Unitrin, Inc. Reports Record First Quarter Net Income Per Share

Business Wire, April 30, 2007

CHICAGO -- Unitrin, Inc. (NYSE:UTR) reported today net income of $72.4 million ($1.08 per common share) for the first quarter of 2007, compared to $66.0 million ($0.96 per common share) for the first quarter of 2006. Net income increased due primarily to higher net realized investment gains and higher operating results in the aggregate in the Company's operating segments, partially offset by lower equity in net income of investee.

Don Southwell, Unitrin's President and Chief Executive Officer, commented, "We are pleased to report record first quarter net income per share. Operating results improved largely due to the performance of our Life and Health Insurance businesses. Results declined in most of our property and casualty insurance businesses mostly due to higher losses and increased marketing dollars spent to expand our Unitrin Direct business platform. We also took advantage of the rise in the price of Northrop Grumman stock to sell a small portion of our holdings." Mr. Southwell also noted that, "We repurchased approximately 767,000 shares of Unitrin common stock in the first quarter of 2007 at a total cost of $35.3 million."

Total Revenue

Total revenues were $775.1 million and $759.5 million for the first quarters of 2007 and 2006, respectively, an increase of $15.6 million. Earned premiums were $603.2 million and $613.8 million for the first quarters of 2007 and 2006, respectively, a decrease of $10.6 million. Earned premiums declined in the Unitrin Business Insurance segment, the Life and Health Insurance segment and the Kemper Auto and Home segment, partially offset by increased earned premiums in the Unitrin Direct segment and the Unitrin Specialty segment. Consumer finance revenues increased by $5.6 million for the first quarter of 2007, compared to the same period in 2006, due primarily to higher levels of loans outstanding. Net investment income increased by $9.5 million for the first quarter of 2007, compared to the same period in 2006, due primarily to higher investment yields and an increase in dividend income from the Company's investment in Northrop Grumman preferred stock, due to the timing of the ex-dividend date. Net realized investment gains were $22.5 million for the first quarter of 2007, compared to $11.6 million for the same period in 2006. The Company cannot anticipate when or if similar net investment gains 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 consumer finance businesses. The Company conducts its operations through six operating segments: Kemper Auto and Home, Unitrin Specialty, Unitrin Direct, Unitrin Business Insurance, Life and Health Insurance and Consumer Finance.

Kemper Auto and Home

Earned premiums in the Kemper Auto and Home segment decreased by $3.1 million for the first quarter of 2007, compared to the same period in 2006, due primarily to lower earned premiums on automobile insurance, partially offset by higher earned premiums on homeowners insurance.

Operating profit in the Kemper Auto and Home segment decreased by $7.1 million for the first quarter of 2007, compared to the same period in 2006, due primarily to higher incurred losses and LAE, partially offset by lower insurance expenses. Loss and LAE reserve development had a favorable effect of $14.6 million (including a favorable effect of $3.4 million for catastrophe losses) for the first quarter of 2007, compared to a favorable effect of $17.4 million in the same period in 2006.

Unitrin Specialty

Earned premiums in the Unitrin Specialty segment increased by $1.2 million for the first quarter of 2007, compared to the same period in 2006, due primarily to higher volume of personal automobile insurance. Operating profit in the Unitrin Specialty segment decreased by $1.0 million for the first quarter of 2007, compared to the same period in 2006, due primarily to higher personal automobile insurance incurred losses and LAE as a percentage of earned premiums, partially offset by lower commercial automobile insurance incurred loss and LAE and, to a much lesser extent, lower insurance expenses as a percentage of earned premiums.

Unitrin Direct

Earned premiums in the Unitrin Direct segment increased by $1.5 million for first quarter of 2007, compared to the same period in 2006, due primarily to higher average premium rates. Unitrin Direct increased its direct marketing initiatives in the first quarter of 2007, which resulted in higher written premiums. The Company expects these increased writings to increase earned premiums in future quarters.

The Unitrin Direct segment reported an operating loss of $9.0 million for the first quarter of 2007, compared to an operating loss of $2.7 million for the same period in 2006. Operating results decreased due primarily to higher marketing and other policy acquisition expenses. Marketing and other policy acquisition expenses as a percentage of earned premiums increased from 9.6% for the first quarter of 2006 to 18.8% for the same period in 2007, due primarily to increased spending on web, television and mail advertising. Unitrin Direct is increasing its direct marketing in both new and existing states to accelerate its growth.