Incorporated under the Laws of Ohio | 03-0483872 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | ¨ | Accelerated filer | x | |
Non-accelerated filer | o (Do not check if smaller reporting company) | Smaller reporting company | ¨ |
Page | ||
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Item 2 | ||
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Item 4 | ||
Item 1 | ||
Item 1A | ||
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Item 6 | ||
EXHIBIT INDEX | ||
Exhibit 31.1 | Certification of the Chief Executive Officer under Exchange Act Rule 13a-14(a) | |
Exhibit 31.2 | Certification of the Chief Financial Officer under Exchange Act Rule 13a-14(a) | |
Exhibit 32 | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350. | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | XBRL Taxonomy Extension Label Linkbase | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||
2012 | 2011 | % Change | 2012 | 2011 | % Change | ||||||||||||||||
(as adjusted see Note 1) | (as adjusted see Note 1) | ||||||||||||||||||||
Revenues: | |||||||||||||||||||||
Earned premium | $ | 301,463 | $ | 255,138 | 18.2 | % | $ | 872,730 | $ | 745,703 | 17.0 | % | |||||||||
Net investment income | 9,018 | 10,166 | (11.3 | )% | 28,364 | 31,117 | (8.8 | )% | |||||||||||||
Net realized gains on investments1 | 268 | 722 | (62.8 | )% | 2,673 | 5,604 | (52.3 | )% | |||||||||||||
Gain on sale of subsidiary | 2,922 | 0 | 0.0 | % | 2,922 | 0 | 0.0 | % | |||||||||||||
Other income | 63 | 101 | (37.8 | )% | 430 | 201 | 113.7 | % | |||||||||||||
Total revenues | 313,734 | 266,127 | 17.9 | % | 907,119 | 782,625 | 15.9 | % | |||||||||||||
Costs and Expenses: | |||||||||||||||||||||
Losses and loss adjustment expenses | 238,261 | 195,275 | 22.0 | % | 683,946 | 566,685 | 20.7 | % | |||||||||||||
Commissions and other underwriting expenses | 63,353 | 57,199 | 10.8 | % | 186,356 | 172,128 | 8.3 | % | |||||||||||||
Interest expense | 3,199 | 2,702 | 18.4 | % | 8,604 | 8,105 | 6.2 | % | |||||||||||||
Corporate general and administrative expenses | 1,750 | 1,729 | 1.2 | % | 5,850 | 5,654 | 3.5 | % | |||||||||||||
Other expenses | 585 | 1,026 | (43.0 | )% | 931 | 1,425 | (34.7 | )% | |||||||||||||
Total costs and expenses | 307,148 | 257,931 | 19.1 | % | 885,687 | 753,997 | 17.5 | % | |||||||||||||
Earnings before income taxes | 6,586 | 8,196 | (19.6 | )% | 21,431 | 28,628 | (25.1 | )% | |||||||||||||
Provision for income taxes | 1,432 | 1,462 | (2.1 | )% | 5,029 | 4,839 | 3.9 | % | |||||||||||||
Net Earnings | $ | 5,154 | $ | 6,733 | (23.4 | )% | $ | 16,402 | $ | 23,789 | (31.1 | )% | |||||||||
Net Earnings per Common Share: | |||||||||||||||||||||
Basic | $ | 0.44 | $ | 0.56 | (21.4 | )% | $ | 1.40 | $ | 1.95 | (28.2 | )% | |||||||||
Diluted | 0.43 | 0.55 | (21.8 | )% | 1.37 | 1.90 | (27.9 | )% | |||||||||||||
Average Number of Common Shares: | |||||||||||||||||||||
Basic | 11,631 | 12,070 | (3.6 | )% | 11,689 | 12,230 | (4.4 | )% | |||||||||||||
Diluted | 11,893 | 12,344 | (3.7 | )% | 11,959 | 12,524 | (4.5 | )% | |||||||||||||
Cash Dividends per Common Share | $ | 0.225 | $ | 0.180 | 25.0 | % | $ | 0.675 | $ | 0.540 | 25.0 | % | |||||||||
1Net realized gains before impairment losses | $ | 479 | $ | 1,146 | (58.2 | )% | $ | 3,949 | $ | 6,873 | (42.5 | )% | |||||||||
Total other-than-temporary impairment (OTTI) losses | (211 | ) | (442 | ) | (52.2 | )% | (1,245 | ) | (2,121 | ) | (41.3 | )% | |||||||||
Non-credit portion in other comprehensive income | 0 | 19 | (100.0 | )% | 1 | 1,036 | (99.9 | )% | |||||||||||||
OTTI losses reclassified from other comprehensive income | 0 | (1 | ) | (100.0 | )% | (32 | ) | (185 | ) | (82.5 | )% | ||||||||||
Net impairment losses recognized in earnings | (211 | ) | (424 | ) | (50.2 | )% | (1,277 | ) | (1,270 | ) | 0.5 | % | |||||||||
Total net realized gains on investments | $ | 268 | $ | 722 | (62.8 | )% | $ | 2,673 | $ | 5,604 | (52.3 | )% |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(as adjusted see Note 1) | (as adjusted see Note 1) | ||||||||||||||
Net earnings | $ | 5,154 | $ | 6,733 | $ | 16,402 | $ | 23,789 | |||||||
Other comprehensive income before tax: | |||||||||||||||
Net change in postretirement benefit liability | (6 | ) | (16 | ) | (17 | ) | (48 | ) | |||||||
Unrealized gains on investments: | |||||||||||||||
Unrealized holding gains arising during the period | 10,662 | 2,723 | 20,780 | 16,483 | |||||||||||
Less: Reclassification adjustments for gains included in net income | (268 | ) | (722 | ) | (2,673 | ) | (5,604 | ) | |||||||
Unrealized gains on investments, net | 10,394 | 2,001 | 18,107 | 10,879 | |||||||||||
Other comprehensive income, before tax | 10,388 | 1,985 | 18,090 | 10,831 | |||||||||||
Income tax expense related to components of other comprehensive income | (3,636 | ) | (695 | ) | (6,332 | ) | (3,791 | ) | |||||||
Other comprehensive income, net of tax | 6,752 | 1,290 | 11,759 | 7,040 | |||||||||||
Comprehensive income | $ | 11,907 | $ | 8,023 | $ | 28,161 | $ | 30,829 |
September 30, 2012 | December 31, 2011 | ||||||
(unaudited) | (as adjusted see Note 1) | ||||||
Assets | |||||||
Investments: | |||||||
Fixed maturities – at fair value (amortized cost $1,195,837 and $1,144,687) | $ | 1,251,930 | $ | 1,187,987 | |||
Equity securities – at fair value (cost $26,569 and $26,413) | 42,400 | 36,930 | |||||
Total investments | $ | 1,294,330 | $ | 1,224,917 | |||
Cash and cash equivalents | 126,574 | 83,767 | |||||
Restricted cash (See Note 10) | 209,879 | 0 | |||||
Accrued investment income | 10,762 | 10,761 | |||||
Agents’ balances and premium receivable, net of allowances for doubtful accounts of $15,010 and $13,497 | 445,334 | 382,621 | |||||
Property and equipment, net of accumulated depreciation of $43,303 and $37,551 | 40,726 | 38,694 | |||||
Prepaid reinsurance premium | 2,676 | 2,131 | |||||
Recoverables from reinsurers (includes $758 and $79 on paid losses and LAE) | 15,318 | 14,719 | |||||
Deferred policy acquisition costs | 92,493 | 80,071 | |||||
Current and deferred income taxes | 8,811 | 10,728 | |||||
Receivable for securities sold | 0 | 1,152 | |||||
Other assets | 20,013 | 5,535 | |||||
Goodwill | 75,275 | 75,275 | |||||
Total assets | $ | 2,342,192 | $ | 1,930,371 | |||
Liabilities and Shareholders’ Equity | |||||||
Liabilities: | |||||||
Unpaid losses and loss adjustment expenses | $ | 544,318 | $ | 495,403 | |||
Unearned premium | 557,748 | 474,528 | |||||
Payable to reinsurers | 0 | 45 | |||||
Long-term debt (See Note 6) | 469,875 | 194,810 | |||||
Commissions payable | 32,644 | 30,605 | |||||
Payable for securities purchased | 4,558 | 10,818 | |||||
Other liabilities | 58,465 | 62,373 | |||||
Total liabilities | $ | 1,667,608 | $ | 1,268,582 | |||
Commitments and contingencies (See Note 10) | |||||||
Shareholders’ equity: | |||||||
Common stock, no par value (50,000,000 shares authorized; 21,420,996 and 21,331,006 shares issued) | $ | 21,456 | $ | 21,358 | |||
Additional paid-in capital | 359,858 | 355,911 | |||||
Retained earnings | 660,896 | 652,423 | |||||
Accumulated other comprehensive income, net of tax | 47,077 | 35,319 | |||||
Treasury stock, at cost (9,732,697 and 9,524,369 shares) | (414,704 | ) | (403,221 | ) | |||
Total shareholders’ equity | $ | 674,584 | $ | 661,789 | |||
Total liabilities and shareholders’ equity | $ | 2,342,192 | $ | 1,930,371 |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss), Net of Tax | Treasury Stock | Total | ||||||||||||||||||
Balance at December 31, 2010 | $ | 21,228 | $ | 349,742 | $ | 625,492 | $ | 24,488 | $ | (359,766 | ) | $ | 661,184 | ||||||||||
Cumulative effect of change in accounting principle | — | — | (6,157 | ) | — | — | (6,157 | ) | |||||||||||||||
Net earnings | — | — | 23,789 | — | — | 23,789 | |||||||||||||||||
Net change in postretirement benefit liability | — | — | — | (31 | ) | — | (31 | ) | |||||||||||||||
Change in unrealized gain on investments | — | — | — | 6,102 | — | 6,102 | |||||||||||||||||
Change in non-credit component of impairment losses on fixed maturities | — | — | — | 969 | — | 969 | |||||||||||||||||
Comprehensive income | $ | 30,829 | |||||||||||||||||||||
Dividends paid to common shareholders | — | — | (6,618 | ) | — | — | (6,618 | ) | |||||||||||||||
