INFINITY PROPERTY & CASUALTY CORP - FORM 10-Q

INFINITY PROPERTY & CASUALTY CORP - FORM 10-Q - November 5, 2010

Attached files

Attached files

INFINITY PROPERTY & CASUALTY CORP Reports

file	filename
EXCEL - IDEA: XBRL DOCUMENT - INFINITY PROPERTY & CASUALTY CORP	Financial_Report.xls
EX-32 - CERTIFICATION - INFINITY PROPERTY & CASUALTY CORP	dex32.htm
EX-31.2 - CERTIFICATION - INFINITY PROPERTY & CASUALTY CORP	dex312.htm
EX-31.1 - CERTIFICATION - INFINITY PROPERTY & CASUALTY CORP	dex311.htm

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 September 30, 2010

¨	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)

Incorporated under

the Laws of Ohio

03-0483872

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3700 Colonnade Parkway, Suite 600, Birmingham, Alabama 35243

(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 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.

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 October 31, 2010, there were 12,517,071 shares of the registrant’s common stock outstanding.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

INDEX


		Page
PART I – FINANCIAL INFORMATION

Item 1	Financial Statements

	Consolidated Statements of Earnings	3

	Consolidated Balance Sheets	4

	Consolidated Statements of Changes in Shareholders’ Equity	5

	Consolidated Statements of Cash Flows	6

	Condensed Notes to Consolidated Financial Statements	8

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4	Controls and Procedures	37

PART II – OTHER INFORMATION

Item 1	Legal Proceedings	37

Item 1A	Risk Factors	37

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 6	Exhibits	39

	Signature	39

	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 13-a-14(a)

Exhibit 32	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

Exhibit 101	XBRL Instance Document

INFINITY PROPERTY AND CASUALTY CORPORATION 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 September 30,									Nine months ended September 30,
	2010			2009			% Change			2010			2009			% Change
Revenues:
Earned premium	$	232,503		$	210,337			10.5	%	$	670,159		$	638,734			4.9	%

Net investment income		11,090			12,107			(8.4	)%		33,968			37,904			(10.4	)%

Net realized gains (losses) on investments*		7,991			(12,113	)		NM			7,580			(18,070	)		NM
Other income		85			25			240.0	%		206			96			114.6	%

Total revenues		251,669			210,357			19.6	%		711,913			658,665			8.1	%

Costs and Expenses:
Losses and loss adjustment expenses		152,304			141,057			8.0	%		452,227			443,151			2.0	%

Commissions and other underwriting expenses		53,340			47,127			13.2	%		155,349			139,778			11.1	%

Interest expense		2,701			2,769			(2.5	)%		8,101			8,306			(2.5	)%

Corporate general and administrative expenses		2,057			1,590			29.4	%		6,155			5,170			19.0	%
Other expenses		(374	)		404			NM			2,182			1,820			19.9	%

Total costs and expenses		210,028			192,946			8.9	%		624,014			598,225			4.3	%


Earnings before income taxes		41,641			17,411			139.2	%		87,899			60,440			45.4	%

Provision for income taxes		10,810			9,187			17.7	%		25,169			24,508			2.7	%


Net Earnings	$	30,831		$	8,224			274.9	%	$	62,730		$	35,932			74.6	%

Earnings per Common Share:
Basic	$	2.45		$	0.61			301.6	%	$	4.83		$	2.62			84.4	%

Diluted		2.39			0.60			298.3	%		4.72			2.58			82.9	%

Average Number of Common Shares:
Basic		12,576			13,534			(7.1	)%		12,980			13,713			(5.3	)%

Diluted		12,913			13,753			(6.1	)%		13,292			13,921			(4.5	)%

Cash Dividends per Common Share	$	0.14		$	0.12			16.7	%	$	0.42		$	0.36			16.7	%

* Net realized gains (losses) before impairment losses	$	8,141		$	(1,077	)		NM		$	9,530		$	1,311			626.9	%

Total other-than-temporary impairment (OTTI) losses		(49	)		(250	)		(80.4	)%		(191	)		(11,832	)		(98.4	)%
Non-credit portion in other comprehensive income		0			0			0.0	%		0			3,783			(100.0	)%
OTTI losses reclassified from other comprehensive income		(101	)		(10,786	)		(99.1	)%		(1,760	)		(11,332	)		(84.5	)%


Net impairment losses recognized in earnings		(150	)		(11,037	)		(98.6	)%		(1,951	)		(19,381	)		(89.9	)%


Total net realized gains (losses) on investments	$	7,991		$	(12,113	)		NM		$	7,580		$	(18,070	)		NM

NM = Not meaningful

See Condensed Notes to Consolidated Financial Statements.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

INFINITY PROPERTY AND CASUALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	September 30, 2010			December 31, 2009
	(unaudited)
Assets
Investments:
Fixed maturities - at fair value (amortized cost $1,161,185 and $1,125,776)	$	1,207,808		$	1,146,692
Equity securities- at fair value (cost $31,327 and $31,331)		40,838			39,438

Total investments		1,248,645			1,186,131
Cash and cash equivalents		65,352			99,700
Accrued investment income		11,861			11,237
Agents’ balances and premium receivable, net of allowances for doubtful accounts of $12,092 and $10,853		346,436			295,691
Property and equipment, net of accumulated depreciation of $49,774 and $42,092		26,950			27,916
Prepaid reinsurance premium		2,013			1,536
Recoverable from reinsurers (includes $120 and $316 on paid losses and loss adjustment expenses)		17,341			18,031
Deferred policy acquisition costs		81,833			68,839
Current and deferred income taxes		6,732			10,258
Other assets		12,104			9,057
Goodwill		75,275			75,275

Total assets	$	1,894,542		$	1,803,671

Liabilities and Shareholders’ Equity
Liabilities:
Unpaid losses and loss adjustment expenses	$	497,454		$	509,114
Unearned premium		438,060			376,068
Payable to reinsurers		0			58
Long-term debt (fair value $198,962 and $192,309)		194,709			194,651
Commissions payable		21,264			18,012
Payable for securities purchased		9,705			17,576
Other liabilities		81,627			70,032

Total liabilities		1,242,819			1,185,511

Commitments and contingencies (See Note 10)
Shareholders’ equity:
Common stock, no par value (50,000,000 shares authorized; 21,142,747 and 21,082,139 shares issued)		21,195			21,064
Additional paid-in capital		348,426			344,031
Retained earnings		598,449			541,167
Accumulated other comprehensive income, net of tax		37,069			19,500
Treasury stock, at cost (8,588,262 and 7,584,762 shares)		(353,417	)		(307,602	)

Total shareholders’ equity		651,723			618,160

Total liabilities and shareholders’ equity	$	1,894,542		$	1,803,671

See Condensed Notes to Consolidated Financial Statements.

INFINITY PROPERTY AND CASUALTY CORPORATION 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 (Loss), Net of Tax			Treasury Stock			Total
Balance at December 31, 2008	$	20,999	$	341,889	$	439,051		$	5,987		$	(282,594	)	$	525,331

Net earnings	$	—	$	—	$	35,932		$	—		$	—		$	35,932
Net change in postretirement benefit liability		—		—		—			(73	)		—			(73	)
Change in unrealized gain on investments		—		—		—			29,834			—			29,834
Change in non-credit component of impairment losses on fixed maturities		—		—		—			11,936			—			11,936

Comprehensive income														$	77,629
Reclassification of non-credit component of previously recognized impairment losses on fixed maturities		—		—		38,107			(38,107	)		—			0
Tax benefit on reclassification		—		—		—			13,338			—			13,338
Dividends paid to common shareholders		—		—		(4,958	)		—			—			(4,958	)
Shares issued and share-based compensation expense		57		1,843		—			—			—			1,900
Acquisition of treasury stock		—		—		—			—			(20,583	)		(20,583	)

Balance at September 30, 2009	$	21,056	$	343,732	$	508,132		$	22,914		$	(303,178	)	$	592,656

Net earnings	$	—	$	—	$	34,662		$	—		$	—		$	34,662
Net change in postretirement benefit liability		—		—		—			(4	)		—			(4	)
Change in unrealized gain on investments		—		—		—			(8,308	)		—			(8,308	)
Change in non-credit component of impairment losses on fixed maturities		—		—		—			4,898			—			4,898

Comprehensive income														$	31,248
Dividends paid to common shareholders		—		—		(1,626	)		—			—			(1,626	)
Shares issued and share-based compensation expense		8		299		—			—			—			307
Acquisition of treasury stock		—		—		—			—			(4,425	)		(4,425	)

Balance at December 31, 2009	$	21,064	$	344,031	$	541,167		$	19,500		$	(307,602	)	$	618,160


Net earnings	$	—	$	—	$	62,730		$	—		$	—		$	62,730
Net change in postretirement benefit liability		—		—		—			(52	)		—			(52	)
Change in unrealized gain on investments		—		—		—			14,002			—			14,002
Change in non-credit component of impairment losses on fixed maturities		—		—		—			3,620			—			3,620

Comprehensive income														$	80,300
Dividends paid to common shareholders		—		—		(5,449	)		—			—			(5,449	)
Shares issued and share-based compensation expense		132		4,395		—			—			—			4,527
Acquisition of treasury stock		—		—		—			—			(45,815	)		(45,815	)

Balance at September 30, 2010	$	21,195	$	348,426	$	598,449		$	37,069		$	(353,417	)	$	651,723

See Condensed Notes to Consolidated Financial Statements.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

INFINITY PROPERTY AND CASUALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three months ended September 30,
	2010			2009
Operating Activities:
Net earnings	$	30,831		$	8,224
Adjustments:
Depreciation and amortization		4,294			2,706
Net realized (gains) losses on investments		(7,991	)		12,113
Loss on disposal of property and equipment		4			2
Share-based compensation expense		1,139			321
(Increase) decrease in accrued investment income		(8	)		156
Increase in agents’ balances and premium receivable		(10,810	)		(3,091	)
Decrease in reinsurance receivables		1,253			1,514
(Increase) decrease in deferred policy acquisition costs		(3,689	)		45
Decrease in other assets		3,200			1,218
Decrease in unpaid losses and loss adjustment expenses		(4,813	)		(1,977	)
Increase in unearned premium		10,039			1,064
Decrease in other liabilities		(3,780	)		(2,283	)

Net cash provided by operating activities		19,668			20,012

Investing Activities:
Purchases of and additional investments in:
Fixed maturities		(178,622	)		(236,935	)
Equity securities		0			(1,700	)
Property and equipment		(1,205	)		(1,433	)
Maturities and redemptions of fixed maturities		34,692			51,757
Sales of fixed maturities		145,219			152,044

