CHICAGO--(BUSINESS WIRE)--
Unitrin, Inc. (NYSE: UTR) reported today a net loss of $5.6 million
($0.09 per unrestricted common share) for the first quarter of 2009,
compared to net income of $15.2 million ($0.24 per unrestricted common
share) for the first quarter of 2008. Loss from continuing operations
was $6.3 million ($0.10 per unrestricted common share) for the first
quarter of 2009, compared to income from continuing operations of $20.7
million ($0.32 per unrestricted common share) for the first quarter of
2008.
Highlights
-- First quarter 2009 net loss of $5.6 million, including restructuring
costs of $4.9 million after tax and a state deferred income tax
valuation allowance of $6.8 million
-- Earned premiums of $612.5 million, an increase of $36.6 million
-- Segment Operating Profit of $22.7 million, an increase of 4%
-- Direct Response acquisition completed
-- Plan to exit automobile finance business underway, expect to recover
investment in Fireside Bank over next several years
Don Southwell, Unitrin's President and Chief Executive Officer,
commented, "Although we are disappointed to have reported a net loss for
the quarter, we are pleased that segment operating profit increased
compared to the prior year. We are in the process of reducing costs in
all of our businesses. Restructuring expense of $8.1 million before tax
recognized in the first quarter of 2009 will reduce our on-going costs
in the future. Our first quarter 2009 results were hurt by $24.2 million
of net realized investment losses, compared to $6.2 million of net
realized investment gains in the first quarter of 2008. Our Kemper and
Life and Health Insurance segments both posted strong first quarter
non-investment operating results. The completion of our acquisition of
Direct Response demonstrates our continued commitment to, and importance
of this distribution channel to, our property and casualty insurance
business. Our plan to exit the automobile finance business and recover
the capital that we have invested in the business is off to a good
start."
Total Revenues
Total revenues were $688.6 million for the first quarter of 2009,
compared to $691.9 million for the first quarter of 2008. Total revenues
decreased due primarily to net realized investment losses and lower
automobile finance revenues, partially offset by higher earned premiums
and higher net investment income.
Earned premiums were $612.5 million and $575.9 million for the first
quarters of 2009 and 2008, respectively, an increase of $36.6 million.
Earned premiums increased significantly in the Unitrin Specialty and
Unitrin Direct segments, with the Kemper and Life and Health Insurance
segments each posting modest increases. Automobile finance revenues
decreased by $10.5 million for the first quarter of 2009, compared to
the same period in 2008.
Net investment income increased by $1.1 million for the first quarter of
2009, compared to the same period in 2008, due primarily to higher net
investment income from investments in fixed maturities, partially the
result of the Primesco and Direct Response acquisitions, offset by lower
dividend income from investments in equity securities and lower
investment income from short-term investments. Net investment losses
from certain investments in limited liability investment companies and
limited partnerships, which the Company accounts for under the equity
method of accounting, were approximately $20 million for the first
quarter of 2009 and the first quarter of 2008.
Net realized investment losses were $24.2 million for the quarter ended
March 31, 2009, compared to net realized investment gains of $6.2
million for the same period in 2008. Net realized investment losses for
the quarter ended March 31, 2009 included pretax losses of $25.0 million
resulting from other-than-temporary declines in the fair values of
investments, compared to $8.5 million for the same period in 2008. The
Company recognized net realized gains on sales of investments of $0.9
million for the first quarter of 2009, compared to net realized
investment gains of $15.0 million for the quarter ended March 31, 2008.
Net realized investment gains for the quarter ended March 31, 2008
included $10.3 million from the sales of a portion of the Company's
Northrop stock. (See "Net Realized Investment Gains (Losses)" chart
below for additional information.) The Company cannot anticipate when or
if similar net 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 automobile finance
businesses. The Company conducts its continuing operations through five
operating segments: Kemper, Unitrin Specialty, Unitrin Direct, Life and
Health Insurance and Fireside Bank.