Shares issued and share-based compensation expense, including tax benefit | 91 | 4,291 | — | — | — | 4,383 | |||||||||||||||||
Acquisition of treasury stock | — | — | — | — | (39,387 | ) | (39,387 | ) | |||||||||||||||
Balance at September 30, 2011, as adjusted | $ | 21,319 | $ | 354,034 | $ | 636,505 | $ | 31,528 | $ | (399,153 | ) | $ | 644,233 | ||||||||||
Net earnings | $ | — | $ | — | $ | 18,044 | $ | — | $ | — | $ | 18,044 | |||||||||||
Net change in postretirement benefit liability | — | — | — | (145 | ) | — | (145 | ) | |||||||||||||||
Change in unrealized gain on investments | — | — | — | 3,618 | — | 3,618 | |||||||||||||||||
Change in non-credit component of impairment losses on fixed maturities | — | — | — | 317 | — | 317 | |||||||||||||||||
Comprehensive income | $ | 21,835 | |||||||||||||||||||||
Dividends paid to common shareholders | — | — | (2,126 | ) | — | — | (2,126 | ) | |||||||||||||||
Shares issued and share-based compensation expense, including tax benefit | 38 | 1,877 | — | — | — | 1,916 | |||||||||||||||||
Acquisition of treasury stock | — | — | — | — | (4,067 | ) | (4,067 | ) | |||||||||||||||
Balance at December 31, 2011, as adjusted | $ | 21,358 | $ | 355,911 | $ | 652,423 | $ | 35,319 | $ | (403,221 | ) | $ | 661,789 | ||||||||||
Net earnings | $ | — | $ | — | $ | 16,402 | $ | — | $ | — | $ | 16,402 | |||||||||||
Net change in postretirement benefit liability | (11 | ) | (11 | ) | |||||||||||||||||||
Change in unrealized gain on investments | — | — | — | 10,784 | — | 10,784 | |||||||||||||||||
Change in non-credit component of impairment losses on fixed maturities | — | — | — | 986 | — | 986 | |||||||||||||||||
Comprehensive income | $ | 28,161 | |||||||||||||||||||||
Dividends paid to common shareholders | — | — | (7,929 | ) | — | — | (7,929 | ) | |||||||||||||||
Shares issued and share-based compensation expense, including tax benefit | 98 | 3,947 | — | — | — | 4,045 | |||||||||||||||||
Acquisition of treasury stock | — | — | — | — | (11,483 | ) | (11,483 | ) | |||||||||||||||
Balance at September 30, 2012 | $ | 21,456 | $ | 359,858 | $ | 660,896 | $ | 47,077 | $ | (414,704 | ) | $ | 674,584 |
Three months ended September 30, | |||||||
2012 | 2011 | ||||||
(as adjusted See Note 1) | |||||||
Operating Activities: | |||||||
Net earnings | $ | 5,154 | $ | 6,733 | |||
Adjustments: | |||||||
Depreciation | 2,356 | 1,850 | |||||
Amortization | 2,580 | 2,038 | |||||
Net realized gains on investments | (268 | ) | (722 | ) | |||
Loss on disposal of property and equipment | 30 | 160 | |||||
Gain on sale of subsidiary | (2,922 | ) | 0 | ||||
Share-based compensation expense | 671 | 967 | |||||
Excess tax benefits from share-based payment arrangements | 0 | (169 | ) | ||||
Activity related to rabbi trust | 37 | (65 | ) | ||||
Decrease (increase) in accrued investment income | 101 | (5 | ) | ||||
Increase in agents’ balances and premium receivable | (18,250 | ) | (14,928 | ) | |||
(Increase) decrease in reinsurance receivables | (1,108 | ) | 186 | ||||
Increase in deferred policy acquisition costs | (2,463 | ) | (2,444 | ) | |||
(Increase) decrease in other assets | (2,685 | ) | 5,903 | ||||
Increase in unpaid losses and loss adjustment expenses | 13,446 | 10,422 | |||||
Increase in unearned premium | 21,645 | 14,409 | |||||
Decrease in other liabilities | (1,099 | ) | (5,848 | ) | |||
Net cash provided by operating activities | 17,225 | 18,488 | |||||
Investing Activities: | |||||||
Purchases of fixed maturities | (89,084 | ) | (46,844 | ) | |||
Purchases of equity securities | 0 | (2,000 | ) | ||||
Purchases of property and equipment | (944 | ) | (2,705 | ) | |||
Maturities and redemptions of fixed maturities | 62,178 | 22,416 | |||||
Proceeds from sale of fixed maturities | 9,968 | 49,360 | |||||
Proceeds from sale of property and equipment | 11 | 0 | |||||
Net cash (used in) provided by investing activities | (17,872 | ) | 20,228 | ||||
Financing Activities: | |||||||
Proceeds from stock options exercised and employee stock purchases, including tax benefit | 396 | 271 | |||||
Excess tax benefits from share-based payment arrangements | 0 | 169 | |||||
Proceeds from issuance of bonds | 273,213 | 0 | |||||
Increase in restricted cash related to planned redemption of debt | (209,879 | ) | 0 | ||||
Acquisition of treasury stock | (3,194 | ) | (21,284 | ) | |||
Dividends paid to shareholders | (2,629 | ) | (2,170 | ) | |||
Net cash provided by (used in) financing activities | 57,906 | (23,014 | ) | ||||
Net increase in cash and cash equivalents | 57,260 | 15,702 | |||||
Cash and cash equivalents at beginning of period | 69,314 | 36,455 | |||||
Cash and cash equivalents at end of period | $ | 126,574 | $ | 52,157 |
Nine months ended September 30, | |||||||
2012 | 2011 | ||||||
(as adjusted See Note 1) | |||||||
Operating Activities: | |||||||
Net earnings | $ | 16,402 | $ | 23,789 | |||
Adjustments: | |||||||
Depreciation | 6,442 | 6,676 | |||||
Amortization | 7,137 | 5,869 | |||||
Net realized gains on investments | (2,673 | ) | (5,604 | ) | |||
Loss on disposal of property and equipment | 44 | 362 | |||||
Gain on sale of subsidiary | (2,922 | ) | 0 | ||||
Share-based compensation expense | 2,817 | 2,383 | |||||
Excess tax benefits from share-based payment arrangements | 0 | (169 | ) | ||||
Activity related to rabbi trust | 72 | (47 | ) | ||||
(Increase) decrease in accrued investment income | (1 | ) | 809 | ||||
Increase in agents’ balances and premium receivable | (62,713 | ) | (53,024 | ) | |||
(Increase) decrease in reinsurance receivables | (1,145 | ) | 1,596 | ||||
Increase in deferred policy acquisition costs | (12,421 | ) | (11,196 | ) | |||
Increase in other assets | (8,004 | ) | (4,087 | ) | |||
Increase in unpaid losses and loss adjustment expenses | 48,915 | 15,698 | |||||
Increase in unearned premium | 83,220 | 63,370 | |||||
Decrease in payable to reinsurers | (45 | ) | (42 | ) | |||
Decrease in other liabilities | (2,096 | ) | (20,328 | ) | |||
Net cash provided by operating activities | 73,029 | 26,057 | |||||
Investing Activities: | |||||||
Purchases of fixed maturities | (344,520 | ) | (242,707 | ) | |||
Purchases of equity securities | 0 | (2,000 | ) | ||||
Purchases of property and equipment | (8,529 | ) | (20,881 | ) | |||
Maturities and redemptions of fixed maturities | 144,171 | 113,081 | |||||
Proceeds from sale of fixed maturities | 133,510 | 150,231 | |||||
Proceeds from sale of equity securities | 0 | 7,871 | |||||
Proceeds from sale of property and equipment | 11 | 0 | |||||
Net cash (used in) provided by investing activities | (75,359 | ) | 5,596 | ||||
Financing Activities: | |||||||
Proceeds from stock options exercised and employee stock purchases, including tax benefit | 1,229 | 1,999 | |||||
Excess tax benefits from share-based payment arrangements | 0 | 169 | |||||
Proceeds from issuance of bonds | 273,213 | 0 | |||||
Increase in restricted cash related to planned redemption of debt | (209,879 | ) | 0 | ||||
Acquisition of treasury stock | (11,497 | ) | (38,650 | ) | |||
Dividends paid to shareholders | (7,929 | ) | (6,618 | ) | |||
Net cash provided by (used in) financing activities | 45,136 | (43,100 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 42,807 | (11,447 | ) | ||||
Cash and cash equivalents at beginning of period | 83,767 | 63,605 | |||||
Cash and cash equivalents at end of period | $ | 126,574 | $ | 52,157 |
December 31, 2011 | ||||||||||||
As Reported | As Adjusted | Difference | ||||||||||
Deferred policy acquisition costs | $ | 89.9 | $ | 80.1 | $ | (9.8 | ) | |||||
Current and deferred income taxes | 7.3 | 10.7 | 3.4 | |||||||||
Total assets | 1,936.8 | 1,930.4 | (6.4 | ) | ||||||||
Shareholders' equity | 668.2 | 661.8 | (6.4 | ) |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
2011 | 2011 | |||||||||||||||||||||||
As Reported | As Adjusted | Difference | As Reported | As Adjusted | Difference | |||||||||||||||||||
Commissions and other underwriting expenses | $ | 58.1 | $ | 57.2 | $ | (0.9 | ) | $ | 170.7 | $ | 172.1 | $ | 1.4 | |||||||||||
Provision for income taxes | 1.1 | 1.5 | 0.3 | 5.3 | 4.8 | (0.5 | ) | |||||||||||||||||
Net earnings | 6.1 | 6.7 | 0.6 | 24.7 | 23.8 | (0.9 | ) | |||||||||||||||||
Net earnings per common share: | ||||||||||||||||||||||||
Basic | $ | 0.51 | $ | 0.56 | $ | 0.05 | $ | 2.02 | $ | 1.95 | $ | (0.07 | ) | |||||||||||
