Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
(Mark One)
x    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2018
OR
o     Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             
Commission File No. 0-50167
INFINITY PROPERTY AND CASUALTY CORPORATION
(Exact name of registrant as specified in its charter)
Ohio
 
03-0483872
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
2201 4th Avenue North, Birmingham, Alabama 35203
(Address of principal executive offices and zip code)
(205) 870-4000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x   No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
  
Accelerated filer
¨
Non-accelerated filer
o  (Do not check if smaller reporting company)
  
Smaller reporting company
¨
Emerging growth company
o  
 
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
As of April 26, 2018, there were 10,941,936 shares of the registrant’s common stock outstanding.


Table of Contents
INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

TABLE OF CONTENTS
 
 
 
 
 
 
Page
 
 
 
 
 
Item 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
 
Item 3
 
 
 
Item 4
 
 
 
 
 
 
Item 1
 
 
 
Item 1A
 
 
 
Item 2
 
 
 
Item 6
 
 
 
 
 
 
 

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

PART I
FINANCIAL INFORMATION

ITEM 1
Financial Statements

INFINITY PROPERTY AND CASUALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
(unaudited)
 
Three months ended
 
March 31,
 
2018
 
2017
 
% Change
 
 
 
(as adjusted)
 
 
Revenues:
 
 
 
 
 
Earned premium
$
353,987

 
$
341,368

 
3.7
 %
Installment and other fee income
27,395

 
26,739

 
2.5
 %
Net investment income
9,786

 
8,695

 
12.5
 %
Net realized (losses) gains on investments (1)
(2,832
)
 
509

 
(656.2
)%
Other income
430

 
275

 
56.3
 %
Total revenues
388,766

 
377,587

 
3.0
 %
Costs and Expenses:
 
 
 
 
 
Losses and loss adjustment expenses
264,552

 
270,676

 
(2.3
)%
Commissions and other underwriting expenses
90,521

 
85,939

 
5.3
 %
Interest expense
3,509

 
3,512

 
(0.1
)%
Corporate general and administrative expenses
4,743

 
2,271

 
108.9
 %
Other expenses
505

 
322

 
56.9
 %
Total costs and expenses
363,829

 
362,719

 
0.3
 %
Earnings before income taxes
24,937

 
14,868

 
67.7
 %
Provision for income taxes
4,853

 
4,358

 
11.4
 %
Net Earnings
$
20,083

 
$
10,510

 
91.1
 %
Net Earnings per Common Share:
 
 
 
 
 
Basic
$
1.84

 
$
0.96

 
91.7
 %
Diluted
1.82

 
0.94

 
93.6
 %
Average Number of Common Shares:
 
 
 
 
 
Basic
10,915

 
10,998

 
(0.8
)%
Diluted
11,009

 
11,127

 
(1.1
)%
Cash Dividends per Common Share
$
0.58

 
$
0.58

 
0.0
 %
(1) Net realized gains on sales
$
1,363

 
$
519

 
162.6
 %
Net holding period losses on equity securities
(2,607
)
 
0

 
NM

Total other-than-temporary impairment (OTTI) losses
(1,468
)
 
(46
)
 
NM

Non-credit portion in other comprehensive income
158

 
36

 
341.9
 %
OTTI losses reclassified from other comprehensive income
(278
)
 
0

 
NM

Net impairment losses recognized in earnings
(1,588
)
 
(10
)
 
NM

Total net realized (losses) gains on investments
$
(2,832
)
 
$
509

 
(656.2
)%
NM = Not Meaningful
See Condensed Notes to Consolidated Financial Statements.

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

INFINITY PROPERTY AND CASUALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands)
(unaudited)
 
Three months ended
 
March 31,
 
2018
 
2017
 
 
 
(as adjusted)
Net earnings
$
20,083

 
$
10,510

Other comprehensive income before tax:
 
 
 
Net change in post-retirement benefit liability
(2
)
 
(13
)
Unrealized gains on investments(1):
 
 
 
Unrealized holding (losses) gains arising during the period
(18,344
)
 
10,664

Less: Reclassification adjustments for losses (gains) included in net earnings
2,106

 
(509
)
Unrealized (losses) gains on investments, net
(16,238
)
 
10,155

Other comprehensive (loss) income, before tax
(16,240
)
 
10,143

Income tax benefit (expense) related to components of other comprehensive income
3,410

 
(3,550
)
Other comprehensive (loss) income, net of tax
(12,829
)
 
6,593

Comprehensive income
$
7,254

 
$
17,102

 
 
 
 
(1) The amounts for 2018 are for fixed maturities only.
 
 
 
See Condensed Notes to Consolidated Financial Statements.


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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

INFINITY PROPERTY AND CASUALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts in line descriptions)
 
March 31, 2018
 
December 31, 2017
 
(unaudited)
 
(as adjusted)
Assets
 
 
 
Investments:
 
 
 
Fixed maturities – at fair value (amortized cost $1,512,939 and $1,439,878)
$
1,497,930

 
$
1,441,107

Equity securities – at fair value (cost $65,913 and $68,812)
90,498

 
96,004

Short-term investments – at fair value (amortized cost $0 and $2,541)
0

 
2,541

Total investments
1,588,428

 
1,539,653

Cash and cash equivalents
88,793

 
107,589

Accrued investment income
10,098

 
13,079

Agents’ balances and premium receivable, net of allowances for doubtful accounts of $13,238 and $15,262
557,206

 
507,963

Property and equipment, net of accumulated depreciation of $87,945 and $84,776
78,732

 
82,453

Prepaid reinsurance premium
482

 
1,032

Recoverables from reinsurers (includes $3,124 and $(1,269) on paid losses and LAE)
22,674

 
30,340

Deferred policy acquisition costs
98,672

 
88,300

Current and deferred income taxes
9,091

 
10,543

Receivable for securities sold
120

 
1,700

Other assets
21,896

 
16,557

Goodwill
75,275

 
75,275

Total assets
$
2,551,466

 
$
2,474,484

Liabilities and Shareholders’ Equity
 
 
 
Liabilities:
 
 
 
Unpaid losses and loss adjustment expenses
$
701,006

 
$
715,098

Unearned premium
691,464

 
627,575

Long-term debt (fair value $286,330 and $290,824)
273,865

 
273,809

Commissions payable
15,844

 
16,743

Payable for securities purchased
40,375

 
5,615

Other liabilities
110,996

 
119,831

Total liabilities
1,833,550

 
1,758,672

Commitments and contingencies (See Note 9)


 


Shareholders’ equity:
 
 
 
Common stock, no par value (50,000,000 shares authorized; 21,879,505 and 21,867,436 shares issued)
21,908

 
21,888

Additional paid-in capital
385,346

 
383,567

Retained earnings
824,932

 
793,077

Accumulated other comprehensive income, net of tax
(11,202
)
 
19,756

Treasury stock, at cost (10,937,569 and 10,932,539 shares)
(503,069
)
 
(502,475
)
Total shareholders’ equity
717,916

 
715,812

Total liabilities and shareholders’ equity
$
2,551,466

 
$
2,474,484

See Condensed Notes to Consolidated Financial Statements.

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

INFINITY PROPERTY AND CASUALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
($ in thousands)
(unaudited)
 
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income,
Net of Tax
 
Treasury
Stock
 
Total
Balance at December 31, 2016
$
21,829

 
$
378,745

 
$
777,695

 
$
7,907

 
$
(486,990
)
 
$
699,187

Cumulative effect of change in accounting principle

 

 
(3,808
)
 

 

 
(3,808
)
Net earnings

 

 
10,510

 

 

 
10,510

Net change in post-retirement benefit liability

 

 

 
(8
)
 

 
(8
)
Change in unrealized gain on investments

 

 

 
6,579

 

 
6,579

Change in non-credit component of impairment losses on fixed maturities

 

 

 
22

 

 
22

Comprehensive income
 
 
 
 
 
 
 
 
 
 
17,102

Dividends paid to common shareholders

 

 
(6,402
)
 

 

 
(6,402
)
Shares issued and share-based compensation expense
18

 
1,430

 

 

 

 
1,449

Acquisition of treasury stock

 

 

 

 
(2,303
)
 
(2,303
)
Balance at March 31, 2017, as adjusted
$
21,848

 
$
380,175

 
$
777,994

 
$
14,500

 
$
(489,293
)
 
$
705,225

Net earnings

 

 
34,214

 

 

 
34,214

Net change in post-retirement benefit liability

 

 

 
(124
)
 

 
(124
)
Change in unrealized gain on investments

 

 

 
5,074

 

 
5,074

Change in non-credit component of impairment losses on fixed maturities

 

 

 
306

 

 
306

Comprehensive income
 
 
 
 
 
 
 
 
 
 
39,469

Dividends paid to common shareholders

 

 
(19,131
)
 

 

 
(19,131
)
Shares issued and share-based compensation expense
40

 
3,391

 

 

 

 
3,432

Acquisition of treasury stock

 

 

 

 
(13,182
)
 
(13,182
)
Balance at December 31, 2017, as adjusted
$
21,888

 
$
383,567

 
$
793,077

 
$
19,756

 
$
(502,475
)
 
$
715,812

Cumulative effect of change in accounting principle
$

 
$

 
18,118

 
$
(18,128
)
 
$

 
(10
)
Net earnings

 

 
20,083

 

 

 
20,083

Net change in post-retirement benefit liability

 

 

 
(1
)
 

 
(1
)
Change in unrealized gain on fixed maturity investments

 

 

 
(12,980
)
 

 
(12,980
)
Change in non-credit component of impairment losses on fixed maturities

 

 

 
152

 

 
152

Comprehensive income
 
 
 
 
 
 
 
 
 
 
7,254

Dividends paid to common shareholders

 

 
(6,346
)
 

 

 
(6,346
)
Shares issued and share-based compensation expense
21

 
1,779

 

 

 

 
1,800

Acquisition of treasury stock

 

 

 

 
(594
)
 
(594
)
Balance at March 31, 2018
$
21,908

 
$
385,346

 
$
824,932

 
$
(11,202
)
 
$
(503,069
)
 
$
717,916

See Condensed Notes to Consolidated Financial Statements.

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

INFINITY PROPERTY AND CASUALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands, unaudited)
 
Three months ended
 
March 31,
 
2018
 
2017
 
 
 
(as adjusted)
Operating Activities:
 
 
 
Net earnings
$
20,083

 
$
10,510

Adjustments:
 
 
 
Depreciation
3,696

 
4,177

Amortization
4,840

 
5,327

Net realized losses (gains) on investments
2,832

 
(509
)
Loss (gain) on disposal of property and equipment
10

 
(2
)
Share-based compensation expense
1,731

 
1,384

Activity related to rabbi trust
(13
)
 
69

Change in accrued investment income
2,980

 
246

Change in agents’ balances and premium receivable
(49,243
)
 
(17,118
)
Change in reinsurance receivables
8,216

 
917

Change in deferred policy acquisition costs
(10,372
)
 
(2,957
)
Change in other assets
(804
)
 
(4,505
)
Change in unpaid losses and loss adjustment expenses
(14,092
)
 
(6,508
)
Change in unearned premium
63,889

 
26,943

Change in other liabilities
(9,815
)
 
5,565

Net cash provided by operating activities
23,939

 
23,538

Investing Activities:
 
 
 
Purchases of fixed maturities
(403,516
)
 
(120,831
)
Purchases of equity securities
0

 
(1,900
)
Purchases of property and equipment
(313
)
 
(889
)
Maturities and redemptions of fixed maturities
32,497

 
43,319

Proceeds from sale of fixed maturities
328,064

 
37,671

Proceeds from sale of equity securities
5,013

 
2,002

Proceeds from sale of short-term investments
2,528

 
2,400

Proceeds from sale of property and equipment
0

 
19

Net cash used in investing activities
(35,727
)
 
(38,209
)
Financing Activities:
 
 
 
Proceeds from stock options exercised and employee stock purchases
70

 
65

Principal payments under capital lease obligations
(138
)
 
(135
)
Acquisition of treasury stock
(594
)
 
(2,296
)
Dividends paid to shareholders
(6,346
)
 
(6,402
)
Net cash used in financing activities
(7,009
)
 
(8,768
)
Net decrease in cash and cash equivalents
(18,796
)
 
(23,438
)
Cash and cash equivalents at beginning of period
107,589

 
92,800

Cash and cash equivalents at end of period
$
88,793

 
$
69,361

See Condensed Notes to Consolidated Financial Statements.