NOTE: The Company uses the registered trademark, "Kemper," under
license, for personal lines insurance only, from Lumbermens Mutual
Casualty Company ("Lumbermens"), which is not affiliated with the
Company. Lumbermens continues to use the name, "Kemper Insurance
Companies," in connection with its operations, which are distinct from,
and not to be confused with, Unitrin's Kemper business segment.
Kemper
Earned premiums in the Kemper segment increased by $1.3 million for the
first quarter of 2009, compared to the same period in 2008, due
primarily to higher volume and higher average premium rates on
homeowners insurance and higher volume on automobile insurance and other
personal lines insurance, partially offset by lower average premium
rates on automobile insurance and the increased cost of reinsurance on
homeowners insurance.
Operating profit in the Kemper segment increased by $4.3 million for the
first quarter of 2009, compared to the same period in 2008, due
primarily to lower incurred losses and loss adjustment expenses ("LAE"),
partially offset by higher insurance expenses and lower net investment
income. Incurred losses and LAE decreased by $9.7 million for the first
quarter of 2009, compared to the same period in 2008, due primarily to
lower catastrophe losses and LAE and lower severity of losses on
automobile insurance. Catastrophe losses and LAE for the first quarter
of 2009 included favorable development of $4.9 million from hurricanes
Ike and Gustav. Insurance Expenses increased by $4.2 million for the
three months ended March 31, 2009, compared to the same period in 2008,
due primarily to higher commission expenses and certain restructuring
costs. Kemper's net investment income decreased by $2.5 million for the
first quarter of 2009, compared to the same period in 2008, due
primarily to higher net investment losses from certain investments in
limited liability investment companies and limited partnerships which
the Company accounts for under the equity method of accounting.
Unitrin Specialty
Earned premiums in the Unitrin Specialty segment increased by $17.8
million for the first quarter of 2009, compared to the same period in
2008, due primarily to higher volume of personal automobile insurance,
partially offset by lower volume of commercial automobile insurance.
Operating results in the Unitrin Specialty segment decreased by $3.0
million for the first quarter of 2009, compared to the same period in
2008, due primarily to higher incurred losses and LAE as a percentage of
earned premiums and lower net investment income.
Unitrin Direct
Earned premiums in the Unitrin Direct segment increased by $10.5 million
for the first quarter of 2009, compared to the same period in 2008, due
primarily to the impact of the Direct Response acquisition, partially
offset by lower volume of insurance. The Unitrin Direct segment reported
an operating loss of $8.5 million for the first quarter of 2009,
compared to an operating loss of $9.9 million for the same period of
2008. Results improved due primarily to lower incurred losses and LAE
and lower insurance expenses as a percentage of earned premiums,
partially offset by an operating loss of $2.1 million related to the
Direct Response acquisition. Operating Loss for the Unitrin Direct
segment included restructuring costs of $1.3 million before tax for the
first quarter of 2009.
Life and Health Insurance
Earned premiums in the Life and Health Insurance segment increased by
$7.0 million for the first quarter of 2009, compared to the same period
in 2008. Earned premiums included $12.6 million resulting from the
acquisition of Primesco, Inc. ("Primesco"). Primesco was acquired on
April 1, 2008 and its results of operations are included in the
Company's results of operations from the date of acquisition. Excluding
the impact of the Primesco acquisition, earned premiums decreased by
$5.6 million for the first quarter of 2009, compared to the same period
in 2008, due primarily to lower volume, partially offset by higher
average premium rates on accident and health insurance products.
Operating profit in the Life and Health Insurance segment decreased by
$1.0 million for the first quarter of 2009, compared to the same period
in 2008, due primarily to higher catastrophe losses and LAE, net of
reinsurance, on property insurance sold by the Life and Health Insurance
segment's career agents, partially offset by higher net investment
income, including net investment income from the Primesco acquisition.
Fireside Bank
On March 24, 2009, Fireside Bank suspended all new lending activity and
ceased opening new certificate of deposit accounts as part of a plan to
exit the automobile finance business. The exit plan envisions an orderly
wind-down of Fireside Bank's operations over the next several years.
