Unitrin, Inc. Reports Full Year and Fourth Quarter Earnings

Business Wire, Feb 4, 2008

CHICAGO -- Unitrin, Inc. (NYSE:UTR) reported today net income of $217.8 million ($3.32 per common share) for the year ended December 31, 2007, compared to $283.1 million ($4.17 per common share) for the year ended December 31, 2006. Income from Continuing Operations was $189.0 million ($2.88 per common share) for the year ended December 31, 2007 compared to $264.2 million ($3.89 per common share) for the year ended December 31, 2006.

Net income was $18.9 million ($0.29 per common share) for the fourth quarter of 2007, compared to $61.6 million ($0.92 per common share) for the fourth quarter of 2006. Income from Continuing Operations was $5.3 million ($0.08 per common share) for the fourth quarter of 2007, compared to $55.8 million ($0.83 per common share) for the same period in 2006.

Don Southwell, Unitrin's President and Chief Executive Officer, commented, "Our fourth quarter results were adversely impacted by a significant addition to Fireside Bank's loan loss reserves. Fireside Bank is in the business of lending money to customers with subprime credit ratings. Fireside Bank does not make real estate loans of any kind. Nevertheless, higher net charge-off and a deteriorating credit market warranted the increase in Fireside's loan loss reserves. We have had good success in this business for a long time - 2007 broke a string of 25 consecutive profitable years. Going forward, we will not accept certain now unprofitable tiers of business that represented approximately 20% of the loans that were originated in 2007." Mr. Southwell added, "Unitrin has not made significant investments in securities that are directly or indirectly related to subprime mortgage loans."

During the fourth quarter of 2007, Unitrin signed a definitive agreement to sell its Unitrin Business Insurance unit to AmTrust Financial Services, Inc. Mr. Southwell stated, "The Unitrin Business Insurance management team has done an outstanding job turning that business around and has written a strong book of business. However, we felt that the task of growing the business profitably to proper scale in the face of a highly competitive commercial lines premium rate environment carried too much risk. Unitrin Business Insurance's results are now reported as a discontinued operation."

Significant wildfires struck Southern California in the fourth quarter. Unitrin's Kemper segment writes homeowners insurance in Southern California. Kemper's estimated losses from the California wildfires total $17.5 million.

Mr. Southwell also mentioned that, "During the fourth quarter, we continued to take advantage of the continuing rise in the price of Northrop Grumman stock to sell a small portion of our holdings, and we repurchased approximately 516,000 shares of Unitrin common stock at a total cost of $23.1 million."

Total Revenue

Total revenue was $2,919.8 million for the year ended December 31, 2007, compared to $2,857.2 million for the year ended December 31, 2006. Total revenue increased due to higher net realized investment gains and higher net investment income and, to a lesser extent, higher automobile finance revenues.

Total revenues were $723.3 million and $708.5 million for the fourth quarters of 2007 and 2006, respectively, an increase of $14.8 million. Earned premiums were $574.3 million and $571.2 million for the fourth quarters of 2007 and 2006, respectively, an increase of $3.1 million. Earned premiums increased in the Unitrin Direct segment, partially offset by decreased earned premiums in the Kemper segment and the Life and Health Insurance segment. Automobile finance revenues increased by $2.3 million for the fourth quarter of 2007, compared to the same period in 2006, due primarily to higher levels of loans outstanding. Net investment income increased by $1.9 million for the fourth quarter of 2007, compared to the same period in 2006, due primarily to higher levels of investments. Net realized investment gains were $10.5 million for the fourth quarter of 2007, compared to $2.8 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 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 $4.1 million for the fourth quarter of 2007, compared to the same period in 2006, due primarily to lower volume of automobile insurance.