(Source: Business Wire)
Unitrin, Inc. (NYSE: UTR) reported today net income of $62.1 million
($1.00 per unrestricted common share) for the third quarter of 2009,
compared to a net loss of $45.2 million ($0.72 per unrestricted common
share) for the third quarter of 2008, an improvement of $107.3 million.
Net Income from continuing operations was $61.0 million ($0.98 per
unrestricted common share) for the third quarter of 2009, compared to a
net loss from continuing operations of $49.6 million ($0.79 per
unrestricted common share) for the third quarter of 2008.
Highlights
Third quarter 2009 net income of $62.1 million; book value per
share increases to $30.36.
Debt to total capitalization ratio declines to 22.9%; new $245
million, three-year revolving credit agreement put in place.
Third quarter 2009 segment operating profit of $88.7 million,
compared to third quarter 2008 loss of $36.2 million.
Fireside Bank reports small profit for the quarter; exit plan on
target and Tier 1 capital ratio increases to 19.3%.
Unitrin Direct achieves break -- even results
Don Southwell, Unitrin's President and Chief Executive Officer,
commented, "We are very pleased with our strong third quarter operating
results and with the continued strengthening of our balance sheet.
Operating results improved in each of our business segments compared to
the prior year and improved on a sequential quarter basis in all of our
businesses, except Unitrin Specialty where results declined slightly.
Catastrophe losses from continuing operations were $9.0 million
after-tax in the third quarter of 2009, compared to $54.0 million
after-tax in the third quarter of 2008 which included the impact of
three major hurricanes. Comprehensive investment gains, which include
the unrealized increases in the value of investments, were $226.0
million before tax for the third quarter of 2009, compared to
comprehensive investment losses of $301.5 million before tax for the
third quarter of 2008. Our plan to exit the automobile finance business
and recover the capital that we have invested in Fireside Bank is going
extremely well. We believe that Unitrin Direct is now running at
approximately a break-even level, but we will not begin to grow that
business again until we are confident that Unitrin Direct's book of
business is adequately priced. Our Life and Health Insurance, Kemper and
Unitrin Specialty segments all continue to report strong operating
results."
Shareholders' Equity
Shareholders' equity was $1,893.2 million at September 30, 2009, an
increase of $199.6 million, or 11.8% during the third quarter of 2009.
Total comprehensive income, which includes the unrealized gains in the
value of investments, was $213.2 million for the three months ended
September 30, 2009. Dividends paid during the third quarter were $12.5
million.
Total Revenues
Total revenues were $750.6 million for the third quarter of 2009,
compared to $679.9 million for the third quarter of 2008. Total revenues
increased due primarily to lower net impairment losses recognized in
earnings, higher net investment income and higher earned premiums,
partially offset by lower automobile finance revenues and lower net
realized gains on sales of investments.
Earned premiums were $616.2 million and $599.5 million for the third
quarters of 2009 and 2008, respectively, an increase of $16.7 million.
Earned premiums increased significantly in the Unitrin Direct segment,
with the Unitrin Specialty segment posting a modest increase, the Life
and Health Insurance segment posting a modest decrease and the Kemper
segment posting a slight decrease. Automobile finance revenues decreased
by $18.0 million for the third quarter of 2009, compared to the same
period in 2008, as Fireside Bank continued to execute its plan to exit
the automobile finance business.
Net investment income increased by $29.6 million for the three months
ended September 30, 2009, compared to the same period in 2008, due
primarily to higher investment income from investments in limited
liability investment companies and limited partnerships, partially
offset by lower dividend income from investments in equity securities
and lower investment income from short-term investments. Net investment
income from limited liability investment companies and limited
partnerships increased due primarily to higher investment returns.
Dividend income from investments in equity securities decreased due
primarily to sales of the vast majority of the Company's investments in
Northrop Grumman common stock and other publicly-traded common stocks
during 2008. Net investment income from short-term investments decreased
due primarily to substantially lower yields and, to a lesser extent, a
lower level of short-term investments.
Net realized gains on sales of investments were $12.4 million for the
third quarter of 2009, compared to $27.5 million for the same period in
2008. Net realized gains on sales of investments for the third quarter
of 2009 included gains of $3.8 million from the sales of a portion of
the Company's investment in Northrop common stock, compared to $35.4
million for the same period in 2008. (See "Net Realized Gains on Sales
of Investments" chart below for additional information.) The Company
cannot anticipate when or if similar net realized gains or losses on
sales of investments may occur in the future.