Fireside Bank will continue to collect outstanding loan balances and
make interest payments and redemptions on outstanding certificates of
deposits in the ordinary course of business.
Automobile finance revenues for the first quarter of 2009 decreased by
$10.5 million, compared to the same period in 2008, due primarily to
lower levels of loans outstanding and slightly lower yields on loans
outstanding. Automobile loan originations were $75.1 million for the
first quarter of 2009, compared to $178.2 million for the same quarter
in 2008. Loan originations declined due primarily to Fireside Bank's
more stringent underwriting requirements and the overall decline in
automobile sales. Fireside Bank derives its interest income solely from
automobile loans.
Fireside Bank reported an operating loss of $5.2 million for the first
quarter of 2009, compared to an operating loss of $4.4 million for the
same period in 2008. Fireside Bank's operating loss in 2009 increased
due primarily to lower automobile finance revenues and increased
restructuring charges, partially offset by reductions in provision for
loan losses, interest expense and general expenses. Operating Loss for
the Fireside Bank segment included restructuring costs of $5.4 million
before tax for the first quarter of 2009. Fireside Bank increased its
valuation allowance for deferred state income taxes by $6.8 million in
the first quarter of 2009 due to the decision to exit the automobile
finance business.
Consolidated results for the three months ended March 31, 2009 and 2008
are as follows:
Three Months Ended
(Dollars and Shares in Millions, March 31, March 31,
Except Per Share Amounts) 2009 2008
Revenues:
Earned Premiums $ 612.5 $ 575.9
Automobile Finance Revenues 52.9 63.4
Net Investment Income 47.0 45.9
Other Income 0.4 0.5
Net Realized Investment Gains (Losses) (24.2 ) 6.2
Total Revenues 688.6 691.9
Expenses:
Policyholders' Benefits and Incurred
Losses and Loss Adjustment Expenses 439.4 410.7
Insurance Expenses 182.9 172.3
Automobile Finance Expenses 46.4 53.9
Interest Expense on Certificates of Deposits 12.6 15.7
Interest and Other Expenses 15.2 16.7
Total Expenses 696.5 669.3
Income (Loss) from Continuing Operations before
Income Taxes and Equity in Net Income of Investee (7.9 ) 22.6
Income Tax Benefit (Expense) 0.4 (4.1 )
Income (Loss) from Continuing Operations before
Equity in Net Income of Investee (7.5 ) 18.5
Equity in Net Income of Investee 1.2 2.2
Income (Loss) from Continuing Operations (6.3 ) 20.7
Discontinued Operations:
Income (Loss) from Discontinued
Operations before Income Taxes 1.2 (10.2 )
Income Tax Benefit (Expense) (0.5 ) 4.7
Income (Loss) from Discontinued Operations 0.7 (5.5 )
Net Income (Loss) $ (5.6 ) $ 15.2
Basic Income (Loss) Per Share from Continuing Operations:
Restricted Common Stock $ - $ 0.41
Unrestricted Common Stock $ (0.10 ) $ 0.32
Basic Net Income (Loss) Per Share:
Restricted Common Stock $ 0.01 $ 0.32
Unrestricted Common Stock $ (0.09 ) $ 0.24
Diluted Income (Loss) Per Share from Continuing
Operations:
Restricted Common Stock $ - $ 0.41
Unrestricted Common Stock $ (0.10 ) $ 0.32
Diluted Net Income (Loss) Per Share:
