 21,067 | |||||
| Dividends paid to common shareholders | (1,864) | (1,864) | ||||
| Shares issued and share-based compensation expense | 45 | 1,264 | 1,309 | |||
| Acquisition of treasury stock | (10,412) | (10,412) | ||||
| Ending Balance at Mar. 31, 2010 | $21,108 | $345,296 | $554,925 | $24,945 | ($318,014) | $628,260 |
| CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | |||||||||||||||||||
| In Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | |||||||||||||||||
| Operating activities: | |||||||||||||||||||
| Net earnings | $15,621 | $10,823 | |||||||||||||||||
| Adjustments: | |||||||||||||||||||
| Depreciation and amortization | 4,255 | 1,748 | |||||||||||||||||
| Net realized losses on investing activities | 455 | [1] | 6,127 | [1] | |||||||||||||||
| Share-based compensation expense | 672 | 318 | |||||||||||||||||
| (Increase) decrease in accrued investment income | (982) | 496 | |||||||||||||||||
| Increase in agents' balances and premium receivable | (34,693) | (12,874) | |||||||||||||||||
| (Increase) decrease in reinsurance receivables | (1,508) | 3,192 | |||||||||||||||||
| Increase in deferred policy acquisition costs | (6,918) | (3,277) | |||||||||||||||||
| Decrease in other assets | 1,040 | 10,814 | |||||||||||||||||
| Increase in insurance claims and reserves | 39,301 | 3,752 | |||||||||||||||||
| Decrease in payable to reinsurers | (58) | (675) | |||||||||||||||||
| (Decrease) increase in other liabilities | (1,581) | 15,129 | |||||||||||||||||
| Net cash provided by operating activities | 15,605 | 35,572 | |||||||||||||||||
| Purchases of and additional investments in: | |||||||||||||||||||
| Fixed maturities | (95,514) | (126,973) | |||||||||||||||||
| Equity securities | 0 | (117) | |||||||||||||||||
| Property and equipment | (2,115) | (1,437) | |||||||||||||||||
| Maturities and redemptions of fixed maturity investments | 39,752 | 31,519 | |||||||||||||||||
| Sales of fixed maturity investments | 11,717 | 75,007 | |||||||||||||||||
| Net cash used in investing activities | (46,161) | (22,001) | |||||||||||||||||
| Financing activities: | |||||||||||||||||||
| Proceeds from stock option exercise and employee stock purchase plan, including tax benefit | 637 | 57 | |||||||||||||||||
| Acquisition of treasury stock | (10,328) | (10,032) | |||||||||||||||||
| Dividends paid to shareholders | (1,864) | (1,687) | |||||||||||||||||
| Net cash used in financing activities | (11,555) | (11,662) | |||||||||||||||||
| Net (decrease) increase in cash and cash equivalents | (42,111) | 1,910 | |||||||||||||||||
| Cash and cash equivalents at beginning of period | 99,700 | 127,568 | |||||||||||||||||
| Cash and cash equivalents at end of period | $57,589 | $129,478 | |||||||||||||||||
| [1] Realized gains before impairment losses $ 1,078 $ 1,389 (22.4 )% Total other-than-temporary impairment (OTTI) losses (99 ) (7,516 ) (98.7 )% OTTI losses reclassed from other comprehensive income (1,434 ) 0 0.0 % Net impairment losses recognized in earnings (1,533 ) (7,516 ) (79.6 )% Total realized losses on investments $ (455 ) $ (6,127 ) (92.6 )% | |||||||||||||||||||
| Reporting and Accounting Policies | |
| 3 Months Ended
Mar. 31, 2010 | |
| Reporting and Accounting Policies | Note 1 Reporting and Accounting Policies Nature of Operations Infinity Property and Casualty Corporation (Infinity or the Company) is a holding company that, through subsidiaries, provides personal automobile insurance with a concentration on nonstandard auto insurance. Although licensed to write insurance in all 50 states and the District of Columbia, Infinity focuses on select states that management believes offer the greatest opportunity for premium growth and profitability. Basis of Consolidation and Reporting The accompanying consolidated financial statements are unaudited and should be read in conjunction with Infinity Property and Casualty Corporations Annual Report on Form 10-K for the year ended December31, 2009. This Quarterly Report on Form 10-Q, including the Notes