Net cash provided by (used in) investing activities		84			(36,266	)

Financing Activities:
Proceeds from stock options exercised and employee stock purchases, including tax benefit		652			529
Acquisition of treasury stock		(16,436	)		(1,692	)
Dividends paid to shareholders		(1,762	)		(1,633	)

Net cash used in financing activities		(17,547	)		(2,796	)

Net increase (decrease) in cash and cash equivalents		2,205			(19,050	)
Cash and cash equivalents at beginning of period		63,147			149,146

Cash and cash equivalents at end of period	$	65,352		$	130,097

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

INFINITY PROPERTY AND CASUALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine months ended September 30,
	2010			2009
Operating Activities:
Net earnings	$	62,730		$	35,932
Adjustments:
Depreciation and amortization		12,574			7,343
Net realized (gains) losses on investments		(7,580	)		18,070
Loss on disposal of property and equipment		7			98
Share-based compensation expense		3,182			1,111
(Increase) decrease in accrued investment income		(625	)		862
Increase in agents’ balances and premium receivable		(50,745	)		(8,949	)
Decrease in reinsurance receivables		214			4,708
Increase in deferred policy acquisition costs		(12,994	)		(1,073	)
(Increase) decrease in other assets		(9,009	)		4,995

Decrease in unpaid losses and loss adjustment expenses		(11,660	)		(12,731	)
Increase in unearned premium		61,993			7,594
Decrease in payable to reinsurers		(58	)		(954	)
Increase in other liabilities		14,846			4,484

Net cash provided by operating activities		62,876			61,489

Investing Activities:
Purchases of and additional investments in:
Fixed maturities		(371,671	)		(393,813	)
Equity securities		0			(1,817	)
Property and equipment		(6,906	)		(3,718	)
Maturities and redemptions of fixed maturities		105,828			119,653
Sales of fixed maturities		225,403			245,740

Net cash used in investing activities		(47,346	)		(33,955	)

Financing Activities:
Proceeds from stock options exercised and employee stock purchases, including tax benefit		1,344			790
Acquisition of treasury stock		(45,775	)		(20,837	)
Dividends paid to shareholders		(5,449	)		(4,958	)

Net cash used in financing activities		(49,879	)		(25,006	)

Net (decrease) increase in cash and cash equivalents		(34,349	)		2,528
Cash and cash equivalents at beginning of period		99,700			127,568

Cash and cash equivalents at end of period	$	65,352		$	130,097

See Condensed Notes to Consolidated Financial Statements.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

INDEX TO NOTES


1.Reporting and Accounting Policies		6.Long-Term Debt

2.Share-Based Compensation		7.Income Taxes

3.Computation of Earnings Per Share		8.Additional Information

4.Fair Value		9.Insurance Reserves

5.Investments		10.Commitments and Contingencies

Note 1 Reporting and Accounting Policies

Nature of Operations

Infinity Property and Casualty Corporation (“Infinity” or the “Company”) is a holding company that, through subsidiaries, provides personal automobile insurance with a concentration on nonstandard auto insurance. Although licensed to write insurance in all 50 states and the District of Columbia, Infinity focuses on select states that management believes 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 Infinity Property and Casualty Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009. 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 Infinity’s financial performance since the beginning of the year.

These financial statements reflect certain adjustments necessary for a fair presentation of Infinity’s results of operations and financial position. Such adjustments consist of normal, recurring accruals recorded to match expenses with their related revenue streams and the elimination of all significant inter-company transactions and balances.

Infinity has evaluated events that occurred after September 30, 2010 for recognition or disclosure in the Company’s financial statements and the notes to the financial statements.

Schedules may not foot due to rounding.

Estimates

Certain accounts and balances within these financial statements are based upon management’s estimates and assumptions. The amount of reserves for claims not yet paid, for example, is an item that can only be recorded by estimation. Unrealized capital gains and losses on investments are subject to market fluctuations, and management uses 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 Infinity’s results of operations could be material. The results of operations for the periods presented may not be indicative of the Company’s results for the entire year.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

Note 2 Share-Based Compensation

Restricted Stock Plan

Infinity’s Amended Restricted Stock Plan was established in 2002 and amended on July 31, 2007. There were 500,000 shares of Infinity common stock reserved for issuance under the Restricted Stock Plan, of which 206,609 shares have been issued through September 30, 2010. The fair value of shares issued under Infinity’s Restricted Stock Plan is expensed over the vesting periods of the awards based on the market value of Infinity’s stock on the date of grant.

On July 31, 2007, Infinity’s Compensation Committee approved the grant of 72,234 shares of restricted stock to certain officers under the Amended Restricted Stock Plan. These shares will vest in full on July 31, 2011. During the vesting period, the shares will not have voting rights but will accrue dividends, which will not be paid until the shares have vested. The shares are treated as issued and outstanding for calculation of diluted earnings per share only. Until fully vested, the shares will not be considered issued and outstanding for purposes of the basic earnings per share calculation. During the third quarter and first nine months of 2010, $0.2 million and $0.6 million, respectively, of expense was recorded in the Consolidated Statements of Earnings related to the grant of restricted stock. During the third quarter and first nine months of 2009, $0.2 million and $0.6 million, respectively, of expense was recorded in the Consolidated Statements of Earnings related to the grant of restricted stock.

Non-employee Directors’ Stock Ownership Plan

In May 2005, Infinity’s shareholders approved the Non-employee Directors’ Stock Ownership Plan (the “Directors’ Plan”). The purpose of the Directors’ Plan is to include Infinity common stock as part of the compensation provided to its non-employee directors and to provide for stock ownership requirements for Infinity’s non-employee directors. There are 200,000 shares of Infinity common stock reserved for issuance under the Directors’ Plan, of which 37,302 shares have been issued through September 30, 2010. Under the terms of the Directors’ Plan, shares are granted on or about June 1 of each year and the recipient may not sell or transfer the shares for six months from the date of grant. On June 1, 2010, 7,672 shares of common stock, determined pursuant to the Directors’ Plan and valued at $350,000, were issued to Infinity’s non-employee directors. On June 1, 2009, 9,583 shares of common stock, determined pursuant to the Directors’ Plan and valued at $350,000, were issued to Infinity’s non-employee directors. Participants’ shares are treated as issued and outstanding for basic and diluted earnings per share calculations.

Employee Stock Purchase Plan

Infinity established the Employee Stock Purchase Plan (the “ESPP”) in 2004. Under this plan, all eligible full-time employees may purchase shares of Infinity common stock at a 15% discount to the current market price. Employees may allocate up to 25% of their base salary with a maximum annual participation amount of $25,000. The source of shares issued to participants is treasury shares or authorized but previously unissued shares. The maximum number of shares that may be issued under the ESPP is 1,000,000, of which 41,434 have been issued through September 30, 2010. Infinity’s ESPP is qualified under Section 423 of the Internal Revenue Code of 1986, as amended. The 15% discount for shares purchased during the three-month periods ended September 30, 2010 and 2009 approximated $10,000 and $8,000, respectively. The 15% discount for shares purchased during the nine-month periods ended September 30, 2010 and 2009 approximated $26,000 and $24,000, respectively. The discounts were recognized as compensation expense in the Consolidated Statements of Earnings in each period. Participants’ shares are treated as issued and outstanding for basic and diluted earnings per share calculations.

Performance Share Plan

In 2008, Infinity’s shareholders approved the Performance Share Plan (the “Plan”). The purpose of the Plan is to align further the interest of management with the long-term shareholders of the Company by including performance-based compensation, payable in shares of common stock, as a component of an executive’s annual compensation. The Plan is administered by the Compensation Committee (“Committee”), which is composed solely of three outside directors as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended. No member of the Committee, while serving as such, is eligible to be granted performance share units. The Committee will (i) establish the performance goals, which may include but are not limited to, combined ratio, premium growth, growth within certain specific geographic areas and earnings per share or return on equity over the course of the upcoming three year period, (ii) determine the Plan participants, (iii) set the performance share units to be awarded to such participants, and (iv) set the rate at which performance share units will convert to shares of common stock based upon attainment of the performance goals. The number of shares of common stock that may be issued under the Plan is limited to 500,000 shares. No shares have been issued under this plan. During the third quarter and first nine months of 2010, approximately $0.9 million and $2.2 million of expense,

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

respectively, was recognized in the Consolidated Statements of Earnings for the Plan. During the third quarter and first nine months of 2009, approximately $0.1 million and $0.2 million of expense, respectively, was recognized in the Consolidated Statements of Earnings for the Plan.

Stock Option Plan

Infinity’s Stock Option Plan (“SOP”) was amended to prohibit any future grant of stock options from the plan after May 20, 2008. No options have been granted since 2004. Options were generally granted with an exercise price equal to the closing price of Infinity’s stock at the date of grant and have a 10-year contractual life. All of the options under this plan have fully vested. Subject to specific limitations contained in the SOP, Infinity’s Board of Directors has the ability to amend, suspend or terminate the plan at any time without shareholder approval. The SOP will continue in effect until the exercise or expiration of all options granted under the plan.

As permitted by the Stock Compensation topic of the FASB Accounting Standards Codification, Infinity used the modified Black-Scholes model with the assumptions noted below to estimate the value of employee stock options on the date of grant. Expected volatilities are based on historical volatilities of Infinity’s stock. Infinity selected the expected option life to be 7.5 years, which represents the midpoint between the last vesting date and the end of the contractual term. The risk-free rate for periods within the contractual life of the options is based on the yield on 10-year Treasury notes in effect at the time of grant. The dividend yield was based on expected dividends at the time of grant.

The weighted-average grant date fair values of options granted during 2004 and 2003 were estimated using the modified Black-Scholes valuation model and the following weighted-average assumptions:


	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 as of September 30, 2010		106,050			156,840

The following table describes activity for Infinity’s Stock Option Plan:


	Number of Options			Weighted-Average Exercise Price		Weighted-Average Remaining Term (in years)		Aggregate Intrinsic Value (a) (in millions)
Outstanding at December 31, 2009		312,840		$	23.05
Granted		0			—
Exercised		(48,950	)	$	21.73
Forfeited		(1,000	)	$	33.58

Outstanding at September 30, 2010		262,890		$	23.26		2.79	$	6.7


Vested as of September 30, 2010		262,890		$	23.26		2.79	$	6.7
Exercisable as of September 30, 2010		262,890		$	23.26		2.79	$	6.7

(a) The intrinsic value for the stock options is calculated based on the difference between the exercise price of the underlying awards and Infinity’s closing stock price as of the reporting date.