Diluted | 0.50 | 0.55 | 0.05 | 1.97 | 1.90 | (0.07 | ) |
2004 Grants | 2003 Grants | |||||||
Weighted-average grant date fair value | $ | 13.87 | $ | 5.97 | ||||
Dividend yield | 0.7 | % | 1.4 | % | ||||
Expected volatility | 33.0 | % | 33.0 | % | ||||
Risk-free interest rate | 4.3 | % | 4.0 | % | ||||
Expected life | 7.5 | years | 7.5 | years | ||||
Weighted-average grant exercise price | $ | 33.56 | $ | 16.11 | ||||
Outstanding at September 30, 2012 | 78,300 | 83,599 |
Number of Options | Weighted-Average Exercise Price | Weighted- Average Remaining Term (in years) | Aggregate Intrinsic Value (a) (in millions) | |||||||||
Outstanding at December 31, 2011 | 192,455 | $ | 23.40 | |||||||||
Granted | 0 | 0 | ||||||||||
Exercised | (30,556 | ) | $ | 16.77 | ||||||||
Forfeited | 0 | 0 | ||||||||||
Outstanding at September 30, 2012 | 161,899 | $ | 24.65 | 0.87 | $ | 5.8 | ||||||
Vested at September 30, 2012 | 161,899 | $ | 24.65 | 0.87 | $ | 5.8 | ||||||
Exercisable at September 30, 2012 | 161,899 | $ | 24.65 | 0.87 | $ | 5.8 |
(a) | We calculated the intrinsic value for the stock options based on the difference between the exercise price of the underlying awards and our closing stock price as of the reporting date. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||||||||
Expense Recognized in Income | Tax Benefit | Expense Recognized in Income | Tax Benefit | Expense Recognized in Income | Tax Benefit | Expense Recognized in Income | Tax Benefit | ||||||||||||||||||||||||
Restricted Stock Plan | $ | 298 | $ | 104 | $ | 265 | $ | 93 | $ | 893 | $ | 312 | $ | 662 | $ | 232 | |||||||||||||||
Directors’ Plan | 0 | 0 | 0 | 0 | 300 | 105 | 350 | 123 | |||||||||||||||||||||||
ESPP | 13 | 0 | 11 | 0 | 40 | 0 | 30 | 0 | |||||||||||||||||||||||
PSP | 373 | 131 | 702 | 246 | 1,624 | 568 | 1,371 | 480 | |||||||||||||||||||||||
Total | $ | 684 | $ | 235 | $ | 978 | $ | 338 | $ | 2,856 | $ | 986 | $ | 2,414 | $ | 834 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net earnings for basic and diluted net earnings per share | $ | 5,154 | $ | 6,733 | $ | 16,402 | $ | 23,789 | |||||||
Average basic shares outstanding | 11,631 | 12,070 | 11,689 | 12,230 | |||||||||||
Basic net earnings per share | $ | 0.44 | $ | 0.56 | $ | 1.40 | $ | 1.95 | |||||||
Average basic shares outstanding | 11,631 | 12,070 | 11,689 | 12,230 | |||||||||||
Restricted stock not yet vested | 32 | 71 | 25 | 72 | |||||||||||
Dilutive effect of assumed option exercises | 101 | 104 | 103 | 119 | |||||||||||
Dilutive effect of Performance Share Plan | 129 | 100 | 141 | 102 | |||||||||||
Average diluted shares outstanding | 11,893 | 12,344 | 11,959 | 12,524 | |||||||||||
Diluted net earnings per share | $ | 0.43 | $ | 0.55 | $ | 1.37 | $ | 1.90 |
(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). |
Fair Value | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Cash and cash equivalents | $ | 126,574 | $ | 0 | $ | 0 | $ | 126,574 | |||||||
Fixed maturity securities: | |||||||||||||||
U.S. government | 106,669 | 318 | 3,735 | 110,722 | |||||||||||
Government-sponsored enterprises | 0 | 70,678 | 0 | 70,678 | |||||||||||
State and municipal | 0 | 432,116 | 4,031 | 436,147 | |||||||||||
Mortgage-backed securities: | |||||||||||||||
Residential | 0 | 238,149 | 0 | 238,149 | |||||||||||
Commercial | 0 | 13,487 | 0 | 13,487 | |||||||||||
Total mortgage-backed securities | $ | 0 | $ | 251,636 | $ | 0 | $ | 251,636 | |||||||
Collateralized mortgage obligations | 0 | 21,920 | 0 | 21,920 | |||||||||||
Asset-backed securities | 0 | 81,295 | 2,645 | 83,940 | |||||||||||
Corporates | 0 | 265,969 | 10,918 | 276,886 | |||||||||||
Total fixed maturities | $ | 106,669 | $ | 1,123,932 | $ | 21,329 | $ | 1,251,930 | |||||||
Equity securities | 42,400 | 0 | 0 | 42,400 | |||||||||||
Total cash and investments | $ | 275,643 | $ | 1,123,932 | $ | 21,329 | $ | 1,420,904 | |||||||
Percentage of total cash and investments | 19.4 | % | 79.1 | % | 1.5 | % | 100.0 | % |
Three months ended September 30, 2012 | |||||||||||||||||||||||||||
U.S. Government | State and Municipal | Mortgage- Backed Securities | Collateralized Mortgage Obligations | Corporates | ABS | Total | |||||||||||||||||||||
Balance at beginning of period | $ | 3,899 | $ | 2,750 | $ | 7,188 | $ | 486 | $ | 9,966 | $ | 1,361 | $ | 25,651 | |||||||||||||
Total gains or (losses), unrealized or realized | |||||||||||||||||||||||||||
Included in net earnings | 0 | 0 | 0 | (71 | ) | (203 | ) | 0 | (274 | ) | |||||||||||||||||
Included in other comprehensive income | (23 | ) | 29 | 0 | 86 | 224 | 0 | 316 | |||||||||||||||||||
Purchases | 0 | 4,002 | 0 | 0 | 0 | 2,645 | 6,647 | ||||||||||||||||||||
Sales | 0 | 0 | 0 | (483 | ) | (1 | ) | 0 | (485 | ) | |||||||||||||||||
Settlements | (141 | ) | (2,750 | ) | 0 | (18 | ) | (122 | ) | 0 | (3,031 | ) | |||||||||||||||
Transfers in | 0 | 0 | 0 | 0 | 1,053 | 0 | 1,053 | ||||||||||||||||||||
Transfers out | 0 | 0 | (7,188 | ) | 0 | 0 | (1,361 | ) | (8,549 | ) | |||||||||||||||||
Balance at end of period | $ | 3,735 | $ | 4,031 | $ | 0 | $ | 0 | $ | 10,918 | $ | 2,645 | $ | 21,329 | |||||||||||||
Nine months ended September 30, 2012 | |||||||||||||||||||||||||||
U.S. Government | State and Municipal | Mortgage- Backed Securities | Collateralized Mortgage Obligations | Corporates | ABS | Total | |||||||||||||||||||||
Balance at beginning of period | $ | 4,438 | $ | 0 | $ | 0 | $ | 509 | $ | 10,426 | $ | 0 | $ | 15,374 | |||||||||||||
Total gains or (losses), unrealized or realized | |||||||||||||||||||||||||||
Included in net earnings | 0 | 0 | 0 | (71 | ) | (1,188 | ) | 0 | (1,259 | ) | |||||||||||||||||
Included in other comprehensive income | (106 | ) | 2,779 | 7,188 | 90 | 1,501 | 1 | 11,452 | |||||||||||||||||||
Purchases | 0 | 4,002 | 0 | 0 | 0 | 4,005 | 8,007 | ||||||||||||||||||||
Sales | 0 | 0 | 0 | (483 | ) | (254 | ) | 0 | (737 | ) | |||||||||||||||||
Settlements | (597 | ) | (2,750 | ) | 0 | (44 | ) | (1,387 | ) | 0 | (4,778 | ) | |||||||||||||||
Transfers in | 0 | 0 | 0 | 0 | 2,889 | 0 | 2,889 | ||||||||||||||||||||
Transfers out | 0 | 0 | (7,188 | ) | 0 | (1,070 | ) | (1,361 | ) | (9,619 | ) | ||||||||||||||||
Balance at end of period | $ | 3,735 | $ | 4,031 | $ | 0 | $ | 0 | $ | 10,918 | $ | 2,645 | $ | 21,329 |
Fair Value | Valuation Technique | Unobservable Input | Value Used | ||||||
Corporate bond | $ | 0.1 | Recovery rate1 | Probability of default | 100% | ||||
Corporate bond | 0.8 | Discounted cash flow | Comparable credit rating | B+ | |||||
Total | $ | 0.8 | |||||||
1 Recovery rate for senior unsecured bonds as indicated in Moody's Investor's Service Annual Default Study: Corporate Default and Recovery Rates, 1920-2011. |
September 30, 2012 | December 31, 2011 | ||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||
Assets: | |||||||||||||||
Cash and cash equivalents | $ | 126,574 | $ | 126,574 | $ | 83,767 | $ | 83,767 | |||||||
Available-for-sale securities | |||||||||||||||
Fixed maturities | 1,251,930 | 1,251,930 | 1,187,987 | 1,187,987 | |||||||||||
Equity securities | 42,400 | 42,400 | 36,930 | 36,930 | |||||||||||
Total cash and investments | $ | 1,420,904 | $ | 1,420,904 | $ | 1,308,684 | $ | 1,308,684 | |||||||
Liabilities: | |||||||||||||||
Long-term debt | $ | 469,875 | $ | 491,414 | $ | 194,810 | $ | 207,246 |
September 30, 2012 | |||||||||||||||||||
Amortized Cost or Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | OTTI Recognized in Accumulated OCI(1) | |||||||||||||||
Fixed maturities: | |||||||||||||||||||
U.S. government | $ | 107,935 | $ | 2,791 | $ | (3 | ) | $ | 110,722 | $ | 0 | ||||||||
Government-sponsored enterprises | 69,021 | 1,658 | 0 | 70,678 | 0 | ||||||||||||||
State and municipal | 414,600 | 21,592 | (45 | ) | 436,147 | (53 | ) | ||||||||||||
Mortgage-backed securities: | |||||||||||||||||||
Residential | 224,736 | 13,412 | 0 | 238,149 | (738 | ) | |||||||||||||
Commercial | 12,670 | 824 | (7 | ) | 13,487 | 0 | |||||||||||||
Total mortgage-backed securities | $ | 237,406 | $ | 14,236 | $ | (7 | ) | $ | 251,636 | $ | (738 | ) | |||||||
Collateralized mortgage obligations | 21,395 | 533 | (8 | ) | 21,920 | (263 | ) | ||||||||||||
Asset-backed securities | 83,620 | 542 | (222 | ) | 83,940 | (8 | ) | ||||||||||||
