United Fire Group Inc. (UFCS) reported third-quarter 2014 operating loss of one cent per share, in line with the Zacks Consensus Estimate. This compares unfavorably with 42 cents per share earned in the year-ago quarter.
Including after-tax net realized investment gains, United Fire reported net income of one cent per share in the third quarter compared to 95 cents per share in the year-ago period. A higher expense level induced the downside.
Quarterly Operational Update
Total revenue of United Fire increased 5.8% year over year to $235.9 million in the third quarter driven mainly by an improvement in net premiums earned (up 9.3%).
Net written premiums increased 7% year over year to $207.4 million. Net premiums written in the Commercial line of business were $170 million, up 9% year over year. However, net premiums written in the Personal line of business decreased 13.8% to $18.4 million.
Net investment income of United Fire decreased 16.3% year over year to $22.8 million in the reported quarter.
Total benefits, losses and expenses increased 14.4% year over year to $238.7 million. The increase stemmed from higher loss and loss settlement expenses, increase in liability for future policy benefits, amortization of deferred policy and acquisition costs.
The combined ratio deteriorated 710 basis points year over year to 107.4%.
Quarterly Segment Update
The Property and Casualty segment of United Fire reported net loss of $1.9 million compared to a net income of $10.3 million in the prior-year quarter. Net premiums written in the segment were $190.6 million, up 6.9% year over year.
The expense ratio increased 60 basis points to 31.1%. The company expects expense ratio in 2014 to be hurt by an increase in premium taxes and assessments due to premium growth in specific lines of business.
The Life Insurance segment of United Fire reported net income of $2.2 million, up 57% year over year. Net premiums written in the segment were $16.8 million, up 7% year over year.
Dividend and Share Repurchase
In the third quarter, United Fire declared and paid dividends of 20 cents per share to shareholders of record as of Sep 2, 2014.
The Zacks Rank #3 (Hold) company also gifted investors with a 0.2 million share buyback worth $5.7 million.
Financial Position
As of Sep 30, 2014, United Fire had cash and investments of $3.2 billion, up 2.2% from $3.1 billion as of Dec 31, 2013.
As of Sep 30, 2014, total assets of United Fire were $3.8 billion, up about 3% from $3.7 billion as of Dec 31, 2013.
Shareholders’ equity as of Sep 30, 2014 was $808 million, up 3.2% from $783 million as of Dec 31, 2013.
Performance of Other Property and Casualty Insurers
The bottom line at RLI Corporation (RLI), The Travelers Companies Inc. (TRV) and ACE Limited (ACE) has outperformed each of their Zacks Consensus Estimate in the third quarter.
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