United Fire Focuses on 'Organic Growth,' Raises Dividend 20%
By George Ford, Reporter
CEDAR RAPIDS, Iowa - United Fire Group is focusing on growing its business with additional agents in underrepresented markets and on new products, redirecting excess capital from its common stock repurchase program.
Randy Ramlo, president and CEO of the property-and-casualty and life insurer, told shareholders at the Cedar Rapids company's annual meeting on Wednesday that organic growth is needed to offset a fairly flat investment environment.
"Insurance companies make a good bit of their income based on investment yield and unfortunately over the last few years it's been trickling down," Ramlo said. "We have to make more of our profits from the generating side, rather than relying on our investments.
"We had overall organic growth of 12.5 percent in 2012. Rate increases accounted for 6 percent of that growth, new business made up about 3.5 percent and 3 percent was based on exposure changes."
Ramlo said payrolls and sales at many companies insured by United Fire were declining in recent years due to the economic recession, requiring United Fire Group to refund part of a premium. He said payrolls and sales have begun rising again, increasing premiums.
Ramlo said a property-and-casualty insurance product aimed at small business customers is just about ready for the market. Agents will be able to quote the annual premium to a prospective policyholder, rather than having to wait for a decision from United Fire Group's underwriters.
"We're also looking at writing workman's compensation policies, particularly for larger accounts that require a little more expertise and have less competition," Ramlo said.
"Agents really value having a company in their stable that can handle the more complicated accounts with products liability and large fire lines.
"We like to be a market for those things so we can leverage them to write some more of what we call 'main street' business, that's really more innocuous and has a lower premium. Workers compensation coverage will be offered in addition to a company's normal property and casualty package."
Ramlo said United Fire is adding agents in markets such as St. Louis, where it only had two agents representing the company. He said the company's United Life Insurance unit has added eight states with the acquisition of Mercer Insurance Group and will continue to look for additional opportunities to write more policies.
With regard to the Mercer acquisition, Ramlo said United Fire has repaid $45 million of debt used as part of the purchase of the New Jersey-based insurer.
United Fire's board of directors on Wednesday voted to raise the company's quarterly dividend to 18 cents per common share, or 72 cents per share annually. That represents a 20 percent increase from 15 cents per share, or 60 cents per share annually, that has been paid since 2007.
"The board's actions today reflect what we believe is an appropriate means of addressing shareholder value at this time," Ramlo said. "We believe that investors will find merit in this significant dividend increase along with our recent stock price appreciation."