to the Consolidated Financial Statements and Managements Discussion and Analysis of Financial Condition and Results of Operations, focuses on Infinitys financial performance since the beginning of the year. These financial statements reflect certain adjustments necessary for a fair presentation of Infinitys 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 the first quarter of 2010, management determined that the percentage of salaries deferrable as deferred acquisition costs had been incorrectly calculated in prior years resulting in an overstatement of the asset. As a result, the Company recorded a pre-tax charge of $1.3 million in its Consolidated Statement of Earnings to correct the deferred acquisition cost balance. Infinity concluded that this error was not material to any prior periods. Infinity has evaluated events that occurred subsequent to March 31, 2010 for recognition or disclosure in the Companys financial statements and the notes to the financial statements. Schedules may not foot due to rounding. Estimates Certain accounts and balances within these financial statements are based upon managements 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 management uses judgment 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 effect on Infinitys results of operations could be material. The results of operations for the periods presented may not be indicative of the Companys results for the entire year. New Accounting Standards Adopted In January 2010 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update Number 2010-06. This update requires new disclosures regarding fair value measurements and clarifies existing fair value disclosures. Infinity adopted the provisions of this update for all periods ending after December15, 2009. The disclosures required by this update can be found in Note 4 of the Con |
| Share-Based Compensation | |
| 3 Months Ended
Mar. 31, 2010 | |
| Share-Based Compensation | Note 2 Share-Based Compensation Restricted Stock Plan Infinitys Amended Restricted Stock Plan was established in 2002 and amended on July31, 2007. There were 500,000 shares of Infinity common stock reserved for issuance under the Restricted Stock Plan, of which 206,609 shares have been issued through March31, 2010. The fair value of shares issued under Infinitys Restricted Stock Plan is expensed over the vesting periods of the awards based on the market value of Infinitys stock on the date of grant. On July31, 2007, Infinitys Compensation Committee approved the grant of 72,234 shares of restricted stock to certain officers under the Amended 2002 Restricted Stock Plan. These shares will vest in full on July31, 2011. During the vesting period, the shares will not have voting rights but will accrue dividends, which will not be paid until the shares have vested. The shares are treated as issued and outstanding for calculation of diluted earnings per share only. Until fully vested, the shares will not be considered issued and outstanding for purposes of the basic earnings per share calculation. During each of the three month periods ended March31, 2010 and 2009, $0.2 million of expense was recorded in the Consolidated Statements of Earnings related to the grant of restricted stock. Non-Employee Directors Stock Ownership Plan In May 2005, Infinitys shareholders approved the Non-Employee Directors Stock Ownership Plan (the Directors Plan). The purpose of the Directors Plan is to include Infinity common stock as part of the compensation provided to its non-employee directors and to provide for stock ownership requirements for Infinitys non-employee directors. There are 200,000 shares of Infinity common stock reserved for issuance under the Directors Plan, of which 29,630 shares have been issued through March31, 2010. Under the terms of the Directors Plan, shares are granted on or about June1 of each year and the recipient may not sell or transfer the shares for six months from the date of grant. On June1, 2009, a total of 9,583 shares of common