CHICAGO--(BUSINESS WIRE)--April 27, 2005--Unitrin, Inc. (NYSE:UTR) reported today net income of $67.9 million ($0.99 per common share) for the first quarter of 2005, compared to net income of $48.0 million ($0.71 per common share) for the same period in 2004. Net Income increased due primarily to improved operating results in the Company's business segments, partially offset by lower Net Realized Investment Gains.
Dick Vie, Unitrin Chairman and Chief Executive Officer, commented, "We are pleased to report record first quarter operating results, which excludes investment gains. The combination of our personal lines operations into our Kemper Auto and Home segment and the launch of our Unitrin Business Insurance segment both are off to strong starts."
Total Revenue
Total Revenue was $747.1 million for the first quarter of 2005, compared to $745.3 million for the first quarter of 2004, an increase of $1.8 million. Net Investment Income increased by $11.8 million due primarily to a higher level of investments. Total Earned Premiums for the first quarter of 2005 were $615.2 million, an increase of $1.0 million compared to the first quarter of 2004. Earned Premiums increased in the Unitrin Direct segment, mostly offset by decreased Earned Premiums in the Unitrin Specialty segment.
Net Realized Investment Gains were $5.7 million for the first quarter of 2005, compared to $18.5 million for the first quarter of 2004. Net Realized Investment Gains for the first quarter of 2005 includes pre-tax gains of $2.2 million from the sales of a portion of the Company's investment in Baker Hughes common stock and pre-tax gains of $1.7 million resulting from the sales of a portion of the Company's investment in Hartford Financial Services Group, Inc. common stock. The Company cannot anticipate when or if similar investment gains may occur in the future.
Quarterly Segment Results
Unitrin is engaged, through its subsidiaries, in the property and casualty insurance, life and health insurance and consumer finance businesses. The Company conducts its operations through six operating segments: Kemper Auto and Home, Unitrin Specialty, Unitrin Direct, Unitrin Business Insurance, Life and Health Insurance and Consumer Finance.
Effective January 1, 2005, the personal lines operations of Unitrin's former Multi Lines Insurance segment were combined into the Kemper Auto and Home segment and the remaining commercial lines operations of the former Multi Lines segment have been renamed "Unitrin Business Insurance" and will continue to operate as a separate business segment. Amounts for the prior period have been restated to conform to the current management reporting structure.
Kemper Auto and Home
Earned Premiums in the combined Kemper Auto and Home segment decreased by $0.5 million for the first quarter of 2005, compared to the same period in 2004, due primarily to lower volume, partially offset by higher rates. Net Investment Income increased by $3.5 million for the three months ended March 31, 2005, compared to the same period in 2004, due primarily to higher levels of investments and higher yields on investments.
Operating Profit in the Kemper Auto and Home segment increased by $17.0 million for the first quarter of 2005, compared to the same period in 2004, due primarily to lower incurred losses and loss adjustment expenses ("LAE") and the higher net investment income, partially offset by higher insurance expenses. The Kemper Auto and Home segment recognized favorable loss and LAE reserve development of $15.3 million for the first quarter of 2005, compared to favorable development of $7.3 million for the same period in 2004. Restructuring costs recognized in the Kemper Auto and Home segment were $0.8 million for the first quarter of 2005.
Unitrin Specialty
Earned Premiums in the Unitrin Specialty segment decreased by $8.0 million for the first quarter of 2005, compared to the same period in 2004, due primarily to lower premium volume in personal automobile insurance, partially offset by higher premium volume in commercial automobile insurance. Net Investment Income increased by $1.2 million, due primarily to higher yields on investments and higher levels of investments.
Operating Profit in the Unitrin Specialty segment decreased slightly for the first quarter of 2005, compared to the same period in 2004. Operating profit from personal automobile insurance decreased by $1.6 million due primarily to the lower premium volume, higher losses and LAE and higher insurance expenses as a percentage of earned premiums, partially offset by the higher investment income. Operating profit from commercial automobile insurance increased by $1.3 million for the first quarter of 2005, compared to the same period in 2004, due primarily to the higher premium volume and higher investment income.
