Unitrin, Inc. Reports First Quarter Earnings

Business Wire, May 5, 2008

CHICAGO -- Unitrin, Inc. (NYSE: UTR) reported today net income of $22.5 million ($0.35 per common share) for the first quarter of 2008, compared to $72.4 million ($1.08 per common share) for the first quarter of 2007. Income from Continuing Operations was $27.2 million ($0.43 per common share) for the first quarter of 2008, compared to $67.4 million ($1.01 per common share) for the first quarter of 2007.

Don Southwell, Unitrin's President and Chief Executive Officer, commented, "We are disappointed that our earnings were adversely affected by the turbulent first quarter environment -- the continuing crisis in the financial markets and the unusually severe weather. However, we were pleased to post positive overall investment returns for the quarter, taking into account the change in the fair values of our investments, given the current state of the financial markets. We also took advantage of the market conditions and our financial strength by repurchasing Unitrin common stock at attractive prices. During the first quarter of 2008, we repurchased 1.6 million shares of Unitrin common stock at a total cost of $57.4 million, or approximately $35.50 per share.

Our operating results declined largely due to lower net investment results, higher catastrophe losses and lower results from Fireside Bank. Net investment income declined by $22.7 million before tax due primarily to losses from certain investments in limited liability investment companies that are accounted for under the equity method of accounting and to lower dividend income from our investments in Northrop as our preferred stock holdings converted into common stock. Catastrophe losses from continuing operations were $13.9 million before tax for the first quarter of 2008, compared to $2.1 million for the first quarter of 2007."

Mr. Southwell further explained, "Fireside Bank reported a small loss for the first quarter of 2008. Our estimate of the loan losses inherent in Fireside's automobile loan portfolio at December 31, 2007 remains relatively consistent with three additional months of data. We have taken a number of steps to improve Fireside's business model. Fireside's loan originations declined by over 15% for the first quarter of 2008, compared to the first quarter of 2007, due primarily to the elimination of certain now unprofitable tiers of business."

On April 1, 2008, Unitrin completed its previously announced acquisition of Primesco, Inc. in a cash merger transaction valued at $95.6 million. Primesco's wholly-owned subsidiaries, Mutual Savings Life Insurance Company and Mutual Savings Fire Insurance Company, specialize in the sale of life, health and fire insurance products to persons of modest financial means in Alabama, Georgia, Mississippi and several other states in the Southeast. Mutual Savings Life and Mutual Savings Fire had total premium revenues of $52.4 million for the year ended December 31, 2007. Mr. Southwell stated, "We are pleased to welcome the Mutual Savings companies to the Unitrin family of companies."

Total Revenue

Total revenue was $701.9 million for the first quarter of 2008, compared to $727.6 million for the first quarter of 2007. Total revenue decreased due primarily to the lower net investment income and lower net realized investment gains, partially offset by higher earned premiums.

Earned premiums were $575.9 million and $562.5 million for the first quarters of 2008 and 2007, respectively, an increase of $13.4 million. Earned premiums increased in the Unitrin Direct segment and Unitrin Specialty segment, partially offset by decreased earned premiums in the Life and Health Insurance segment. Earned premiums in the Kemper segment and automobile finance revenues in the Fireside Bank segment were relatively flat for the first quarter of 2008, compared to the same period in 2007.

Net investment income decreased by $22.7 million for the first quarter of 2008, compared to the same period in 2007, due primarily to lower net investment income from certain investments in limited liability investment companies and limited partnerships which the Company accounts for under the equity method of accounting and lower dividend income from the Company's investment in Northrop preferred stock. The Company reported a net investment loss of $9.1 million from its investments in limited liability investment companies and limited partnerships for the first quarter of 2008, compared to net investment income of $8.4 million for the same period in 2007. Each of the Company's insurance segments reported lower net investment income as a result of these investments. Dividend income from the Company's investments in Northrop decreased by $5.5 million due primarily to the timing of the preferred stock ex-dividend date in 2007, which resulted in two dividend payments in the first quarter of 2007, and the conversion of the Company's holdings of Northrop preferred stock into Northrop common stock in the first quarter of 2008.

Net realized investment gains were $6.2 million for the first quarter of 2008, compared to $22.5 million for the same period in 2007. Net realized investment gains for the first quarters of 2008 and 2007 included gains of $10.3 million and $18.9 million, respectively, from sales of a portion of the Company's investment in Northrop common stock. Net realized investment gains for the first quarters of 2008 and 2007 includes pretax losses of $8.5 million and $0.8 million, respectively, resulting from other than temporary declines in the fair values of investments. The Company cannot anticipate when or if similar net investment gains and losses may occur in the future.