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TEXT-Fitch affirms Infinity Property & Casualty Corp
June 5, 2012 / 3:42 PM / 5 years ago

TEXT-Fitch affirms Infinity Property & Casualty Corp

 (The following statement was released by the rating agency)	
June 5 - Fitch Ratings has affirmed Infinity Property & Casualty
Corporation's ratings (Infinity) (NASDAQ: IPCC), and its subsidiaries,
as follows:	
--Long-term Issuer Default Rating (IDR) at 'BBB+';	
--$195 million senior notes due 2014 at 'BBB';	
--Insurer Financial Strength (IFS) rating of the operating subsidiaries at 'A'.	
See below for a complete list of subsidiary ratings. The Rating Outlook is 	
The ratings are based on Infinity's underwriting results, quality balance sheet,	
characterized by strong capitalization and adequate loss reserving levels. 	
Offsetting these positives are Infinity's business concentration in the 	
California auto market, which represents approximately 49% of net written 	
premiums.  Also, Infinity is challenged as a more modest sized personal auto 	
specialist to compete with insurers with greater capital bases and operating 	
scale, and to manage regulatory and operating risks inherent to this business 	
Infinity is one of the largest non-standard auto insurance companies in the 	
country.  The average non-standard automobile consumer is more likely to be 	
impacted by broader negative economic issues than the standard or preferred 	
automobile consumer.  This may impede premium growth or negatively impact 	
customer retention.	
As of March 31, 2012, Infinity's financial leverage ratio was 23.4%.  Fitch 	
notes that earnings based interest coverage for first quarter 2012 was 3.0 times	
(x) and anticipates that the company will continue to maintain adequate interest	
coverage levels to support debt servicing requirements going forward.	
An important accounting item to point out when looking at Infinity's 	
underwriting results is that there is a significant difference between statutory	
and GAAP expense ratios.  From a statutory perspective, beginning in 2007, to be	
more consistent with the way other insurance companies reported fee income, 	
Infinity did not directly offset underwriting income expenses but rather put the	
fees in other income lines.  However, from a GAAP perspective, the company 	
reports expenses on a net basis.  Fee income generated for 2011 was 	
approximately $91 million or 8.4% of rolling 12 month gross written premium.	
Infinity reported a statutory underwriting combined ratio of 103.5% for full 	
year 2011 compared to 95.8% for the prior year.  From a GAAP perspective 	
Infinity reported a combined ratio of 98.0% for full year 2011 compared to 89.6%	
for prior year.  The primary driver for the decline in underwriting is reserve 	
development.  In 2010, Infinity's results benefited $73.9 million from favorable	
prior year reserve development compared to an adverse $4.5 million experienced 	
for full year 2011.  Removing the impact of reserve development, Infinity 	
reported an accident year combined ratio of 97.6% for full year 2011 which is 	
very comparable to full year 2010's result of 97.7%.  	
While Fitch believes a ratings upgrade in the near term is unlikely the 	
following is a list of key rating triggers that could lead to an upgrade:	
--A sustained increase in capitalization such that statutory net leverage was 	
3.5x or lower.	
--A more diverse geographical premium distribution while simultaneously 	
maintaining disciplined underwriting and profitability.	
The following is a list of key rating triggers that could lead to a downgrade:	
--A pretax GAAP operating loss that meaningfully increases operating leverage.	
--An increase in the company's statutory net leverage of 5.0x or higher.	
--A negative legal or political action associated with either the nonstandard 	
auto market or Infinity's marketing strategy of targeting the Hispanic market 	
that damages Infinity's brand image.	
Fitch has affirmed the following ratings with a Stable Outlook:	
Infinity Property Casualty Corp.	
--IDR at 'BBB+';	
--$195 million 5.5% senior unsecured note due 2014 at 'BBB'.	
Fitch has also affirmed the following IFS ratings at 'A', with a Stable Outlook:	
Hillstar Insurance Co	
Infinity Assurance Insurance Co	
Infinity Auto Insurance Co	
Infinity Casualty Insurance Company	
Infinity County Mutual Insurance Company	
Infinity Indemnity Insurance Co	
Infinity Insurance Company	
Infinity Preferred Insurance Co	
Infinity Reserve Insurance Co	
Infinity Safeguard Insurance Co	
Infinity Security Insurance Company	
Infinity Select Insurance Co	
Infinity Standard Insurance Co	
Fitch no longer has sufficient information to rate the following entities thus 	
the ratings have been withdrawn:	
Infinity General Insurance Co	
Infinity Specialty Insurance Co	
Infinity Premier Insurance Co	
 (Caryn Trokie, New York Ratings Unit)	

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