Corporates | 261,860 | 15,108 | (81 | ) | 276,886 | (1,131 | ) | ||||||||||||
Total fixed maturities | $ | 1,195,837 | $ | 56,461 | $ | (367 | ) | $ | 1,251,930 | $ | (2,194 | ) | |||||||
Equity securities | 26,569 | 15,831 | 0 | 42,400 | 0 | ||||||||||||||
Total | $ | 1,222,405 | $ | 72,292 | $ | (367 | ) | $ | 1,294,330 | $ | (2,194 | ) | |||||||
December 31, 2011 | |||||||||||||||||||
Amortized Cost or Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | OTTI Recognized in Accumulated OCI(1) | |||||||||||||||
Fixed maturities: | |||||||||||||||||||
U.S. government | $ | 124,378 | $ | 3,428 | $ | (8 | ) | $ | 127,798 | $ | 0 | ||||||||
Government-sponsored enterprises | 55,220 | 958 | (9 | ) | 56,170 | 0 | |||||||||||||
State and municipal | 391,436 | 18,016 | (63 | ) | 409,388 | (70 | ) | ||||||||||||
Mortgage-backed securities: | |||||||||||||||||||
Residential | 225,506 | 10,878 | (14 | ) | 236,370 | (1,157 | ) | ||||||||||||
Commercial | 19,751 | 760 | (142 | ) | 20,369 | (11 | ) | ||||||||||||
Total mortgage-backed securities | $ | 245,257 | $ | 11,638 | $ | (156 | ) | $ | 256,739 | $ | (1,168 | ) | |||||||
Collateralized mortgage obligations | 27,447 | 757 | (102 | ) | 28,103 | (515 | ) | ||||||||||||
Asset-backed securities | 48,403 | 368 | (143 | ) | 48,628 | (8 | ) | ||||||||||||
Corporates | 252,546 | 9,688 | (1,072 | ) | 261,162 | (1,949 | ) | ||||||||||||
Total fixed maturities | $ | 1,144,687 | $ | 44,853 | $ | (1,553 | ) | $ | 1,187,987 | $ | (3,711 | ) | |||||||
Equity securities | 26,413 | 10,554 | (38 | ) | 36,930 | 0 | |||||||||||||
Total | $ | 1,171,100 | $ | 55,408 | $ | (1,590 | ) | $ | 1,224,917 | $ | (3,711 | ) | |||||||
(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. |
Less than 12 Months | 12 Months or More | |||||||||||||||||||||||||
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 | |||||||||||||||||||
September 30, 2012 | ||||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||||
U.S. government | 2 | $ | 7,236 | $ | (3 | ) | 0.0 | % | 0 | $ | 0 | $ | 0 | 0.0 | % | |||||||||||
State and municipal | 7 | 6,843 | (38 | ) | 0.6 | % | 1 | 518 | (7 | ) | 1.3 | % | ||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||
Commercial | 2 | 377 | (2 | ) | 0.4 | % | 2 | 349 | (6 | ) | 1.6 | % | ||||||||||||||
Total mortgage-backed securities | 2 | $ | 377 | $ | (2 | ) | 0.4 | % | 2 | $ | 349 | $ | (6 | ) | 1.6 | % | ||||||||||
Collateralized mortgage obligations | 1 | 882 | (8 | ) | 0.9 | % | 1 | 1 | 0 | 1.4 | % | |||||||||||||||
Asset-backed securities | 4 | 14,035 | (107 | ) | 0.8 | % | 3 | 4,151 | (115 | ) | 2.7 | % | ||||||||||||||
Corporates | 11 | 5,246 | (47 | ) | 0.9 | % | 2 | 166 | (34 | ) | 17.0 | % | ||||||||||||||
Total fixed maturities | 27 | $ | 34,619 | $ | (206 | ) | 0.6 | % | 9 | $ | 5,185 | $ | (162 | ) | 3.0 | % | ||||||||||
Equity securities | 0 | 0 | 0 | 0.0 | % | 0 | 0 | 0 | 0.0 | % | ||||||||||||||||
Total | 27 | $ | 34,619 | $ | (206 | ) | 0.6 | % | 9 | $ | 5,185 | $ | (162 | ) | 3.0 | % |
Less than 12 Months | 12 Months or More | ||||||||||||||||||||||||||
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 | ||||||||||||||||||||
December 31, 2011 | |||||||||||||||||||||||||||
Fixed maturities: | |||||||||||||||||||||||||||
U.S. government | 1 | $ | 557 | $ | (8 | ) | 1.4 | % | 0 | $ | 0 | $ | 0 | 0.0 | % | ||||||||||||
Government-sponsored enterprises | 1 | 5,032 | (9 | ) | 0.2 | % | 0 | 0 | 0 | 0.0 | % | ||||||||||||||||
State and municipal | 5 | 7,841 | (36 | ) | 0.5 | % | 2 | 2,885 | (28 | ) | 0.9 | % | |||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||||
Residential | 1 | 10,481 | (14 | ) | 0.1 | % | 0 | 0 | 0 | 0.0 | % | ||||||||||||||||
Commercial | 2 | 1,926 | (7 | ) | 0.4 | % | 5 | 4,505 | (135 | ) | 2.9 | % | |||||||||||||||
Total mortgage-backed securities | 3 | $ | 12,407 | $ | (21 | ) | 0.2 | % | 5 | $ | 4,505 | $ | (135 | ) | 2.9 | % | |||||||||||
Collateralized mortgage obligations | 4 | 2,714 | (9 | ) | 0.3 | % | 1 | 509 | (93 | ) | 15.5 | % | |||||||||||||||
Asset-backed securities | 6 | 13,653 | (143 | ) | 1.0 | % | 1 | 433 | 0 | 0.1 | % | ||||||||||||||||
Corporates | 43 | 44,695 | (1,057 | ) | 2.3 | % | 1 | 721 | (15 | ) | 2.0 | % | |||||||||||||||
Total fixed maturities | 63 | $ | 86,899 | $ | (1,282 | ) | 1.5 | % | 10 | $ | 9,053 | $ | (271 | ) | 2.9 | % | |||||||||||
Equity securities | 0 | 0 | 0 | 0.0 | % | 0 | 0 | 0 | 0.0 | % | |||||||||||||||||
Total | 63 | $ | 86,899 | $ | (1,282 | ) | 1.5 | % | 10 | $ | 9,053 | $ | (271 | ) | 2.9 | % |
• | the intent to sell the security; |
• | whether it is more likely than not that there will be a requirement to sell the security before our anticipated recovery; |
• | whether the unrealized loss is credit-driven or a result of changes in market interest rates; |
• | the length of time the security’s fair value has been below our cost; |
• | the extent to which fair value is less than cost basis; |
• | 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. |
September 30, 2012 | December 31, 2011 | ||||
Number of positions held with unrealized: | |||||
Gains | 714 | 583 | |||
Losses | 36 | 73 | |||
Number of positions held that individually exceed unrealized: | |||||
Gains of $500,000 | 7 | 5 | |||
Losses of $500,000 | 0 | 0 | |||
Percentage of positions held with unrealized: | |||||
Gains that were investment grade | 84 | % | 83 | % | |
Losses that were investment grade | 72 | % | 73 | % | |
Percentage of fair value held with unrealized: | |||||
Gains that were investment grade | 95 | % | 95 | % | |
Losses that were investment grade | 90 | % | 91 | % |
Age of Unrealized Losses: | Fair Value of Securities with Unrealized Losses | Total Gross Unrealized Losses | Less Than 5%* | 5% - 10%* | Greater Than 10%* | ||||||||||||||
Less than or equal to: | |||||||||||||||||||
Three months | $ | 21,709 | $ | (45 | ) | $ | (45 | ) | $ | 0 | $ | 0 | |||||||
Six months | 6,213 | (38 | ) | (38 | ) | 0 | 0 | ||||||||||||
Nine months | 1,568 | (19 | ) | (19 | ) | 0 | 0 | ||||||||||||
Twelve months | 5,129 | (104 | ) | (104 | ) | 0 | 0 | ||||||||||||
Greater than twelve months | 5,185 | (162 | ) | (128 | ) | 0 | (34 | ) | |||||||||||
Total | $ | 39,804 | $ | (367 | ) | $ | (333 | ) | $ | 0 | $ | (34 | ) |
Pre-tax | |||||||||||||||
Fixed Maturities | Equity Securities | Tax Effects | Net | ||||||||||||
Nine months ended September 30, 2012 | |||||||||||||||
Unrealized holding gains (losses) on securities arising during the period | $ | 15,466 | $ | 5,314 | $ | (7,273 | ) | $ | 13,507 | ||||||
Realized (gains) losses on securities sold | (3,949 | ) | 0 | 1,382 | (2,567 | ) | |||||||||
Impairment loss recognized in earnings(1) | 1,277 | 0 | (447 | ) | 830 | ||||||||||
Change in unrealized gains (losses) on marketable securities, net | $ | 12,793 | $ | 5,314 | $ | (6,338 | ) | $ | 11,770 | ||||||
Nine months ended September 30, 2011 | |||||||||||||||
Unrealized holding gains (losses) on securities arising during the period | $ | 19,943 | $ | (3,460 | ) | $ | (5,769 | ) | $ | 10,714 | |||||
Realized (gains) losses on securities sold | (4,126 | ) | (2,748 | ) | 2,406 | (4,468 | ) | ||||||||
Impairment loss recognized in earnings(1) | 1,270 | 0 | (444 | ) | 825 | ||||||||||
Change in unrealized gains (losses) on marketable securities, net | $ | 17,087 | $ | (6,207 | ) | $ | (3,808 | ) | $ | 7,072 | |||||
(1) Tax excludes valuation reserve |
Nine months ended September 30, | |||||||
2012 | 2011 | ||||||
Beginning balance | $ | 1,728 | $ | 1,828 | |||
Additions for: | |||||||
Previously impaired securities | 0 | 37 | |||||
Newly impaired securities | 9 | 694 | |||||
Reductions for: | |||||||
Securities sold and paid down | (362 | ) | (519 | ) | |||
Securities that no longer have a non-credit component | (735 | ) | 0 | ||||
Ending balance | $ | 640 | $ | 2,040 |
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 | $ | 52,635 | $ | 0 | $ | 327 | $ | 52,962 | $ | 51,902 | |||||||||
After one year through five years | 553,858 | 10,833 | 1,347 | 566,038 | 543,658 | ||||||||||||||
After five years through ten years | 208,191 | 5,618 | 280 | 214,089 | 200,021 | ||||||||||||||
After ten years | 57,787 | 3,558 | 0 | 61,345 | 57,835 | ||||||||||||||
Mortgage-backed, asset-backed and collateralized mortgage obligations | 337,701 | 19,795 | 0 | 357,496 | 342,421 | ||||||||||||||