Restricted Common Stock $ 0.01 $ 0.32
Unrestricted Common Stock $ (0.09 ) $ 0.24
Dividends Paid Per Share $ 0.47 $ 0.47
Business segment revenues for the three months ended March 31, 2009 and
2008 are as follows:
Three Months Ended
March 31, March 31,
(Dollars in Millions) 2009 2008
Revenues:
Segment Revenues:
Kemper:
Earned Premiums $ 230.9 $ 229.6
Net Investment Income 2.3 4.8
Other Income 0.1 0.1
Total Kemper 233.3 234.5
Unitrin Specialty:
Earned Premiums 132.6 114.8
Net Investment Income 1.1 2.2
Total Unitrin Specialty 133.7 117.0
Unitrin Direct:
Earned Premiums 82.6 72.1
Net Investment Income 0.8 1.1
Other Income - 0.1
Total Unitrin Direct 83.4 73.3
Life and Health Insurance:
Earned Premiums 166.4 159.4
Net Investment Income 41.2 32.6
Other Income 0.3 0.2
Total Life and Health Insurance 207.9 192.2
Fireside Bank:
Automobile Finance Revenues 52.9 63.4
Net Investment Income 0.9 1.8
Total Fireside Bank 53.8 65.2
Total Segment Revenues 712.1 682.2
Unallocated Dividend Income 0.3 3.3
Net Realized Investment Gains (Losses) (24.2 ) 6.2
Other 0.4 0.2
Total Revenues $ 688.6 $ 691.9
Business segment operating profit for the three months ended March 31,
2009 and 2008 is as follows:
Three Months Ended
March 31, March 31,
(Dollars in Millions) 2009 2008
Segment Operating Profit (Loss):
Kemper $ 13.0 $ 8.7
Unitrin Specialty - 3.0
Unitrin Direct (8.5 ) (9.9 )
Life and Health Insurance 23.4 24.4
Fireside Bank (5.2 ) (4.4 )
Total Segment Operating Profit 22.7 21.8
Unallocated Dividend Income 0.3 3.3
Net Realized Investment Gains (Losses) (24.2 ) 6.2
Other Expense, Net (6.7 ) (8.7 )
Income (Loss) from Continuing Operations before Income
Taxes and Equity in Net Income of Investee $ (7.9 ) $ 22.6
Business segment net income (loss) for the three months ended March
31, 2009 and 2008 is as follows:
Three Months Ended
March 31, March 31,
(Dollars in Millions) 2009 2008
Segment Net Income (Loss):
Kemper $ 10.4 $ 7.8
Unitrin Specialty 1.0 2.9
Unitrin Direct (4.9 ) (5.9 )
Life and Health Insurance 15.0 15.0
Fireside Bank (9.9 ) (2.6 )
Total Segment Net Income 11.6 17.2
Net Income (Loss) From:
Unallocated Dividend Income 0.3 2.9
Net Realized Investment Gains (Losses) (15.7 ) 4.0
Other Expense, Net (3.7 ) (5.6 )
Income (Loss) from Continuing Operations
Before Equity in Net Income of Investee (7.5 ) 18.5
Equity in Net Income of Investee 1.2 2.2
Income (Loss) from Continuing Operations $ (6.3 ) $ 20.7
The components of Net Realized Investment Gains (Losses) for the three
months ended March 31, 2009 and 2008 are as follows:
Three Months Ended
March 31, March 31,
(Dollars in Millions) 2009 2008
Fixed Maturities:
Gains on Dispositions $ 0.4 $ 0.5
Losses on Dispositions - (0.1 )
Losses from Write-downs (1) (21.6 ) (0.6 )
Equity Securities:
Gains on Dispositions 0.5 16.1
Losses on Dispositions - (1.3 )
Losses from Write-downs (3.4 ) (7.9 )
Other Investments:
Losses on Dispositions - (0.2 )
Net Trading Securities Gains (Losses) (0.1 ) (0.3 )
Net Realized Investment Gains (Losses) $ (24.2 ) $ 6.2
(1) Includes a loss of $16.1 million for the three months ended March
31, 2009 to write down Celerity bonds.
