CHICAGO--(BUSINESS WIRE)--July 31, 2006--
Unitrin, Inc. (NYSE:UTR) reported today net income of
$69.4 million ($1.02 per common share) for the second quarter of 2006,
compared to $78.2 million ($1.13 per common share) for the second
quarter of 2005. Net income decreased due primarily to lower net
realized investment gains, partially offset by higher operating
results in the Company's operating segments.
Dick Vie, Unitrin Chairman and Chief Executive Officer, commented,
"We are pleased to report record second quarter Unitrin operating
results. Operating results continued to improve at our Unitrin Kemper
Auto and Home segment, which was the largest single contributor to our
bottom line in the second quarter. Our Life and Health Insurance and
Consumer Finance businesses also produced solid quarterly operating
results. Unitrin Direct and Unitrin Business Insurance returned to
profitability in the second quarter. Common stock repurchases in the
second quarter totaled $25.2 million."
Total Revenue
Total revenue was $773.2 million for the second quarter of 2006,
compared to $791.0 million for the second quarter of 2005. Earned
premiums increased by $1.0 million due primarily to increases in the
Life and Health Insurance segment, the Unitrin Kemper Auto and Home
segment and the Unitrin Direct segment, partially offset by decreased
earned premiums in the Unitrin Specialty segment. Net realized
investment gains were $9.0 million for the second quarter of 2006,
compared to $40.0 million for the second quarter of 2005, which
included pretax gains of $39.4 million from the sales of certain real
estate investments. Net realized investment gains for the second
quarters of 2006 and 2005 include pretax losses of $0.7 million and
$3.9 million, respectively, to write down certain investments where
the declines in the fair values of the investments were determined to
be other than temporary. The Company cannot anticipate when or if
similar investment gains and losses 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: Unitrin Kemper Auto and Home, Unitrin Specialty, Unitrin
Direct, Unitrin Business Insurance, Life and Health Insurance and
Consumer Finance.
Unitrin Kemper Auto and Home
Earned premiums in the Unitrin Kemper Auto and Home segment
increased $1.1 million for the second quarter of 2006, compared to the
same period in 2005, due primarily to higher premium rates, partially
offset by lower volume. Homeowners insurance earned premiums increased
by $2.9 million due primarily to higher premium rates and, to a lesser
extent, higher volume. Other insurance earned premiums increased by
$0.7 million due primarily to higher premium rates, partially offset
by lower volume. Automobile insurance earned premiums decreased by
$2.5 million due primarily to lower volume, partially offset by higher
rates. Net investment income increased by $1.2 million due to higher
levels of investments and higher yields on investments.
Operating profit in the Unitrin Kemper Auto and Home segment
increased by $15.0 million for the second quarter of 2006, compared to
the same period in 2005. Operating profit increased due primarily to
lower incurred losses and LAE on automobile insurance and other
insurance, lower insurance expenses as a percentage of earned premiums
and the higher net investment income, partially offset by higher
incurred losses and LAE on homeowners insurance. The Unitrin Kemper
Auto and Home segment recognized favorable loss and LAE reserve
development of $16.5 million for the second quarter of 2006, compared
to favorable loss and LAE reserve development of $10.6 million for the
same period in 2005. Excluding development, incurred losses and LAE
decreased, as a percentage of earned premiums, due to lower incurred
losses and LAE from automobile insurance and other insurance,
partially offset by higher incurred losses and LAE from homeowners
insurance. Insurance expenses decreased by $4.8 million due primarily
to the realization of economies of scale and to lower restructuring
costs. Restructuring costs recognized in the Unitrin Kemper Auto and
Home segment were insignificant in the second quarter of 2006,
compared to $0.9 million for the second quarter of 2005.
Unitrin Specialty
Earned premiums in the Unitrin Specialty segment decreased by $1.8
million for the second quarter of 2006, compared to the same period in
2005, due primarily to lower personal automobile insurance premium
rates and lower volume of motorcycle insurance, partially offset by
higher volume of personal automobile insurance. Operating profit in
the Unitrin Specialty segment decreased by $3.2 million due primarily
to lower favorable loss reserve development in 2006.
Unitrin Direct
Earned premiums in the Unitrin Direct segment increased by $0.8
million for the second quarter of 2006, compared to the same period in
2005, due to higher premium rates, partially offset by lower volume.
Unitrin Direct reduced its writings of new and renewal business in
certain states during 2005 while implementing certain product changes
and rate increases. Unitrin Direct has begun to allocate a larger
portion of its marketing budget to television advertising and to
reduce its direct mail efforts. Unitrin Direct began writing premiums
in two new states during the second quarter of 2006 and anticipates
entering into three additional states during the second half of 2006.