Net impairment losses recognized in earnings were $14.5 million for the
third quarter of 2009, compared to $72.1 million for the same period in
2008. Net impairment losses recognized in earnings for the third quarter
of 2008 included losses of $42.1 million to write down the Company's
investments in preferred and common stocks of financial institutions
(See "Net Impairment Losses Recognized in Earnings" chart below for
additional information.) The Company cannot anticipate when or if
similar net impairment 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 decreased by $0.5 million for the
third quarter of 2009, compared to the same period in 2008, due
primarily to an increase in the cost of reinsurance. The Kemper segment
reported an operating profit of $26.4 million for the third quarter of
2009, compared to an operating loss of $23.6 million for the same period
in 2008. Operating results for the Kemper segment improved by $50.0
million for the third quarter of 2009, compared to the same period in
2008, due primarily to lower incurred losses and loss adjustment
expenses ("LAE") and, to a lesser extent, higher net investment income
and lower insurance expenses. Incurred losses and LAE decreased by $36.6
million for the third quarter of 2009, compared to the same period in
2008, due primarily to lower catastrophe losses and LAE, partially
offset by higher frequency of losses on automobile insurance.
Unitrin Specialty
Earned premiums in the Unitrin Specialty segment increased by $6.0
million for the third 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 profit in the Unitrin Specialty segment increased by $6.2
million for the third quarter of 2009, compared to the same period in
2008, due primarily to lower losses and LAE as a percentage of earned
premiums and higher net investment income. Losses and LAE as a
percentage of earned premiums decreased due primarily to favorable loss
and LAE reserve development of $2.2 million in the third quarter of
2009, compared to adverse development of $0.1 million in the same period
in 2008.
Unitrin Direct
Earned premiums in the Unitrin Direct segment increased by $14.4 million
for the third 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 profit of $0.6 million for the third quarter of 2009,
compared to an operating loss of $13.9 million for the same period of
2008. Operating results for the Unitrin Direct segment improved by $14.5
million due primarily to lower incurred losses and LAE as a percentage
of earned premiums, lower marketing expenses, higher net investment
income, and an operating profit of $0.7 million related to the Direct
Response acquisition. Operating Profit for the Unitrin Direct segment
included restructuring costs of $1.2 million before tax for the third
quarter of 2009.
Life and Health Insurance
Earned premiums in the Life and Health Insurance segment decreased by
$3.2 million for the third quarter of 2009, compared to the same period
in 2008, due primarily to lower volume, partially offset by higher
average premium rates and lower cost of catastrophe reinsurance coverage.
Operating profit in the Life and Health Insurance segment increased by
$49.5 million for the third quarter of 2009, compared to the same period
in 2008, due primarily to lower catastrophe losses and LAE, net of
reinsurance, on property insurance sold by the Life and Health Insurance
segment's career agents, higher net investment income, and lower
policyholders' benefits as a percentage of earned premiums on life
insurance.
Fireside Bank
As previously announced, 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 continues to collect
outstanding loan balances and make interest payments and redemptions on
outstanding certificates of deposits in the ordinary course of business.
While in its early stages, the exit plan thus far has exceeded the
Company's expectations. Net automobile loan receivables outstanding has
declined steadily to $867.2 million at September 30, 2009 from $1,125.2
million at March 31, 2009, while certificates of deposits declined to
$758.6 million at September 30, 2009 from $1,054.4 million at March 31,
2009. Fireside Bank's cash and investments totaled $177.4 million, or
23.4% of certificates of deposits, at September 30, 2009, compared to
$204.7 million, or 19.4% of certificates of deposits, at March 31, 2009.
The Company expects that the Fireside Bank segment will record
approximately break-even results for the fourth quarter of 2009.
Fireside Bank's ratio of Tier 1 capital to total average assets
increased from 15.6% at March 31, 2009 to 19.3% at September 30, 2009.
The Company expects that Fireside Bank's ratio of Tier 1 capital to
total average assets will continue to increase in the fourth quarter of
2009.
Automobile finance revenues decreased by $18.0 million for the third
quarter of 2009, compared to the same period in 2008, due to the lower
levels of loans outstanding as a result of the exit plan. Fireside Bank
reported operating profit of $3.4 million for the third quarter of 2009,
compared to an operating loss of $1.3 million for the same period in
2008.
Consolidated results for the three and nine months ended September 30,
2009 and 2008 are as follows:
Three Months Ended Nine Months Ended
(Dollars and Shares in Millions, Sept. 30, Sept. 30, Sept. 30, Sept.