Unitrin Direct
Earned Premiums for the first quarter of 2005 were $53.1 million, compared to $42.2 million for the same period in 2004. Earned Premiums increased due to higher volume and higher premium rates. Net Investment Income in the Unitrin Direct segment increased by $0.9 million for the first quarter of 2005, compared to the same period in 2004, due primarily to higher levels of investments and, to a lesser extent, higher yields on investments.
The Unitrin Direct segment reported an Operating Profit of $0.7 million for the first quarter of 2005, compared to an Operating Loss of $3.3 million for the same period in 2004. The Unitrin Direct segment's operating results improved due primarily to lower insurance expenses as a percentage of earned premiums and lower incurred loss and LAE as a percentage of earned premiums. Insurance expenses as a percentage of earned premiums decreased due primarily to improved economies of scale. The lower incurred loss and LAE as a percentage of earned premiums reflect improved premium rate adequacy.
Unitrin Business Insurance
On January 1, 2005, the Company launched its new stand-alone commercial lines business segment - Unitrin Business Insurance. The Unitrin Business Insurance segment includes the commercial lines operations and certain commercial reinsurance programs of the former Multi Lines Insurance segment.
Earned Premiums in the Unitrin Business Insurance segment decreased by $2.6 million for the first quarter of 2005, compared to the same period in 2004. Commercial automobile insurance and commercial property and liability insurance earned premiums decreased due primarily to lower premium volume, partially offset by higher premium rates. Net Investment Income in the Unitrin Business Insurance segment increased by $1.5 million for the first quarter of 2005, compared to the same period in 2004, due to higher yields on investments and, to a lesser extent, higher levels of investments.
Operating Profit in the Unitrin Business Insurance segment increased by $3.5 million for the first quarter of 2005, compared to the same period in 2004, due primarily to lower incurred losses and LAE and the higher net investment income, partially offset by higher insurance expenses partly due to certain restructuring costs. Incurred losses and LAE decreased due to improved underwriting and the favorable effects of reserve development. Reserve development was $4.2 million favorable for the first quarter of 2005, compared to $3.2 million favorable for the same period in 2004. Catastrophe losses and LAE were $0.2 million for the first quarter of 2005, compared to $0.7 million for the same period in 2004. Restructuring costs recognized in the Unitrin Business Insurance segment were $1.1 million for the first quarter of 2005.
Life and Health Insurance
Earned Premiums in the Life and Health Insurance segment increased by $1.2 million for the first quarter of 2005, compared to the same period in 2004, due primarily to higher volume of life insurance and higher volume of property insurance sold by the Life and Health Insurance segment's career agents, partially offset by lower volume of accident and health insurance. Net Investment Income in the Life and Health Insurance segment increased by $5.6 million for the first quarter of 2005, compared to the same period in 2004, due primarily to higher levels of investments and higher yields on investments.
Operating Profit in the Life and Health Insurance segment increased by $10.8 million for the first quarter of 2005, compared to the same period in 2004, due primarily to the higher net investment income and lower life insurance policyholders' benefits.
Consumer Finance
Consumer Finance Revenues increased by $2.7 million for the first quarter of 2005, compared to the same period of 2004, due primarily to higher levels of loans outstanding, partially offset by lower loan portfolio interest rates. Operating Profit in the Consumer Finance segment increased by $3.3 million for the first quarter of 2005, compared to the same period of 2004, due primarily to lower provision for loan losses and the higher levels of loans outstanding.