Operating profit in the Unitrin Direct segment was $0.4 million
for the second quarter of 2006, compared to $0.2 million for the same
period in 2005. Operating profit increased due primarily to lower
incurred losses and LAE as a percentage of earned premiums, partially
offset by higher insurance expenses as a percentage of earned
premiums. Incurred losses and LAE as a percentage of earned premiums
decreased due primarily to improved premium rate adequacy, partially
offset by the effects of loss and LAE reserve development. Unitrin
Direct recognized adverse loss and LAE reserve development of $0.8
million for the second quarter of 2006, compared to favorable loss and
LAE reserve development of $1.1 million for the same period in 2005.
Marketing expenses as a percentage of earned premiums increased from
6.5% in 2005 to 7.2% in 2006, due primarily to increased spending on
television and web advertising.
Unitrin Business Insurance
Earned premiums in the Unitrin Business Insurance segment
decreased by $0.4 million for the second quarter of 2006, compared to
the same period in 2005. Operating profit in the Unitrin Business
Insurance segment increased by $1.2 million due primarily to lower
incurred losses and LAE and the gain on the sale of a regional office
building, partially offset by higher restructuring and system
migration costs. Incurred losses and LAE decreased due primarily to
favorable reserve development, partially offset by an abnormal number
of large fire losses and higher catastrophe losses and LAE.
Life and Health Insurance
Earned premiums in the Life and Health Insurance segment increased
by $1.3 million for the second quarter of 2006, compared to the same
period in 2005, due primarily to higher volume of property insurance
sold by the Life and Health Insurance segment's career agents,
partially offset by higher costs for catastrophe reinsurance coverage,
lower earned premiums on life insurance and lower earned premiums from
accident and health insurance. The Company entered into a quota share
reinsurance agreement effective January 1, 2006, whereby the Company
assumes 100% of the business written by Old Reliable Casualty Company
("ORCC"). ORCC's earned premiums for the three months ended June 30,
2006 were $2.8 million. Net investment income increased by $6.8
million due to higher yields on investments and higher levels of
investments.
Operating profit in the Life and Health Insurance segment
increased by $2.3 million for the second quarter of 2006, compared to
the same period in 2005, due primarily to the higher net investment
income and lower mortality on life insurance products, partially
offset by the higher cost of catastrophe reinsurance and higher
catastrophe losses and LAE (including development) on property
insurance products sold by the Life and Health Insurance segment's
career agents and the gain on the sale of the Career Agency Group's
home office building in 2005.
Consumer Finance
Consumer finance revenues increased by $7.4 million for the second
quarter of 2006, compared to the same period in 2005, 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 $3.0 million due primarily to the higher level of
loans outstanding, partially offset by higher interest expense.
Results for Unitrin, Inc. for the three and six months ended June
30, 2006 and 2005 are as follows:
Three Months Ended Six Months Ended
(Dollars and Shares ------------------- -------------------
in Millions, June 30, June 30, June 30, June 30,
Except Per Share Amounts) 2006 2005 2006 2005
------------------------------ --------- --------- --------- ---------
Revenues:
Earned Premiums $624.0 $623.0 $1,237.8 $1,238.2
Consumer Finance Revenues 61.6 54.2 120.0 106.5
Net Investment Income 76.4 69.3 151.3 141.3
Other Income 2.2 4.5 3.0 6.4
Net Realized Investment
Gains 9.0 40.0 20.6 45.7
--------- --------- --------- ---------
Total Revenues 773.2 791.0 1,532.7 1,538.1
--------- --------- --------- ---------
Expenses:
Policyholders' Benefits and
Incurred Losses and Loss
Adjustment Expenses 409.2 413.0 822.6 812.3
Insurance Expenses 202.6 207.0 401.6 408.1
Consumer Finance Expenses 47.3 42.9 92.5 81.9
Interest and Other Expenses 15.8 15.7 31.7 30.3
--------- --------- --------- ---------
Total Expenses 674.9 678.6 1,348.4 1,332.6
--------- --------- --------- ---------
Income before Income Taxes and
Equity in Net Income of
Investee 98.3 112.4 184.3 205.5
Income Tax Expense 30.7 34.7 56.1 62.5
--------- --------- --------- ---------
Income before Equity in Net
Income of Investee 67.6 77.7 128.2 143.0
Equity in Net Income of
Investee 1.8 0.5 7.2 3.1
--------- --------- --------- ---------
Net Income $69.4 $78.2 $135.4 $146.1
========= ========= ========= =========
Net Income Per Share $1.02 $1.13 $1.98 $2.12
========= ========= ========= =========
Net Income Per Share Assuming
Dilution $1.01 $1.12 $1.97 $2.10
========= ========= ========= =========
Weighted Average Common Shares
Outstanding 68.3 69.1 68.4 69.0
========= ========= ========= =========
.
