CHICAGO-- (BUSINESS WIRE) -- Unitrin, Inc. (NYSE: UTR) reported today net income of $62.1 million ($1.00 per unrestricted common share) for the third quarter of 2009, compared to a net loss of $45.2 million ($0.72 per unrestricted common share) for the third quarter of 2008, an improvement of $107.3 million. Net Income from continuing operations was $61.0 million ($0.98 per unrestricted common share) for the third quarter of 2009, compared to a net loss from continuing operations of $49.6 million ($0.79 per unrestricted common share) for the third quarter of 2008.

Highlights

• Third quarter 2009 net income of $62.1 million; book value per share increases to $30.36.
• Debt to total capitalization ratio declines to 22.9%; new $245 million, three-year revolving credit agreement put in place.
• Third quarter 2009 segment operating profit of $88.7 million, compared to third quarter 2008 loss of $36.2 million.
• Fireside Bank reports small profit for the quarter; exit plan on target and Tier 1 capital ratio increases to 19.3%.
• Unitrin Direct achieves break–even results

Don Southwell, Unitrin’s President and Chief Executive Officer, commented, “We are very pleased with our strong third quarter operating results and with the continued strengthening of our balance sheet. Operating results improved in each of our business segments compared to the prior year and improved on a sequential quarter basis in all of our businesses, except Unitrin Specialty where results declined slightly. Catastrophe losses from continuing operations were $9.0 million after-tax in the third quarter of 2009, compared to $54.0 million after-tax in the third quarter of 2008 which included the impact of three major hurricanes. Comprehensive investment gains, which include the unrealized increases in the value of investments, were $226.0 million before tax for the third quarter of 2009, compared to comprehensive investment losses of $301.5 million before tax for the third quarter of 2008. Our plan to exit the automobile finance business and recover the capital that we have invested in Fireside Bank is going extremely well. We believe that Unitrin Direct is now running at approximately a break-even level, but we will not begin to grow that business again until we are confident that Unitrin Direct’s book of business is adequately priced. Our Life and Health Insurance, Kemper and Unitrin Specialty segments all continue to report strong operating results.”

Shareholders’ Equity

Shareholders’ equity was $1,893.2 million at September 30, 2009, an increase of $199.6 million, or 11.8% during the third quarter of 2009. Total comprehensive income, which includes the unrealized gains in the value of investments, was $213.2 million for the three months ended September 30, 2009. Dividends paid during the third quarter were $12.5 million.

Total Revenues

Total revenues were $750.6 million for the third quarter of 2009, compared to $679.9 million for the third quarter of 2008. Total revenues increased due primarily to lower net impairment losses recognized in earnings, higher net investment income and higher earned premiums, partially offset by lower automobile finance revenues and lower net realized gains on sales of investments.

Earned premiums were $616.2 million and $599.5 million for the third quarters of 2009 and 2008, respectively, an increase of $16.7 million. Earned premiums increased significantly in the Unitrin Direct segment, with the Unitrin Specialty segment posting a modest increase, the Life and Health Insurance segment posting a modest decrease and the Kemper segment posting a slight decrease. Automobile finance revenues decreased by $18.0 million for the third quarter of 2009, compared to the same period in 2008, as Fireside Bank continued to execute its plan to exit the automobile finance business.

Net investment income increased by $29.6 million for the three months ended September 30, 2009, compared to the same period in 2008, due primarily to higher investment income from investments in limited liability investment companies and limited partnerships, partially offset by lower dividend income from investments in equity securities and lower investment income from short-term investments. Net investment income from limited liability investment companies and limited partnerships increased due primarily to higher investment returns. Dividend income from investments in equity securities decreased due primarily to sales of the vast majority of the Company’s investments in Northrop Grumman common stock and other publicly-traded common stocks during 2008. Net investment income from short-term investments decreased due primarily to substantially lower yields and, to a lesser extent, a lower level of short-term investments.

Net realized gains on sales of investments were $12.4 million for the third quarter of 2009, compared to $27.5 million for the same period in 2008. Net realized gains on sales of investments for the third quarter of 2009 included gains of $3.8 million from the sales of a portion of the Company’s investment in Northrop common stock, compared to $35.4 million for the same period in 2008. (See “Net Realized Gains on Sales of Investments” chart below for additional information.) The Company cannot anticipate when or if similar net realized gains or losses on sales of investments may occur in the future.

Net impairment losses recognized in earnings were $14.5 million for the third quarter of 2009, compared to $72.1 million for the same period in 2008. Net impairment losses recognized in earnings for the third quarter of 2008 included losses of $42.1 million to write down the Company’s investments in preferred and common stocks of financial institutions (See “Net Impairment Losses Recognized in Earnings” chart below for additional information.) The Company cannot anticipate when or if similar net impairment losses may occur in the future.