$ | 1,210,172 | $ | 39,804 | $ | 1,954 | $ | 1,251,930 | $ | 1,195,837 |
September 30, 2012 | December 31, 2011 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
5.5% Senior Notes due 2014 | $ | 194.9 | $ | 205.3 | $ | 194.8 | $ | 207.2 | ||||||||
5.0% Senior Notes due 2022 | 275.0 | 286.1 | 0.0 | 0.0 | ||||||||||||
Total | $ | 469.9 | $ | 491.4 | $ | 194.8 | $ | 207.2 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Earnings before income taxes | $ | 6,586 | $ | 8,196 | $ | 21,431 | $ | 28,628 | |||||||
Income taxes at statutory rates | $ | 2,305 | $ | 2,868 | $ | 7,501 | $ | 10,020 | |||||||
Effect of: | |||||||||||||||
Dividends-received deduction | (44 | ) | (35 | ) | (123 | ) | (101 | ) | |||||||
Tax-exempt interest | (824 | ) | (887 | ) | (2,468 | ) | (2,647 | ) | |||||||
Adjustment to valuation allowance | 36 | (510 | ) | 117 | (2,454 | ) | |||||||||
Other | (42 | ) | 25 | 3 | 21 | ||||||||||
Provision for income taxes | $ | 1,432 | $ | 1,462 | $ | 5,029 | $ | 4,839 | |||||||
GAAP effective tax rate | 21.7 | % | 17.8 | % | 23.5 | % | 16.9 | % |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Income tax payments | $ | 4,000 | $ | 0 | $ | 9,000 | $ | 9,203 | |||||||
Interest payments on debt | 5,363 | 5,363 | 10,725 | 10,725 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Balance at Beginning of Period | |||||||||||||||
Unpaid losses on known claims | $ | 202,622 | $ | 188,189 | $ | 181,972 | $ | 180,334 | |||||||
IBNR losses | 182,630 | 160,992 | 177,645 | 164,140 | |||||||||||
LAE | 145,620 | 133,928 | 135,787 | 133,359 | |||||||||||
Total unpaid losses and LAE | 530,872 | 483,108 | 495,403 | 477,833 | |||||||||||
Reinsurance recoverables | (13,798 | ) | (14,880 | ) | (14,640 | ) | (16,521 | ) | |||||||
Unpaid losses and LAE, net of reinsurance recoverables | 517,074 | 468,228 | 480,764 | 461,312 | |||||||||||
Current Activity | |||||||||||||||
Loss and LAE incurred: | |||||||||||||||
Current accident year | 232,940 | 190,459 | 676,822 | 561,846 | |||||||||||
Prior accident years | 5,321 | 4,816 | 7,124 | 4,839 | |||||||||||
Total loss and LAE incurred | 238,261 | 195,275 | 683,946 | 566,685 | |||||||||||
Loss and LAE payments: | |||||||||||||||
Current accident year | (165,714 | ) | (131,711 | ) | (368,230 | ) | (301,638 | ) | |||||||
Prior accident years | (59,864 | ) | (53,016 | ) | (266,722 | ) | (247,582 | ) | |||||||
Total loss and LAE payments | (225,578 | ) | (184,727 | ) | (634,953 | ) | (549,220 | ) | |||||||
Balance at End of Period | |||||||||||||||
Unpaid losses and LAE, net of reinsurance recoverables | 529,757 | 478,777 | 529,757 | 478,777 | |||||||||||
Add back reinsurance recoverables | 14,561 | 14,754 | 14,561 | 14,754 | |||||||||||
Total unpaid losses and LAE | $ | 544,318 | $ | 493,531 | $ | 544,318 | $ | 493,531 | |||||||
Unpaid losses on known claims | $ | 201,804 | $ | 194,164 | $ | 201,804 | $ | 194,164 | |||||||
IBNR losses | 193,959 | 162,809 | 193,959 | 162,809 | |||||||||||
LAE | 148,556 | 136,557 | 148,556 | 136,557 | |||||||||||
Total unpaid losses and LAE | $ | 544,318 | $ | 493,531 | $ | 544,318 | $ | 493,531 |
Redemption price | $ | 208,122 | |
Amortized cost at redemption | (194,878 | ) | |
Unamortized issuance costs | 352 | ||
Loss on redemption of debt, pre-tax | $ | 13,595 |
Accident Year Combined Ratio Developed Through | Prior Accident Year Favorable / (Unfavorable) Development | ($ in millions) Prior Accident Year Favorable / (Unfavorable) Development | ||||||||||||||||||||||||||
Accident Year | Sept 2011 | Dec 2011 | Mar 2012 | Jun 2012 | Sept 2012 | Q3 2012 | YTD 2012 | Q3 2012 | YTD 2012 | |||||||||||||||||||
(as adjusted see Note 1) | ||||||||||||||||||||||||||||
Prior | $ | (0.7 | ) | $ | (1.0 | ) | ||||||||||||||||||||||
2004 | 84.9 | % | 84.9 | % | 84.9 | % | 85.0 | % | 85.0 | % | 0.0 | % | 0.0 | % | (0.1 | ) | (0.1 | ) | ||||||||||
2005 | 87.9 | % | 87.8 | % | 87.8 | % | 87.8 | % | 87.8 | % | 0.0 | % | 0.0 | % | (0.1 | ) | 0.1 | |||||||||||
2006 | 90.5 | % | 90.4 | % | 90.3 | % | 90.3 | % | 90.3 | % | 0.0 | % | 0.1 | % | 0.2 | 1.4 | ||||||||||||
2007 | 92.7 | % | 92.7 | % | 92.5 | % | 92.5 | % | 92.5 | % | 0.0 | % | 0.2 | % | 0.1 | 2.3 | ||||||||||||
2008 | 91.7 | % | 91.7 | % | 91.6 | % | 91.5 | % | 91.5 | % | 0.0 | % | 0.2 | % | 0.2 | 2.0 | ||||||||||||
2009 | 92.9 | % | 92.9 | % | 92.7 | % | 92.6 | % | 92.6 | % | 0.0 | % | 0.3 | % | 0.3 | 2.5 | ||||||||||||
2010 | 99.4 | % | 99.4 | % | 99.8 | % | 99.6 | % | 99.5 | % | 0.1 | % | (0.1 | )% | 0.9 | (0.5 | ) | |||||||||||
2011 | 98.4 | % | 97.6 | % | 97.9 | % | 98.3 | % | 98.9 | % | (0.6 | )% | (1.4 | )% | (6.2 | ) | (13.9 | ) | ||||||||||
2012 YTD | 99.9 | % | 99.2 | % | 98.9 | % | ||||||||||||||||||||||
$ | (5.3 | ) | $ | (7.1 | ) |
• | “Focus States” – We have identified Urban Zones in these states, which include Arizona, California, Florida, Georgia, Nevada, Pennsylvania and Texas. |
• | “Maintenance States” – We are maintaining our writings in these states, which include Alabama, Colorado, Illinois, South Carolina and Tennessee. We believe each state offers us an opportunity for underwriting profit. |
• | “Other States” – Includes eight states where we maintain a renewal book of personal auto business. |
• | “Urban Zones” – include the following urban areas: |
◦ | Arizona – Phoenix and Tucson |
◦ | California – Bay Area, Los Angeles, Sacramento, San Diego and San Joaquin Valley |
◦ | Florida – Jacksonville, Miami, Orlando, Sarasota and Tampa |
◦ | Georgia – Atlanta |
◦ | Nevada – Las Vegas |
◦ | Pennsylvania – Allentown and Philadelphia |
◦ | Texas – Dallas, Fort Worth, Houston and San Antonio |
• | “Non-urban Zones” – include all remaining areas in the Focus States located outside of a designated Urban Zone. |
Three months ended September 30, | ||||||||||||||
2012 | 2011 | Change | % Change | |||||||||||
Net earned premium | ||||||||||||||
Gross written premium | ||||||||||||||
Personal Auto | ||||||||||||||
Focus States | ||||||||||||||
Urban Zones | $ | 250,863 | $ | 215,105 | $ | 35,758 | 16.6 | % | ||||||
Non-urban Zones | 41,885 | 29,462 | 12,423 | 42.2 | % | |||||||||
Total Focus States | 292,748 | 244,567 | 48,181 | 19.7 | % | |||||||||
Maintenance States | 7,553 | 6,386 | 1,167 | 18.3 | % | |||||||||
Other States | 1,744 | 1,629 | 116 | 7.1 | % | |||||||||
Total Personal Auto | 302,045 | 252,581 | 49,464 | 19.6 | % | |||||||||
Commercial Vehicle | 19,471 | 15,538 | 3,933 | 25.3 | % | |||||||||
Classic Collector | 3,450 | 3,010 | 440 | 14.6 | % | |||||||||
Other | (1 | ) | 0 | (1 | ) | 0.0 | % | |||||||
Total gross written premium | 324,966 | 271,129 | 53,836 | 19.9 | % | |||||||||
Ceded reinsurance | (1,994 | ) | (1,575 | ) | (419 | ) | 26.6 | % | ||||||
Net written premium | 322,972 | 269,554 | 53,418 | 19.8 | % | |||||||||
Change in unearned premium | (21,509 | ) | (14,417 | ) | (7,092 | ) | 49.2 | % | ||||||
Net earned premium | $ | 301,463 | $ | 255,138 | $ | 46,326 | 18.2 | % | ||||||
Nine months ended September 30, | ||||||||||||||
2012 | 2011 | Change | % Change | |||||||||||
Net earned premium | ||||||||||||||
Gross written premium | ||||||||||||||
Personal Auto | ||||||||||||||
Focus States | ||||||||||||||
Urban Zones | $ | 747,495 | $ | 641,627 | $ | 105,869 | 16.5 | % | ||||||
Non-urban Zones | 117,985 | 88,099 | 29,886 | 33.9 | % | |||||||||
Total Focus States | 865,480 | 729,725 | 135,755 | 18.6 | % | |||||||||
Maintenance States | 22,904 | 22,031 | 874 | 4.0 | % | |||||||||
Other States | 5,389 | 5,534 | (145 | ) | (2.6 | )% | ||||||||
Total Personal Auto | 893,774 | 757,290 | 136,483 | 18.0 | % | |||||||||
Commercial Vehicle | 57,736 | 47,878 | 9,857 | 20.6 | % | |||||||||
Classic Collector | 9,735 | 8,456 | 1,280 | 15.1 | % | |||||||||
Other | (1 | ) | 0 | (1 | ) | 0.0 | % | |||||||
Total gross written premium | 961,244 | 813,625 | 147,619 | 18.1 | % | |||||||||
Ceded reinsurance | (5,733 | ) | (4,810 | ) | (924 | ) | 19.2 | % | ||||||
Net written premium | 955,511 | 808,815 | 146,696 | 18.1 | % | |||||||||
Change in unearned premium | (82,781 | ) | (63,112 | ) | (19,669 | ) | 31.2 | % | ||||||
Net earned premium | $ | 872,730 | $ | 745,703 | $ | 127,027 | 17.0 | % |
At September 30, | |||||||||||
2012 | 2011 | Change | % Change | ||||||||
Policies in Force | |||||||||||
Personal Auto | |||||||||||