Results for Unitrin, Inc. for the first quarter of 2005 and 2004
are as follows:
Three Months Ended
------------------------
(Dollars and Shares in Millions, March 31, March 31,
Except Per Share Amounts) 2005 2004
----------------------------------------- ----------- -----------
Revenues:
Earned Premiums $615.2 $614.2
Consumer Finance Revenues 52.3 49.6
Net Investment Income 72.0 60.2
Other Income 1.9 2.8
Net Realized Investment Gains 5.7 18.5
----------- -----------
Total Revenues 747.1 745.3
----------- -----------
Expenses:
Policyholders' Benefits and Incurred
Losses and Loss Adjustment Expenses 399.3 423.5
Insurance Expenses 201.1 200.3
Consumer Finance Expenses 39.0 39.6
Interest and Other Expenses 14.6 14.8
----------- -----------
Total Expenses 654.0 678.2
----------- -----------
Income before Income Taxes and
Equity in Net Income (Loss) of Investee 93.1 67.1
Income Tax Expense 27.8 19.0
----------- -----------
Income before Equity in Net
Income (Loss) of Investee 65.3 48.1
Equity in Net Income (Loss) of Investee 2.6 (0.1)
----------- -----------
Net Income $67.9 $48.0
=========== ===========
Net Income Per Share $0.99 $0.71
=========== ===========
Net Income Per Share Assuming Dilution $0.98 $0.70
=========== ===========
Weighted Average Common Shares
Outstanding 68.9 68.0
=========== ===========
Weighted Average Common Shares
and Equivalent Shares Outstanding
Assuming Dilution 69.4 68.6
=========== ===========
Business segment revenues for the first quarter of 2005 and 2004
are as follows:
Three Months Ended
------------------------
March 31, March 31,
(Dollars in Millions) 2005 2004
--------------------------------------- ----------- -----------
Revenues:
Segment Revenues:
Kemper Auto and Home:
Earned Premiums $233.1 $233.6
Net Investment Income 12.0 8.5
Other Income 0.2 1.2
----------- -----------
Total Kemper Auto and Home 245.3 243.3
----------- -----------
Unitrin Specialty:
Earned Premiums 113.9 121.9
Net Investment Income 5.3 4.1
----------- -----------
Total Unitrin Specialty 119.2 126.0
----------- -----------
Unitrin Direct:
Earned Premiums 53.1 42.2
Net Investment Income 2.3 1.4
----------- -----------
Total Unitrin Direct 55.4 43.6
----------- -----------
Unitrin Business Insurance:
Earned Premiums 47.2 49.8
Net Investment Income 7.6 6.1
----------- -----------
Total Unitrin Business Insurance 54.8 55.9
----------- -----------
Life and Health Insurance:
Earned Premiums 167.9 166.7
Net Investment Income 40.2 34.6
Other Income 1.1 0.9
----------- -----------
Total Life and Health Insurance 209.2 202.2
----------- -----------
Consumer Finance 52.3 49.6
----------- -----------
Total Segment Revenues 736.2 720.6
Unallocated Dividend Income 5.1 5.9
Net Realized Investment Gains 5.7 18.5
Other 0.1 0.3
----------- -----------
Total Revenues $747.1 $745.3
=========== ===========
Business segment Operating Profit for the first quarter of 2005
and 2004 is as follows:
Three Months Ended
------------------------
March 31, March 31,
(Dollars in Millions) 2005 2004
------------------------------------------ ----------- -----------
Segment Operating Profit (Loss):
Kemper Auto and Home $28.5 $11.5
Unitrin Specialty 10.6 10.8
Unitrin Direct 0.7 (3.3)
Unitrin Business Insurance 8.7 5.2
Life and Health Insurance 27.5 16.7
Consumer Finance 13.3 10.0
----------- -----------
Total Segment Operating Profit 89.3 50.9
Unallocated Dividend Income 5.1 5.9
Net Realized Investment Gains 5.7 18.5
Other Expense, Net (7.0) (8.2)
----------- -----------
Income before Income Taxes and Equity
in Net Income (Loss) of Investee $93.1 $67.1
=========== ===========
Business segment Net Income for the first quarter of 2005 and 2004
is as follows:
Three Months Ended
-------------------------
March 31, March 31,
(Dollars in Millions) 2005 2004
------------------------------------------ ----------- -----------
Segment Net Income (Loss):
Kemper Auto and Home $20.5 $8.9
Unitrin Specialty 7.7 7.8
Unitrin Direct 0.9 (1.8)
Unitrin Business Insurance 6.9 4.4
Life and Health Insurance 17.9 11.1
Consumer Finance 7.7 5.7
----------- -----------
Total Segment Net Income 61.6 36.1
Net Income (Loss) From:
Unallocated Dividend Income 4.5 5.2
Net Realized Investment Gains 3.7 12.0
Other Expense, Net (4.5) (5.2)
----------- -----------
Income Before Equity in
Net Income (Loss) of Investee 65.3 48.1
Equity in Net Income (Loss) of Investee 2.6 (0.1)