Quarterly Segment Results

Unitrin is engaged, through its subsidiaries, in the property and casualty insurance, life and health insurance and automobile finance businesses. The Company conducts its continuing operations through five operating segments: Kemper, Unitrin Specialty, Unitrin Direct, Life and Health Insurance and Fireside Bank.

NOTE: The Company uses the registered trademark, “Kemper,” under license, for personal lines insurance only, from Lumbermens Mutual Casualty Company (“Lumbermens”), which is not affiliated with the Company. Lumbermens continues to use the name, “Kemper Insurance Companies,” in connection with its operations, which are distinct from, and not to be confused with, Unitrin’s Kemper business segment.

Kemper

Earned premiums in the Kemper segment decreased by $0.5 million for the third quarter of 2009, compared to the same period in 2008, due primarily to an increase in the cost of reinsurance. The Kemper segment reported an operating profit of $26.4 million for the third quarter of 2009, compared to an operating loss of $23.6 million for the same period in 2008. Operating results for the Kemper segment improved by $50.0 million for the third quarter of 2009, compared to the same period in 2008, due primarily to lower incurred losses and loss adjustment expenses (“LAE”) and, to a lesser extent, higher net investment income and lower insurance expenses. Incurred losses and LAE decreased by $36.6 million for the third quarter of 2009, compared to the same period in 2008, due primarily to lower catastrophe losses and LAE, partially offset by higher frequency of losses on automobile insurance.

Unitrin Specialty

Earned premiums in the Unitrin Specialty segment increased by $6.0 million for the third quarter of 2009, compared to the same period in 2008, due primarily to higher volume of personal automobile insurance, partially offset by lower volume of commercial automobile insurance. Operating profit in the Unitrin Specialty segment increased by $6.2 million for the third quarter of 2009, compared to the same period in 2008, due primarily to lower losses and LAE as a percentage of earned premiums and higher net investment income. Losses and LAE as a percentage of earned premiums decreased due primarily to favorable loss and LAE reserve development of $2.2 million in the third quarter of 2009, compared to adverse development of $0.1 million in the same period in 2008.

Unitrin Direct

Earned premiums in the Unitrin Direct segment increased by $14.4 million for the third quarter of 2009, compared to the same period in 2008, due primarily to the impact of the Direct Response acquisition, partially offset by lower volume of insurance. The Unitrin Direct segment reported an operating profit of $0.6 million for the third quarter of 2009, compared to an operating loss of $13.9 million for the same period of 2008. Operating results for the Unitrin Direct segment improved by $14.5 million due primarily to lower incurred losses and LAE as a percentage of earned premiums, lower marketing expenses, higher net investment income, and an operating profit of $0.7 million related to the Direct Response acquisition. Operating Profit for the Unitrin Direct segment included restructuring costs of $1.2 million before tax for the third quarter of 2009.

Life and Health Insurance

Earned premiums in the Life and Health Insurance segment decreased by $3.2 million for the third quarter of 2009, compared to the same period in 2008, due primarily to lower volume, partially offset by higher average premium rates and lower cost of catastrophe reinsurance coverage.

Operating profit in the Life and Health Insurance segment increased by $49.5 million for the third quarter of 2009, compared to the same period in 2008, due primarily to lower catastrophe losses and LAE, net of reinsurance, on property insurance sold by the Life and Health Insurance segment’s career agents, higher net investment income, and lower policyholders’ benefits as a percentage of earned premiums on life insurance.

Fireside Bank

As previously announced, on March 24, 2009, Fireside Bank suspended all new lending activity and ceased opening new certificate of deposit accounts as part of a plan to exit the automobile finance business. The exit plan envisions an orderly wind-down of Fireside Bank’s operations over the next several years. Fireside Bank continues to collect outstanding loan balances and make interest payments and redemptions on outstanding certificates of deposits in the ordinary course of business.

While in its early stages, the exit plan thus far has exceeded the Company’s expectations. Net automobile loan receivables outstanding has declined steadily to $867.2 million at September 30, 2009 from $1,125.2 million at March 31, 2009, while certificates of deposits declined to $758.6 million at September 30, 2009 from $1,054.4 million at March 31, 2009. Fireside Bank’s cash and investments totaled $177.4 million, or 23.4% of certificates of deposits, at September 30, 2009, compared to $204.7 million, or 19.4% of certificates of deposits, at March 31, 2009. The Company expects that the Fireside Bank segment will record approximately break-even results for the fourth quarter of 2009. Fireside Bank’s ratio of Tier 1 capital to total average assets increased from 15.6% at March 31, 2009 to 19.3% at September 30, 2009. The Company expects that Fireside Bank’s ratio of Tier 1 capital to total average assets will continue to increase in the fourth quarter of 2009.

Automobile finance revenues decreased by $18.0 million for the third quarter of 2009, compared to the same period in 2008, due to the lower levels of loans outstanding as a result of the exit plan. Fireside Bank reported operating profit of $3.4 million for the third quarter of 2009, compared to an operating loss of $1.3 million for the same period in 2008.

