United Fire Shares Fall on Depressed Earnings - Analyst Blog

United Fire Group, Inc . ( UFCS ) reported first-quarter 2014 operating net income of 47 cents per share, missing the Zacks Consensus Estimate by 27%. The results also slumped 44% year over year.

Including after-tax net realized investment gains, United Fire reported net income of 52 cents per share, down 41% year over year.

The reported quarter witnessed losses from single large claim (in the wake of a large explosion in a suburban townhome community) and lower favorable reserve development. The share price of the property and casualty insurer fell 4.63% at the close of the trading session on May 6.

However, rate increases in excess of loss costs across all lines of business came as a respite. Positive premium audits, increased renewals by the insured and continued policy count growth also brought some relief in the quarter.

Operational Update

Total revenue of United Fire increased 8.6% year over year to approximately $222.9 million, driven by a 9.3% year-over-year improvement in net premiums earned and 1.1% higher net investment income.

Total benefits, losses and expenses of United Fire flared up 18% year over year to $207 million during the quarter. The increase stemmed from higher losses and loss settlement expenses.

Combined ratio deteriorated 930 basis points from the year-ago quarter to 99.6%.

Quarterly Segment Update

Property and Casualty : Net premium written for this segment improved 10.3% year over year to $179.5 million.

Revenues increased 10.5% year over year to $192.5 million on the back of higher net earned premiums as well as higher net investment income.

Net income of $11.8 million plunged about 43% year over year.

Life : Net premiums earned decreased 1.9% year over year due to rate increases that negatively impacted the sales of single premium whole life policies.

Revenues declined 2.2% year over year to $30.4 million due to lower premiums.

Net income of $1.5 million registered a year-over-year decline of 8.4%.

Financial Updates

United Fire exited the quarter with cash and cash investments of $3.18 billion, higher than $3.14 billion at 2013 end.

Shareholders' equity on Mar 31, 2014 was $808.1 million, up 3.2% from $782.8 million on Dec 31, 2013.

United Fire's book value per share increased 3.1% from 2013 end and currently stands at $31.82.

Return on equity decreased to 6.7% in the quarter from 12% in the year-ago quarter.

Zacks Rank and Peers

United Fire presently carries a Zacks Rank #3 (Hold). Other property and casualty insurers such as ACE Ltd . ( ACE ), The Travelers Companies, Inc. ( TRV ) and PartnerRe Ltd . ( PRE ) outperformed the Zacks Consensus Estimate in the first quarter of 2014. These are also better-ranked stocks each with a Zacks Rank #2 (Buy).

ACE LIMITED (ACE): Free Stock Analysis Report

PARTNERRE LTD (PRE): Free Stock Analysis Report

TRAVELERS COS (TRV): Free Stock Analysis Report

UNITED FIRE GRP (UFCS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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