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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
INDEX TO NOTES
 
1.
7.
 
 
 
2.
8.
 
 
 
3.
9.
 
 
 
4.
10.
 
 
 
5.
11.
 
 
 
 
6.
 
 

Note 1 Significant Reporting and Accounting Policies
Nature of Operations
We are a holding company that provides insurance through our subsidiaries for personal auto with a concentration on nonstandard risks, commercial auto and classic collectors. Although licensed to write insurance in all 50 states and the District of Columbia, we focus on select states that we believe offer the greatest opportunity for premium growth and profitability.
Basis of Consolidation and Reporting
The accompanying consolidated financial statements are unaudited and should be read in conjunction with our Annual Report on Form 10-K (Form 10-K) for the year ended December 31, 2017. This Quarterly Report on Form 10-Q, including the Condensed Notes to Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations, focuses on our financial performance since the beginning of the year.
These financial statements reflect certain adjustments necessary for a fair presentation of our results of operations and financial position. Such adjustments consist of normal, recurring accruals recorded to accurately match expenses with their related revenue streams and the elimination of all significant intercompany transactions and balances.
We have evaluated events that occurred after March 31, 2018, for recognition or disclosure in our financial statements and the notes to the financial statements.
Schedules may not foot due to rounding.
Estimates
We based certain accounts and balances within these financial statements upon our estimates and assumptions. The amount of reserves for claims not yet paid, for example, is an item that we can only record by estimation. Unrealized capital gains and losses on investments are subject to market fluctuations, and we use judgment in the determination of whether unrealized losses on certain securities are temporary or other-than-temporary. Should actual results differ significantly from these estimates, the effect on our results of operations could be material. The results of operations for the periods presented may not be indicative of our results for the entire year.
Recently Adopted Accounting Standards
In February 2018 the FASB issued an ASU allowing a reclassification from accumulated other comprehensive income to retained earnings and consequently eliminating the stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. We elected to early adopt the ASU and applied the amendment in the period of adoption, with a cumulative-effect adjustment of $0.4 million reclassified from accumulated other comprehensive income to retained earnings.
In October 2016 the FASB issued an ASU related to the recognition of income tax on intra-entity transfers of assets other than inventory. The guidance requires the income tax to be recognized when the transfer occurs rather than when the asset is sold to an

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

outside party. We adopted the change on a modified retrospective basis, with a cumulative-effect adjustment of less than $(0.1) million recorded to retained earnings as of January 1, 2018.
In January 2016 the FASB issued an ASU amending the guidance on classifying and measuring financial instruments. The guidance requires equity securities to be measured at fair value and changes in that fair value to be recognized through net income. We adopted the change on a modified retrospective basis as of January 1, 2018, with a cumulative-effect adjustment of $17.7 million reclassified from other comprehensive income to retained earnings.
In May 2014 the FASB issued an ASU related to the accounting for revenue from contracts with customers. Insurance contracts were excluded from the scope of the guidance. As an insurance-entity, we are largely exempt from the provisions of this standard, with only fee income subject to this new standard. Processing and policy fees were generally earned at the inception of the policy under previous guidance but are earned over the life of the policy under current guidance. The guidance was adopted as of January 1, 2018, using a full retrospective approach with a cumulative-effect adjustment to the balance sheet, which reduced shareholders' equity by $4.5 million.
The following table illustrates the effect of adopting this standard on the Consolidated Balance Sheets ($ in millions):
 
December 31, 2017
 
As Reported
 
As Adjusted
 
Difference
Agents' balances and premium receivable
$
508.1

 
$
508.0

 
$
(0.1
)
Current and deferred income taxes
9.4

 
10.5

 
1.2

Total assets
2,473.4

 
2,474.5

 
1.1

Other liabilities
114.3

 
119.8

 
5.5

Shareholders' equity
720.3

 
715.8

 
(4.5
)
Total liabilities and shareholders' equity
2,473.4

 
2,474.5

 
1.1


The following table illustrates the effect of adopting this standard on the Consolidated Statements of Earnings (in millions, except per share amounts):        
 
Three months ended March 31, 2017
 
As Reported
 
As Adjusted
 
Difference
Installment and other fee income
$
26.9

 
$
26.7

 
$
(0.2
)
Total revenues
377.8

 
377.6

 
(0.2
)
Earnings before income taxes
15.1

 
14.9

 
(0.2
)
Provision for income taxes
4.4

 
4.4

 
(0.1
)
Net earnings
10.6

 
10.5

 
(0.1
)
Net earnings per common share:
 
 
 
 
 
  Basic
$
0.97

 
$
0.96

 
$
(0.01
)
  Diluted
0.96

 
0.94

 
(0.02
)

We also adjusted the Consolidated Statements of Changes in Shareholders' Equity and the Consolidated Statements of Cash Flows for these changes for the three months ended March 31, 2017.
Recently Issued Accounting Standards
In March 2017 the FASB issued an ASU related to the amortization of premium on purchased callable debt securities. The guidance amends the amortization period for certain purchased callable debt securities held at a premium. Securities that contain explicit, noncontingent call features that are callable at fixed prices and on preset dates should shorten the amortization period for the premium to the earliest call date (and if the call option is not exercised, the effective yield is reset using the payment terms of the debt security). The standard is effective for fiscal years, and interim period within those years, beginning after December 15, 2018, and is to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings. We do not expect the adoption of this standard to have a material impact on our financial condition or results of operations.
In June 2016 the FASB issued an ASU related to the accounting for credit losses. The guidance generally requires credit losses on available-for-sale debt securities to be recognized as an allowance rather than as a reduction to the amortized cost of a security.

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The standard is effective for fiscal periods beginning after December 15, 2019, and interim periods within the year of adoption, with prospective application of the ASU required for debt securities for which an other-than-temporary impairment has been recognized before the implementation date. We do not expect the adoption of this standard to have a material impact on our financial condition or results of operations.
In February 2016 the FASB issued an ASU related to the accounting for leases. The guidance requires lessees to recognize lease assets and liabilities on the balance sheet. The standard is effective for fiscal years beginning after December 15, 2018, and is to be applied retrospectively, with an option to use a modified retrospective approach for leases which commenced prior to the effective date of this ASU. We do not expect the adoption of this standard to have a material impact on our financial condition or results of operations.

Note 2 Computation of Net Earnings per Share
The following table illustrates our computations of basic and diluted net earnings per common share ($ in thousands, except per
share figures):
 
Three months ended
 
March 31,
 
2018
 
2017
Net earnings
$
20,083

 
$
10,510

Average basic shares outstanding
10,915

 
10,998

Basic net earnings per share
$
1.84

 
$
0.96

 
 
 
 
Average basic shares outstanding
10,915

 
10,998

Restricted stock not vested
8

 
33

Dilutive effect of Performance Share Plan
86

 
96

Average diluted shares outstanding
11,009

 
11,127

Diluted net earnings per share
$
1.82

 
$
0.94


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Note 3 Fair Value
Fair values of instruments are based on:
(i)
quoted prices in active markets for identical assets (Level 1);
(ii)
quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs are observable in active markets (Level 2); or
(iii)
valuations derived from valuation techniques in which one or more significant inputs are unobservable in the marketplace (Level 3).
The following tables present, for each of the fair value hierarchy levels, our assets and liabilities for which we report fair value on a recurring basis ($ in thousands):
 
Fair Value
March 31, 2018
Level 1
 
Level 2
 
Level 3
 
Total
Cash and cash equivalents
$
88,793

 
$
0

 
$
0

 
$
88,793

Fixed maturity securities:
 
 
 
 
 
 
 
U.S. government
124,757

 
0

 
0

 
124,757

State and municipal
0

 
296,048

 
766

 
296,814

Mortgage-backed securities:

 
 
 
 
 
 
Residential
0

 
365,007

 
0

 
365,007

Commercial
0

 
59,204

 
2,857

 
62,061

Total mortgage-backed securities
0

 
424,211

 
2,857

 
427,068

Asset-backed securities
0

 
110,836

 
17,647

 
128,484

Corporates
0

 
520,698

 
109

 
520,807

Total fixed maturities
124,757

 
1,351,794

 
21,379

 
1,497,930

Equity securities
90,498

 
0

 
0

 
90,498

Short-term investments
0

 
0

 
0

 
0

Total cash and investments
$
304,048

 
$
1,351,794

 
$
21,379

 
$
1,677,221

Percentage of total cash and investments
18.1
%
 
80.6
%
 
1.3
%
 
100.0
%
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
Cash and cash equivalents
$
107,589

 
$
0

 
$
0

 
$
107,589

Fixed maturity securities:
 
 
 
 
 
 
 
U.S. government
60,528

 
0

 
0

 
60,528

State and municipal
0

 
490,724

 
3,488

 
494,211

Mortgage-backed securities:
 
 
 
 
 
 
 
Residential
0

 
350,992

 
0

 
350,992

Commercial
0

 
30,569

 
0

 
30,569

Total mortgage-backed securities
0

 
381,561

 
0

 
381,561

Asset-backed securities
0

 
62,266

 
152

 
62,418

Corporates
0

 
442,281

 
108

 
442,390

Total fixed maturities
60,528

 
1,376,832

 
3,748

 
1,441,107

Equity securities
96,004

 
0

 
0

 
96,004

Short-term investments
0

 
2,541

 
0

 
2,541

Total cash and investments
$
264,121

 
$
1,379,373

 
$
3,748

 
$
1,647,242

Percentage of total cash and investments
16.0
%
 
83.7
%
 
0.2
%
 
100.0
%

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

We do not report our long-term debt at fair value in the Consolidated Balance Sheets. The $286.3 million and $290.8 million fair value of our long-term debt at March 31, 2018, and December 31, 2017, respectively, would be included in Level 2 of the fair value hierarchy if it were reported at fair value.
Level 1 includes cash and cash equivalents, U.S. Treasury securities, an exchange-traded fund and equities held in a rabbi trust which funds our Supplemental Employee Retirement Plan (SERP). Level 2 includes securities whose fair value was determined using observable market inputs. Level 3 securities are comprised of (i) securities for which there is no active or inactive market for similar instruments; (ii) securities whose fair value is determined based on unobservable inputs; and (iii) securities, other than those backed by the U.S. Government, that are not rated by a nationally recognized statistical rating organization (NRSRO). We recognize transfers between levels at the beginning of the reporting period.
A third party nationally recognized pricing service provides the fair value of securities in Level 2. A summary of the significant valuation techniques and market inputs for each class of security follows:
U.S. Government: In determining the fair value for U.S. Government securities we use the market approach. The primary inputs to the valuation include reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data and industry and economic events.
State and municipal: In determining the fair value for state and municipal securities we use the market approach. The primary inputs to the valuation include reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data and industry and economic events.
Mortgage-backed securities: In determining the fair value for mortgage-backed securities we use the market approach and to a lesser extent the income approach. The primary inputs to the valuation include reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data, industry and economic events and monthly payment information.
Asset-backed securities: In determining the fair value for asset-backed securities we use the market approach and to a lesser extent the income approach. The primary inputs to the valuation include reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data, industry and economic events, monthly payment information and collateral performance.
Corporate: In determining the fair value for corporate securities we use the market approach. The primary inputs to the valuation include reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads (for investment grade securities), observations of equity and credit default swap curves (for high-yield corporates), reference data and industry and economic events.
We review the third party pricing methodologies quarterly and test for significant differences between the market price used to value the security and recent sales activity.