The Stock Compensation topic of the FASB Accounting Standards codification requires the recognition of share-based compensation for the number of awards that are ultimately expected to vest. As of September 30, 2010, Infinity used an estimated forfeiture rate of 0%. Estimated forfeitures will be reassessed in subsequent periods and may change based on new facts and circumstances.

Cash received from option exercises for the nine months ended September 30, 2010 and 2009 was approximately $1.1 million and $0.5 million, respectively. The actual tax benefit realized for the tax deductions from options exercised of share-based payment

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

arrangements was approximately $0.1 million and $0.2 million, respectively, for the nine months ended September 30, 2010 and 2009. The total intrinsic value of options exercised during the nine months ended September 30, 2010 and 2009 was approximately $0.7 million and $0.5 million, respectively.

Infinity has a policy of issuing new stock for the exercise of stock options.

Note 3 Computation of Earnings per Share

The following table illustrates the computation of Infinity’s basic and diluted earnings per common share (in thousands, except per share figures):


	For the three months ended September 30,				For the nine months ended September 30,
	2010		2009		2010		2009
Net earnings for basic and diluted earnings per share	$	30,831	$	8,224	$	62,730	$	35,932
Average basic shares outstanding		12,576		13,534		12,980		13,713

Basic earnings per share	$	2.45	$	0.61	$	4.83	$	2.62


Average basic shares outstanding		12,576		13,534		12,980		13,713
Restricted stock not yet vested		72		72		72		72
Dilutive effect of assumed option exercises		141		146		141		136
Dilutive effect of Performance Share Plan		124		0		98		0

Average diluted shares outstanding		12,913		13,753		13,292		13,921

Diluted earnings per share	$	2.39	$	0.60	$	4.72	$	2.58

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

Note 4 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 table presents for each of the fair value hierarchy levels the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2010 (in thousands):


	Fair Value
	Level 1			Level 2			Level 3			Total
Cash and cash equivalents	$	65,352		$	—		$	—		$	65,352
Fixed maturity securities:
U.S. government		181,697			—			—			181,697
Government-sponsored entities		—			46,279			5,061			51,340
State and municipal		—			397,978			—			397,978
Mortgage-backed securities:
Residential		—			178,536			—			178,536
Commercial		—			38,354			—			38,354

Total mortgage-backed securities	$	—		$	216,890		$	—		$	216,890
Collateralized mortgage obligations		—			49,390			1,455			50,844
Asset-backed securities		—			27,938			—			27,938
Corporates		—			257,788			23,332			281,121

Total fixed maturities	$	181,697		$	996,263		$	29,848		$	1,207,808
Equity securities		40,837			1			—			40,838

Total	$	287,886		$	996,263		$	29,848		$	1,313,997

Percentage of total		21.9	%		75.8	%		2.3	%		100.0	%

Level 1 includes cash and cash equivalents, U.S. Treasury securities and an exchange-traded fund. Level 2 securities are comprised of 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. Transfers between levels are recognized at the end of the reporting period.

A third party, nationally recognized pricing service provides the fair value of securities in Level 2. Infinity periodically reviews the third party pricing methodologies and tests for significant differences between the market price used to value the security and recent sales activity.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

The following table presents the changes in the Level 3 fair value category at September 30, 2010 (in thousands):


	For the three months ended September 30, 2010
	Government- Sponsored Entities			State and Municipal			Mortgage- Backed Securities			Collateralized Mortgage Obligations			Asset- Backed Securities			Corporates			Total
Balance at beginning of period	$	5,087		$	0		$	0		$	1,703		$	0		$	13,643		$	20,433
Total gains or (losses), unrealized or realized
Included in net earnings		0			0			0			(3	)		0			(99	)		(102	)
Included in other comprehensive income		(26	)		0			0			42			0			301			317
Purchases		0			0			0			0			0			5,257			5,257
Sales		0			0			0			0			0			0			0
Settlements		0			0			0			(286	)		0			(314	)		(600	)
Transfers in		0			0			0			0			0			5,541			5,541
Transfers out		0			0			0			0			0			(997	)		(997	)

Balance at end of period	$	5,061		$	0		$	0		$	1,455		$	0		$	23,332		$	29,848


	For the nine months ended September 30, 2010
	Government- Sponsored Entities			State and Municipal			Mortgage- Backed Securities			Collateralized Mortgage Obligations			Asset- Backed Securities			Corporates			Total
Balance at beginning of period	$	4,392		$	3,810		$	6,169		$	8,888		$	576		$	13,469		$	37,302
Total gains or (losses), unrealized or realized
Included in net earnings		0			0			0			(14	)		0			(1,738	)		(1,753	)
Included in other comprehensive income		49			0			0			129			0			2,546			2,725
Purchases		0			0			0			0			645			6,896			7,541
Sales		0			0			0			0			0			(334	)		(334	)
Settlements		(277	)		0			0			(680	)		0			(1,571	)		(2,528	)
Transfers in		897			0			0			0			0			5,541			6,437
Transfers out		0			(3,810	)		(6,169	)		(6,867	)		(1,221	)		(1,476	)		(19,542	)

Balance at end of period	$	5,061		$	0		$	0		$	1,455		$	0		$	23,332		$	29,848

Of the $29.8 million fair value of securities in Level 3, which consists of 16 securities, 13 are priced based on non-binding broker quotes or prices from various outside sources. The remaining three securities, which have a fair value of $3.1 million, are manually calculated based on expected principal repayments from Bloomberg, the zero spot Treasury curve at September 30, 2010 and the average spreads to Treasury for the type and rating of the security being priced.

Approximately $19.5 million of securities in Level 3 at December 31, 2009 were transferred to Level 2 during the nine months ended September 30, 2010 because a price for those securities was obtained from a third party, nationally recognized pricing service. Approximately $6.4 million of securities were transferred into Level 3 from Level 2 during the nine months ended September 30, 2010 because the Company could not obtain a price from a third party, nationally recognized pricing service. There were no transfers between Levels 1 and 2.

The gains or losses included in net earnings are included in the line item net realized gains (losses) on investments in the Consolidated Statements of Earnings. The net gains or losses included in other comprehensive income are recognized in 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.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

The following table presents the carrying value and estimated fair value of Infinity’s financial instruments (in thousands):


	September 30, 2010				December 31, 2009
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Cash and cash equivalents	$	65,352	$	65,352	$	99,700	$	99,700
Available-for-sale securities
Fixed maturities		1,207,808		1,207,808		1,146,692		1,146,692
Equity securities		40,838		40,838		39,438		39,438

Total cash and investments	$	1,313,997	$	1,313,997	$	1,285,831	$	1,285,831


Liabilities:
Long-term debt	$	194,709	$	198,962	$	194,651	$	192,309

See Note 5 to the Consolidated Financial Statements for additional information on investments and Note 6 for additional information on long-term debt.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

Note 5 Investments

All fixed maturity and equity securities are considered available-for-sale and reported at fair value with the net unrealized gains or losses reported after-tax (net of any valuation allowance) as a component of other comprehensive income. The proceeds from sales of securities for the three and nine months ended September 30, 2010 were $145.2 million and $225.4 million, respectively. Proceeds from sales of securities for the three and nine months ended September 30, 2009 were $152.0 million and $245.7 million, respectively. These proceeds are net of $2.3 million of receivable for securities sold during the third quarter of 2009 that had not settled at September 30, 2009. Gains or losses on securities are determined on a specific identification basis.

Summarized information for the major categories of Infinity’s investment portfolio follows (in thousands):


	September 30, 2010
	Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses			OTTI Recognized in Accumulated OCI			Fair Value
Fixed maturities:
U.S. government	$	177,149	$	4,548	$	0		$	0		$	181,697
Government-sponsored entities		49,547		1,793		0			0			51,340
State and municipal		382,351		15,680		(54	)		0			397,978
Mortgage-backed securities:
Residential		172,301		6,276		(40	)		0			178,536
Commercial		36,937		1,462		(45	)		0			38,354

Total mortgage-backed securities	$	209,238	$	7,737	$	(85	)	$	0		$	216,890
Collateralized mortgage obligations		49,677		1,292		(1	)		(123	)		50,844
Asset-backed securities		27,488		483		(31	)		(2	)		27,938
Corporates		265,736		15,391		(6	)		0			281,121

Total fixed maturities	$	1,161,185	$	46,925	$	(177	)	$	(125	)	$	1,207,808
Equity securities		31,327		9,511		0			0			40,838

Total	$	1,192,511	$	56,436	$	(177	)	$	(125	)	$	1,248,645


	December 31, 2009
	Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses			OTTI Recognized in Accumulated OCI			Fair Value
Fixed maturities:
U.S. government	$	187,915	$	4,063	$	(717	)	$	0		$	191,261
Government-sponsored entities		56,344		790		(118	)		0			57,015
State and municipal		342,696		9,020		(1,640	)		0			350,076
Mortgage-backed securities:
Residential		149,354		3,549		(36	)		0			152,867
Commercial		53,338		637		(49	)		0			53,926

Total mortgage-backed securities	$	202,692	$	4,186	$	(85	)	$	0		$	206,793
Collateralized mortgage obligations		65,249		619		(387	)		(901	)		64,580
Asset-backed securities		6,760		41		(71	)		(5	)		6,726
Corporates		264,120		8,190		(696	)		(1,374	)		270,241

Total fixed maturities	$	1,125,776	$	26,909	$	(3,714	)	$	(2,279	)	$	1,146,692
Equity securities		31,331		8,108		0			0			39,438

Total	$	1,157,107	$	35,017	$	(3,714	)	$	(2,279	)	$	1,186,131

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

The following table sets 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
	Number of Securities with Unrealized Losses		Fair Value		Gross Unrealized Losses			Unrealized Loss as % of Cost			Number of Securities with Unrealized Losses		Fair Value		Gross Unrealized Losses			Unrealized Loss as % of Cost
September 30, 2010
Fixed maturities:
U.S. government		—	$	—	$	—			0.0	%		—	$	—	$	—			0.0	%
Government-sponsored entities		—		—		—			0.0	%		—		—		—			0.0	%
State and municipal		12		25,193		(54	)		0.2	%		—		—		—			0.0	%
Mortgage-backed securities:
Residential		3		14,542		(40	)		0.3	%		—		—		—			0.0	%
Commercial		4		4,819		(7	)		0.2	%		4		3,728		(37	)		1.0	%