Weighted Average Common Shares
and Equivalent Shares
Outstanding
Assuming Dilution 68.7 69.7 68.8 69.6
========= ========= ========= =========
Business segment revenues for the three and six months ended June 30,
2006 and 2005 are as follows:
Three Months Ended Six Months Ended
------------------- -------------------
June 30, June 30, June 30, June 30,
(Dollars in Millions) 2006 2005 2006 2005
------------------------------ --------- --------- --------- ---------
Revenues:
Segment Revenues:
Unitrin Kemper Auto and
Home:
Earned Premiums $237.9 $236.8 $470.5 $469.9
Net Investment Income 12.8 11.6 25.2 23.6
Other Income 0.1 0.2 0.2 0.4
--------- --------- --------- ---------
Total Unitrin Kemper Auto
and Home 250.8 248.6 495.9 493.9
--------- --------- --------- ---------
Unitrin Specialty:
Earned Premiums 112.4 114.2 221.6 228.1
Net Investment Income 5.7 5.0 11.3 10.3
--------- --------- --------- ---------
Total Unitrin Specialty 118.1 119.2 232.9 238.4
--------- --------- --------- ---------
Unitrin Direct:
Earned Premiums 56.6 55.8 111.2 108.9
Net Investment Income 2.3 2.1 4.6 4.4
Other Income 0.1 0.1 0.2 0.1
--------- --------- --------- ---------
Total Unitrin Direct 59.0 58.0 116.0 113.4
--------- --------- --------- ---------
Unitrin Business
Insurance:
Earned Premiums 46.8 47.2 93.6 94.4
Net Investment Income 7.5 6.9 14.7 14.5
Other Income 1.3 - 1.3 -
--------- --------- --------- ---------
Total Unitrin Business
Insurance 55.6 54.1 109.6 108.9
--------- --------- --------- ---------
Life and Health Insurance:
Earned Premiums 170.3 169.0 340.9 336.9
Net Investment Income 45.8 39.0 88.3 79.2
Other Income - 3.6 - 4.7
--------- --------- --------- ---------
Total Life and Health
Insurance 216.1 211.6 429.2 420.8
--------- --------- --------- ---------
Consumer Finance 61.6 54.2 120.0 106.5
--------- --------- --------- ---------
Total Segment Revenues 761.2 745.7 1,503.6 1,481.9
Unallocated Dividend Income 2.3 5.2 7.4 10.3
Net Realized Investment
Gains 9.0 40.0 20.6 45.7
Other 0.7 0.1 1.1 0.2
--------- --------- --------- ---------
Total Revenues $773.2 $791.0 $1,532.7 $1,538.1
========= ========= ========= =========
Business segment operating profit for the three and six months
ended June 30, 2006 and 2005 is as follows:
Three Months Ended Six Months Ended
------------------- -------------------
June 30, June 30, June 30, June 30,
(Dollars in Millions) 2006 2005 2006 2005
------------------------------ --------- --------- --------- ---------
Segment Operating Profit
(Loss):
Unitrin Kemper Auto and
Home $36.0 $21.0 $66.3 $49.5
Unitrin Specialty 8.8 12.0 19.4 22.6
Unitrin Direct 0.4 0.2 (2.3) 0.9
Unitrin Business Insurance 6.1 4.9 3.7 13.6
Life and Health Insurance 27.8 25.5 55.5 53.0
Consumer Finance 14.3 11.3 27.5 24.6
--------- --------- --------- ---------
Total Segment Operating Profit 93.4 74.9 170.1 164.2
Unallocated Dividend Income 2.3 5.2 7.4 10.3
Net Realized Investment Gains 9.0 40.0 20.6 45.7
Other Expense, Net (6.4) (7.7) (13.8) (14.7)
--------- --------- --------- ---------
Income before Income Taxes and
Equity
in Net Income of Investee $98.3 $112.4 $184.3 $205.5
========= ========= ========= =========
Business segment net income for the three and six months ended
June 30, 2006 and 2005 is as follows:
Three Months Ended Six Months Ended
------------------- -------------------
June 30, June 30, June 30, June 30,
(Dollars in Millions) 2006 2005 2006 2005
------------------------------ --------- --------- --------- ---------
Segment Net Income (Loss):
Unitrin Kemper Auto and
Home $25.4 $15.8 $47.3 $36.3
Unitrin Specialty 6.6 8.8 14.5 16.5
Unitrin Direct 0.6 0.5 (0.7) 1.4
Unitrin Business Insurance 5.3 4.3 4.9 11.2
Life and Health Insurance 17.8 16.3 35.9 34.2
Consumer Finance 8.5 6.5 16.2 14.2
--------- --------- --------- ---------
Total Segment Net Income 64.2 52.2 118.1 113.8
Net Income (Loss) From:
Unallocated Dividend Income 2.0 4.6 6.5 9.1
Net Realized Investment
Gains 5.9 26.0 13.4 29.7
Other Expense, Net (4.5) (5.1) (9.8) (9.6)
--------- --------- --------- ---------
Income Before Equity in
Net Income of Investee 67.6 77.7 128.2 143.0
Equity in Net Income of
Investee 1.8 0.5 7.2 3.1
--------- --------- --------- ---------
Net Income $69.4 $78.2 $135.4 $146.1
========= ========= ========= =========
Corporate Investments
After adjusting for sales of a portion of the Company's
investments in Northrop common stock and Baker Hughes common stock
during the second quarter of 2006, the fair value of Unitrin's
Corporate Investments (Northrop preferred and common stock, Baker
