[February 15, 2013]

A.M. Best Affirms Ratings of Infinity Insurance Company, Its Insurance Subsidiaries and Affiliate

A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of Infinity Insurance Company (Infinity), its 11 insurance subsidiaries and one insurance affiliate. Concurrently, A.M. Best has affirmed the ICR of "bbb" and debt rating of "bbb" on $275 million 5.00% senior unsecured notes due 2022, issued by Infinity's parent, Infinity Property & Casualty Corporation (IPCC) [NASDAQ: IPCC]. The outlook for all ratings is stable. The above named companies are headquartered in Birmingham, AL. (See below for a detailed listing of the companies.)

The rating affirmations of Infinity reflect its excellent risk-adjusted capitalization, favorable five-year operating performance and strong non-standard automobile market presence. Infinity's favorable operating earnings are attributed to management's product line expertise, local market knowledge and utilization of sophisticated technologies within the pricing, risk selection and claims handling process. Infinity ranks among the leading non-standard automobile writers in the United States. In addition, the group has implemented numerous strategic initiatives to improve underwriting results in underperforming states, which include rate increases, rating enhancements, agency management initiatives and revised claims operational processes. Furthermore, Infinity benefits from the financial flexibility provided by IPCC, which maintains moderate financial leverage and solid interest and fixed coverage.

Partially offsetting these positive rating factors are Infinity's limited business profile, with policies comprised predominantly of non-standard autoand approximately 70% of its direct written premiums concentrated in two key states. As a result, the organization's earnings are susceptible to increased competition in the non-standard auto segment and changes in the regulatory, judicial and legislative environment in its largest states. This has been evident in recent years when Infinity's underwriting results deteriorated, driven by increased private passenger auto liability loss ratios and adverse loss reserve development, primarily related to strong policy growth and increased loss severity. In addition, dividend distributions over the previous five-year period to IPCC limited Infinity's ability to increase its surplus position.

While the outlook for the ratings of Infinity is stable, negative rating actions could be the result of the continued deterioration in operating results that have occurred in recent years, potentially driven by adverse loss reserve development, and/or a material decrease in risk-adjusted capitalization, potentially driven by significant stockholder dividend payments to IPCC.

The FSR of A (Excellent) and ICRs of "a" have been affirmed for Infinity Insurance Company and its following insurance subsidiaries and insurance affiliate:

• Infinity Assurance Insurance Company
• Infinity Auto Insurance Company
• Infinity Casualty Insurance Company
• Infinity Indemnity Insurance Company
• Hillstar Insurance Company
• Infinity Preferred Insurance Company
• Infinity Reserve Insurance Company
• Infinity Safeguard Insurance Company
• Infinity Security Insurance Company
• Infinity Select Insurance Company
• Infinity Standard Insurance Company
• Infinity County Mutual Insurance Company (Affiliate)

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Catastrophe Analysis in A.M. Best Ratings"; "Insurance Holding Company and Debt Ratings"; "Rating Members of Insurance Groups"; "Risk Management and the Rating Process for Insurance Companies"; and "Understanding BCAR for Property/Casualty Insurers." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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