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

The following tables present the progression in the Level 3 fair value category ($ in thousands): 
Three months ended March 31, 2018
State and
Municipal
 
Mortgage-
Backed
Securities
 
Asset-Backed Securities
 
Corporates
 
Total
Balance at beginning of period
$
3,488

 
$
0

 
$
152

 
$
108

 
$
3,748

Total (losses) gains, unrealized or realized
 
 
 
 
 
 
 
 
 
Included in net earnings
(10
)
 
0

 
(0
)
 
(0
)
 
(10
)
Included in other comprehensive income
3

 
10

 
27

 
1

 
41

Purchases
0

 
2,847

 
17,729

 
0

 
20,576

Sales
(3,360
)
 
0

 
0

 
0

 
(3,360
)
Settlements
0

 
0

 
(261
)
 
0

 
(261
)
Transfers in
645

 
0

 
0

 
0

 
645

Balance at end of period
$
766

 
$
2,857

 
$
17,647

 
$
109

 
$
21,379

 
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2017
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
3,860

 
$
0

 
$
412

 
$
666

 
$
4,938

Total (losses) gains, unrealized or realized
 
 
 
 
 
 
 
 
 
Included in net earnings
(31
)
 
0

 
0

 
1

 
(30
)
Included in other comprehensive income
15

 
0

 
1

 
(22
)
 
(6
)
Purchases
0

 
0

 
4,259

 
2,000

 
6,259

Sales
(694
)
 
0

 
0

 
0

 
(694
)
Settlements
0

 
0

 
(88
)
 
(92
)
 
(180
)
Transfers in
329

 
0

 
0

 
0

 
329

Balance at end of period
$
3,479

 
$
0

 
$
4,584

 
$
2,553

 
$
10,616

 
 
 
 
 
 
 
 
Of the $21.4 million fair value of securities in Level 3 at March 31, 2018, which consisted of eleven securities, we priced six based on non-binding broker quotes, one was priced based on our unaffiliated money manager and four securities, which were included in Level 3 because they were not rated by a nationally recognized statistical rating organization, were priced by a nationally recognized pricing service.
During the three months ended March 31, 2018, eight securities were purchased and are new issues. One security, which was an exchange of a rated municipal bond for an unrated refunded bond, was transferred from Level 2 into Level 3. There were no transfers of securities between Levels 1 and 2. During the three months ended March 31, 2017, one security, which was an exchange of a rated municipal bond for an unrated refunded bond, was transferred from Level 2 into Level 3.
The gains or losses included in net earnings are included in the line item "Net realized gains on investments" in the Consolidated Statements of Earnings. We recognize the net gains or losses included in other comprehensive income in the line item "Unrealized (losses) gains on investments, net" in the Consolidated Statements of Comprehensive Income and the line item "Change in unrealized gain on investments" or the line item "Change in non-credit component of impairment losses on fixed maturities" in the Consolidated Statements of Changes in Shareholders’ Equity.

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

The following table presents the carrying value and estimated fair value of our financial instruments ($ in thousands):
 
March 31, 2018
 
December 31, 2017
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
88,793

 
$
88,793

 
$
107,589

 
$
107,589

Available-for-sale securities:
 
 
 
 
 
 
 
Fixed maturities
1,497,930

 
1,497,930

 
1,441,107

 
1,441,107

Equity securities
90,498

 
90,498

 
96,004

 
96,004

Short-term investments
0

 
0

 
2,541

 
2,541

Total cash and investments
$
1,677,221

 
$
1,677,221

 
$
1,647,242

 
$
1,647,242

Liabilities:
 
 
 
 
 
 
 
Long-term debt
$
273,865

 
$
286,330

 
$
273,809

 
$
290,824

Refer to Note 4 – Investments to the Consolidated Financial Statements for additional information on investments and Note 5 – Long-Term Debt to the Consolidated Financial Statements for additional information on long-term debt.
Note 4 Investments
We consider all fixed maturity and equity securities to be available-for-sale and report them at fair value. Net unrealized gains or losses on equity securities prior to January 1, 2018, and on fixed maturities are reported after-tax (net of any valuation allowance) as a component of other comprehensive income. As of January 1, 2018, changes in fair value of equity securities are recognized through net income. The proceeds from sales of securities for the three months ended March 31, 2018, and March 31, 2017, were $335.6 million and $42.1 million, respectively. Sales of securities were higher during the first quarter of 2018 as a result of our transition to a new investment policy statement and related portfolio repositioning. The proceeds for the three months ended March 31, 2018, were net of $0.1 million of receivable for securities sold as of March 31, 2018. The proceeds for the three months ended March 31, 2017, were net of $5.2 million of receivable for securities sold during the first quarter of 2017 that had not settled as of March 31, 2017.
Gross gains of $2.9 million and gross losses of $1.6 million were realized on sales of available-for-sale securities during the three months ended March 31, 2018, compared with gross gains of $0.7 million and gross losses of $0.2 million realized on sales during the three months ended March 31, 2017. Gains or losses on securities are determined on a specific identification basis.

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

Summarized information for the major categories of our investment portfolio follows ($ in thousands):
March 31, 2018
Amortized
Cost or Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
OTTI
Recognized in
Accumulated
OCI(1)
Fixed maturities:
 
 
 
 
 
 
 
 
 
U.S. government
$
125,887

 
$
58

 
$
(1,188
)
 
$
124,757

 
$
0

State and municipal
297,994

 
1,031

 
(2,211
)
 
296,814

 
0

Mortgage-backed securities:

 

 

 
 
 
 
Residential
372,319

 
669

 
(7,981
)
 
365,007

 
(72
)
Commercial
63,053

 
23

 
(1,016
)
 
62,061

 
0

Total mortgage-backed securities
435,372

 
693

 
(8,996
)
 
427,068

 
(72
)
Asset-backed securities
129,010

 
104

 
(630
)
 
128,484

 
0

Corporates
524,676

 
1,726

 
(5,595
)
 
520,807

 
0

Total fixed maturities
1,512,939

 
3,612

 
(18,621
)
 
1,497,930

 
(72
)
Short-term investments
0

 
0

 
0

 
0

 
0

Total
$
1,512,939

 
$
3,612

 
$
(18,621
)
 
$
1,497,930

 
$
(72
)
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
U.S. government
$
61,196

 
$
0

 
$
(668
)
 
$
60,528

 
$
0

State and municipal
492,442

 
2,768

 
(999
)
 
494,211

 
(46
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Residential
353,277

 
1,812

 
(4,097
)
 
350,992

 
(1,479
)
Commercial
31,204

 
18

 
(653
)
 
30,569

 
0

Total mortgage-backed securities
384,481

 
1,830

 
(4,750
)
 
381,561

 
(1,479
)
Asset-backed securities
62,552

 
62

 
(196
)
 
62,418

 
(8
)
Corporates
439,208

 
4,610

 
(1,429
)
 
442,390

 
(31
)
Total fixed maturities
1,439,878

 
9,271

 
(8,042
)
 
1,441,107

 
(1,564
)
Equity securities
68,812

 
27,192

 
0

 
96,004

 
0

Short-term investments
2,541

 
0

 
0

 
2,541

 
0

Total
$
1,511,232

 
$
36,463

 
$
(8,042
)
 
$
1,539,653

 
$
(1,564
)
 
 
 
 
 
 
 
 
 
 
(1) The total non-credit portion of OTTI recognized in Accumulated OCI reflecting the original non-credit loss at the time the credit impairment was determined.

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

The following tables set forth the amount of unrealized loss by investment category and length of time that individual securities have been in a continuous unrealized loss position ($ in thousands):
 
Less than 12 Months
 
12 Months or More
March 31, 2018
Number of
Securities
with
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Unrealized
Losses as
% of Cost
 
Number of
Securities
with
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Unrealized
Losses as
% of Cost
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government
28
 
$
48,202

 
$
(881
)
 
1.8
%
 
16

 
$
12,743

 
$
(307
)
 
2.4
%
State and municipal
99
 
184,046

 
(2,147
)
 
1.2
%
 
4

 
4,573

 
(64
)
 
1.4
%
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential
263
 
144,098

 
(2,250
)
 
1.5
%
 
272

 
119,273

 
(5,730
)
 
4.6
%
Commercial
15
 
30,658

 
(177
)
 
0.6
%
 
8

 
23,206

 
(839
)
 
3.5
%
Total mortgage-backed securities
278
 
174,756

 
(2,427
)
 
1.4
%
 
280

 
142,480

 
(6,569
)
 
4.4
%
Asset-backed securities
43
 
74,670

 
(628
)
 
0.8
%
 
1

 
1,458

 
(2
)
 
0.1
%
Corporates
232
 
367,660

 
(5,168
)
 
1.4
%
 
15

 
18,126

 
(427
)
 
2.3
%
Total fixed maturities
680
 
849,333

 
(11,252
)
 
1.3
%
 
316

 
179,380

 
(7,369
)
 
3.9
%
Short-term investments
0
 
0

 
0

 
0.0
%
 
0

 
0

 
0

 
0.0
%
Total
680
 
$
849,333

 
$
(11,252
)
 
1.3
%
 
316

 
$
179,380

 
$
(7,369
)
 
3.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government
25
 
$
46,160

 
$
(422
)
 
0.9
%
 
16

 
$
14,368

 
$
(246
)
 
1.7
%
State and municipal
82
 
163,997

 
(939
)
 
0.6
%
 
5

 
10,529

 
(60
)
 
0.6
%
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential
154
 
81,841

 
(453
)
 
0.6
%
 
279

 
127,317

 
(3,644
)
 
2.8
%
Commercial
2
 
3,578

 
(30
)
 
0.8
%
 
9

 
23,066

 
(623
)
 
2.6
%
Total mortgage-backed securities
156
 
85,419

 
(483
)
 
0.6
%
 
288

 
150,383

 
(4,267
)
 
2.8
%
Asset-backed securities
31
 
35,407

 
(193
)
 
0.5
%
 
2

 
1,561

 
(3
)
 
0.2
%
Corporates
104
 
158,788

 
(1,197
)
 
0.7
%
 
13

 
16,468

 
(232
)
 
1.4
%
Total fixed maturities
398
 
489,771

 
(3,233
)
 
0.7
%
 
324

 
193,309

 
(4,809
)
 
2.4
%
Equity securities
0
 
0

 
0

 
0.0
%
 
0

 
0

 
0

 
0.0
%
Short-term investments
0
 
0

 
0

 
0.0
%
 
0

 
0

 
0

 
0.0
%
Total
398
 
$
489,771

 
$
(3,233
)
 
0.7
%
 
324

 
$
193,309

 
$
(4,809
)
 
2.4
%
The determination of whether unrealized losses are “other-than-temporary” requires judgment based on subjective as well as objective factors. Factors we considered and resources we used in our determination include:
whether the unrealized loss is credit-driven or a result of changes in market interest rates;
the length of time the security’s market value has been below its cost;
the extent to which fair value is less than cost basis;
the intent to sell the security;
whether it is more likely than not that there will be a requirement to sell the security before its anticipated recovery;
historical operating, balance sheet and cash flow data contained in issuer SEC filings;
issuer news releases;
near-term prospects for improvement in the issuer and/or its industry;
industry research and communications with industry specialists; and
third-party research and credit rating reports.