Total mortgage-backed securities		7	$	19,361	$	(48	)		0.2	%		4	$	3,728	$	(37	)		1.0	%
Collateralized mortgage obligations		1		438		(1	)		0.3	%		2		1,455		(123	)		7.8	%
Asset-backed securities		2		1,148		(31	)		2.6	%		1		69		(2	)		3.0	%
Corporates		5		3,301		(6	)		0.2	%		—		—		—			0.0	%

Total fixed maturities		27	$	49,441	$	(140	)		0.3	%		7	$	5,252	$	(162	)		3.0	%
Equity securities		—		—		—			0.0	%		—		—		—			0.0	%

Total		27	$	49,441	$	(140	)		0.3	%		7	$	5,252	$	(162	)		3.0	%


	Less than 12 Months										12 Months or More
	Number of Securities with Unrealized Losses		Fair Value		Gross Unrealized Losses			Unrealized Loss as % of Cost			Number of Securities with Unrealized Losses		Fair Value		Gross Unrealized Losses			Unrealized Loss as % of Cost
December 31, 2009
Fixed maturities:
U.S. government		11	$	46,288	$	(717	)		1.5	%		—	$	—	$	—			0.0	%
Government-sponsored entities		2		23,440		(118	)		0.5	%		—		—		—			0.0	%
State and municipal		39		98,053		(1,640	)		1.6	%		—		—		—			0.0	%
Mortgage-backed securities:
Residential		5		26,305		(36	)		0.1	%		—		—		—			0.0	%
Commercial		8		11,742		(49	)		0.4	%		—		—		—			0.0	%

Total mortgage-backed securities		13	$	38,047	$	(85	)		0.2	%		—	$	—	$	—			0.0	%
Collateralized mortgage obligations		5		17,916		(131	)		0.7	%		7		14,133		(1,157	)		7.6	%
Asset-backed securities		1		576		(1	)		0.2	%		3		536		(75	)		12.3	%
Corporates		32		57,203		(768	)		1.3	%		18		8,117		(1,301	)		13.8	%

Total fixed maturities		103	$	281,523	$	(3,460	)		1.2	%		28	$	22,786	$	(2,533	)		10.0	%
Equity securities		—		—		—			0.0	%		—		—		—			0.0	%

Total		103	$	281,523	$	(3,460	)		1.2	%		28	$	22,786	$	(2,533	)		10.0	%

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

The determination of whether unrealized losses are “other-than-temporary” requires judgment based on subjective as well as objective factors. Factors considered and resources used by management include:

•

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 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.

Management regularly evaluates for potential impairment each security position that has any of the following: a fair value of less than 95% of its book value, an unrealized loss that equals or exceeds $100,000 or one or more impairment charges recorded in the past. In addition, management reviews positions held related to an issuer of a previously impaired security.


	September 30, 2010			December 31, 2009
Number of positions held with unrealized:
Gains		564			413
Losses		34			131

Number of positions held that individually exceed unrealized:
Gains of $500,000		5			4
Losses of $500,000		0			1

Percentage of positions held with unrealized:
Gains that were investment grade		77	%		76	%
Losses that were investment grade		91	%		78	%

Percentage of fair value held with unrealized:
Gains that were investment grade		91	%		94	%
Losses that were investment grade		99	%		95	%

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

The following table sets forth the amount of unrealized loss by age and severity at September 30, 2010 (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%*

Less than or equal to:
Three months	$	46,310	$	(92	)	$	(92	)	$	0		$	0
Six months		2,720		(26	)		(26	)		0			0
Nine months		0		0			0			0			0
Twelve months		1,297		(44	)		(22	)		(22	)		0
Greater than twelve months		4,367		(141	)		(27	)		0			(114	)

Total	$	54,693	$	(302	)	$	(166	)	$	(22	)	$	(114	)

*	As a percentage of amortized cost or cost.

The change in unrealized gains (losses) on marketable securities included the following (in thousands):


	Pre-tax
	Fixed Maturities¹			Equity Securities		Tax Effects			Net
Nine months ended September 30, 2010
Unrealized holding gains (losses) on securities arising during the period	$	33,290		$	1,399	$	(12,141	)	$	22,548
Realized (gains) losses on securities sold		(9,530	)		0		3,336			(6,195	)
Impairment loss recognized in earnings		1,947			4		(683	)		1,268

Change in unrealized gains (losses) on marketable securities, net	$	25,706		$	1,403	$	(9,488	)	$	17,621


Nine months ended September 30, 2009
Unrealized holding gains (losses) on securities arising during the period	$	39,999		$	6,192	$	(16,167	)	$	30,024
Realized (gains) losses on securities sold		(1,311	)		0		459			(852	)
Impairment loss recognized in earnings		19,381			0		(6,783	)		12,598

Change in unrealized gains (losses) on marketable securities, net	$	58,069		$	6,192	$	(22,491	)	$	41,770

¹The change in unrealized gains (losses) for the nine months ended September 30, 2009 excludes a $38.1 million reclassification of the non-credit component of previously recognized impairments from retained earnings to accumulated other comprehensive income

For fixed maturity securities that are other-than-temporarily impaired, Infinity assesses its intent to sell and the likelihood that the Company will be required to sell the security before recovery of its amortized cost. If a fixed maturity security is considered other-than-temporarily impaired but the Company does not intend to and is not more than likely to be required to sell the security before its recovery to amortized cost, the amount of the impairment is separated into a credit loss component and the amount due to all other factors. 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 (1) the effective interest rate implicit at the date of acquisition for non-structured securities or (2) 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. The credit loss component of an impairment charge is recognized in net earnings while the non-credit component is recognized in accumulated other comprehensive income. If Infinity intends 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.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

The following table is a progression of credit losses on fixed maturity securities for which a portion was recognized in accumulated other comprehensive income (in thousands):


Balance at December 31, 2009	$	3,136

Additional credit impairments on:
Previously impaired securities		1,753
Securities without prior impairments		7
Reductions for securities sold and pay downs		(1,503	)

Balance at September 30, 2010	$	3,394

The table below sets forth the scheduled maturities of fixed maturity securities at September 30, 2010, based on their fair values (in thousands). Securities that do not have a single maturity date are reported 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	$	79,513	$	0	$	0	$	79,513	$	78,638
After one year through five years		450,202		861		2,413		453,476		433,772
After five years through ten years		261,209		22,310		0		283,519		270,017
After ten years		90,304		5,322		0		95,627		92,355
Mortgage-backed, asset-backed and collateralized mortgage obligations		269,473		26,199		0		295,672		286,402

Total	$	1,150,701	$	54,693	$	2,413	$	1,207,808	$	1,161,185

Note 6 Long-Term Debt

In February 2004, Infinity issued $200 million principal of senior notes due February 2014 (the “Senior Notes”). The Senior Notes accrue interest at an effective yield of 5.55% and bear a coupon of 5.5%, payable semiannually. At the time the notes were issued, Infinity capitalized $2.1 million of debt issuance costs, which are being amortized over the term of the Senior Notes. During 2009, Infinity repurchased $5.0 million of its debt, bringing the outstanding principal to $195.0 million. The September 30, 2010 fair value of $199.0 million was calculated using a 233 basis point spread to the ten-year U.S. Treasury Note of 2.512%.

In August 2008, Infinity entered into an agreement for a $50 million three-year revolving credit facility (the “Credit Agreement”) that requires Infinity to meet certain financial and other covenants. Infinity is currently in compliance with all covenants under the Credit Agreement. At September 30, 2010, there were no borrowings outstanding under the Credit Agreement.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

Note 7 Income Taxes

The provision for income taxes for the three and nine months ended September 30, 2010 was $10.8 million and $25.2 million, respectively, compared to $9.2 million and $24.5 million for the same periods of 2009. The following table reconciles Infinity’s income taxes at statutory rates to its effective provision for income taxes (in thousands):


	For the three months ended September 30,						For the nine months ended September 30,
	2010			2009			2010			2009
Earnings before income taxes	$	41,641		$	17,411		$	87,899		$	60,440

Income taxes at statutory rates		14,574			6,094			30,765			21,154
Effect of:
Dividends-received deduction		(43	)		(38	)		(117	)		(111	)
Tax-exempt interest		(895	)		(601	)		(2,667	)		(1,846	)
Adjustment to valuation allowance		(2,849	)		3,708			(2,872	)		5,277
Other		23			24			60			34

Provision for income taxes	$	10,810		$	9,187		$	25,169		$	24,508


GAAP effective tax rate		26.0	%		52.8	%		28.6	%		40.6	%

During the third quarter and first nine months of 2010, Infinity decreased its tax valuation allowance by approximately $2.8 million and $2.9 million, respectively. This adjustment is primarily due to the utilization of a capital loss carryforward. The following table illustrates the Company’s remaining capital loss carryforwards at September 30, 2010 (in thousands).


	Expiring		Amount
Capital loss carryforward		2012	$	143
Capital loss carryforward		2014	$	2,858

In the third quarter and first nine months of 2009, Infinity increased its tax valuation allowance by approximately $3.7 million and $5.3 million, respectively, primarily due to an increase in the deferred tax asset related to other-than-temporary impaired securities.

Note 8 Additional Information

Supplemental Cash Flow Information

The Company made the following payments that are not separately disclosed in the Consolidated Statements of Cash Flows (in thousands):


	For the three months ended September 30,				For the nine months ended September 30,
	2010		2009		2010		2009
Income tax payments	$	9,400	$	8,500	$	31,000	$	25,700
Interest payments on debt		5,363		5,500		10,725		11,000

Negative Cash Book Balances

Negative cash book balances, included in the line item “Other liabilities” in the Consolidated Balance Sheets, were $29.9 million and $22.1 million, respectively, at September 30, 2010 and December 31, 2009.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

Note 9 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 September 30,						Nine months ended September 30,
	2010			2009			2010			2009
Balance at Beginning of Period
Unpaid losses on known claims	$	170,692		$	169,753		$	164,134		$	179,530
IBNR losses		185,553			196,830			193,790			196,891
LAE		146,022			167,419			151,191			168,335

Total unpaid losses and LAE		502,267			534,002			509,114			544,756
Reinsurance recoverables		(18,574	)		(18,557	)		(17,715	)		(20,516	)

Unpaid losses and LAE, net of reinsurance recoverables		483,693			515,445			491,399			524,241

Current Activity
Loss and LAE incurred:
Current accident year		169,094			154,269			505,982			476,515
Prior accident years		(16,790	)		(13,211	)		(53,755	)		(33,364	)

Total loss and LAE incurred		152,304			141,057			452,227			443,151
Loss and LAE payments:
Current accident year		(114,387	)		(101,870	)		(262,287	)		(239,046	)
Prior accident years		(41,376	)		(40,514	)		(201,105	)		(214,227	)

Total loss and LAE payments		(155,763	)		(142,384	)		(463,393	)		(453,273	)

Balance at End of Period
Unpaid losses and LAE, net of reinsurance recoverables		480,234			514,118			480,234			514,118
Add back reinsurance recoverables		17,221			17,907			17,221			17,907

Total unpaid losses and LAE	$	497,454		$	532,025		$	497,454		$	532,025


Unpaid losses on known claims	$	173,542		$	169,814		$	173,542		$	169,814
IBNR losses		182,666			196,715			182,666			196,715
LAE		141,247			165,497			141,247			165,497

Total unpaid losses and LAE	$	497,454		$	532,025		$	497,454		$	532,025

Bodily injury and property damage coverage in California, Florida, Pennsylvania, Texas and Connecticut as well as the Commercial Vehicle product related to accident years 2009, 2008 and 2007 were the primary source of the $16.8 million and $53.8 million, respectively, of favorable reserve development during the three and nine months ended September 30, 2010.