stock, determined pursuant to the Directors Plan and valued at $350,000, were issued to Infinitys non-employee directors. Employee Stock Purchase Plan Infinity established the Employee Stock Purchase Plan (the ESPP) in 2004. Under this plan, all eligible full-time employees may purchase shares of Infinity common stock at a 15% discount to the current market price. Employees may allocate up to 25% of their base salary with a maximum annual participation amount of $25,000. The source of shares issued to participants is treasury shares or authorized but previously unissued shares. The maximum number of shares which may be issued under the ESPP is 1,000,000, of which 38,885 have been issued through March31, 2010. Infinitys ESPP is qualified under Section423 of the Internal Revenue Code of 1986, as amended. The 15% market discount for shares purchased during the three-month periods ended March31, 2010 and 2009 approximated $8,000 and $9,000, respectively. The discounts were recognized as compensation expense in the Consolidated Statements of Earnings in each period. Participants shares are treated |
| Computation of Earnings Per Share | |
| 3 Months Ended
Mar. 31, 2010 | |
| Computation of Earnings Per Share | Note 3 Computation of Earnings Per Share The following table illustrates the computation of Infinitys basic and diluted earnings per common share (in thousands, except per share figures): For the three months ended March31, 2010 2009 Net earnings for basic and diluted earnings per share $ 15,621 $ 10,823 Average basic shares outstanding 13,319 13,976 Basic earnings per share $ 1.17 $ 0.77 Average basic shares outstanding 13,319 13,976 Restricted stock not yet vested 72 72 Dilutive effect of assumed option exercises 136 138 Dilutive effect of Performance Share Plan 93 0 Average diluted shares outstanding 13,620 14,185 Diluted earnings per share $ 1.15 $ 0.76 |
| Fair Value | |
| 3 Months Ended
Mar. 31, 2010 | |
| Fair Value | Note 4 Fair Value Fair values of instruments are based on (i)quoted prices in active markets for identical assets (Level 1), (ii)quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs are observable in active markets (Level 2) or (iii)valuations derived from valuation techniques in which one or more significant inputs are unobservable in the marketplace (Level 3). The following table presents for each of the fair value hierarchy levels the Companys assets and liabilities that are measured at fair value on a recurring basis at March31, 2010 (in thousands): Fair Value Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 57,589 $ 0 $ 0 $ 57,589 Fixed maturity securities: U.S. government 215,969 0 0 215,969 Government-sponsored entities 0 40,510 4,062 44,572 State and municipal 0 349,898 0 349,898 Mortgage-backed securities: Residential 0 175,032 0 175,032 Commercial 0 43,437 0 43,437 Total mortgage-backed securities $ 0 $ 218,469 $ 0 $ 218,469 Collateralized mortgage obligations 0 60,191 1,831 62,023 Asset-backed securities 0 22,772 645 23,417 Corporates 0 255,208 13,031 268,238 Total fixed maturities $ 215,969 $ 947,048 $ 19,568 $ 1,182,586 Equity securities 41,691 1 0 41,691 Total $ 315,249 $ 947,049 $ 19,568 $ 1,281,866 Percentage of total 24.6 % 73.9 % 1.5 % 100.0 % Level 1 includes cash and cash equivalents, U.S. Treasury securities and an exchange-traded fund. Level 2 securities are comprised of securities whose fair value was determined using observable market inputs. Level 3 securities are comprised of (i)securities for which there is no active or inactive market for similar instruments, (ii)securities whose fair value is determined based on unobservable inputs and (iii)securities, other than securities backed by the U.S. Government, that are not rated by a nationally recognized statistical rating organization. Transfers between levels are recognized at the end of the reporting period. The fair value of securities in Level 2 is provided by a third-party, nationally recognized pricing service. Infinity attempts to validate market prices obtained from third parties through periodic review of model pricing methodologies and periodic testing of sales activity to determine if there are any significant differences between the market price used to value the security as of the balance sheet date and the sales price of the security for sales that occurred around the balance sheet date. The following table presents the changes in the Leve |