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

We regularly evaluate for potential impairment each security position that has either of the following: a fair value of less than 95% of its book value or an unrealized loss that equals or exceeds $100,000.
The following table summarizes those securities with unrealized gains or losses (2018 includes fixed maturity securities only):
 
March 31, 2018
 
December 31, 2017
Number of positions held with unrealized:
 
 
 
Gains
302

 
496

Losses
996

 
722

Number of positions held that individually exceed unrealized:
 
 
 
Gains of $500,000
0

 
2

Losses of $500,000
0

 
0

Percentage of positions held with unrealized:
 
 
 
Gains that were investment grade
84
%
 
81
%
Losses that were investment grade
94
%
 
97
%
Percentage of fair value held with unrealized:
 
 
 
Gains that were investment grade
88
%
 
81
%
Losses that were investment grade
93
%
 
95
%
The following table sets forth the amount of unrealized losses by age and severity at March 31, 2018, ($ in thousands):
Age of Unrealized Losses
Fair Value of
Securities with
Unrealized
Losses
 
Total Gross
Unrealized
Losses
 
Less  Than 5%*
 
5% - 10%*
 
Total Gross Greater
Than 10%*
Three months or less
$
454,565

 
$
(3,506
)
 
$
(3,394
)
 
$
(112
)
 
$
0

Four months through six months
247,851

 
(4,193
)
 
(4,007
)
 
(185
)
 
0

Seven months through nine months
139,484

 
(3,392
)
 
(3,392
)
 
0

 
0

Ten months through twelve months
7,432

 
(161
)
 
(161
)
 
0

 
0

Greater than twelve months
179,380

 
(7,369
)
 
(4,846
)
 
(2,523
)
 
0

Total
$
1,028,713

 
$
(18,621
)
 
$
(15,801
)
 
$
(2,820
)
 
$
0

* As a percentage of amortized cost or cost.

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

The change in unrealized gains (losses) on marketable securities recognized through accumulated other comprehensive income included the following ($ in thousands):
 
Pre-tax
 
 
 
 
Three months ended March 31, 2018
Fixed
Maturities
 
Short-Term Investments
 
Tax
Effects
 
Net
Unrealized holding (losses) gains on securities arising during the period
$
(18,346
)
 
$
1

 
3,852

 
(14,492
)
Realized losses (gains) on securities sold
519

 
(1
)
 
(109
)
 
409

Impairment loss recognized in earnings
1,588

 
0

 
(334
)
 
1,255

Change in unrealized, net
$
(16,238
)
 
$
0

 
$
3,410

 
$
(12,828
)
 
Pre-tax
 
 
 
 
Three months ended March 31, 2017
Fixed
Maturities
 
Equity
Securities
 
Short-Term Investments
 
Tax
Effects
 
Net
Unrealized holding gains on securities arising during the period
$
4,368

 
$
6,294

 
$
3

 
$
(3,733
)
 
$
6,932

Realized losses (gains) on securities sold
52

 
(569
)
 
(1
)
 
182

 
(337
)
Impairment loss recognized in earnings
10

 
0

 
0

 
(3
)
 
6

Change in unrealized, net
$
4,429

 
$
5,725

 
$
1

 
$
(3,554
)
 
$
6,601

For fixed maturity securities that are other-than-temporarily impaired, we assess our intent to sell and the likelihood that we will be required to sell the security before recovery of our amortized cost. If a fixed maturity security is considered other-than-temporarily impaired but we do not intend to and are not more than likely to be required to sell the security before our recovery to amortized cost, the amount of the impairment is separated into a credit loss component and the amount due to all other factors ("non-credit component"). The excess of the amortized cost over the present value of the expected cash flows determines the credit loss component of an impairment charge on a fixed maturity security. The present value is determined using the best estimate of cash flows discounted at (i) the effective interest rate implicit at the date of acquisition for non-structured securities; or (ii) the book yield for structured securities. The techniques and assumptions for determining the best estimate of cash flows vary depending on the type of security. We recognize the credit loss component of an impairment charge in net earnings and the non-credit component in accumulated other comprehensive income. If we intend to sell or will, more likely than not, be required to sell a security, the entire amount of the impairment is treated as a credit loss.
For our securities held with unrealized losses, we believe, based on our analysis, that we will recover our cost basis in these securities and we do not intend to sell the securities nor is it more likely than not that there will be a requirement to sell the securities before they recover in value.
The following table is a progression of credit losses on fixed maturity securities that were bifurcated between a credit and non-credit component ($ in thousands):
 
Three months ended March 31,
 
2018
 
2017
Beginning balance
$
753

 
$
557

Additions for:
 
 
 
Previously impaired securities
278

 
0

Newly impaired securities
7

 
10

Reductions for:
 
 
 
Securities sold and paid down
(41
)
 
(24
)
Ending balance
$
996

 
$
542


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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

The table below sets forth the scheduled maturities of fixed maturity securities at March 31, 2018, based on their fair values ($ in thousands). We report securities that do not have a single maturity date at average maturity. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid by the issuers.
 
Fair Value
 
Amortized
Cost
Maturity
Securities with Unrealized Gains
 
Securities with Unrealized Losses
 
Securities with No Unrealized Gains or Losses
 
All Fixed Maturity Securities
 
All Fixed Maturity Securities
One year or less
$
9,473

 
$
24,024

 
$
1,353

 
$
34,850

 
$
34,848

After one year through five years
188,968

 
453,537

 
7,187

 
649,692

 
653,913

After five years through ten years
68,219

 
157,207

 
649

 
226,075

 
228,286

After ten years
31,179

 
582

 
0

 
31,761

 
31,510

Mortgage- and asset-backed securities
143,210

 
393,363

 
18,979

 
555,552

 
564,382

Total
$
441,049

 
$
1,028,713

 
$
28,168

 
$
1,497,930

 
$
1,512,939


The portion of unrealized gains and losses recorded during the three months ended March 31, 2018, that relate to equities still held at the end of the reporting date are as follows ($ in thousands):
Net losses recognized during the period on equity securities
$
(726
)
Less: Net gains recognized during the period on equity securities sold
(1,881
)
Unrealized losses recognized during the period on equity securities still held at the reporting date
$
(2,607
)

Note 5 Long-Term Debt
($ in thousands)
March 31, 2018
 
December 31, 2017
Principal
$
275,000

 
$
275,000

Unamortized debt issuance costs
1,135

 
1,191

Long-term debt less unamortized debt issuance costs
$
273,865

 
$
273,809

In September 2012 we issued $275 million principal of senior notes due September 2022 (the “5.0% Senior Notes”). The 5.0% Senior Notes accrue interest at 5.0%, payable semiannually. At the time we issued the 5.0% Senior Notes, we capitalized $2.2 million of debt issuance costs, which we are amortizing over the term of the 5.0% Senior Notes. We calculated the March 31, 2018, fair value of $286.3 million using a 124 basis point spread to the 10-year U.S. Treasury Note of 2.741%.
In August 2017 we renewed our agreement for a $50 million three-year revolving credit facility (the “Credit Agreement”) that requires us to meet certain financial and other covenants. We are currently in compliance with all covenants under the Credit Agreement, and as of March 31, 2018, there were no borrowings outstanding against it.

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Note 6 Income Taxes
The following is a reconciliation of income taxes at the statutory rate of 21% and 35% for 2018 and 2017, respectively, to the effective provision for income taxes as shown in the Consolidated Statements of Earnings ($ in thousands):
 
Three months ended
 
March 31,
 
2018
 
2017
Earnings before income taxes
$
24,937

 
$
14,868

Income taxes at statutory rate
5,237

 
5,204

Effect of:
 
 
 
Dividends-received deduction
(25
)
 
(79
)
Tax-exempt interest
(279
)
 
(633
)
Other
(80
)
 
(134
)
Provision for income taxes as shown on the Consolidated Statements of Earnings
$
4,853

 
$
4,358

GAAP effective tax rate
19.5
%
 
29.3
%
Note 7 Additional Information
Supplemental Cash Flow Information
We made the following payments that we do not separately disclose in the Consolidated Statements of Cash Flows ($ in thousands):
 
Three months ended
 
March 31,
 
2018
 
2017
Income tax payments
$
0

 
$
3,100

Interest payments on debt
6,875

 
6,875

Interest payments on capital leases
15

 
21

Negative Cash Book Balances
Negative cash book balances, included in the line item “Other liabilities” in the Consolidated Balance Sheets, were $49.2 million and $49.7 million at March 31, 2018, and December 31, 2017, respectively.

Merger with Kemper Corporation

On February 13, 2018, Kemper Corporation (“Kemper”), a wholly owned subsidiary of Kemper (“Kemper Merger Sub”) and Infinity entered into a merger agreement (the “Merger Agreement”) under which Kemper will acquire Infinity in a cash and stock transaction valued at approximately $1.4 billion, plus assumption of certain of Infinity’s debt, or $129.00 per Infinity share; the exchange ratio for stock consideration to be issued in the merger is fixed and was determined based on Kemper’s 20-trading day volume weighted average price as of February 12, 2018 of $64.40. Based on Kemper’s February 12, 2018 closing stock price of $57.75, the implied total consideration is approximately $1.3 billion, or $121.01 per Infinity share. Pursuant to the Merger Agreement, Kemper Merger Sub will merge with and into Infinity, with Infinity surviving as a wholly owned subsidiary of Kemper. Kemper is a diversified insurance holding company, with subsidiaries that provide automobile, homeowners, life, health, and other insurance products to individuals and businesses. Kemper conducts its operations through two operating segments: Property & Casualty Insurance and Life & Health Insurance. Kemper conducts its operations solely in the United States with approximately 5,550 full-time associates supporting their operations.

Under the terms of the Merger Agreement, as of the effective time of the merger (the “Effective Time”), each share of Infinity common stock issued and outstanding as of immediately prior to the Effective Time (other than as set forth in the Merger Agreement) will be canceled and converted into, at the election of the holder of such share and subject to an automatic adjustment as described below, the right to, receive (i) $51.60 in cash and 1.2019 Kemper common shares for each share of Infinity common stock, without

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interest (the “Mixed Consideration”), (ii) an amount of cash for each share of Infinity common stock, without interest, equal to $129.00 (the “Cash Consideration”) or (iii) a number of shares of Kemper common stock equal to 2.0031 (the “Stock Consideration”). Holders of Infinity common stock who do not make an election will receive the Mixed Consideration. The consideration to be paid to holders of Infinity common stock electing to receive the Cash Consideration or the Stock Consideration in connection with the merger is subject to automatic adjustment, as applicable, to ensure that the total amount of cash paid and the total number of shares of Kemper common stock issued in the merger is the same as what would be paid and issued if all holders of Infinity common stock were to receive the Mixed Consideration. Following the close of the merger, Infinity shareholders are expected to own approximately 20% of the combined company on a pro-forma basis.