Focus States | |||||||||||
Urban Zones | 756,141 | 695,036 | 61,105 | 8.8 | % | ||||||
Non-urban Zones | 109,936 | 85,657 | 24,279 | 28.3 | % | ||||||
Total Focus States | 866,077 | 780,693 | 85,384 | 10.9 | % | ||||||
Maintenance States | 26,853 | 26,513 | 340 | 1.3 | % | ||||||
Other States | 3,761 | 4,123 | (362 | ) | (8.8 | )% | |||||
Total Personal Auto | 896,691 | 811,329 | 85,362 | 10.5 | % | ||||||
Commercial Vehicle | 38,868 | 35,042 | 3,826 | 10.9 | % | ||||||
Classic Collector | 37,815 | 35,167 | 2,648 | 7.5 | % | ||||||
Total policies in force | 973,374 | 881,538 | 91,836 | 10.4 | % |
• | California gross written premium grew 5.7% and 7.9%, respectively, during the third quarter and first nine months of 2012. Rate actions taken by competitors and a shift in business mix to policies offering broader coverage and higher average premium have stimulated premium growth in the state. |
• | Florida gross written premium grew 85.4% and 76.1%, respectively, during the third quarter and first nine months of 2012. This growth is primarily a result of an increase in new business application count, higher business retention, an increase in average premium from rate increases, and competitor rate increases. |
Three months ended September 30, | ||||||||||||||||||||
2012 | 2011 | % 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: | ||||||||||||||||||||
Focus States: | ||||||||||||||||||||
Urban Zones | 79.5 | % | 17.8 | % | 97.3 | % | 76.7 | % | 19.9 | % | 96.6 | % | 2.7 | % | (2.0 | )% | 0.7 | % | ||
Non-urban Zones | 77.1 | % | 18.6 | % | 95.7 | % | 80.6 | % | 20.1 | % | 100.7 | % | (3.5 | )% | (1.5 | )% | (5.0 | )% | ||
Total Focus States | 79.1 | % | 17.9 | % | 97.1 | % | 77.2 | % | 19.9 | % | 97.1 | % | 1.9 | % | (2.0 | )% | 0.0 | % | ||
Maintenance States | 84.5 | % | 21.6 | % | 106.1 | % | 87.7 | % | 26.9 | % | 114.6 | % | (3.2 | )% | (5.4 | )% | (8.5 | )% | ||
Other States | NM | NM | NM | NM | NM | NM | NM | NM | NM | |||||||||||
Subtotal | 79.4 | % | 18.0 | % | 97.4 | % | 77.5 | % | 20.0 | % | 97.6 | % | 1.9 | % | (2.1 | )% | (0.2 | )% | ||
Commercial Vehicle | 76.4 | % | 17.8 | % | 94.1 | % | 62.8 | % | 17.8 | % | 80.6 | % | 13.6 | % | 0.0 | % | 13.6 | % | ||
Classic Collector | 60.2 | % | 40.7 | % | 101.0 | % | 64.5 | % | 36.1 | % | 100.6 | % | (4.2 | )% | 4.6 | % | 0.4 | % | ||
Total statutory ratios | 79.1 | % | 18.3 | % | 97.4 | % | 76.6 | % | 19.9 | % | 96.5 | % | 2.5 | % | (1.6 | )% | 0.9 | % | ||
Total statutory ratios excluding development | 76.4 | % | 18.3 | % | 94.7 | % | 76.1 | % | 19.9 | % | 96.0 | % | 0.3 | % | (1.6 | )% | (1.3 | )% | ||
GAAP ratios | 79.0 | % | 21.0 | % | 100.0 | % | 76.5 | % | 22.4 | % | 99.0 | % | 2.5 | % | (1.4 | )% | 1.1 | % | ||
GAAP ratios excluding development | 76.3 | % | 21.0 | % | 97.3 | % | 76.0 | % | 22.4 | % | 98.4 | % | 0.3 | % | (1.4 | )% | (1.1 | )% | ||
Nine months ended September 30, | ||||||||||||||||||||
2012 | 2011 | % 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: | ||||||||||||||||||||
Focus States: | ||||||||||||||||||||
Urban Zones | 78.9 | % | 18.5 | % | 97.4 | % | 75.9 | % | 20.9 | % | 96.8 | % | 3.0 | % | (2.4 | )% | 0.5 | % | ||
Non-urban Zones | 78.4 | % | 18.6 | % | 97.0 | % | 78.9 | % | 20.1 | % | 99.0 | % | (0.5 | )% | (1.5 | )% | (2.0 | )% | ||
Total Focus States | 78.9 | % | 18.5 | % | 97.3 | % | 76.3 | % | 20.8 | % | 97.1 | % | 2.5 | % | (2.3 | )% | 0.2 | % | ||
Maintenance States | 77.9 | % | 22.6 | % | 100.5 | % | 87.0 | % | 27.3 | % | 114.3 | % | (9.1 | )% | (4.7 | )% | (13.9 | )% | ||
Other States | NM | NM | NM | NM | NM | NM | NM | NM | NM | |||||||||||
Subtotal | 79.0 | % | 18.6 | % | 97.5 | % | 76.7 | % | 21.0 | % | 97.6 | % | 2.3 | % | (2.4 | )% | (0.1 | )% | ||
Commercial Vehicle | 70.0 | % | 18.0 | % | 88.0 | % | 68.6 | % | 18.1 | % | 86.7 | % | 1.4 | % | (0.1 | )% | 1.3 | % | ||
Classic Collector | 66.5 | % | 38.4 | % | 105.0 | % | 65.6 | % | 38.6 | % | 104.2 | % | 0.9 | % | (0.2 | )% | 0.8 | % | ||
Total statutory ratios | 78.5 | % | 18.8 | % | 97.3 | % | 76.1 | % | 20.8 | % | 96.8 | % | 2.4 | % | (1.9 | )% | 0.5 | % | ||
Total statutory ratios excluding development | 77.7 | % | 18.8 | % | 96.5 | % | 75.4 | % | 20.8 | % | 96.2 | % | 2.3 | % | (1.9 | )% | 0.4 | % | ||
GAAP ratios | 78.4 | % | 21.4 | % | 99.7 | % | 76.0 | % | 23.1 | % | 99.1 | % | 2.4 | % | (1.7 | )% | 0.6 | % | ||
GAAP ratios excluding development | 77.6 | % | 21.4 | % | 98.9 | % | 75.3 | % | 23.1 | % | 98.4 | % | 2.2 | % | (1.7 | )% | 0.5 | % |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Investment income: | |||||||||||||||
Interest income on fixed maturities, cash and cash equivalents | $ | 9,351 | $ | 10,514 | $ | 29,294 | $ | 32,162 | |||||||
Dividends on equity securities | 209 | 165 | 587 | 484 | |||||||||||
Gross investment income | $ | 9,560 | $ | 10,679 | $ | 29,881 | $ | 32,646 | |||||||
Investment expenses | (542 | ) | (513 | ) | (1,517 | ) | (1,529 | ) | |||||||
Net investment income | $ | 9,018 | $ | 10,166 | $ | 28,364 | $ | 31,117 | |||||||
Average investment balance, at cost | $ | 1,251,317 | $ | 1,198,458 | $ | 1,241,846 | $ | 1,224,973 | |||||||
Annualized returns excluding realized gains and losses | 2.9 | % | 3.4 | % | 3.0 | % | 3.4 | % |
Three months ended September 30, 2012 | Three months ended September 30, 2011 | ||||||||||||||||||||||
Impairments Recognized in Earnings | Realized Gains (Losses) on Sales | Total Realized Gains (Losses) | Impairments Recognized in Earnings | Realized Gains (Losses) on Sales | Total Realized Gains (Losses) | ||||||||||||||||||
Fixed maturities | $ | (211 | ) | $ | 479 | $ | 268 | $ | (424 | ) | $ | 1,146 | $ | 722 | |||||||||
Equities | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
Total | $ | (211 | ) | $ | 479 | $ | 268 | $ | (424 | ) | $ | 1,146 | $ | 722 | |||||||||
Nine months ended September 30, 2012 | Nine months ended September 30, 2011 | ||||||||||||||||||||||
Impairments Recognized in Earnings | Realized Gains (Losses) on Sales | Total Realized Gains (Losses) | Impairments Recognized in Earnings | Realized Gains (Losses) on Sales | Total Realized Gains (Losses) | ||||||||||||||||||
Fixed maturities | $ | (1,277 | ) | $ | 3,949 | $ | 2,673 | $ | (1,270 | ) | $ | 4,126 | $ | 2,856 | |||||||||
Equities | 0 | 0 | 0 | 0 | 2,748 | 2,748 | |||||||||||||||||
Total | $ | (1,277 | ) | $ | 3,949 | $ | 2,673 | $ | (1,270 | ) | $ | 6,873 | $ | 5,604 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
5.5% Senior Notes | $ | 2,703 | $ | 2,702 | $ | 8,108 | $ | 8,105 | ||||||||
5.0% Senior Notes | 497 | 0 | 497 | 0 | ||||||||||||
Total | $ | 3,199 | $ | 2,702 | $ | 8,604 | $ | 8,105 |
Amortized Cost | Fair Value | % of Total Fair Value | ||||||||
U.S. government and agencies: | ||||||||||
U.S. government | $ | 107,935 | $ | 110,722 | 8.6 | % | ||||
Government-sponsored enterprises | 69,021 | 70,678 | 5.5 | % | ||||||
Total U.S. government and agencies | 176,955 | 181,401 | 14.0 | % | ||||||
State and municipal | 414,600 | 436,147 | 33.7 | % | ||||||
Mortgage-backed, CMOs and asset-backed: | ||||||||||
Residential mortgage-backed securities | 224,736 | 238,149 | 18.4 | % | ||||||
Commercial mortgage-backed securities | 12,670 | 13,487 | 1.0 | % | ||||||
Collateralized mortgage obligations: | ||||||||||
PAC | 12,120 | 12,417 | 1.0 | % | ||||||
Sequentials | 8,034 | 8,210 | 0.6 | % | ||||||
Whole loan | 1,241 | 1,293 | 0.1 | % | ||||||
Total CMO | 21,395 | 21,920 | 1.7 | % | ||||||
Asset-backed securities: | ||||||||||
Auto loans | 50,513 | 50,962 | 3.9 | % | ||||||
Equipment leases | 6,884 | 6,904 | 0.5 | % | ||||||
Home equity | 505 | 528 | 0.0 | % | ||||||
Credit card receivables | 25,607 | 25,425 | 2.0 | % | ||||||
Miscellaneous | 110 | 121 | 0.0 | % | ||||||
Total ABS | 83,620 | 83,940 | 6.5 | % | ||||||
Total mortgage-backed, CMOs and asset-backed | 342,421 | 357,496 | 27.6 | % | ||||||
Corporates | ||||||||||
Investment grade | 189,628 | 199,293 | 15.4 | % | ||||||
Non-investment grade | 72,232 | 77,593 | 6.0 | % | ||||||
Total corporates | 261,860 | 276,886 | 21.4 | % | ||||||
Total fixed maturities | 1,195,837 | 1,251,930 | 96.7 | % | ||||||
Equity securities | 26,569 | 42,400 | 3.3 | % | ||||||
Total investments | $ | 1,222,405 | $ | 1,294,330 | 100.0 | % |
Rating | ||||||||||||||||||||||||||
