Catastrophic Losses Slash Cedar Rapids-based Insurer's Earnings

By George Ford, Reporter


By Aaron Hepker

CEDAR RAPIDS, Iowa - Natural disaster claims as well as one-time acquisition-related costs slashed United Fire Group’s earnings for 2011, but the Cedar Rapids-based insurer posted sharply improved fourth-quarter results.

United Fire Group, corporate parent of United Fire & Casualty and United Life Insurance, on Tuesday reported net income of $11,000 for 2011, down significantly from $47.5 million, or $1.80 per share, in 2010. The company’s revenues rose 19.3 percent to $705 million in 2011 from $591.1 million in 2010.

United Fire Group incurred $80.8 million of pretax catastrophic losses in 2011, including $21.1 million from the company’s assumed reinsurance business, which experienced significant losses from natural disasters in New Zealand and Japan. The company posted a $4.2 million, or 16 cents per share, operating loss in 2011, compared with an operating profit of $42 million, or $1.60 per share, in the previous year.

United Fire Group recorded a fourth-quarter profit of $16.9 million, or 66 cents per share, up 46.3 percent from $11.5 million, or 44 cents per share, in the final three months of 2010. Revenues rose 27.7 percent to $191.6 million in the three months that ended Dec. 31 from $150 million in the fourth quarter of 2010.

United Fire Group incurred a pretax catastrophic loss of $9.8 million in the fourth quarter of 2011, compared with a pretax catastrophic loss of $4.3 million in the same period of 2010.

Randy Ramlo, United Fire Group president and CEO, said 2011 will be remembered in the property and casualty insurance industry for its devastating catastrophes, both domestic and abroad.

“According to various reports, it was the costliest catastrophe year on record for the property and casualty insurance industry globally,” Ramlo said. “The fourth quarter results showed great improvement, and we posted solid results with increases in net premiums earned and operating income.

“We’ve been encouraged by rate increases across all lines, as well as by some positive signs in the overall economy. Additionally, we’ve taken steps to improve and tighten our underwriting based on our catastrophe experiences of the past year.”

Ramlo said the integration of Mercer Insurance Group is progressing, noting that United Life Insurance has received approval to operate in New Jersey, North Carolina, Pennsylvania, Virginia and West Virginia. He said that will continue to leverage the Mercer Insurance Group acquisition by expanding the company’s geographical footprint.

United Fire Group’s common stock rose 31 cents , or 1.6 percent, to $19.70 per share in late morning trading on the Nasdaq Stock Market.

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