The merger has been approved by the Board of Directors of each company and is expected to close in the third quarter of 2018, subject to the satisfaction or waiver of applicable closing conditions. During the first quarter of 2018, Kemper and Infinity received notice from the U.S. Federal Trade Commission granting early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, thereby satisfying one of the applicable closing conditions. Remaining closing conditions to which the completion of the merger is subject include, among others, (i) adoption by Infinity shareholders of the Merger Agreement, (ii) approval by Kemper stockholders of the issuance of Kemper common stock in connection with the merger, (iii) the receipt of certain other regulatory approvals, (iv) the absence of any effective order issued by any court of competent jurisdiction or other legal restraint prohibiting or preventing the consummation of the merger and (v) other closing conditions.



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Note 8 Insurance Reserves
Insurance reserves include liabilities for unpaid losses, both known and estimated for incurred but not reported (IBNR), and unpaid loss adjustment expenses (LAE). The following table provides an analysis of changes in the liability for unpaid losses and LAE on a GAAP basis ($ in thousands): 
 
Three months ended
 
March 31,
 
2018
 
2017
Balance at Beginning of Period
 
 
 
Unpaid losses on known claims
$
264,470

 
$
238,412

IBNR losses
312,516

 
306,641

LAE
138,112

 
140,402

Total unpaid losses and LAE
715,098

 
685,455

Reinsurance recoverables
(31,609
)
 
(17,130
)
Unpaid losses and LAE, net of reinsurance recoverables
683,489

 
668,325

Current Activity
 
 
 
Loss and LAE incurred:
 
 
 
Current accident year
273,408

 
277,044

Prior accident years
(8,856
)
 
(6,368
)
Total loss and LAE incurred
264,552

 
270,676

Loss and LAE payments:
 
 
 
Current accident year
(89,106
)
 
(96,869
)
Prior accident years
(177,479
)
 
(179,319
)
Total loss and LAE payments
(266,585
)
 
(276,187
)
Balance at End of Period
 
 
 
Unpaid losses and LAE, net of reinsurance recoverables
681,457

 
662,814

Add back reinsurance recoverables
19,549

 
16,133

Total unpaid losses and LAE
701,006

 
678,947

Unpaid losses on known claims
247,940

 
233,303

IBNR losses
318,281

 
307,932

LAE
134,786

 
137,712

Total unpaid losses and LAE
$
701,006

 
$
678,947

The $8.9 million of favorable reserve development during the three months ended March 31, 2018, was primarily due to decreases in accident year 2017 estimates from California, with lower ultimate frequency estimates in collision and comprehensive coverages along with lower ultimate severity estimates for collision coverage, and from Florida, with decreased ultimate frequency estimates in collision, comprehensive and personal injury protection coverages.
The $6.4 million of favorable reserve development during the three months ended March 31, 2017, was primarily due to decreases in frequency estimates in California and Florida material damage coverages related to accident year 2016, partially offset by increases in severity estimates in personal injury protection coverages and in bodily injury coverages in our commercial auto product related to accident years 2016 and prior.
Note 9 Commitments and Contingencies
Commitments
There have been no material changes from the commitments discussed on Form 10-K for the year ended December 31, 2017. For a description of our previously reported commitments, refer to Note 14 Commitments and Contingencies of our Form 10-K for the year ended December 31, 2017.

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Contingencies
From time to time, we and our subsidiaries are named as defendants in various lawsuits incidental to our insurance operations. We consider legal actions relating to claims made in the ordinary course of seeking indemnification for a loss covered by the insurance policy in establishing loss and LAE reserves.
We also face in the ordinary course of business lawsuits that seek damages beyond policy limits, commonly known as extra-contractual claims, as well as class action and individual lawsuits that involve issues not unlike those facing other insurance companies and employers.
We continually evaluate potential liabilities and reserves for litigation of these types using the criteria established by the Contingencies topic of the FASB Accounting Standards Codification. Under this guidance, we may only record reserves for a loss if the likelihood of occurrence is probable and we can reasonably estimate the amount or range of the loss. When disclosing litigation or claims where a material loss is judged to be reasonably possible, we will disclose an estimated range of loss or state that an estimate cannot be made. We consider each legal action using this guidance and record reserves for losses as warranted by establishing a reserve captured within our Consolidated Balance Sheets line-items “Unpaid losses and loss adjustment expenses” for extra-contractual claims and “Other liabilities” for class action and other non-claims related lawsuits. We record amounts incurred on the Consolidated Statements of Earnings within “Losses and loss adjustment expenses” for extra-contractual claims and “Other expenses” for class action and other non-claims related lawsuits.
Certain claims and regulatory or legal actions have been threatened or brought against us for which we have accrued no loss, and for which an estimate of a possible range of loss cannot be made under the above rules. While it is not possible to predict the ultimate outcome of these lawsuits, we do not believe they are likely to have a material effect on our financial condition or liquidity. However, losses incurred because of these cases could have a material adverse impact on net earnings in a given period.
As of March 31, 2018, pending putative (i.e., not certified) class action lawsuits that challenge certain of Infinity’s business operations and practices included the following:
• allegations we sold a lessor liability endorsement affording only illusory coverage.
• a challenge to denial of personal injury protection benefits to a class of injured third parties in vehicle accidents.
• a challenge to our payment of a percentage of arbitration awards to collection agencies in successful intercompany
arbitrations.
• allegations that we are obligated to reimburse Medicare or secondary payers for accident-related medical payments in
which personal injury protection benefits were denied.
In addition to lawsuits, regulatory bodies, including state insurance departments and the Securities and Exchange Commission, among others, may make inquiries, investigate consumer complaints or conduct on-site examinations concerning specific business practices or compliance more generally. Such inquiries, investigations or examinations have in the past and may in the future directly or indirectly result in regulatory orders requiring remedial, injunctive or other actions or the assessment of substantial fines or other penalties.
For a description of previously reported contingencies, refer to Note 14 Commitments and Contingencies of our Form 10-K for the year ended December 31, 2017.

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Note 10 Accumulated Other Comprehensive Income
The components of other comprehensive income before and after tax are as follows ($ in thousands):
 
Three months ended March 31,
 
2018
 
2017
 
Before Tax
 
Income Tax
 
Net
 
Before Tax
 
Income Tax
 
Net
Accumulated change in post-retirement benefit liability, beginning of period
$
829

 
$
(290
)
 
$
539

 
$
1,033

 
$
(361
)
 
$
671

Cumulative effect of change in accounting principle
0

 
116

 
116

 
0

 
0

 
0

Effect on other comprehensive income
(2
)
 
0

 
(1
)
 
(13
)
 
4

 
(8
)
Accumulated change in post-retirement benefit liability, end of period
827

 
(174
)
 
653

 
1,020

 
(357
)
 
663

Accumulated unrealized gains on investments, net, beginning of period
28,421

 
(9,204
)
 
19,217

 
11,133

 
(3,896
)
 
7,236

Cumulative effect of change in accounting principle
(27,192
)
 
8,948

 
(18,244
)
 
0

 
0

 
0

Other comprehensive (loss) income before reclassification (1)
(18,344
)
 
3,852

 
(14,492
)
 
10,664

 
(3,733
)
 
6,932

Reclassification adjustment for other-than-temporary impairments included in net income (1)
1,588

 
(334
)
 
1,255

 
10

 
(3
)
 
6

Reclassification adjustment for realized losses (gains) included in net income (1)
518

 
(109
)
 
409

 
(519
)
 
182

 
(337
)
Effect on other comprehensive income
(16,238
)
 
3,410

 
(12,828
)
 
10,155

 
(3,554
)
 
6,601

Accumulated unrealized (losses) gains on investments, net, end of period
(15,009
)
 
3,154

 
(11,855
)
 
21,288

 
(7,451
)
 
13,837

Accumulated other comprehensive income, beginning of period
29,250

 
(9,494
)
 
19,756

 
12,165

 
(4,258
)
 
7,907

Cumulative effect of change in accounting principle
(27,192
)
 
9,064

 
(18,128
)
 
0

 
0

 
0

Change in post-retirement benefit liability
(2
)
 
0

 
(1
)
 
(13
)
 
4

 
(8
)
Change in unrealized (losses) gains on investments, net (1)
(16,238
)
 
3,410

 
(12,828
)
 
10,155

 
(3,554
)
 
6,601

Effect on other comprehensive income
(43,432
)
 
12,474

 
(30,958
)
 
10,143

 
(3,550
)
 
6,593

Accumulated other comprehensive (loss) income, end of period
$
(14,182
)
 
$
2,980

 
$
(11,202
)
 
$
22,308

 
$
(7,808
)
 
$
14,500


(1) The amounts for 2018 are for fixed maturities only.
 
 
 
 
 
 
 
 
 
 
 
 

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Note 11 Segment Information
We manage our business based on product line and have three operating segments: Personal Auto, Commercial Auto and Classic Collector (our reportable segments are Personal Auto and Commercial Auto).
Our Personal Auto product provides coverage to individuals for liability to others for bodily injury and property damage and for physical damage to an insured's own vehicle from collision and various other perils. In addition, some states require policies to provide for first party personal injury protection, frequently referred to as no-fault coverage.
Our Commercial Auto product provides coverage to businesses for liability to others for bodily injury and property damage and for physical damage to vehicles from collision and various other perils. We primarily target businesses with fleets of 10 or fewer vehicles and average 1.9 vehicles per policy. We avoid businesses that are involved in what we consider to be hazardous operations or interstate commerce.
Our Classic Collector product provides coverage to individuals with classic or antique automobiles for liability to others for bodily injury and property damage and for physical damage to an insured's own vehicle from collision and various other perils.

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All segment revenues are generated from external customers. The following table provides revenues by segment and a reconciliation to "Total revenues" as reported on the Consolidated Statements of Earnings ($ in thousands):
 
Three months ended
 
March 31,
Gross written premium:
2018
 
2017
Personal Auto
$
370,193

 
$
324,352

Commercial Auto
47,739

 
42,785

Classic Collector
3,660

 
3,565

Total gross written premium
421,592

 
370,702

 
 
 
 
Ceded reinsurance:
 
 
 
Personal Auto
(2,077
)
 
(983
)
Commercial Auto
(1,379
)
 
(1,412
)
Classic Collector
(260
)
 
(213
)
Total ceded reinsurance
(3,716
)
 
(2,608
)
 
 
 
 
Net written premium:
 
 
 
Personal Auto
368,116

 
323,369

Commercial Auto
46,360

 
41,373

Classic Collector
3,400

 
3,352

Total net written premium
417,876

 
368,094

 
 
 
 
Change in unearned premium:
 
 
 
Personal Auto
(57,817
)
 
(20,983
)
Commercial Auto
(6,532
)
 
(6,170
)
Classic Collector
460

 
428

Total change in unearned premium
(63,889
)
 
(26,726
)
 
 
 
 
Earned premium:
 
 
 
Personal Auto
310,298

 
302,386

Commercial Auto
39,828

 
35,203

Classic Collector
3,860

 
3,780

Total earned premium
353,987

 
341,368

 
 
 
 
Installment and other fee income:
 
 
 
Personal Auto
24,281

 
23,937

Commercial Auto
3,114

 
2,802

Classic Collector
0

 
0

Total installment and other fee income
27,395

 
26,739

 
 
 
 
Net investment income
9,786

 
8,695

Net realized gains on investments
(2,832
)
 
509

Other income
430

 
275

Total revenues
$
388,766

 
$
377,587


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Our management uses underwriting income and combined ratios calculated on a statutory accident year basis as primary measures of profitability. Statutory accident year underwriting income is calculated by subtracting losses and loss adjustment expenses and commissions and other underwriting expenses (including bad debt charge-offs on agents' balances and premium receivables) from the total of earned premium and installment and other fee income. The statutory accident year combined ratio represents the sum of the following ratios: (i) losses and LAE incurred, excluding development from prior accident years, as a percentage of net earned premium; and (ii) underwriting expenses incurred, including bad debt and net of fees, as a percentage of net written premium.
The primary differences between the calculation of the statutory accident year used by management and the statutory calendar year combined ratios is the exclusion of bad debt charge-offs and the inclusion of development on prior accident year loss and LAE reserves.
Certain expenses are treated differently under statutory accounting principles. Under GAAP, commissions, premium taxes and other variable costs incurred in connection with successfully writing new and renewal business are capitalized as deferred policy acquisition costs and amortized on a pro rata basis over the period in which the related premium is earned. On a statutory basis, these items are expensed as incurred. Additionally, bad debt charge-offs on agents' balances and premium receivables are included in the GAAP combined ratios.
The following tables present the underwriting income and combined ratio on a statutory accident year basis with reconciliations to "Earnings before income taxes" as presented on the Consolidated Statements of Earnings ($ in thousands). We do not allocate assets or "Provision for income taxes" to operating segments.
 