----------- -----------
Net Income $67.9 $48.0
=========== ===========
Corporate Investments
After adjusting for first quarter 2005 sales of a portion of the Company's investment in Baker Hughes common stock, the fair value of Unitrin's Corporate Investments (Northrop Grumman preferred and common stock and the common stocks of Baker Hughes and UNOVA, Inc.) decreased by $63.0 million for the first quarter of 2005. The changes in fair values of Unitrin's Corporate Investments are summarized below:
Holding
Gain Fair
Fair (Loss) Value
Value Arising March
(Dollars in Millions) Dec. 31, During 31,
2004 Period Dispositions 2005
----------------------------- --------- -------- ------------ -------
Northrop Preferred Stock $ 234.3 $ (3.6) $ - $230.7
Northrop Common Stock 430.3 (3.0) - 427.3
Baker Hughes Common Stock 48.4 2.3 (3.9) 46.8
UNOVA Common Stock 320.1 (58.7) - 261.4
--------- -------- ------------ -------
Total Fair Value of
Corporate Investments $1,033.1 $ (63.0) $ (3.9) $966.2
========= ======== ============ =======
This press release may contain or incorporate by reference information that includes or is based upon 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. Forward-looking statements give expectations or forecasts of future events. The reader can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "believe(s)," "goal(s)," "target(s)," "estimate(s)," "anticipate(s)," "forecast(s)," "project(s)," "plan(s)," "intend(s)," "expect(s)," "might," "may" and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.
Any or all forward-looking statements may turn out to be wrong, and, accordingly, readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this press release. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the Company's actual future results. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance; actual results could differ materially from those expressed or implied in the forward-looking statements. Among factors that could cause actual results to differ materially are:
-- Changes in general economic conditions, including performance of financial markets, interest rates, and unemployment rates and the inflationary impact on claims;
-- Heightened competition, including with respect to pricing, entry of new competitors and the development of new products by new and existing competitors;
-- The number and severity of insurance claims (including those associated with catastrophe losses) and their impact on the adequacy of loss reserves;
-- The inflationary impact of the availability of labor and materials on repair and reconstruction costs;
-- Changes in the pricing or availability of reinsurance;
-- Changes in the financial condition of reinsurers and amounts recoverable therefrom;
-- Changes in industry trends;
-- Regulatory approval of insurance rates, policy forms, license applications and similar matters;
-- Governmental actions (including new laws or regulations or court decisions interpreting existing laws and regulations or policy provisions) and adverse judgments in litigation to which the Company or its subsidiaries are parties;
-- Regulatory, accounting or tax changes that may affect the cost of, or demand for, the Company's products or services;
-- Changes in distribution channels, methods or costs resulting from changes in laws or regulations, lawsuits or market forces;
-- Changes in ratings by credit rating agencies and/or A.M. Best Co., Inc.;
-- Realization of economies of scale;
-- Absolute and relative performance of the Company's products or services;
-- Ability to maintain uninterrupted operation of facilities and business operations; and
-- Other risks and uncertainties described from time to time in the Company's filings with the Securities and Exchange Commission ("SEC").
No assurances can be given that the results contemplated in any forward-looking statements will be achieved or will be achieved in any particular timetable. The Company assumes no obligation to publicly correct or update any forward-looking statements as a result of events or developments subsequent to the date of this press release. The reader is advised, however, to consult any further disclosures the Company makes on related subjects in filings made with the SEC.
Unitrin, Inc. Reports Record First Quarter Operating Results
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