AAA | AA | A | BBB | Non- investment Grade | Total Fair Value | % of Total Exposure | ||||||||||||||||||||
U.S. government and agencies | $ | 0 | $ | 181,401 | $ | 0 | $ | 0 | $ | 0 | $ | 181,401 | 14.5 | % | ||||||||||||
State and municipal | 28,794 | 257,299 | 141,998 | 8,056 | 0 | 436,147 | 34.8 | % | ||||||||||||||||||
Mortgage-backed, asset-backed and CMO | 92,945 | 264,551 | 0 | 0 | 0 | 357,496 | 28.6 | % | ||||||||||||||||||
Corporates | 0 | 14,820 | 110,033 | 74,441 | 77,593 | 276,886 | 22.1 | % | ||||||||||||||||||
Total fair value | $ | 121,739 | $ | 718,071 | $ | 252,031 | $ | 82,497 | $ | 77,593 | $ | 1,251,930 | 100.0 | % | ||||||||||||
% of total fair value | 9.7 | % | 57.4 | % | 20.1 | % | 6.6 | % | 6.2 | % | 100.0 | % |
Rating | ||||||||||||||||||||||||||
Deal Origination Year | AAA | AA | A | BBB | Non- investment Grade | Total Fair Value | % of Total Exposure | |||||||||||||||||||
2006 | $ | 0 | $ | 916 | $ | 0 | $ | 0 | $ | 0 | $ | 916 | 0.4 | % | ||||||||||||
2007 | 0 | 5,080 | 0 | 0 | 0 | 5,080 | 2.1 | % | ||||||||||||||||||
2008 | 0 | 23,164 | 0 | 0 | 0 | 23,164 | 9.7 | % | ||||||||||||||||||
2009 | 0 | 32,994 | 0 | 0 | 0 | 32,994 | 13.9 | % | ||||||||||||||||||
2010 | 0 | 67,574 | 0 | 0 | 0 | 67,574 | 28.4 | % | ||||||||||||||||||
2011 | 0 | 42,604 | 0 | 0 | 0 | 42,604 | 17.9 | % | ||||||||||||||||||
2012 | 0 | 65,817 | 0 | 0 | 0 | 65,817 | 27.6 | % | ||||||||||||||||||
Total fair value | $ | 0 | $ | 238,149 | $ | 0 | $ | 0 | $ | 0 | $ | 238,149 | 100.0 | % | ||||||||||||
% of total fair value | 0.0 | % | 100.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 100.0 | % |
Rating | ||||||||||||||||||||||||||
Deal Origination Year | AAA | AA | A | BBB | Non- investment Grade | Total Fair Value | % of Total Exposure | |||||||||||||||||||
2003 | $ | 44 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 44 | 0.3 | % | ||||||||||||
2004 | 3,762 | 0 | 0 | 0 | 0 | 3,762 | 27.9 | % | ||||||||||||||||||
2005 | 3,333 | 0 | 0 | 0 | 0 | 3,333 | 24.7 | % | ||||||||||||||||||
2006 | 6,298 | 0 | 0 | 0 | 0 | 6,298 | 46.7 | % | ||||||||||||||||||
2007 | 50 | 0 | 0 | 0 | 0 | 50 | 0.4 | % | ||||||||||||||||||
Total fair value | $ | 13,487 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 13,487 | 100.0 | % | ||||||||||||
% of total fair value | 100.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 100.0 | % |
Rating | ||||||||||||||||||||||||||
Deal Origination Year | AAA | AA | A | BBB | Non- investment Grade | Total Fair Value | % of Total Exposure | |||||||||||||||||||
2002 | $ | 1,293 | $ | 985 | $ | 0 | $ | 0 | $ | 0 | $ | 2,279 | 10.4 | % | ||||||||||||
2003 | 906 | 1,898 | 0 | 0 | 0 | 2,804 | 12.8 | % | ||||||||||||||||||
2004 | 1 | 1,745 | 0 | 0 | 0 | 1,746 | 8.0 | % | ||||||||||||||||||
2009 | 0 | 5,942 | 0 | 0 | 0 | 5,942 | 27.1 | % | ||||||||||||||||||
2010 | 0 | 4,301 | 0 | 0 | 0 | 4,301 | 19.6 | % | ||||||||||||||||||
2011 | 0 | 1,759 | 0 | 0 | 0 | 1,759 | 8.0 | % | ||||||||||||||||||
2012 | 0 | 3,090 | 0 | 0 | 0 | 3,090 | 14.1 | % | ||||||||||||||||||
Total fair value | $ | 2,200 | $ | 19,720 | $ | 0 | $ | 0 | $ | 0 | $ | 21,920 | 100.0 | % | ||||||||||||
% of total fair value | 10.0 | % | 90.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 100.0 | % |
Rating | ||||||||||||||||||||||||||
Deal Origination Year | AAA | AA | A | BBB | Non- investment Grade | Total Fair Value | % of Total Exposure | |||||||||||||||||||
2001 | $ | 0 | $ | 75 | $ | 0 | $ | 0 | $ | 0 | $ | 75 | 0.1 | % | ||||||||||||
2003 | 5,263 | 453 | 0 | 0 | 0 | 5,716 | 6.8 | % | ||||||||||||||||||
2004 | 5,010 | 0 | 0 | 0 | 0 | 5,010 | 6.0 | % | ||||||||||||||||||
2007 | 2,806 | 0 | 0 | 0 | 0 | 2,806 | 3.3 | % | ||||||||||||||||||
2008 | 5,129 | 0 | 0 | 0 | 0 | 5,129 | 6.1 | % | ||||||||||||||||||
2009 | 8,198 | 84 | 0 | 0 | 0 | 8,282 | 9.9 | % | ||||||||||||||||||
2010 | 2,579 | 2,103 | 0 | 0 | 0 | 4,683 | 5.6 | % | ||||||||||||||||||
2011 | 16,503 | 0 | 0 | 0 | 0 | 16,503 | 19.7 | % | ||||||||||||||||||
2012 | 31,769 | 3,967 | 0 | 0 | 0 | 35,736 | 42.6 | % | ||||||||||||||||||
Total fair value | $ | 77,257 | $ | 6,683 | $ | 0 | $ | 0 | $ | 0 | $ | 83,940 | 100.0 | % | ||||||||||||
% of total fair value | 92.0 | % | 8.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 100.0 | % |
Insured | Uninsured | Total | ||||||||||||||||||
Rating | Fair Value | % of Fair Value | Fair Value | % of Fair Value | Fair Value | % of Fair Value | ||||||||||||||
AAA | $ | 3,481 | 2.1 | % | $ | 25,313 | 9.3 | % | $ | 28,794 | 6.6 | % | ||||||||
AA+, AA, AA- | 88,941 | 53.9 | % | 168,358 | 62.1 | % | $ | 257,299 | 59.0 | % | ||||||||||
A+, A, A- | 64,410 | 39.1 | % | 77,588 | 28.6 | % | $ | 141,998 | 32.6 | % | ||||||||||
BBB+, BBB, BBB- | 8,056 | 4.9 | % | 0 | 0.0 | % | $ | 8,056 | 1.8 | % | ||||||||||
Total | $ | 164,889 | 100.0 | % | $ | 271,259 | 100.0 | % | $ | 436,147 | 100.0 | % |
Rating | ||||||||||||||||||||||||||
State | AAA | AA | A | BBB | Non- investment Grade | Total Fair Value | % of Total Exposure | |||||||||||||||||||
TX | $ | 15,286 | $ | 15,871 | $ | 8,589 | $ | 0 | $ | 0 | $ | 39,746 | 9.1 | % | ||||||||||||
NY | 0 | 36,056 | 1,225 | 0 | 0 | $ | 37,280 | 8.5 | % | |||||||||||||||||
FL | 0 | 16,503 | 15,077 | 0 | 0 | $ | 31,581 | 7.2 | % | |||||||||||||||||
GA | 2,842 | 4,337 | 10,722 | 4,806 | 0 | $ | 22,707 | 5.2 | % | |||||||||||||||||
WA | 1,389 | 17,297 | 3,121 | 0 | 0 | $ | 21,807 | 5.0 | % | |||||||||||||||||
VA | 0 | 18,021 | 0 | 0 | 0 | $ | 18,021 | 4.1 | % | |||||||||||||||||
IL | 0 | 4,947 | 12,830 | 0 | 0 | $ | 17,777 | 4.1 | % | |||||||||||||||||
IN | 418 | 13,184 | 3,943 | 0 | 0 | $ | 17,545 | 4.0 | % | |||||||||||||||||
PA | 0 | 5,708 | 10,603 | 0 | 0 | $ | 16,311 | 3.7 | % | |||||||||||||||||
CA | 0 | 3,574 | 12,292 | 377 | 0 | $ | 16,244 | 3.7 | % | |||||||||||||||||
All other states | 8,859 | 121,801 | 63,598 | 2,873 | 0 | $ | 197,130 | 45.2 | % | |||||||||||||||||
Total fair value | $ | 28,794 | $ | 257,299 | $ | 141,998 | $ | 8,056 | $ | 0 | $ | 436,147 | 100.0 | % | ||||||||||||
% of total fair value | 6.6 | % | 59.0 | % | 32.6 | % | 1.8 | % | 0.0 | % | 100.0 | % |
Type | ||||||||||||||||||||||
General Obligation | ||||||||||||||||||||||
State | State | Local | Revenue | Other | Total Fair Value | % of Total Exposure | ||||||||||||||||
TX | $ | 0 | $ | 12,993 | $ | 26,753 | $ | 0 | $ | 39,746 | 9.1 | % | ||||||||||
NY | 0 | 6,444 | 30,836 | 0 | $ | 37,280 | 8.5 | % | ||||||||||||||
FL | 3,742 | 0 | 18,454 | 9,384 | $ | 31,581 | 7.2 | % | ||||||||||||||
GA | 3,380 | 2,401 | 16,925 | 0 | $ | 22,707 | 5.2 | % | ||||||||||||||
WA | 4,203 | 3,794 | 13,809 | 0 | $ | 21,807 | 5.0 | % | ||||||||||||||
VA | 0 | 3,614 | 14,407 | 0 | $ | 18,021 | 4.1 | % | ||||||||||||||
IL | 1,993 | 960 | 14,823 | 0 | $ | 17,777 | 4.1 | % | ||||||||||||||
IN | 0 | 0 | 17,545 | 0 | $ | 17,545 | 4.0 | % | ||||||||||||||
PA | 0 | 2,748 | 13,562 | 0 | $ | 16,311 | 3.7 | % | ||||||||||||||
CA | 6,324 | 0 | 9,919 | 0 | $ | 16,244 | 3.7 | % | ||||||||||||||
All other states | 21,600 | 33,693 | 139,753 | 2,084 | $ | 197,130 | 45.2 | % | ||||||||||||||
Total fair value | $ | 41,244 | $ | 66,647 | $ | 316,788 | $ | 11,468 | $ | 436,147 | 100.0 | % | ||||||||||
% of total fair value | 9.5 | % | 15.3 | % | 72.6 | % | 2.6 | % | 100.0 | % |
Revenue Bonds | ||||||||||||||||||||||
State | Transportation | Utilities | Education | Other | Total Fair Value | % of Total Exposure | ||||||||||||||||
NY | $ | 9,255 | $ | 0 | $ | 7,941 | $ | 13,640 | $ | 30,836 | 9.7 | % | ||||||||||
TX | 15,854 | 6,452 | 3,025 | 1,422 | $ | 26,753 | 8.4 | % | ||||||||||||||
FL | 11,848 | 0 | 0 | 6,607 | $ | 18,454 | 5.8 | % | ||||||||||||||
IN | 3,252 | 1,245 | 9,106 | 3,943 | $ | 17,545 | 5.5 | % | ||||||||||||||
GA | 8,679 | 4,806 | 1,397 | 2,043 | $ | 16,925 | 5.3 | % | ||||||||||||||
IL | 8,164 | 0 | 2,269 | 4,391 | $ | 14,823 | 4.7 | % | ||||||||||||||
VA | 773 | 0 | 5,353 | 8,280 | $ | 14,407 | 4.5 | % | ||||||||||||||
WA | 1,324 | 9,300 | 0 | 3,185 | $ | 13,809 | 4.4 | % | ||||||||||||||
PA | 7,299 | 0 | 2,960 | 3,304 | $ | 13,562 | 4.3 | % | ||||||||||||||
CO | 5,927 | 0 | 7,476 | 0 | $ | 13,403 | 4.2 | % | ||||||||||||||
All other states | 31,820 | 30,835 | 20,069 | 53,545 | $ | 136,270 | 43.0 | % | ||||||||||||||
Total fair value | $ | 104,194 | $ | 52,638 | $ | 59,596 | $ | 100,360 | $ | 316,788 | 100.0 | % | ||||||||||