Three months ended March 31, 2018
 
Personal Auto
 
Commercial Auto
 
Classic Collector
 
Total
 
Pre-tax Profit (Loss)
 
Combined Ratio (1)
 
Pre-tax Profit (Loss)
 
Combined Ratio (1)
 
Pre-tax Profit (Loss)
 
Combined Ratio (1)
 
Pre-tax Profit (Loss)
 
Combined Ratio (1)
Statutory accident year underwriting income
$
6,311

 
94.8
%
 
$
812

 
95.2
%
 
$
613

 
88.1
%
 
$
7,737

 
94.7
%
Bad debt charge-offs
3,363

 
 
 
392

 
 
 
(44
)
 
 
 
3,711

 
 
Favorable (unfavorable) development on prior accident years
10,555

 
 
 
(1,362
)
 
 
 
(337
)
 
 
 
8,856

 
 
Statutory calendar year underwriting income
20,229

 
90.5
%
 
(158
)
 
97.8
%
 
233

 
98.2
%
 
20,304

 
91.3
%
Statutory-to-GAAP underwriting income differences
 
 
 
 
 
 
 
 
 
 
 
 
6,005

 
 
GAAP calendar year underwriting income
 
 
 
 
 
 
 
 
 
 
 
 
26,309

 
92.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investment income
 
 
 
 
 
 
 
 
 
 
 
 
9,786

 
 
Net realized gains on investments
 
 
 
 
 
 
 
 
 
 
 
 
(2,832
)
 
 
Other income
 
 
 
 
 
 
 
 
 
 
 
 
430

 
 
Interest expense
 
 
 
 
 
 
 
 
 
 
 
 
(3,509
)
 
 
Corporate general and administrative expenses
 
 
 
 
 
 
 
 
 
 
 
 
(4,743
)
 
 
Other expenses
 
 
 
 
 
 
 
 
 
 
 
 
(505
)
 
 
Earnings before income taxes
 
 
 
 
 
 
 
 
 
 
 
 
$
24,937

 
 
(1) Management includes the provision for uncollectible accounts in the underwriting income and combined ratio on both statutory accident year and GAAP calendar year bases.

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Three months ended March 31, 2017
 
Personal Auto
 
Commercial Auto
 
Classic Collector
 
Total
 
Pre-tax Profit (Loss)
 
Combined Ratio (1)
 
Pre-tax Profit (Loss)
 
Combined Ratio (1)
 
Pre-tax Profit (Loss)
 
Combined Ratio (1)
 
Pre-tax Profit (Loss)
 
Combined Ratio (1)
Statutory accident year underwriting income
$
1,594

 
98.3
%
 
$
629

 
95.3
%
 
$
335

 
95.3
%
 
$
2,558

 
98.0
%
Bad debt charge-offs
2,251

 
 
 
291

 
 
 
10

 
 
 
2,552

 
 
Favorable (unfavorable) development on prior accident years
6,986

 
 
 
(874
)
 
 
 
256

 
 
 
6,368

 
 
Statutory calendar year underwriting income
10,831

 
95.2
%
 
45

 
97.1
%
 
602

 
88.3
%
 
11,478

 
95.4
%
Statutory-to-GAAP underwriting income differences
 
 
 
 
 
 
 
 
 
 
 
 
14

 
 
GAAP calendar year underwriting income
 
 
 
 
 
 
 
 
 
 
 
 
11,492

 
96.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investment income
 
 
 
 
 
 
 
 
 
 
 
 
8,695

 
 
Net realized gains on investments
 
 
 
 
 
 
 
 
 
 
 
 
509

 
 
Other income
 
 
 
 
 
 
 
 
 
 
 
 
275

 
 
Interest expense
 
 
 
 
 
 
 
 
 
 
 
 
(3,512
)
 
 
Corporate general and administrative expenses
 
 
 
 
 
 
 
 
 
 
 
 
(2,271
)
 
 
Other expenses
 
 
 
 
 
 
 
 
 
 
 
 
(322
)
 
 
Earnings before income taxes
 
 
 
 
 
 
 
 
 
 
 
 
$
14,868

 
 
(1) Management includes the provision for uncollectible accounts in the underwriting income and combined ratio on both statutory accident year and GAAP calendar year bases.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations


ITEM 2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain “forward-looking statements” which anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. We make these statements subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements in this report not dealing with historical results or current facts are forward-looking and we base them on estimates, assumptions and projections. Statements which include the words “assumes,” “believes,” “seeks,” “expects,” “may,” “should,” “intends,” “likely,” “targets,” “plans,” “anticipates,” “estimates” or the negative version of those words and similar statements of a future or forward-looking nature identify forward-looking statements. Examples of such forward-looking statements include statements relating to expectations concerning market conditions, premium growth, earnings, investment performance, expected losses, rate changes and loss experience.
The primary events or circumstances that could cause actual results to differ materially from what we expect include determinations with respect to reserve adequacy, realized gains or losses on the investment portfolio (including other-than-temporary impairments for credit losses), loss cost trends, and competitive conditions in our key Focus States (defined in Results of Operations – Underwriting – Premium). Additionally, risks and uncertainties related to the merger are set forth in the Joint Proxy Statement/Prospectus with Kemper, filed with the SEC on April 27, 2018, and incorporated herein by reference.We undertake no obligation to publicly update or revise any of the forward-looking statements. For a more detailed discussion of some of the foregoing risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements refer to Part I, Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2017.
OVERVIEW
On February 13, 2018, the Company entered into the Merger Agreement with Kemper and Kemper Merger Sub. The Merger Agreement provides that, subject to the satisfaction or waiver of certain conditions set forth therein, Kemper Merger Sub will merge with and into the Company in accordance with the Ohio General Corporation Law (the “merger”), with the Company surviving such merger as a wholly owned subsidiary of Kemper. The Company expects the closing of the merger to occur in the third quarter of 2018.
Gross written premium grew 13.7% during the first quarter of 2018 compared with the first quarter of 2017 primarily due to an increase in new application counts and higher average premium in California, higher average premium on renewal business in Texas as well as policy growth and higher average premium in our Commercial Auto product. Partially offsetting the growth was a decline in renewal business in Florida. Refer to Results of Operations – Underwriting – Premium for a more detailed discussion of our gross written premium.
Net earnings and diluted earnings per share for the three months ended March 31, 2018, were $20.1 million and $1.82, respectively, compared with $10.5 million and $0.94, respectively, for the same period of 2017. The increase in net earnings and diluted earnings per share for the three months ended March 31, 2018, was primarily due to a decrease in the accident year combined ratio from 98.5% at March 31, 2017, to 95.1% at March 31, 2018,
Included in net earnings for the three months ended March 31, 2018, was $7.0 million ($8.9 million pre-tax) of favorable development on prior accident year loss and LAE reserves. This development was primarily due to decreases in accident year 2017 estimates from California, with lower ultimate frequency estimates in collision and comprehensive coverages along with lower ultimate severity estimates for collision coverage, and from Florida, with decreased ultimate frequency estimates in collision, comprehensive and personal injury protection coverages. Included in net earnings for the three months ended March 31, 2017, was $4.1 million ($6.4 million pre-tax) of favorable development on prior accident year loss and LAE reserves. This development was primarily due to decreases in frequency estimates in California and Florida material damage coverages related to accident year 2016, partially offset by increases in severity estimates in personal injury protection coverages and in bodily injury coverages in our commercial auto product related to accident years 2016 and prior.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations


The following table displays combined ratio results by accident year developed through March 31, 2018:
 
Accident Year Combined Ratio
Developed Through
 
Prior Accident Year
(Favorable) Unfavorable Development
($ in millions)
 
Dec 2016
 
Mar 2017
 
Dec 2017
 
Mar 2018
 
Q1 2018
Accident Year
 
 
 
 
 
 
 
 
 
 
 
Prior
 
 
 
 
 
 
 
 
 
 
$
(0.2
)
2010
99.3
%
 
99.3
%
 
99.3
%
 
99.3
%
 
(0.0
)%
 
(0.1
)
2011
99.8
%
 
99.9
%
 
99.9
%
 
99.9
%
 
0.0
 %
 
0.0

2012
99.6
%
 
99.5
%
 
99.4
%
 
99.4
%
 
(0.0
)%
 
(0.0
)
2013
94.8
%
 
94.9
%
 
94.8
%
 
94.7
%
 
(0.1
)%
 
(1.4
)
2014
94.4
%
 
94.4
%
 
94.5
%
 
94.5
%
 
(0.0
)%
 
(0.6
)
2015
98.3
%
 
98.4
%
 
98.5
%
 
98.4
%
 
(0.0
)%
 
(0.6
)
2016
98.4
%
 
97.8
%
 
96.7
%
 
96.6
%
 
(0.1
)%
 
(0.8
)
2017
 
 
98.5
%
 
96.5
%
 
96.1
%
 
(0.4
)%
 
(5.2
)
2018 YTD
 
 
 
 
 
 
95.1
%
 

 
 
 
 
 
 
 
 
 
 
 
 
 
$
(8.9
)
Pre-tax net investment income increased from $8.7 million during the three months ended March 31, 2017, to $9.8 million during the three months ended March 31, 2018, primarily due to lower premium amortization on municipal bonds and commercial mortgage-backed securities during 2018.
Our book value per share increased 0.2% from $65.46 at December 31, 2017, to $65.61 at March 31, 2018. This increase was primarily due to earnings partially offset by a decrease in unrealized gains on fixed maturity investments and shareholder dividends.
RESULTS OF OPERATIONS
Underwriting
Premium
Our insurance subsidiaries provide personal automobile insurance products with a concentration on nonstandard auto insurance. While there is no industry-recognized definition of nonstandard auto insurance, we believe that it is generally understood to mean coverage for drivers who, due to factors such as their driving record, driving experience, lapse in (or the absence of) prior insurance, or credit history, represent a higher than normal risk. Customers in the market for nonstandard auto insurance generally seek minimum required liability limits and are willing to accept restrictive coverages in exchange for more affordable insurance, given their risk profile. We also write commercial auto insurance and insurance for classic collectible automobiles (Classic Collector).
We are licensed to write insurance in all 50 states and the District of Columbia, but we focus our operations in targeted urban areas that we believe offer the greatest opportunity for premium growth and profitability.