The $13.2 million and $33.4 million of favorable development during the three and nine months ended September 30, 2009, respectively, primarily relates to liability coverage on the nonstandard personal auto programs in California, Connecticut and Florida in accident years 2006 through 2008. In addition, there was favorable development on loss and LAE reserves relating to liability coverage in the Commercial Vehicle program. Included in the favorable development for the three and nine months ended September 30, 2009 is $2.4 million and $2.6 million, pre-tax respectively, related to the cancellation of non-escheatable claim checks.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

Condensed Notes to Consolidated Financial Statements

Note 10 Commitments and Contingencies

Commitments

There have been no other material changes from the commitments discussed in the Form 10-K for the year ended December 31, 2009. For a description of the Company’s previously reported commitments, refer to Note 16 in the Form 10-K for the year ended December 31, 2009 and Note 10 in the Form 10-Q for the quarter ended June 30, 2010.

Contingencies

There have been no material changes from the contingencies discussed in the Form 10-K for the year ended December 31, 2009. For a description of the Company’s previously reported contingencies, refer to Note 16 Commitments and Contingencies, in the Form 10-K for the year ended December 31, 2009.

INFINITY PROPERTY AND CASUALTY CORPORATION 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 statements that could be considered “forward-looking statements” which anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made 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 are based 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 those expected by Infinity include determinations with respect to reserve adequacy, realized gains or losses on the investment portfolio including other-than-temporary impairments for credit losses, rising bodily injury loss cost trends, undesired business mix or risk profile for new business, elevated unemployment rates and the proliferation of illegal immigration legislation in key Focus States. Infinity undertakes 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 see “Risk Factors” contained in Part I, Item 1A of Infinity’s Annual Report on Form 10-K for the twelve months ended December 31, 2009.

OVERVIEW

Despite a weak economy, the Company continued to enjoy strong growth in written premiums. The third quarter of 2010 marks the fourth consecutive quarter that the Company has experienced growth in written premiums. This increase is a result of aggressive marketing efforts intended to expand Infinity’s presence in its target markets, including the appointment of new agents in the Urban Zones and increased advertising. See Results of Operations – Underwriting – Premium for a more detailed discussion of Infinity’s gross written premium growth.

Net earnings and diluted earnings per share for the three months ended September 30, 2010 were $30.8 million and $2.39, respectively, compared to $8.2 million and $0.60, respectively, for the three months ended September 30, 2009. Net earnings and diluted earnings per share for the nine months ended September 30, 2010 were $62.7 million and $4.72, respectively, compared to $35.9 million and $2.58, respectively, for the nine months ended September 30, 2009. The increase in diluted earnings per share for the nine months ended September 30, 2010 is primarily due to an increase in underwriting income coupled with a decline in other-than-temporary impairment losses.

Infinity had a net realized gain on investments of $8.0 million for the third quarter of 2010 compared to a net realized loss of $12.1 million in the third quarter of 2009. Net realized gains on investments were $7.6 million for the first nine months of 2010 compared to net realized losses of $18.1 million for the same period of 2009. Included in the net realized gain for the first nine months of 2010 is $2.0 million of other-than-temporary impairments on fixed income securities compared with $19.4 million of impairments during the first nine months of 2009. Included in the net realized gain for the third quarter of 2010 is $0.2 million of other-than-temporary impairments on fixed income securities compared with $11.0 million of impairments during the third quarter of 2009.

Included in net earnings for the three and nine months ended September 30, 2010 were $10.9 million ($16.8 million pre-tax) and $34.9 million ($53.8 million pre-tax), respectively, of favorable development on prior accident period loss and LAE reserves. Included in net earnings for the three and nine months ended September 30, 2009 were $8.6 million ($13.2 million pre-tax) and $21.7 million ($33.4 million pre-tax), respectively, of favorable development. The following table displays combined ratio results by accident year developed through September 30, 2010.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

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


	Accident Year Combined Ratio Developed Through									Prior Accident Year Favorable / (Unfavorable) Development						Prior Accident Year Favorable / (Unfavorable) Development (in millions)
Accident Year	Dec. 2009			June 2010			Sept. 2010			Q3 2010			YTD 2010			Q3 2010			YTD 2010
Prior																$	(0.9	)	$	0.7
2004		85.4	%		85.3	%		85.1	%		0.2	%		0.3	%		1.4			2.3
2005		88.6	%		88.3	%		88.2	%		0.2	%		0.4	%		1.7			4.1
2006		91.3	%		90.9	%		90.8	%		0.1	%		0.5	%		1.1			4.8
2007		94.0	%		93.4	%		93.1	%		0.4	%		0.9	%		3.9			9.6
2008		94.1	%		93.3	%		92.8	%		0.5	%		1.3	%		4.7			12.2
2009		96.2	%		94.4	%		93.9	%		0.6	%		2.3	%		4.9			19.9
2010 YTD					100.3	%		98.7	%

																$	16.8		$	53.8

Recent accident years are less developed than prior years and must be interpreted with caution. However, the upward trend in the 2009 and 2010 accident year combined ratios is primarily due to an increase in new business during 2009 and 2010. In 2009, new business earned premium accounted for 35% of total earned premium while, through the first nine months of 2010, new business accounted for 40% of total earned premium. Infinity’s new business combined ratios typically run 20 to 30 points higher than renewal business combined ratios due to higher commission and acquisition expenses as well as typically higher loss ratios. See Results of Operations – Underwriting – Profitability for a more detailed discussion of Infinity’s underwriting results.

Infinity’s book value per share increased 19.2% from $43.56 at September 30, 2009 to $51.91 at September 30, 2010. This increase was primarily due to earnings and the change in unrealized net gains on investments, net of shareholder dividends, for the twelve months ended September 30, 2010. Annualized return on equity for the three and nine months ended September 30, 2010 was 19.3% and 13.2%, respectively, compared with 5.7% and 8.6% for the three and nine months ended September 30, 2009.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

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

RESULTS OF OPERATIONS

Underwriting

Premium

Infinity’s 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, Infinity believes that it is generally understood to mean coverage for drivers who, because of their driving record, age or vehicle type, represent higher than normal risks and pay higher rates for comparable coverage. Infinity also writes commercial vehicle insurance and insurance for classic collectible automobiles (“Classic Collector”).

Infinity is licensed to write insurance in all 50 states and the District of Columbia, but focuses its operations in targeted urban areas (“Urban Zones”) identified within selected Focus States that management believes offer the greatest opportunity for premium growth and profitability.

Infinity classifies the states in which it operates into three categories:

•

“Focus States” – Infinity has identified Urban Zones in these states which include: Arizona, California, Florida, Georgia, Illinois, Nevada, Pennsylvania and Texas.

•

“Maintenance States” – Infinity is maintaining its writings in these states which include: Alabama, Colorado, Connecticut, South Carolina, and Tennessee. Infinity believes each state offers the Company an opportunity for underwriting profit.

•

“Other States” – Includes all remaining states.

Infinity further classifies territories within the Focus States into two categories:

•

“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

•

Illinois – Chicago

•

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.

Infinity continually evaluates its market opportunities; thus the Focus States, Urban Zones, Maintenance States and Other States may change over time as new market opportunities arise, as the allocation of resources changes or as regulatory environments change. In the tables below, Infinity has restated 2009 premium, policies-in-force and combined ratios to be consistent with the 2010 definition of Urban Zones, Focus States, Maintenance States and Other States.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

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

The following table shows Infinity’s net earned premium for the three months ended September 30, 2010 and 2009 ($ in thousands):


	Three months ended September 30,
	2010			2009			$ Change			% Change
Net earned premium
Gross written premium
Personal Auto
Focus States:
Urban Zones	$	195,341		$	166,928		$	28,414			17.0	%
Non-urban Zones		26,524			21,799			4,725			21.7	%

Total Focus States		221,866			188,727			33,139			17.6	%
Maintenance States		5,518			6,429			(911	)		(14.2	)%
Other States		596			1,141			(545	)		(47.8	)%

Total personal auto		227,979			196,297			31,683			16.1	%

Commercial Vehicle		13,048			13,331			(283	)		(2.1	)%
Classic Collector		2,822			2,956			(134	)		(4.5	)%
Other		0			(1	)		1			(100.0	)%

Total gross written premium		243,850			212,583			31,267			14.7	%
Ceded reinsurance		(1,433	)		(1,236	)		(197	)		15.9	%

Net written premium		242,417			211,348			31,069			14.7	%
Change in unearned premium		(9,914	)		(1,010	)		(8,904	)		881.6	%

Net earned premium	$	232,503		$	210,337		$	22,165			10.5	%

The following table shows Infinity’s net earned premium for the nine months ended September 30, 2010 and 2009 ($ in thousands):


	Nine months ended September 30,
	2010			2009			$ Change			% Change
Net earned premium
Gross written premium
Personal Auto
Focus States:
Urban Zones	$	581,201		$	505,501		$	75,699			15.0	%
Non-urban Zones		83,947			66,905			17,042			25.5	%

Total Focus States		665,148			572,406			92,741			16.2	%
Maintenance States		17,229			21,445			(4,216	)		(19.7	)%
Other States		2,332			4,310			(1,978	)		(45.9	)%

Total personal auto		684,708			598,160			86,547			14.5	%

Commercial Vehicle		43,266			40,533			2,733			6.7	%
Classic Collector		7,936			11,131			(3,196	)		(28.7	)%
Other		0			111			(111	)		(100.0	)%

Total gross written premium		735,909			649,936			85,973			13.2	%
Ceded reinsurance		(4,073	)		(3,813	)		(260	)		6.8	%

Net written premium		731,836			646,123			85,713			13.3	%
Change in unearned premium		(61,677	)		(7,389	)		(54,288	)		734.7	%

Net earned premium	$	670,159		$	638,734		$	31,425			4.9	%

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

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

The following table shows Infinity’s policies-in-force:


	As of September 30,
	2010		2009		Change			% Change
Policies-in-force
Personal Auto
Focus States:
Urban Zones		665,330		593,003		72,327			12.2	%
Non-urban Zones		83,510		68,025		15,485			22.8	%

Total Focus States		748,840		661,028		87,812			13.3	%
Maintenance States		18,054		21,169		(3,115	)		(14.7	)%
Other States		2,417		4,315		(1,898	)		(44.0	)%

Total Personal Auto		769,311		686,512		82,799			12.1	%

Commercial Vehicle		31,761		26,601		5,160			19.4	%
Classic Collector		33,970		47,172		(13,202	)		(28.0	)%
Other		0		2		(2	)		(100.0	)%

Total policies-in-force		835,042		760,287		74,755			9.8	%

Gross written premium grew 14.7% and 13.2% during the third quarter and first nine months of 2010, respectively, compared with the same periods of 2009. During the first nine months of 2010, Infinity implemented 19 rate revisions in various states with an overall rate increase of less than 1%. Policies-in-force at September 30, 2010 increased 9.8% compared with the same period in 2009. Gross written premium grew more than policies-in-force due to a shift in business mix toward policies offering broader coverage. These policies typically generate a higher premium per policy than those with coverage that is more restricted.