| Investments | |
| 3 Months Ended
Mar. 31, 2010 | |
| Investments | Note 5 Investments All fixed maturity and equity securities are considered available-for-sale and reported at fair value with the net unrealized gains or losses reported after-tax (net of any valuation allowance) as a component of other comprehensive income. The proceeds from sales of securities for the three months ended March31, 2010 were $11.7 million. Proceeds from sales of securities for the three months ended March31, 2009 were $75.0 million. Summarized information for the major categories of Infinitys investment portfolio follows (in thousands): March31, 2010 AmortizedCostor Cost Gross Unrealized Gains Gross Unrealized Losses OTTI Recognizedin Accumulated OCI Fair Value Fixed maturities: U.S. government $ 212,261 $ 4,199 $ (491 ) $ 0 $ 215,969 Government-sponsored entities 43,786 788 (3 ) 0 44,572 State and municipal 342,407 8,875 (1,385 ) 0 349,898 Mortgage-backed securities: Residential 170,613 4,455 (35 ) 0 175,032 Commercial 42,441 1,014 (17 ) 0 43,437 Total mortgage-backed securities $ 213,053 $ 5,468 $ (52 ) $ 0 $ 218,469 Collateralized mortgage obligations 61,637 997 (330 ) (281 ) 62,023 Asset-backed securities 23,449 87 (116 ) (2 ) 23,417 Corporates 258,924 9,824 (156 ) (354 ) 268,238 Total fixed maturities $ 1,155,517 $ 30,239 $ (2,534 ) $ (637 ) $ 1,182,586 Equity securities 31,331 10,361 0 0 41,691 Total $ 1,186,848 $ 40,600 $ (2,534 ) $ (637 ) $ 1,224,277 December31, 2009 AmortizedCostor Cost Gross Unrealized Gains Gross Unrealized Losses OTTI Recognizedin Accumulated OCI Fair Value Fixed maturities: U.S. government $ 187,915 $ 4,063 $ (717 ) $ 0 $ 191,261 Government-sponsored entities 56,344 790 (118 ) 0 57,015 State and municipal 342,696 9,020 (1,640 ) 0 350,076 Mortgage-backed securities: Residential 149,354 3,549 (36 ) 0 152,867 Commercial 53,338 637 (49 ) 0 53,926 Total mortgage-backed securities $ 202,692 $ 4,186 $ (85 ) $ 0 $ 206,793 Collateralized mortgage obligations 65,249 619 (387 ) (901 ) 64,580 Asset-backed securities 6,760 41 (71 ) (5 ) 6,726 Corporates 264,120 8,190 (696 ) (1,374 ) 270,241 Total fixed maturities $ 1,125,776 $ 26,909 $ (3,714 ) $ (2,279 ) $ 1,146,692 Equity securities 31,331 8,108 0 0 39,438 |
| Long-term Debt | |
| 3 Months Ended
Mar. 31, 2010 | |
| Long-term Debt | Note 6 Long-term Debt In February 2004, Infinity issued $200 million principal of senior notes due February 2014 (the Senior Notes). The Senior Notes accrue interest at an effective yield of 5.55% and bear a coupon of 5.5%, payable semiannually. At the time the notes were issued, Infinity capitalized $2.1 million of debt issuance costs, which are being amortized over the term of the Senior Notes. During 2009, Infinity repurchased $5.0 million of its debt, bringing the outstanding principle to $195.0 million. The March31, 2010 fair value of $192.7 million was calculated using a 201 basis point spread to the ten-year U.S. Treasury Note of 3.828%. In August 2008, Infinity entered into an agreement for a $50 million three-year revolving credit facility (the Credit Agreement) that requires Infinity to meet certain financial and other covenants. Infinity is currently in compliance with all covenants under the Credit Agreement. At March31, 2010, there were no borrowings outstanding under the Credit Agreement. |
| Income Taxes | |
| 3 Months Ended
Mar. 31, 2010 | |