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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations


Our net earned premium was as follows ($ in thousands):
 
Three months ended March 31,
 
2018
 
2017
 
Change
 
% Change
Gross written premium:
 
 
 
 
 
 
 
Personal Auto
$
370,193

 
$
324,352

 
$
45,841

 
14.1
%
Commercial Auto
47,739

 
42,785

 
4,954

 
11.6
%
Classic Collector
3,660

 
3,565

 
95

 
2.7
%
Total gross written premium
421,592

 
370,702

 
50,890

 
13.7
%
Ceded reinsurance
(3,716
)
 
(2,608
)
 
(1,108
)
 
42.5
%
Net written premium
417,876

 
368,094

 
49,782

 
13.5
%
Change in unearned premium
(63,889
)
 
(26,726
)
 
(37,163
)
 
139.1
%
Net earned premium
$
353,987

 
$
341,368

 
$
12,618

 
3.7
%
The following table summarizes our policies in force:
 
At March 31,
 
2018
 
2017
 
Change
 
% Change
Personal Auto
712,893

 
706,783

 
6,110

 
0.9
 %
Commercial Auto
58,708

 
53,756

 
4,952

 
9.2
 %
Classic Collector
41,009

 
41,547

 
(538
)
 
(1.3
)%
Total policies in force
812,610

 
802,086

 
10,524

 
1.3
 %
The increase in gross written premium in Personal Auto during the first quarter of 2018 was primarily due to premium growth in California and Texas, partially offset by a decline in Florida. New business in California grew during the first quarter of 2018 due to an increase in application counts and higher average premium. Growth during the first three months in Texas was primarily due to higher average premium on renewal business. This growth was offset by a decline in renewal business in Florida primarily as a result of rate increases of 14.4% implemented during 2017.
The gross written premium growth in our Commercial Auto product during the first quarter of 2018 was primarily due to new and renewal policy growth and higher average premium in Texas, California and Florida.
Profitability
A key operating performance measure of insurance companies is underwriting profitability, as opposed to overall profitability or net earnings. We measure underwriting profitability by the combined ratio. When the combined ratio is under 100%, we consider underwriting results profitable; when the ratio is over 100%, we consider underwriting results unprofitable. The combined ratio does not reflect investment income, other income, interest expense, corporate general and administrative expenses, other expenses or federal income taxes.
In addition to reporting financial results in accordance with GAAP, we report results on a statutory basis for insurance regulatory purposes. We evaluate underwriting profitability based on a combined ratio calculated using statutory accounting principles. The statutory combined ratio represents the sum of the following ratios: (i) losses and LAE incurred as a percentage of net earned premium; and (ii) underwriting expenses incurred, net of installment and other fees, as a percentage of net written premium. Certain expenses are treated differently under statutory and GAAP accounting principles. Under GAAP, commissions, premium taxes and other variable costs incurred in connection with writing new and renewal business are capitalized as deferred policy acquisition costs and amortized on a pro rata basis over the period in which the related premium is earned. On a statutory basis, these items are expensed as incurred. Additionally, bad debt charge-offs on agent balances and premium receivables are included only in the GAAP combined ratios.
The discussion of underwriting results that follows focuses on statutory ratios and the components thereof, unless otherwise indicated.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations


The following table presents statutory and GAAP combined ratios: 
 
Three months ended March 31,
 
 
 
 
 
2018
 
2017
 
% Point Change
 
Loss &
LAE
Ratio
Underwriting
Ratio
Combined
Ratio
 
Loss &
LAE
Ratio
Underwriting
Ratio
Combined
Ratio
 
Loss &
LAE
Ratio
Underwriting
Ratio
Combined
Ratio
Personal Auto
74.3
%
16.2
%
90.5
%
 
79.6
%
15.6
%
95.2
%
 
(5.4
)%
0.6
 %
(4.7
)%
Commercial Auto
81.7
%
16.1
%
97.8
%
 
81.0
%
16.1
%
97.1
%
 
0.7
 %
0.0
 %
0.7
 %
Classic Collector
62.9
%
35.3
%
98.2
%
 
51.0
%
37.2
%
88.3
%
 
11.8
 %
(1.9
)%
9.9
 %
Total statutory ratios
75.0
%
16.3
%
91.3
%
 
79.5
%
15.9
%
95.4
%
 
(4.5
)%
0.5
 %
(4.1
)%
Total statutory ratios excluding development
77.5
%
16.3
%
93.8
%
 
81.4
%
15.9
%
97.3
%
 
(3.9
)%
0.5
 %
(3.4
)%
GAAP ratios
74.7
%
17.8
%
92.6
%
 
79.3
%
17.3
%
96.6
%
 
(4.6
)%
0.6
 %
(4.0
)%
GAAP ratios excluding development
77.2
%
17.8
%
95.1
%
 
81.2
%
17.3
%
98.5
%
 
(3.9
)%
0.6
 %
(3.4
)%
The statutory combined ratio for the three months ended March 31, 2018, decreased by 4.1 points from the same period of 2017. The first quarter of 2018 included $8.9 million of favorable reserve development on prior accident year loss and LAE reserves primarily due to decreases in accident year 2017 estimates from California, with lower ultimate frequency estimates in collision and comprehensive coverages along with lower ultimate severity estimates for collision coverage, and from Florida, with decreased ultimate frequency estimates in collision, comprehensive and personal injury protection coverages. The first quarter of 2017 included $6.4 million of favorable development on prior accident year loss and LAE reserves primarily due to decreases in frequency estimates in California and Florida material damage coverages related to accident year 2016, partially offset by increases in severity estimates in personal injury protection coverages and in bodily injury coverages in our commercial auto product related to accident years 2016 and prior. Excluding the effect of development, the statutory combined ratio decreased 3.4 points during the first quarter of 2018, compared with the same period of 2017.
The GAAP combined ratio for the three months ended March 31, 2018, decreased by 4.0 points from the same period of 2017. Excluding the effect of development, the GAAP combined ratio decreased by 3.4 points during the first quarter of 2018 primarily due to an increase in average earned premium and lower estimates of ultimate frequency and severity.
Net recoveries from catastrophes were $0.1 million for the three months ended March 31, 2018, compared with net losses from catastrophes of $1.5 million for the same period of 2017.
The 4.7 points decrease in the Personal Auto combined ratio for the three months ended March 31, 2018, compared with the same period of 2017, was primarily due to relatively flat loss cost trends and an increase in average earned premium in California and lower frequency estimates in Florida.
The 0.7 point increase in the Commercial Auto combined ratio for the three months ended March 31, 2018, was primarily due to an increase in frequency and severity estimates in our bodily injury product.
Installment and Other Fee Income
 
Three months ended
 
March 31,
($ in thousands)
2018
 
2017
Installment and other fee income
$
27,395

 
$
26,739

The increase in installment and other fee income charged to policyholders during the first three months of 2018 was primarily related to an increase in installment fees.

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations


Net Investment Income
Net investment income is comprised of gross investment income less investment management fees and expenses, as shown in the following table ($ in thousands):
 
Three months ended
 
March 31,
 
2018
 
2017
Gross investment income:
 
 
 
Interest income on fixed maturities, cash and cash equivalents
$
10,017

 
$
8,890

Dividends on equity securities
317

 
376

Gross investment income
10,335

 
9,266

Investment expenses
(548
)
 
(570
)
Net investment income
9,786

 
8,695

Average investment balance, at cost
$
1,609,057

 
$
1,542,245

Annualized returns excluding realized gains and losses
2.4%

 
2.3%

Annualized returns including realized gains and losses
2.4%

 
2.4%

Pre-tax net investment income increased from $8.7 million during the three months ended March 31, 2017, to $9.8 million during the three months ended March 31, 2018, primarily due to lower premium amortization on municipal bonds and commercial mortgage-backed securities during 2018.
New money rates are higher than the book yield on the portfolio. Therefore, we expect investment returns will gradually increase as proceeds from maturing or prepaid investments are reinvested at the higher yields.
The following table provides information about our fixed maturity investments at March 31, 2018, which are sensitive to interest rate risk. The table shows expected principal cash flows by expected maturity date for each of the five subsequent years and collectively for all years thereafter. Callable bonds and notes are included based on call date or maturity date depending upon which date produces the most conservative yield. Mortgage Backed Securities (MBS) and sinking fund issues are included based on maturity year adjusted for expected payment patterns.
 
Expected Principal Cash Flows
 
 
($ in thousands)
MBS and
ABS only
 
Excluding
MBS and ABS
 
Total
 
Maturing Book Yield
For the period ending December 31,
 
 
 
 
 
 
 
2018
$
29,268

 
$
16,050

 
$
45,318

 
3.1%
2019
44,763

 
128,762

 
173,524

 
2.4%
2020
53,990

 
165,164

 
219,153

 
2.8%
2021
51,694

 
199,374

 
251,069

 
2.9%
2022
53,905

 
153,245

 
207,150

 
2.8%
Thereafter
314,171

 
253,941

 
568,112

 
3.1%
Total
$
547,791

 
$
916,535

 
$
1,464,326

 
2.9%
The cash flows presented take into consideration historical relationships of market yields and prepayment rates. However, the actual prepayment rate may differ from historical trends, resulting in actual principal cash flows that differ from those presented above.

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations


Net Realized Gains (Losses) on Investments
We recorded net realized gains (losses) on sales, impairments for unrealized losses deemed other-than-temporary and net holding period losses on equity securities as follows (before tax, $ in thousands):
 
Three months ended March 31, 2018
 
Net Realized (Losses) Gains on Sales
 
Net Impairment Losses Recognized in Earnings
 
Net Holding Period Losses
 
Total Net Realized (Losses) Gains on Investments
Fixed maturities
(519
)
 
(1,588
)
 
0

 
(2,107
)
Equity securities
1,881

 
0

 
(2,607
)
 
(726
)
Short-term investments
1

 
0

 
0

 
1

Total
1,363

 
(1,588
)
 
(2,607
)
 
(2,832
)
 
Three months ended March 31, 2017
 
Net Realized (Losses) Gains on Sales
 
Net Impairment Losses Recognized in Earnings
 
Total Net Realized (Losses) Gains on Investments
Fixed maturities
(52
)
 
(10
)
 
(62
)
Equity securities
569

 
0

 
569

Short-term investments
1

 
0

 
1

Total
519

 
(10
)
 
$
509

For our securities held with unrealized losses, we believe, based on our analysis, that (i) we will recover our cost basis in these securities; and (ii) we do not intend to sell the securities nor is it more likely than not that there will be a requirement to sell the securities before they recover in value. Should either of these beliefs change with regard to a particular security, a charge for impairment would likely be required. While it is not possible to predict accurately if or when a specific security will become impaired, charges for other-than-temporary impairments could be material to results of operations in a future period.
Of the $1.6 million impairments recorded during the first quarter of 2018, $1.5 million were as a result of our transition to a new investment policy statement and the related repositioning of our portfolio. These securities, impaired as we have an intent to sell, are expected to be sold by the end of May 2018.
Interest Expense
 
Three months ended
 
March 31,
($ in thousands)
2018
 
2017
5.0% Senior Notes
$
3,438

 
$
3,438

Amortization of debt issuance costs
56

 
53

Capital leases
15

 
21

Total
$
3,509

 
$
3,512

At March 31, 2018, we had $275 million principal outstanding of senior notes. These notes carry a coupon rate of 5.0% and require no principal payment until maturity in September 2022. Refer to Note 5 – Long-Term Debt to the Consolidated Financial Statements for additional information on the 5.0% Senior Notes.

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations


Income Taxes
Our GAAP effective tax rate was 19.5% and 29.3% for the three months ended March 31, 2018, and 2017, respectively. The GAAP effective tax rate has decreased in 2018 primarily as a result of the enacted tax rate change from 35% to 21% under the Tax Cuts and Jobs Act of 2017 (TCJA). Refer to Note 6 – Income Taxes to the Consolidated Financial Statements for additional information on income taxes.
The TCJA also changed the interest rate used to calculate the discounted tax loss reserves and required the setup of a transition liability to be ratably recognized in income over eight years. Since neither the new interest rate nor the discount factors have not been published by the Internal Revenue Service, we believe that the estimates used to calculate the deferred tax asset and liability relating to these two items as of December 31, 2017, continue to be reasonable estimates under SAB 118.