During the third quarter and first nine months of 2010, personal auto insurance gross written premium in Infinity’s Focus States grew 17.6% and 16.2%, respectively, when compared with the same periods of 2009, with growth in all states excluding Nevada. The increase in gross written premium is primarily a result of growth in California, Florida, Pennsylvania and Texas.

•

California gross written premium grew 7.3% during the third quarter and 3.9% for the first nine months of 2010, respectively, compared to the same periods of 2009. Infinity believes that two program revisions that became effective in California during the second quarter will allow the Company to more effectively segment its rates and stimulate further growth in the state.

•

Florida gross written premium grew 42.3% and 65.5% during the third quarter and first nine months of 2010, respectively, compared with the same periods of 2009. The overall increase in Non-urban Zone premium is primarily attributable to Florida. The growth in Florida gross written premium is attributable to increased marketing efforts coupled with underwriting restrictions recently implemented by competitors. Infinity took aggressive actions in 2008 and 2009 in advance of competitors to improve profit margins in Florida. The Company has recently increased rates and modified certain underwriting rules in the state and expects premium growth to moderate throughout the rest of 2010.

•

Pennsylvania gross written premium increased by 23.2% and 25.7% during the third quarter and first nine months of 2010, respectively, compared with the same periods of 2009. This increase is a result of new agency appointments and rate increases taken by competitors.

•

Texas gross written premium grew by 60.0% and 25.7% during the third quarter and first nine months of 2010, respectively, compared with the same periods of 2009. The growth in Texas primarily relates to the standard program, which was introduced in late 2009. Premium should moderate somewhat in the fourth quarter as the Company took a moderate rate increase in September.

Gross written premium in the Maintenance States declined 14.2% and 19.7% during the third quarter and first nine months of 2010, respectively, compared with the same periods of 2009, primarily due to declines in Connecticut and South Carolina. Infinity has increased rates in several of the Maintenance States over the last twelve months in an effort to improve profitability.

Infinity’s Commercial Vehicle gross written premium decreased 2.1% during the third quarter of 2010 but grew 6.7% during the first nine months of 2010. Growth during the nine months is primarily due to growth in California resulting from the appointment of new agents. Premium shrank during the third quarter as Infinity has tightened underwriting standards in this program.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

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

Profitability

A key operating performance measure of insurance companies is underwriting profitability, as opposed to overall profitability or net earnings. Underwriting profitability is measured by the combined ratio. When the combined ratio is under 100%, underwriting results are generally considered profitable; when the ratio is over 100%, underwriting results are generally considered unprofitable. The combined ratio does not reflect investment income, other income, interest expense, other expenses or federal income taxes.

While financial data is reported in accordance with GAAP for shareholder and other investment purposes, it is reported on a statutory basis for insurance regulatory purposes. Infinity evaluates 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 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. Costs for computer software developed or obtained for internal use are capitalized under GAAP and amortized over their useful life, rather than expensed as incurred, as required for statutory purposes. Additionally, bad debt charge-offs on agent balances and premium receivables are included only in the GAAP combined ratios.

The following table presents the statutory and GAAP combined ratios:


	Three months ended September 30,
	2010									2009									% 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		66.9	%		22.4	%		89.4	%		67.7	%		20.0	%		87.7	%		(0.8	)%		2.4	%		1.7	%
Non-urban Zones		71.0	%		22.3	%		93.4	%		66.2	%		21.3	%		87.5	%		4.9	%		1.0	%		5.9	%

Total Focus States		67.5	%		22.4	%		89.9	%		67.5	%		20.1	%		87.7	%		(0.1	)%		2.3	%		2.2	%
Maintenance States		54.2	%		25.5	%		79.7	%		57.5	%		22.7	%		80.2	%		(3.3	)%		2.8	%		(0.5	)%
Other States		NM			NM			NM			NM			NM			NM			NM			NM			NM

Subtotal		66.6	%		22.5	%		89.1	%		66.6	%		20.3	%		86.9	%		0.1	%		2.2	%		2.3	%

Commercial Vehicle		51.1	%		21.0	%		72.2	%		85.0	%		21.4	%		106.3	%		(33.9	)%		(0.3	)%		(34.2	)%
Classic Collector		46.0	%		45.1	%		91.2	%		41.0	%		43.6	%		84.6	%		5.1	%		1.5	%		6.6	%
Other		NM			NM			NM			NM			NM			NM			NM			NM			NM

Total statutory ratios		65.5	%		22.1	%		87.6	%		67.1	%		20.7	%		87.8	%		(1.6	)%		1.4	%		(0.2	)%

Total statutory ratios excluding development		72.7	%		22.1	%		94.8	%		73.3	%		20.7	%		94.0	%		(0.6	)%		1.4	%		0.8	%

GAAP ratios		65.5	%		22.9	%		88.4	%		67.1	%		22.4	%		89.5	%		(1.6	)%		0.5	%		(1.1	)%

NM: not meaningful due to the low premium for these lines.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

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


	Nine months ended September 30,
	2010									2009									% 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		67.8	%		21.6	%		89.4	%		70.5	%		20.0	%		90.5	%		(2.7	)%		1.7	%		(1.0	)%
Non-urban Zones		73.8	%		21.8	%		95.6	%		68.9	%		20.9	%		89.8	%		4.9	%		0.9	%		5.8	%
Total Focus States		68.6	%		21.6	%		90.2	%		70.3	%		20.1	%		90.4	%		(1.7	)%		1.6	%		(0.2	)%
Maintenance States		59.7	%		25.2	%		84.9	%		70.3	%		23.3	%		93.6	%		(10.6	)%		1.8	%		(8.7	)%
Other States		NM			NM			NM			NM			NM			NM			NM			NM			NM
Subtotal		67.9	%		21.8	%		89.7	%		70.1	%		20.3	%		90.3	%		(2.2	)%		1.5	%		(0.7	)%

Commercial Vehicle		70.0	%		20.0	%		90.1	%		71.8	%		21.5	%		93.3	%		(1.8	)%		(1.5	)%		(3.3	)%
Classic Collector		41.6	%		41.7	%		83.3	%		38.9	%		41.0	%		79.8	%		2.7	%		0.8	%		3.5	%
Other		NM			NM			NM			NM			NM			NM			NM			NM			NM

Total statutory ratios		67.5	%		21.8	%		89.2	%		69.4	%		20.6	%		90.0	%		(1.9	)%		1.2	%		(0.8	)%
Total statutory ratios excluding development		75.5	%		21.8	%		97.3	%		74.6	%		20.6	%		95.2	%		0.9	%		1.2	%		2.1	%
GAAP ratios		67.5	%		23.2	%		90.7	%		69.4	%		21.9	%		91.3	%		(1.9	)%		1.3	%		(0.6	)%

NM: not meaningful due to the low premium for these lines.

In evaluating the profit performance of Infinity’s business, the Company’s management reviews underwriting profitability using statutory combined ratios. Accordingly, the discussion of underwriting results that follows will focus on these ratios and the components thereof, unless otherwise indicated.

The third quarter and first nine months of 2010 benefited from $16.8 million and $53.8 million, respectively, of favorable development on loss and LAE reserves compared to $13.2 million and $33.4 million of favorable development for the same periods of 2009. Bodily injury and property damage coverage in California, Florida, Pennsylvania, Texas and Connecticut as well as the Commercial Vehicle product related to accident years 2009, 2008 and 2007 drove favorable development during 2010. The Company believes that the favorable development recognized in 2010 has occurred as lower paid development patterns continue to emerge because of an increase in the claims settlement tempo over the last several years.

Losses from catastrophes were $0.2 million and $0.7 million for the three and nine months ended September 30, 2010, respectively, compared to $0.4 million and $0.6 million for the same periods of 2009.

The statutory combined ratio for the third quarter and first nine months of 2010 decreased 0.2 and 0.8 points, respectively, compared with the same periods of 2009. Excluding the effect of favorable development on all periods, the statutory combined ratio increased by 0.8 and 2.1 points for the third quarter and first nine months of 2010 when compared with the same periods of 2009. The GAAP combined ratio for the third quarter and first nine months of 2010 decreased by 1.1 and 0.6 points, respectively. Excluding the effect of favorable development and one-time expense adjustments, the GAAP combined ratios for the third quarter and first nine months of 2010 were 97.4% and 98.5%, respectively. Excluding the effect of favorable development, the GAAP combined ratios for the third quarter and first nine months of 2009 were 95.7% and 96.5%. Infinity expects the GAAP combined ratio, excluding redundancy releases, to be between 98.0% and 99.0% for the year as seasonality from the first half of the year moderates and tightened underwriting standards take effect.