Unitrin, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
March 31, Dec. 31,
2009 2008
(Unaudited)
Assets:
Investments:
Fixed Maturities at Fair Value (Amortized
Cost: 2009 - $4,392.6; 2008 - $4,174.4) $ 4,310.1 $ 4,135.9
Equity Securities at Fair Value
(Cost: 2009 - $254.9; 2008 - $255.4) 196.9 221.8
Investee (Intermec) at Cost Plus Cumulative
Undistributed Earnings
(Fair Value: 2009 - $131.6; 2008 - $168.1) 95.2 102.2
Short-term Investments at Cost which Approximates 535.7 548.6
Fair Value
Other 703.8 714.9
Total Investments 5,841.7 5,723.4
Cash 66.2 184.2
Automobile Loan Receivables at Cost (Fair
Value: 2009 - $1,025.1; 2008 - $1,099.6) 1,011.6 1,078.6
Other Receivables 688.8 686.5
Deferred Policy Acquisition Costs 520.0 489.2
Goodwill 334.5 334.6
Current and Deferred Income Taxes 281.3 201.4
Other Assets 138.0 120.9
Total Assets $ 8,882.1 $ 8,818.8
Liabilities and Shareholders' Equity:
Insurance Reserves:
Life and Health $ 2,986.6 $ 2,972.6
Property and Casualty 1,314.0 1,268.7
Total Insurance Reserves 4,300.6 4,241.3
Certificates of Deposits at Cost
(Fair Value: 2009 - $1,099.6; 2008 - $1,148.7) 1,054.4 1,110.8
Unearned Premiums 784.0 733.5
Liabilities for Income Taxes 25.5 68.2
Notes Payable at Amortized Cost (Fair Value: 2009 - 665.9 560.8
$483.6; 2008 - $433.9)
Accrued Expenses and Other Liabilities 487.0 455.6
Total Liabilities 7,317.4 7,170.2
Shareholders' Equity:
Common Stock, $0.10 par value, 100 Million Shares
Authorized;
62,440,728 Shares Issued and Outstanding at March 31,
2009 and
62,314,503 Shares Issued and Outstanding at December 6.2 6.2
31, 2008
Paid-in Capital 766.0 764.7
Retained Earnings 950.8 985.8
Accumulated Other Comprehensive Loss (158.3 ) (108.1 )
Total Shareholders' Equity 1,564.7 1,648.6
Total Liabilities and Shareholders' Equity $ 8,882.1 $ 8,818.8
This press release may contain or incorporate by reference information
that includes or is based on 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 held by the Company;
-- 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;
-- Orders, interpretations or other actions by regulators that impact the
reporting, adjustment and payment of claims;
-- 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
including, but not limited to, 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 hurricanes
and other catastrophes;
-- Governmental actions, including new laws or regulations or court
decisions interpreting existing laws and regulations or policy
provisions;
-- Adverse outcomes in litigation or other legal or regulatory proceedings
involving Unitrin or its subsidiaries or affiliates;
-- Regulatory, accounting or tax changes that may affect the cost of, or
demand for, the Company's products or services;
-- The impact of residual market assessments and assessments for insurance
industry insolvencies;
-- 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 including A.M. Best Co.,
Inc.;
-- Changes in laws or regulations governing or affecting the regulatory
status of industrial banks, such as Fireside Bank, and their parent
companies, including minimum capital requirements and restrictions on
the non-financial activities and equity investments of companies that
acquire control of industrial banks;
-- Changes in the estimated rates of automobile loan receivables net
charge-off used to estimate Fireside Bank's reserve for loan losses,
including, but not limited to, the impact of changes in the value of
collateral held;
-- The degree of success in effecting an orderly wind-down of the
operations of Fireside Bank and the recovery of Unitrin's investment in
Fireside Bank;
-- 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").
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 financial services company focused on creating shareholder
value by providing through its subsidiaries a diverse array of insurance
products and services for individuals, families and small businesses.
Among the brands in Unitrin'sProperty and Casualty Insurance businesses
are Kemper and Unitrin Specialty which sell personal and commercial
insurance through networks of independent agents, and Unitrin Direct,
which sells automobile and homeowners insurance directly to consumers or
through employer-sponsored voluntary benefit programs. Unitrin'sLife
and Health Insurance businesses bring a high-level of personalized
service to their customers. Additional information about Unitrin is
available by visiting its website (www.unitrin.com).
Source: Unitrin, Inc.
Contact: Unitrin, Inc.
David F. Bengston, (312) 661-4930
investor.relations@unitrin.com