% of total fair value | 32.9 | % | 16.6 | % | 18.8 | % | 31.7 | % | 100.0 | % |
Rating | ||||||||||||||||||||||||||
Industry Sector | AAA | AA | A | BBB | Non- investment Grade | Total Fair Value | % of Total Exposure | |||||||||||||||||||
Basic Materials | $ | 0 | $ | 0 | $ | 0 | $ | 2,660 | $ | 2,753 | $ | 5,414 | 2.0 | % | ||||||||||||
Communications | 0 | 0 | 0 | 12,969 | 12,245 | $ | 25,213 | 9.1 | % | |||||||||||||||||
Consumer, Cyclical | 0 | 4,285 | 0 | 3,354 | 11,992 | $ | 19,631 | 7.1 | % | |||||||||||||||||
Consumer, Non-cyclical | 0 | 0 | 26,252 | 10,094 | 6,997 | $ | 43,344 | 15.7 | % | |||||||||||||||||
Energy | 0 | 1,069 | 21,630 | 6,660 | 11,740 | $ | 41,098 | 14.8 | % | |||||||||||||||||
Financial | 0 | 9,467 | 50,672 | 28,170 | 13,277 | $ | 101,585 | 36.7 | % | |||||||||||||||||
Industrial | 0 | 0 | 6,895 | 0 | 11,767 | $ | 18,662 | 6.7 | % | |||||||||||||||||
Technology | 0 | 0 | 0 | 2,385 | 3,288 | $ | 5,673 | 2.0 | % | |||||||||||||||||
Utilities | 0 | 0 | 4,585 | 8,148 | 3,534 | $ | 16,266 | 5.9 | % | |||||||||||||||||
Total fair value | $ | 0 | $ | 14,820 | $ | 110,033 | $ | 74,441 | $ | 77,593 | $ | 276,886 | 100.0 | % | ||||||||||||
% of total fair value | 0.0 | % | 5.4 | % | 39.7 | % | 26.9 | % | 28.0 | % | 100.0 | % |
Rating | ||||||||||||||||||||||||||
Issuer or Guarantor | AAA | AA | A | BBB | Non- investment Grade | Total Fair Value | % of Total Exposure | |||||||||||||||||||
Aruba | $ | 0 | $ | 0 | $ | 785 | $ | 0 | $ | 0 | $ | 785 | 1.8 | % | ||||||||||||
Australia | 0 | 0 | 3,732 | 0 | 0 | $ | 3,732 | 8.8 | % | |||||||||||||||||
Britain | 0 | 4,774 | 7,564 | 0 | 0 | $ | 12,339 | 28.9 | % | |||||||||||||||||
Canada | 0 | 0 | 8,619 | 1,125 | 2,336 | $ | 12,081 | 28.3 | % | |||||||||||||||||
Cayman Islands | 0 | 0 | 0 | 0 | 1,204 | $ | 1,204 | 2.8 | % | |||||||||||||||||
France | 0 | 1,069 | 2,117 | 0 | 0 | $ | 3,185 | 7.5 | % | |||||||||||||||||
Germany | 0 | 0 | 4,091 | 0 | 0 | $ | 4,091 | 9.6 | % | |||||||||||||||||
South Korea | 0 | 0 | 2,049 | 0 | 0 | $ | 2,049 | 4.8 | % | |||||||||||||||||
Switzerland | 0 | 0 | 3,171 | 0 | 0 | $ | 3,171 | 7.4 | % | |||||||||||||||||
Total fair value | $ | 0 | $ | 5,843 | $ | 32,128 | $ | 1,125 | $ | 3,540 | $ | 42,637 | 100.0 | % | ||||||||||||
% of total fair value | 0.0 | % | 13.7 | % | 75.4 | % | 2.6 | % | 8.3 | % | 100.0 | % |
Period | Total Number of Shares Purchased | Average Price Paid per Share (a) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) | Maximum Number (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans or Programs | |||||||||
July 1, 2012 - July 31, 2012 | 11,880 | $ | 57.48 | 11,880 | $ | 38,839,776 | |||||||
August 1, 2012 - August 31, 2012 | 26,858 | $ | 56.37 | 26,858 | 37,324,892 | ||||||||
September 1, 2012 - September 30, 2012 | 8,306 | $ | 58.81 | 8,306 | 36,836,200 | ||||||||
Total | 47,044 | $ | 57.08 | 47,044 | $ | 36,836,200 |
(a) | Average price paid per share excludes commissions. |
(b) | On November 6, 2012, our Board of Directors increased the authority under our current share and debt repurchase plan by $25.0 million and extended the date to execute the program to December 31, 2014 from December 31, 2012. |
Infinity Property and Casualty Corporation | ||
BY: | /s/ ROGER SMITH | |
November 8, 2012 | Roger Smith | |
Executive Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Infinity Property and Casualty Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
November 8, 2012 | BY: | /s/ JAMES R. GOBER |
James R. Gober | ||
Chief Executive Officer | ||
(principal executive officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Infinity Property and Casualty Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
November 8, 2012 | BY: | /s/ ROGER SMITH |
Roger Smith | ||
Chief Financial Officer | ||
(principal financial officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of The Company. |
November 8, 2012 | BY: | /s/ JAMES R. GOBER |
James R. Gober President and Chief Executive Officer | ||
November 8, 2012 | BY: | /s/ ROGER SMITH |
Roger Smith Executive Vice President, Chief Financial Officer and Treasurer |
Additional Information (Details) (USD $)
|
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Dec. 31, 2011
|
|
Supplemental Cash Flow Elements [Abstract] | |||||
Income tax payments | $ 4,000,000 | $ 0 | $ 9,000,000 | $ 9,203,000 | |
Interest payments on debt | 5,363,000 | 5,363,000 | 10,725,000 | 10,725,000 | |
Negative cash book balances | $ 5,900,000 |
Long-Term Debt (Details) (USD $)
|
12 Months Ended | 1 Months Ended | 0 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Dec. 31, 2011
|
Aug. 31, 2011
|
Aug. 31, 2011
Revolving Credit Facility
|
Dec. 31, 2004
Senior Notes Due 2014
Senior Notes
|
Sep. 30, 2012
Senior Notes Due 2014
Senior Notes
|
Dec. 31, 2011
Senior Notes Due 2014
Senior Notes
|
Dec. 31, 2009
Senior Notes Due 2014
Senior Notes
|
Feb. 29, 2004
Senior Notes Due 2014
Senior Notes
|
Sep. 30, 2012
Senior Notes Due 2022
Senior Notes
|
Dec. 31, 2011
Senior Notes Due 2022
Senior Notes
|
Oct. 17, 2012
Repayment of Debt
Subsequent Event
Senior Notes Due 2014
Senior Notes
|
|
Debt Instrument [Line Items] | ||||||||||||
Principal amount | $ 200,000,000 | $ 275,000,000 | ||||||||||
Effective yield | 5.55% | |||||||||||
Coupon rate | 5.50% | 5.00% | 5.50% | |||||||||
Capitalized debt issuance costs | 2,100,000 | 2,200,000 | ||||||||||
Amount of repurchased debt | 5,000,000 | 195,000,000 | ||||||||||
Outstanding principal | 195,000,000 | 194,878,000 | ||||||||||
Long-term debt, fair value | 491,400,000 | 207,200,000 | 205,300,000 | 286,100,000 | 0 | |||||||
Fair Value, Debt Instrument, Valuation Basis, US Treasury Note Rate, Term of Note Used | 2 years | 10 years | ||||||||||
Long-term debt | 469,875,000 | 194,810,000 | 194,900,000 | 194,800,000 | 275,000,000 | 0 | ||||||
Fair value spread to U.S. Treasury Note rate | 1.39% | 2.86% | ||||||||||
Two-year U.S. Treasury Note rate used for debt fair value calculation | 0.232% | 1.634% | ||||||||||
Credit facility capacity | 50,000,000 | |||||||||||
Term of revolving credit facility | 3 years | |||||||||||
Make whole price of redeemed debt | 106.729% | |||||||||||
Debt Instrument, Repurchase Amount | 208,122,000 | |||||||||||
Interest Payable | $ 1,800,000 |
Share-Based Compensation - Additional Disclosures (Details) (USD $)
|
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Cash received from option exercises | $ 500,000 | $ 900,000 | ||
Actual tax benefit realized from options exercised | 200,000 | 500,000 | ||
Total intrinsic value of options exercised | 1,200,000 | 1,800,000 | ||
Expense recognized in income | 684,000 | 978,000 | 2,856,000 | 2,414,000 |
Tax benefit | 235,000 | 338,000 | 986,000 | 834,000 |
Restricted Stock Plan
|
||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expense recognized in income | 298,000 | 265,000 | 893,000 | 662,000 |
Tax benefit | 104,000 | 93,000 | 312,000 | 232,000 |
Directors Plan
|
||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expense recognized in income | 0 | 0 | 300,000 | 350,000 |
Tax benefit | 0 | 0 | 105,000 | 123,000 |
ESPP
|
||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expense recognized in income | 13,000 | 11,000 | 40,000 | 30,000 |
Tax benefit | 0 | 0 | 0 | 0 |
PSP
|
||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expense recognized in income | 373,000 | 702,000 | 1,624,000 | 1,371,000 |
Tax benefit | $ 131,000 | $ 246,000 | $ 568,000 | $ 480,000 |
Income Taxes (Tables)
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of provision for income taxes | The following table reconciles our income taxes at statutory rates to our effective provision for income taxes (in thousands):
|
Commitments And Contingencies Details (Details) (USD $)
|
0 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2012
|
Dec. 31, 2011
|
Feb. 29, 2004
Senior Notes
Senior Notes Due 2014
|
Oct. 17, 2012
Senior Notes
Repayment of Debt
Senior Notes Due 2014
Subsequent Event
|
|
Debt Instrument [Line Items] | ||||
Restricted cash | $ 209,879,000 | $ 0 | ||
Coupon rate | 5.50% | 5.50% | ||
Make whole price of redeemed debt | 106.729% | |||
Debt Instrument, Repurchase Amount | 208,122,000 | |||
Interest Payable | $ 1,800,000 |
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