The combined ratio in the Focus States increased 2.2 points in the third quarter of 2010. This increase is partially due to an increase in the loss ratio in the Florida Non-urban zones. Florida’s combined ratio rose as a result of growth in new business in late 2009 and into 2010. Infinity has taken actions, including raising rates and modifying certain underwriting standards, to improve the underperforming segments of the Florida business. The combined ratio in the Focus States declined 0.2 points during the first nine months of 2010 a result of a 2.7 point decline in the Urban Zone loss and LAE ratio, primarily in the California and Nevada loss ratios. The underwriting ratio in the Focus States has increased during the third quarter and first nine months of 2010 as the overall commission ratio has increased due to higher commission rates paid on new business.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

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

The loss and LAE ratio in the Maintenance States declined 3.3 and 10.6 points in the third quarter and first nine months of 2010, respectively, because of a decline in the loss ratios in South Carolina and Connecticut.

The loss and LAE ratio for the Commercial Vehicle business declined by 33.9 and 1.8 points during the third quarter and first nine months of 2010 when compared with the same periods in 2009, primarily as a result of favorable development on loss reserves. Additionally, the Company experienced several large losses in its Commercial Vehicle business during the third quarter of 2009.

Net Investment Income

Net investment income is comprised of gross investment income and investment management fees and expenses, as shown in the following table (in thousands):


	Three months ended September 30,						Nine months ended September 30,
	2010			2009			2010			2009
Investment income:
Interest income on fixed maturities, cash and cash equivalents	$	11,387		$	12,405		$	34,922		$	38,812
Dividends on equity securities		208			181			561			532

Gross investment income	$	11,595		$	12,586		$	35,483		$	39,343
Investment expenses		(504	)		(478	)		(1,515	)		(1,439	)

Net investment income	$	11,090		$	12,107		$	33,968		$	37,904


Average investment balance, at cost	$	1,249,758		$	1,244,677		$	1,244,941		$	1,215,155
Net investment income as a percentage of average investment balances		0.9	%		1.0	%		2.7	%		3.1	%

Changes in investment income reflect fluctuations in market rates and changes in average invested assets. Net investment income for the three and nine months ended September 30, 2010 declined compared to the same periods in 2009 primarily due to a decline in book yields as a result of a general decline in market interest rates for high quality bonds. Infinity expects market rates to remain low throughout 2010, which will continue to depress investment income.

Infinity recorded impairments for unrealized losses deemed other-than-temporary and realized gains and losses on sales and disposals, as follows (before tax, in thousands):


	Three months ended September 30, 2010								Three months ended September 30, 2009
	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	$	(150	)	$	8,141	$	7,991		$	(11,037	)	$	(1,077	)	$	(12,113	)
Equities		0			0		0			—			—			—

Total	$	(150	)	$	8,141	$	7,991		$	(11,037	)	$	(1,077	)	$	(12,113	)


	Nine months ended September 30, 2010								Nine months ended September 30, 2009
	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	$	(1,947	)	$	9,530	$	7,584		$	(19,381	)	$	1,311		$	(18,070	)
Equities		(4	)		0		(4	)		—			—			—

Total	$	(1,951	)	$	9,530	$	7,580		$	(19,381	)	$	1,311		$	(18,070	)

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

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

For Infinity’s securities held with unrealized losses, management believes, based on its analysis, that (i) Infinity will recover its cost basis in these securities and (ii) Infinity does 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.

Interest Expense

The Senior Notes accrue interest at an effective yield of 5.55% (Refer to Note 6 to the Consolidated Financial Statements for additional information on the Senior Notes.) Interest expense on the Senior Notes recognized in the Consolidated Statements of Earnings for the three and nine months ended September 30, 2010 was $2.7 million and $8.1 million, respectively, compared to $2.8 million and $8.3 million, respectively, for the same periods of 2009.

Corporate General and Administrative Expenses

Corporate general and administrative expenses were $2.1 million and $6.2 million, respectively, for the three and nine months ended September 30, 2010, compared to $1.6 million and $5.2 million for the same periods of 2009. This increase was primarily due to an increase in the accrual of expense for the Performance Share Plan. Because of recent premium growth, a higher share award is indicated than was previously projected. See Note 2 to the Consolidated Financial Statements for additional information on the Performance Share Plan.

Other Expenses

Other expenses for the three months ended September 30, 2010 were $(0.4) million compared to $0.4 million for the corresponding period of 2009. This decline is due to the release of reserves held for class action lawsuits. Other expenses for the nine months ended September 30, 2010 were $2.2 million compared to $1.8 million for the same period of 2009. The increase is primarily due to $1.9 million in sublease losses incurred during the first nine months of 2010.

Income Taxes

The Company’s GAAP effective tax rates for the three and nine months ended September 30, 2010 were 26.0% and 28.6%, respectively, compared to 52.8% and 40.6% for the same periods of 2009. See Note 7 to the Consolidated Financial Statements for additional information.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Funds

Infinity is organized as a holding company and all of its operations are conducted by its insurance subsidiaries. Accordingly, Infinity will have continuing cash needs for administrative expenses, the payment of interest on borrowings, shareholder dividends, share repurchases and taxes. Administrative expenses at the holding company currently average approximately $8.2 million annually.

At September 30, 2010, Infinity had outstanding $195 million principal of Senior Notes due 2014, bearing a fixed 5.5% interest rate. Interest payments on the Senior Notes of $5.4 million are due each February and August through maturity in February 2014. (Refer to Note 6 to the Consolidated Financial Statements for more information on the Senior Notes).

In August 2010, Infinity filed a “shelf” registration with the Securities and Exchange Commission, which will allow the Company to sell any combination of senior or subordinated debt securities, common stock, preferred stock, warrants, depositary shares and units in one or more offerings should the Company choose to do so in the future.

In February 2010, Infinity increased its quarterly dividend to $0.14 per share from $0.12 per share. At this current amount, Infinity’s 2010 annualized dividend payments would be approximately $7.3 million.

In October 2006, the Board of Directors approved a share repurchase program whereby the Company may repurchase up to an aggregate amount of $100 million of its outstanding common shares. On August 6, 2009, the Board of Directors increased the authority by $28.8 million to $50.0 million as of that date and modified the authority to include the repurchase of Infinity’s debt.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

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

During the first quarter of 2010, Infinity repurchased 251,900 shares at an average cost, excluding commissions, of $41.30. During the second quarter of 2010, Infinity repurchased 435,100 shares at an average cost, excluding commissions, of $46.67. During the third quarter of 2010, Infinity exhausted the remaining repurchase authority under this program. On August 3, 2010, Infinity’s Board of Directors approved an additional $50.0 million share and debt repurchase program expiring on December 31, 2011. During the third quarter of 2010, Infinity repurchased 316,500 shares at an average cost, excluding commissions, of $47.63. As of September 30, 2010, Infinity had $44.4 million of authority remaining under this program.

Funds to meet expenditures at the holding company come primarily from dividends and tax payments from the insurance subsidiaries as well as cash and investments held by the holding company. As of September 30, 2010, the holding company had $204.6 million of cash and investments. In 2010, Infinity’s insurance subsidiaries may pay Infinity up to $107.0 million in ordinary dividends without prior regulatory approval. For the nine months ended September 30, 2010, the subsidiaries paid $75.0 million of dividends to the holding company.

Infinity’s insurance subsidiaries generate liquidity to satisfy their obligations primarily by collecting and investing premium in advance of paying claims and generating investment income on their $1.1 billion investment portfolio. Infinity’s insurance subsidiaries’ cash flow from operations was approximately $22.6 million and $68.9 million for the three and nine-month periods ended September 30, 2010, respectively, and approximately $26.7 million and $75.2 million for the three and nine-month periods ended September 30, 2009, respectively.

Management believes that cash balances, cash flows generated from operations or borrowings, and maturities and sales of investments are adequate to meet the future liquidity needs for Infinity and its insurance subsidiaries.

Reinsurance

Infinity uses excess of loss, catastrophe and extra-contractual loss reinsurance to mitigate the financial impact of large or catastrophic losses. During 2010, the catastrophe reinsurance provides protection for losses up to $15 million in excess of $5 million for any single event. Infinity’s excess of loss reinsurance provides reinsurance protection for commercial auto losses up to $700,000 for claims in excess of $300,000 per occurrence. Infinity’s extra-contractual loss reinsurance provides for protection for losses up to $15 million in excess of $5 million for any single extra-contractual loss. Infinity also uses reinsurance to mitigate losses on its Classic Collector business.

Premium ceded under all reinsurance agreements for the three months ended September 30, 2010 and 2009 was $1.4 million and $1.2 million, respectively. Premium ceded under these agreements for the nine months ended September 30, 2010 and 2009 was $4.1 million and $3.8 million, respectively.

Investments

Infinity’s consolidated investment portfolio at September 30, 2010 contained approximately $1.2 billion in fixed maturity securities and $40.8 million in equity securities, all carried at fair value with unrealized gains and losses reported as a separate component of shareholders’ equity on an after-tax basis. At September 30, 2010, Infinity had pre-tax net unrealized gains of $46.6 million on fixed maturities and pre-tax net unrealized gains of $9.5 million on equity securities. Combined, the pre-tax net unrealized gain increased by $27.1 million for the nine months ended September 30, 2010.

Approximately 93.9% of Infinity’s fixed maturity investments at September 30, 2010 were rated “investment grade,” and as of the same date, the average credit rating of Infinity’s 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. Management believes that a high quality investment portfolio is more likely to generate a stable and predictable investment return.

Since all of these securities are carried at fair value in the balance sheet, there is virtually no effect on liquidity or financial condition upon the sale and ultimate realization of unrealized gains and losses. The average option adjusted duration of Infinity’s fixed maturity portfolio is 3.1 years at September 30, 2010.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

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

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).

Level 1 securities are U.S. Treasury securities and an exchange-traded fund that makes up Infinity’s equity portfolio. Level 2 securities are comprised of 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.