Consolidated results for the three and nine months ended September 30, 2009 and 2008 are as follows:

Business segment revenues for the three and nine months ended September 30, 2009 and 2008 are as follows:

Business segment operating profit (loss) for the three and nine months ended September 30, 2009 and 2008 is as follows:

Business segment net income (loss) for the three and nine months ended September 30, 2009 and 2008 is as follows:

The components of Net Realized Gains on Sales of Investments for the three and nine months ended September 30, 2009 and 2008 are as follows:

The components of Net Impairment Losses Recognized in Earnings for the three and nine months ended September 30, 2009 and 2008 were:

This press release may contain or incorporate by reference information that includes or is based on forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give expectations or forecasts of future events. The reader can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “believe(s),” “goal(s),” “target(s),” “estimate(s),” “anticipate(s),” “forecast(s),” “project(s),” “plan(s),” “intend(s),” “expect(s),” “might,” “may” and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. Forward-looking statements, in particular, include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.

Any or all forward-looking statements may turn out to be wrong, and, accordingly, readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this press release. Forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the Company’s actual future results. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance; actual results could differ materially from those expressed or implied in the forward-looking statements.

Among the general factors that could cause actual results to differ materially from estimated results are:

• Changes in general economic conditions, including performance of financial markets, interest rates, unemployment rates and fluctuating values of particular investments held by the Company;

• Heightened competition, including, with respect to pricing, entry of new competitors and the development of new products by new and existing competitors;

• The number and severity of insurance claims (including those associated with catastrophe losses) and their impact on the adequacy of loss reserves;

• The impact of inflation on insurance claims, including, but not limited to, the effects attributed to scarcity of resources available to rebuild damaged structures, including labor and materials and the amount of salvage value recovered for damaged property;

• Orders, interpretations or other actions by regulators that impact the reporting, adjustment and payment of claims;

• Changes in the pricing or availability of reinsurance;

• Changes in the financial condition of reinsurers and amounts recoverable therefrom;

• Changes in industry trends and significant industry developments;

• Regulatory approval of insurance rates, policy forms, license applications and similar matters;

• Developments related to insurance policy claims and coverage issues including, but not limited to, interpretations or decisions by courts or regulators that may govern or influence insurance policy coverage issues arising with respect to losses incurred in connection with hurricanes and other catastrophes;

• Governmental actions, including, but not limited to, national health care reform, new laws or regulations or court decisions interpreting existing laws and regulations or policy provisions;

• Adverse outcomes in litigation or other legal or regulatory proceedings involving Unitrin or its subsidiaries or affiliates;

• Regulatory, accounting or tax changes that may affect the cost of, or demand for, the Company’s products or services;

• The impact of residual market assessments and assessments for insurance industry insolvencies;

• Changes in distribution channels, methods or costs resulting from changes in laws or regulations, lawsuits or market forces;

• Changes in ratings by credit rating agencies, including A.M. Best Co., Inc.;

• Changes in laws or regulations governing or affecting the regulatory status of industrial banks, such as Fireside Bank, and their parent companies, including minimum capital requirements and restrictions on the non-financial activities and equity investments of companies that acquire control of industrial banks;

• Changes in the estimated rates of automobile loan receivables net charge-off used to estimate Fireside Bank’s reserve for loan losses, including, but not limited to, the impact of changes in the value of collateral held;

• The degree of success in effecting an orderly wind-down of the operations of Fireside Bank and the recovery of Unitrin’s investment in Fireside Bank;

• The degree of success and costs expended in realizing economies of scale and implementing significant business consolidations and technology initiatives;

• Increased costs and risks related to data security;

• Absolute and relative performance of the Company’s products or services; and

• Other risks and uncertainties described from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”).

No assurances can be given that the results contemplated in any forward-looking statements will be achieved or will be achieved in any particular timetable. The Company assumes no obligation to publicly correct or update any forward-looking statements as a result of events or developments subsequent to the date of this press release. The reader is advised, however, to consult any further disclosures the Company makes on related subjects in filings made with the SEC.

Unitrin is a financial services company focused on creating shareholder value by providing through its subsidiaries a diverse array of insurance products and services for individuals, families and small businesses.

Among the brands in Unitrin’s Property and Casualty Insurance businesses are Kemper and Unitrin Specialty, which sell personal and commercial insurance through networks of independent agents, and Unitrin Direct, which sells automobile and homeowners insurance directly to consumers or through employer-sponsored voluntary benefit programs. Unitrin’s Life and Health Insurance businesses bring a high-level of personalized service to their customers.

Additional information about Unitrin, including a copy of its Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, is available by visiting its website (www.unitrin.com).

Unitrin plans to issue its next earnings news release discussing its full year and fourth quarter results and file its annual report on Form 10-K after the market closes on or about Monday, February 1, 2010.