LIQUIDITY AND CAPITAL RESOURCES
Sources of Funds
We are a holding company and our insurance subsidiaries conduct our operations. Accordingly, we will have continuing cash needs for administrative expenses, the payment of interest on borrowings, shareholder dividends, share repurchases and taxes.
Funds to meet expenditures at the holding company level come primarily from dividends and tax payments from the insurance subsidiaries, as well as cash and investments held by the holding company. As of March 31, 2018, the holding company had $170.7 million of cash and investments. In 2018 our insurance subsidiaries may pay us up to $67.9 million in ordinary dividends without prior regulatory approval. For the three months ended March 31, 2018, our insurance subsidiaries have paid us ordinary dividends of $16.8 million.
Our insurance subsidiaries generate liquidity to satisfy their obligations primarily by collecting and investing premiums in advance of paying claims and generating investment income on their $1.4 billion investment portfolio. Our insurance subsidiaries generated positive cash flows from operations of $30.9 million during the three months ended March 31, 2018, compared with positive operating cash flows of $28.4 million during the same period of 2017.
At March 31, 2018, we had $275 million principal outstanding of 5.0% Senior Notes. The 5.0% Senior Notes accrue interest at 5.0%, payable semiannually each March and September. Refer to Note 5 – Long-Term Debt to the Consolidated Financial Statements for more information on our long-term debt.
In August 2017 we renewed our agreement for a $50 million three-year revolving credit facility (the “Credit Agreement”) that requires us to meet certain financial and other covenants. We are currently in compliance with all covenants under the Credit Agreement, and as of March 31, 2018, there were no borrowings outstanding against it.
On February 29, 2016, we filed a "shelf" registration statement with the Securities and Exchange Commission registering securities, and as long as it remains effective, it will allow us to sell any combination of senior or subordinated debt securities, common stock, preferred stock, warrants, depositary shares, purchase contracts and units in one or more offerings should we choose to do so in the future. This shelf registration statement expires March 1, 2019.
Uses of Funds
Our quarterly dividend is currently $0.58 per share. At this current amount, our 2018 annualized dividend payments would be approximately $25.4 million.
On November 4, 2014, our Board of Directors increased the authority of our share and debt repurchase program to a total of $75 million and extended the date to execute the program to December 31, 2016, from December 31, 2014. On November 1, 2016, our Board approved the extension of the date to execute the program from December 31, 2016, to December 31, 2017, and on November 2, 2017, approved an extension to December 31, 2018. In addition, the Merger Agreement prohibits us from repurchasing shares between the signing of the Merger Agreement (i.e., February 13, 2018) and the closing of the merger. There were no share repurchases during the first three months of 2018.
We believe that cash balances, cash flows generated from operations or borrowings, and maturities and sales of investments are adequate to meet our future liquidity needs and those of our insurance subsidiaries.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations


Reinsurance
Premium ceded under all reinsurance agreements for the three months ended March 31, 2018, was $3.7 million compared with $2.6 million for the same period of 2017. Refer to Note 11 - Reinsurance to the Consolidated Financial Statements of our Form 10-K for the year ended December 31, 2017, for more information on our reinsurance contracts.
Investments
Our consolidated investment portfolio at March 31, 2018, contained approximately $1.5 billion in fixed maturity securities and $90.5 million in equity securities. All of these are carried at fair value with unrealized gains and losses on fixed maturity securities reported in accumulated other comprehensive income, a separate component of shareholders’ equity, on an after-tax basis. As of January 1, 2018, unrealized gains and losses on equity securities are recognized through net income. At March 31, 2018, we had pre-tax net unrealized losses of $15.0 million on fixed maturities. The average option adjusted duration of our fixed maturity portfolio was 4.0 years at March 31, 2018, compared with 3.3 years at December 31, 2017.
Since we carry all of these securities at fair value in our balance sheet, there is virtually no effect on liquidity or financial condition upon the sale and ultimate realization of unrealized gains and losses.
Approximately 91.2% of our fixed maturity investments at March 31, 2018, were rated “investment grade,” and, as of the same date, the average credit rating of our fixed maturity portfolio was AA-. Investment grade securities generally bear lower yields and have lower degrees of risk than those that are unrated or non-investment grade. We believe that a high quality investment portfolio is more likely to generate a stable and predictable investment return.
Fair values of instruments are based on (i) quoted prices in active markets for identical assets (Level 1); (ii) quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs are observable in active markets (Level 2); or (iii) valuations derived from valuation techniques in which one or more significant inputs are unobservable in the marketplace (Level 3).
Our Level 1 securities are U.S. Treasury securities, an exchange-traded fund and equity securities held in a rabbi trust. Our Level 2 securities are comprised of securities whose fair value was determined using observable market inputs. Our Level 3 securities are comprised of (i) securities for which there is no active or inactive market for similar instruments; (ii) securities whose fair value is determined based on unobservable inputs; and (iii) securities that nationally recognized statistical rating organizations do not rate.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations


Summarized information for our investment portfolio at March 31, 2018, was as follows ($ in thousands):
 
Amortized
Cost
 
Fair Value
 
% of Total 
Fair Value
Fixed Maturities:
 
 
 
 
 
U.S. government
$
125,887

 
$
124,757

 
7.9
%
State and municipal
297,994

 
296,814

 
18.7
%
Mortgage- and asset-backed:
 
 
 
 
 
Residential mortgage-backed securities
372,319

 
365,007

 
23.0
%
Commercial mortgage-backed securities
63,053

 
62,061

 
3.9
%
Asset-backed securities (ABS):
 
 
 
 
 
Collateralized loan obligations
42,042

 
41,996

 
2.6
%
Auto loans
32,383

 
32,162

 
2.0
%
Equipment leases
5,983

 
5,969

 
0.4
%
Credit card
24,785

 
24,530

 
1.5
%
All other
23,818

 
23,827

 
1.5
%
Total ABS
129,010

 
128,484

 
8.1
%
Total mortgage- and asset-backed
564,382

 
555,552

 
35.0
%
Corporates
 
 
 
 
 
Investment grade
401,681

 
398,594

 
25.1
%
Non-investment grade
122,996

 
122,213

 
7.7
%
Total corporates
524,676

 
520,807

 
32.8
%
Total fixed maturities
1,512,939

 
1,497,930

 
94.3
%
Equity securities
65,913

 
90,498

 
5.7
%
Short-term investments
0

 
0

 
0.0
%
Total investments
$
1,578,852

 
$
1,588,428

 
100.0
%
We categorize securities by rating based upon available ratings issued by Moody's, Standard & Poor's or Fitch. If all three ratings are available but not equivalent, we exclude the lowest rating and the lower of the remaining ratings is used. If ratings are only available from two agencies, the lowest is used. This methodology is consistent with that used by the major bond indices.
The following table presents the credit rating and fair value of our fixed maturity portfolio by major security type at March 31, 2018 ($ in thousands): 
 
Rating
 
 
 
 
 
AAA
 
AA
 
A
 
BBB
 
Non-investment Grade
 
Total Fair
Value
 
% of Total Exposure
U.S. government
$
124,757

 
$
0

 
$
0

 
$
0

 
$
0

 
$
124,757

 
8.3
%
State and municipal
44,719

 
168,372

 
80,741

 
2,216

 
766

 
296,814

 
19.8
%
Mortgage- and asset-backed
480,097

 
49,168

 
10,573

 
6,450

 
9,263

 
555,552

 
37.1
%
Corporates
0

 
19,712

 
175,310

 
203,572

 
122,213

 
520,807

 
34.8
%
Total fair value
$
649,573

 
$
237,252

 
$
266,624

 
$
212,238

 
$
132,243

 
$
1,497,930

 
100.0
%
% of total fair value
43.4%

 
15.8%

 
17.8%

 
14.2%

 
8.8%

 
100.0%

 
 

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

ITEM 3
Quantitative and Qualitative Disclosures about Market Risk
As of March 31, 2018, there were no material changes to the information provided on Form 10-K for the year ended December 31, 2017, under the caption “Exposure to Market Risk” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. Refer to Item 2 Management’s Discussion and Analysis under the caption “Investments” for updates to disclosures made under the subcaption “Credit Risk” of our Form 10-K for the year ended December 31, 2017.
ITEM 4
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of the Company’s management, including its principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2018. Based on that evaluation, we concluded that the controls and procedures are effective in providing reasonable assurance that material information required to be disclosed in our reports filed with or submitted to the Securities and Exchange Commission (SEC) under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate.
Changes in Internal Control over Financial Reporting
During the fiscal quarter ended March 31, 2018, there have been no changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
OTHER INFORMATION

ITEM 1
Legal Proceedings
We have not become a party to any material legal proceedings and there have not been any material developments in our legal proceedings disclosed on Form 10-K for the year ended December 31, 2017. For a description of our previously reported legal proceedings, refer to Part I, Item 3, Legal Proceedings of our Form 10-K for the year ended December 31, 2017.
ITEM 1A
Risk Factors
Other than the risks relating to entering into the Merger Agreement referred to in Part I, Item 2 "Cautionary Statement Regarding Forward-Looking Statements," there have been no material changes in our risk factors as disclosed on Form 10-K for the year ended December 31, 2017. For a description of our previously reported risk factors, refer to Part I, Item 1A, Risk Factors of our Form 10-K for the year ended December 31, 2017.

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INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q

ITEM 2
Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
Period
 
Total Number of Shares Purchased (a)
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Approximate Dollar Value that May Yet Be Purchased Under the Plans or Programs (b)
January 1, 2018 - January 31, 2018
 
0

 
$
0.00

 
0

 
$
22,531,509

February 1, 2018 - February 28, 2018
 
0

 
0.00

 
0

 
22,531,509

March 1, 2018 - March 31, 2018
 
5,030

 
118.10

 
0

 
22,531,509

Total
 
5,030

 
$
118.10

 
0

 
$
22,531,509

 
(a)
5,030 shares surrendered to cover the withholding taxes related to the issuance of shares under the performance share plan.
(b)
On November 4, 2014, our Board of Directors increased the authority under our current share and debt repurchase plan to a total of $75.0 million and extended the date to execute the program to December 31, 2016, from December 31, 2014. On November 1, 2016, our Board approved the extension of the date to execute the program from December 31, 2016, to December 31, 2017, and on November 2, 2017, approved an extension to December 31, 2018.

ITEM 6
Exhibit 31.1
Exhibit 31.2
Exhibit 32
Exhibit 101.INS
XBRL Instance Document
Exhibit 101.SCH
XBRL Taxonomy Extension Schema Document (1)
Exhibit 101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document (1)
Exhibit 101.DEF
XBRL Taxonomy Extension Definition Linkbase Document (1)
Exhibit 101.LAB
XBRL Taxonomy Extension Label Linkbase Document (1)
Exhibit 101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document (1)
 
 
(1) Furnished with this report, in accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

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Table of Contents
INFINITY PROPERTY AND CASUALTY CORPORATION FORM 10-Q


Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, Infinity Property and Casualty Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
Infinity Property and Casualty Corporation
 
 
 
 
BY:
/s/ ROBERT H. BATEMAN
April 30, 2018
 
Robert H. Bateman
 
 
Executive Vice President, Chief Financial Officer and Treasurer

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