Hughes common stock and Intermec, Inc. common stock) decreased by
$132.6 million during the second quarter of 2006. The changes in fair
values of Unitrin's Corporate Investments are summarized below:
Three Months Ended
June 30, 2006
-------------------------
Fair Value Holding Fair Value
March 31, Gain June 30,
(Dollars in Millions) 2006 (Loss) Dispositions 2006
------------------------ ---------- ---------- ------------ ----------
Equity Securities:
Northrop Preferred
Stock $239.2 $(14.7) $- $224.5
Northrop Common Stock 509.2 (31.0) (4.8) 473.4
Baker Hughes Common
Stock 45.5 8.9 (9.3) 45.1
Investee:
Intermec Common Stock 386.2 (95.8) - 290.4
---------- ---------- ------------ ----------
Total Corporate
Investments $1,180.1 $(132.6) $(14.1) $1,033.4
========== ========== ============ ==========
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. Forward-looking statements, in particular, 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. Forward-looking statements 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 the general factors that could cause actual results to
differ materially from estimated results are:
-- Changes in general economic conditions, including performance
of financial markets, interest rates, unemployment rates and
fluctuating values of particular investments maintained by the
Company and its subsidiaries;
-- 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 impact of inflation on insurance claims, including, but
not limited to, the effects attributed to scarcity of
resources available to rebuild damaged structures, including
labor and materials and the amount of salvage value recovered
for damaged property;
-- Changes in the pricing or availability of reinsurance;
-- Changes in the financial condition of reinsurers and amounts
recoverable therefrom;
-- Changes in industry trends and significant industry
developments;
-- Regulatory approval of insurance rates, policy forms, license
applications and similar matters;
-- Developments related to insurance policy claims and coverage
issues;
-- Governmental actions, including new laws or regulations or
court decisions interpreting existing laws and regulations or
policy provisions;
-- Adverse outcomes in litigation or other proceedings involving
the Company or its subsidiaries;
-- 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.;
-- The level of success and costs expended in realizing economies
of scale and implementing significant business consolidations
and technology initiatives;
-- Increased costs and risks related to data security;
-- Absolute and relative performance of the Company's products or
services; and
-- Other risks and uncertainties described from time to time in
the Company's filings with the Securities and Exchange
Commission ("SEC").
Among the factors that could cause the Company's actual losses
from Hurricanes Katrina, Rita and Wilma to differ materially from
estimated results are:
-- The impact of inflation on insurance claims, including, but
not limited to, the effects attributed to scarcity of
resources available to rebuild damaged structures, including
labor and materials;
-- Orders, interpretations or other actions by regulators that
impact the reporting, adjustment and payment of claims;
-- Interpretations or decisions by courts or regulators that may
govern or influence insurance policy coverage issues arising
with respect to losses incurred in connection with these
hurricanes; and
-- The impact of residual market assessments and assessments for
insurance industry insolvencies.
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 is a $3 billion financial services company focused on
creating shareholder value by providing a diverse array of insurance
and consumer finance products and services for individuals, families
and small businesses.
Among the brands in Unitrin's Property and Casualty Insurance
businesses are Unitrin Kemper Auto and Home, Unitrin Specialty and
Unitrin Business Insurance, which sell personal and commercial
insurance through networks of independent agents, and Unitrin Direct,
which sells auto insurance directly to consumers. Unitrin's Life and
Health Insurance businesses bring a high-level of personalized service
to their customers. Unitrin's consumer finance subsidiary, Fireside
Bank, specializes in automobile loans for the purchase of pre-owned
vehicles. Additional information about Unitrin is available by
visiting its website (www.unitrin.com).
Source: Unitrin, Inc.
Contact: Unitrin, Inc.
Edward J. Konar, 312-661-4930
investor.relations@unitrin.com