Infinity Property and Casualty Corp. Reports Operating Results (10-K)

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Feb 25, 2011
Infinity Property and Casualty Corp. (IPCC, Financial) filed Annual Report for the period ended 2010-12-31.

Infinity Property And Casualty Corp. has a market cap of $750.8 million; its shares were traded at around $59.98 with a P/E ratio of 9.7 and P/S ratio of 0.8. The dividend yield of Infinity Property And Casualty Corp. stocks is 0.9%.Hedge Fund Gurus that owns IPCC: Bruce Kovner of Caxton Associates. Mutual Fund and Other Gurus that owns IPCC: Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Personal auto insurance is the largest line of property and casualty insurance, accounting for approximately 38%, or $160 billion, of the estimated $425 billion of annual industry premium. Personal auto insurance is comprised of preferred, standard and nonstandard risks. Nonstandard auto insurance is intended for drivers who, due to factors such as their driving record, age or vehicle type, represent a higher than normal risk. As a result, customers who purchase nonstandard auto insurance generally pay a higher premium for similar coverage than the drivers qualifying for standard or preferred policies. While there is no established industry-recognized distinction between nonstandard risks and all other personal auto risks, Infinity believes that nonstandard auto risks constitute approximately 20% of the personal automobile insurance market, with this percentage fluctuating according to competitive conditions in the market. Independent agents sell approximately 30% of all personal automobile insurance. The remainder is sold by captive agents or directly by insurance companies to their customers. Infinity believes that, relative to the standard and preferred auto insurance market, a disproportionately larger portion of nonstandard auto insurance is sold through independent agents.

Industry-wide, rates increased 4.0% during 2008, 4.7% in 2009 and 4.4% in 2010. Infinitys filed average rate adjustments on its personal auto business were (2.6)%, (0.3)% and 1.2% for 2008, 2009 and 2010, respectively.

Infinity estimates that approximately 77% of its personal auto business in 2010 was nonstandard auto insurance, compared to 79% in 2009. Based on data published by A.M. Best, Infinity believes that it is the fourth largest provider of nonstandard auto coverage through independent agents in the United States. Infinity also writes standard and preferred personal auto insurance, mono-line commercial auto insurance and classic collector automobile insurance.

Infinity has a history of favorable underwriting results. The following table compares Infinitys statutory combined ratio, net of fees, in past years with those of the private passenger auto industry. The statutory combined ratio is the sum of the loss ratio (the ratio of losses and loss adjustment expenses (LAE) to net earned premium) and the expense ratio (when calculated on a statutory accounting basis, the ratio of underwriting expenses, net of fees, to net written premium). 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. Infinity has consistently performed better than the industry as shown below:

Personal Automobile is Infinitys primary insurance product. It provides coverage to individuals for liability to others for bodily injury and property damage and for physical damage to an insureds own vehicle from collision and various other perils. In addition, many states require policies to provide for first party personal injury protection, frequently referred to as no-fault coverage. Infinity offers three primary products to individual drivers: the Low Cost product, which offers the most restrictive coverage, the Value Added product, which offers broader coverage and higher limits, and the Premier product, which offers the broadest coverage and is designed for standard and preferred risk drivers. For the year ended December 31, 2010, Infinitys mix of personal automobile written premium was 39% Low Cost, 56% Value Added and 5% Premier.

Infinity distributes its products primarily through a network of over 12,500 independent agencies and brokers (with approximately 16,000 locations). In 2010, three independent agencies each accounted for between 2.0% and 3.6% of Infinitys gross written premium, four other agencies each accounted for between 1.0% and 1.8% of the Companys gross written premium and 14% of the agency force produced 80% of Infinitys gross written premium. In California, Infinitys largest state by premium volume, 40 independent agents and brokers produced 44% of gross written premium (which represents 22% countrywide).

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