Summarized information for Infinity’s investment portfolio at September 30, 2010 is as follows (in thousands):


	Amortized Cost		Fair Value		% of Total Fair Value
U.S. government and agencies:
U.S. government	$	177,149	$	181,697		14.6	%
Government-sponsored entities		49,547		51,340		4.1	%

Total U.S. government and agencies		226,695		233,037		18.7	%

State and municipal		382,351		397,978		31.9	%

Mortgage-backed, CMOs and asset-backed:

Residential mortgage-backed securities		172,301		178,536		14.3	%

Commercial mortgage-backed securities		36,937		38,354		3.1	%

Collateralized mortgage obligations:
PAC		24,517		25,224		2.0	%
Sequentials		17,831		18,312		1.5	%
Junior		695		581		0.0	%
Accretion directed		883		874		0.1	%
Whole loan		5,751		5,854		0.5	%

Total CMO		49,677		50,844		4.1	%

Asset-backed securities:
Auto loans		5,272		5,350		0.4	%
Home equity		920		898		0.1	%
Credit card receivables		21,296		21,690		1.7	%

Total ABS		27,488		27,938		2.2	%


Total mortgage-backed, CMOs and asset-backed		286,402		295,672		23.7	%

Corporates
Investment grade		197,292		207,588		16.6	%
Non-investment grade		68,444		73,533		5.9	%

Total corporates		265,736		281,121		22.5	%

Total fixed maturities		1,161,185		1,207,808		96.7	%
Equity securities		31,327		40,838		3.3	%

Total investment portfolio	$	1,192,511	$	1,248,645		100.0	%

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

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

The following table presents the credit rating and fair value (in thousands) of Infinity’s fixed maturity portfolio by major security type:


	Rating
	AAA			AA			A			BBB			Non- investment Grade			Fair Value			% of Total Exposure
U.S. government and agencies	$	233,037		$	—		$	—		$	—		$	—		$	233,037			19.3	%
State and municipal		49,095			250,567			95,893			2,422			—			397,978			33.0	%
Mortgage-backed, asset-backed and CMO		288,986			6,686			—			—			—			295,672			24.5	%
Corporates		12,930			11,791			147,775			35,092			73,533			281,121			23.3	%

Total fair value	$	584,048		$	269,044		$	243,669		$	37,514		$	73,533		$	1,207,808			100.0	%

% of total fair value		48.4	%		22.3	%		20.2	%		3.1	%		6.1	%		100.0	%

Other than securities backed by the U.S. government or issued by its agencies, Infinity’s fixed income portfolio contains no securities issued by any single issuer that exceed 1% of the fair value of the fixed income portfolio.

Since 2007, the mortgage industry has experienced a rise in mortgage delinquencies and foreclosures, particularly among lower quality exposures (“sub-prime” and “Alt-A”). As a result, many securities with underlying sub-prime and Alt-A mortgages as collateral experienced significant drops in market value. Infinity has only modest exposure to these types of investments. At September 30, 2010, Infinity’s fixed maturity portfolio included 6 securities, or less than 1% of the total fair value of the fixed maturity portfolio, with exposure to sub-prime and Alt-A mortgages. Although these securities have sub-prime mortgages as underlying collateral, all are rated AA or better.

The following table presents the credit rating and fair value of Infinity’s MBS and CMO portfolio at September 30, 2010, excluding Government-Sponsored Enterprises (“GSE”), by deal origination year (in thousands):


	Rating
Deal Origination Year	AAA			AA			A			BBB			Non- investment Grade			Fair Value			% of Total Exposure
1999	$	0		$	581		$	0		$	0		$	0		$	581			1.0	%
2001		921			0			0			0			0			921			1.6	%
2002		7,418			0			0			0			0			7,418			13.2	%
2003		3,631			0			0			0			0			3,631			6.5	%
2004		11,082			2,883			0			0			0			13,965			24.9	%
2005		8,882			2,325			0			0			0			11,207			20.0	%
2006		16,252			0			0			0			0			16,252			29.0	%
2007		2,130			0			0			0			0			2,130			3.8	%

Total fair value	$	50,316		$	5,789		$	0		$	0		$	0		$	56,105			100.0	%

% of total fair value		89.7	%		10.3	%		0.0	%		0.0	%		0.0	%		100.0	%

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

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

The following table presents the credit rating and fair value of Infinity’s GSE MBS and CMO portfolio at September 30, 2010 by deal origination year (in thousands):


	Rating
Deal Origination Year	AAA			AA			A			BBB			Non- investment Grade			Fair Value			% of Total Exposure
2002	$	4,894		$	—		$	—		$	—		$	—		$	4,894			2.3	%
2003		8,921			—			—			—			—			8,921			4.2	%
2004		4,209			—			—			—			—			4,209			2.0	%
2006		2,625			—			—			—			—			2,625			1.2	%
2007		1,086			—			—			—			—			1,086			0.5	%
2008		72,636			—			—			—			—			72,636			34.3	%
2009		78,354			—			—			—			—			78,354			37.0	%
2010		38,903			—			—			—			—			38,903			18.4	%

Total fair value	$	211,629		$	—		$	—		$	—		$	—		$	211,629			100.0	%

% of total fair value		100.0	%		0.0	%		0.0	%		0.0	%		0.0	%		100.0	%

Of the $211.6 million fair value of GSE MBS and CMO securities, $178.5 million are residential MBS and $33.1 million are CMOs.

The following table presents the credit rating and fair value of Infinity’s ABS portfolio at September 30, 2010 by deal origination year (in thousands):


	Rating
Deal Origination Year	AAA			AA			A			BBB			Non- investment Grade			Fair Value			% of Total Exposure
2001	$	69		$	0		$	0		$	0		$	0		$	69			0.2	%
2003		5,951			0			0			0			0			5,951			21.3	%
2004		0			63			0			0			0			63			0.2	%
2006		737			0			0			0			0			737			2.6	%
2007		3,917			0			0			0			0			3,917			14.0	%
2008		5,484			0			0			0			0			5,484			19.6	%
2009		8,349			0			0			0			0			8,349			29.9	%
2010		2,533			833			0			0			0			3,367			12.1	%

Total fair value	$	27,041		$	897		$	0		$	0		$	0		$	27,938			100.0	%

% of total fair value		96.8	%		3.2	%		0.0	%		0.0	%		0.0	%		100.0	%

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

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

In 2008, several state and municipal bond insurers had their credit ratings downgraded or placed under review by one or more nationally recognized statistical rating organizations. These downgrades were a result of a perceived weakening of the insurers’ financial strength as a result of losses incurred on mortgage-backed and asset-backed securities. These securities experienced increased delinquencies and defaults because of a weakening economy and housing market in particular.

Infinity’s investment portfolio consists of $398.0 million of state and municipal bonds, of which $162.6 million are insured. Of the insured bonds, 47.2% are insured with MBIA, 28.9% with Assured Guaranty, 23.6% with AMBAC and 0.4% are insured with XL Capital. The following table presents the underlying ratings, represented by the lower of Standard and Poor’s, Moody’s or Fitch’s ratings, of the state and municipal bond portfolio (in thousands) at September 30, 2010:


	Insured					Uninsured					Total
	Fair Value		% of Fair Value			Fair Value		% of Fair Value			Fair Value		% of Fair Value
AAA	$	5,534		3.4	%	$	43,561		18.5	%	$	49,095		12.3	%
AA+, AA, AA-		90,408		55.6	%		160,159		68.0	%		250,567		63.0	%
A+, A, A-		64,188		39.5	%		31,706		13.5	%		95,893		24.1	%
BBB+, BBB, BBB-		2,422		1.5	%		0		0.0	%		2,422		0.6	%

Total	$	162,552		100.0	%	$	235,426		100.0	%	$	397,978		100.0	%

The following table presents the credit rating and fair value of Infinity’s state and municipal bond portfolio, by state, at September 30, 2010 (in thousands):


	Rating
State	AAA			AA			A			BBB			Non- investment Grade			Fair Value			% of Total Exposure
TX	$	14,794		$	18,020		$	6,737		$	0		$	0		$	39,551			9.9	%
GA		9,648			8,683			11,285			0			0			29,615			7.4	%
NY		0			26,117			0			0			0			26,117			6.6	%
FL		0			11,703			10,213			0			0			21,916			5.5	%
WA		1,495			16,697			0			0			0			18,192			4.6	%
PA		0			9,279			8,456			0			0			17,735			4.5	%
MI		392			6,882			8,561			0			0			15,835			4.0	%
CO		1,813			8,980			4,092			0			0			14,886			3.7	%
IN		0			13,251			1,550			0			0			14,801			3.7	%
MO		4,747			3,499			1,388			2,422			0			12,056			3.0	%
All other states		16,205			127,455			43,611			0			0			187,272			47.1	%

Total fair value	$	49,095		$	250,567		$	95,893		$	2,422		$	0		$	397,978			100.0	%

% of total fair value		12.3	%		63.0	%		24.1	%		0.6	%		0.0	%		100.0	%

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

ITEM 3

Quantitative and Qualitative Disclosures about Market Risk

As of September 30, 2010, there were no material changes to the information provided in Infinity’s Form 10-K for the year ended December 31, 2009 under the caption “Exposure to Market Risk” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 4

Controls and Procedures

Infinity’s chief executive officer and chief financial officer, with assistance from management, evaluated Infinity’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15) as of September 30, 2010. Based on that evaluation, they concluded that the controls and procedures are effective. There has been no change in Infinity’s internal controls during the first nine months of 2010 that has materially affected, or is reasonably likely to materially affect, Infinity’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)).

PART II

OTHER INFORMATION

ITEM 1

Legal Proceedings

The Company has not become a party to any material legal proceedings nor have there been any material developments in the Company’s legal proceedings disclosed in the Company’s Form 10-K for the year ended December 31, 2009. For a description of the Company’s previously reported legal proceedings, refer to Part I, Item 3, Legal Proceedings, in the form 10-K for the year ended December 31, 2009.

ITEM 1A

Risk Factors

There have been no material changes in the Company’s risk factors as disclosed in the Company’s Form 10-K for the year ended December 31, 2009. For a description of the Company’s previously reported risk factors, refer to Part I, Item 1A, Risk Factors, in the Form 10-K for the year ended December 31, 2009.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

ITEM 2

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities


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, 2010 – July 31, 2010		197,900	$	47.91		197,900	$	3,754

August 1, 2010 – August 31, 2010		66,900	$	46.65		66,900		46,881,048

September 1, 2010 – September 30, 2010		51,700	$	47.84		51,700		44,406,277


Total		316,500	$	47.63		316,500	$	44,406,277

(a)	Average price paid per share excludes commissions.

(b)

In October 2006, the Company announced that the Board of Directors approved a share repurchase program whereby the Company may repurchase up to an aggregate of $100 million of its outstanding shares. Effective August 6, 2009, Infinity’s Board of Directors increased this authority by $28.8 million to $50.0 million as of that date and modified the authority to include the repurchase of Infinity’s debt. In addition to $25.0 million in shares repurchased during 2009, Infinity repurchased approximately $5.0 million of debt. During the third quarter of 2010, Infinity exhausted the remaining repurchase authority under this program. On August 3, 2010, Infinity’s Board of Directors approved an additional $50.0 million share and debt repurchase program expiring on December 31, 2011.

INFINITY PROPERTY AND CASUALTY CORPORATION 10-Q

ITEM 6

Exhibits


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 13-a-14(a).

Exhibit 32 -		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

Exhibit 101 -		XBRL Instance Document

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/ ROGER SMITH
November 5, 2010		Roger Smith
		Executive Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer)

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