| Income Taxes | Note 7 Income Taxes Income tax expense for the three months ended March31, 2010 was $7.2 million compared to $8.0 million for the same period of 2009. The following table reconciles Infinitys statutory federal income tax rate to its effective tax rate (in thousands): For the three months ended March31, 2010 2009 Earnings before income taxes $ 22,828 $ 18,787 Income taxes at statutory rates 7,990 6,575 Effect of: Dividends-received deduction (34 ) (40 ) Tax-exempt interest (882 ) (597 ) Adjustment to valuation allowance 112 2,034 Other 21 (8 ) Provision for income taxes as shown on the Consolidated Statements of Earnings $ 7,206 $ 7,964 GAAP effective tax rate 31.6 % 42.4 % Infinity increased its tax valuation allowance by approximately $0.1 million and $2.0 million in the first quarter of 2010 and 2009, respectively, primarily due to an increase in the reserve for other-than-temporary impaired securities in both periods. |
| Additional Information | |
| 3 Months Ended
Mar. 31, 2010 | |
| Additional Information | Note 8 Additional Information Supplemental Cash Flow Information Non-cash activity includes the issuance of and the accounting for stock-based compensation and the changes in net unrealized gains or losses in securities. The Company made the following payments that are not separately disclosed in the Consolidated Statements of Cash Flows (in thousands): ForthethreemonthsendedMarch31, 2010 2009 Income tax payments $ 5,500 $ 200 Interest payments on debt 5,363 5,500 Negative Cash Book Balances Negative cash book balances, included in the line item Other Liabilities in the Consolidated Balance Sheets, were $21.4 million and $22.1 million, respectively, at March31, 2010 and December 31, 2009. |
| Insurance Reserves | |
| 3 Months Ended
Mar. 31, 2010 | |
| Insurance Reserves | Note 9 Insurance Reserves Insurance reserves include liabilities for unpaid losses, both known and estimated for incurred but not reported (IBNR), and unpaid loss adjustment expenses (LAE). The following table provides an analysis of changes in the liability for unpaid losses and LAE on a GAAP basis (in thousands): Three months ended March31, 2010 2009 Balance at Beginning of Period Unpaid losses on known claims $ 164,134 $ 179,530 IBNR losses 193,790 196,891 LAE 151,191 168,335 Total unpaid losses and LAE 509,114 544,756 Reinsurance recoverables (17,715 ) (20,516 ) Unpaid losses and LAE, net of reinsurance recoverables 491,399 524,241 Current Activity Loss and LAE incurred: Current accident year 163,332 161,040 Prior accident years (16,689 ) (9,771 ) Total loss and LAE incurred 146,643 151,269 Loss and LAE payments: Current accident year (51,006 ) (49,561 ) Prior accident years (100,545 ) (114,290 ) Total loss and LAE payments (151,551 ) (163,851 ) Balance at End of Period Unpaid losses and LAE, net of reinsurance recoverables 486,491 511,658 Add back reinsurance recoverables 18,735 19,461 Total unpaid losses and LAE $ 505,225 $ 531,120 Unpaid losses on known claims $ 168,918 $ 171,700 IBNR losses 185,538 194,121 LAE 150,769 165,299 Total unpaid losses and LAE $ 505,225 $ 531,120 The $16.7 million of favorable reserve development during the three months ended March31, 2010 primarily relates to personal auto coverage in California, Connecticut, Pennsylvania and Arizona. The $9.8 million of favorable reserve development during the three months ended March31, 2009 primarily relates to personal auto coverage in California, Florida and New York. |
| Commitments and Contingencies | |
| 3 Months Ended
Mar. 31, 2010 | |
| Commitments and Contingencies | Note 10 Commitments and Contingencies Commitments There have been no material changes from the commitments discussed in the Form 10-K for the year ended December31, 2009. For a description of the Companys previously reported commitments, refer to Note 16 Commitments and Contingencies, in the form 10-K for the year ended December31, 2009. Contingencies There have been no material changes from the contingencies discussed in the Form 10-K for the year ended December31, 2009. For a description of the Companys previously reported contingencies, refer to Note 16 Commitments and Contingencies, in the form 10-K for the year ended December31, 2009. |
