United Fire Group, Inc. (Nasdaq: UFCS)
Consolidated Financial Results -
Highlights(1):
| Three Months Ended
September 30, 2020 |
|
|
Nine Months Ended
September 30, 2020 |
|
|
Net income (loss) per diluted share |
$ |
(1.49 |
) |
|
|
Net income (loss) per diluted share |
$ |
(4.15 |
) |
|
| Adjusted operating income
(loss)(2) per diluted share |
$ |
(1.37 |
) |
|
|
Adjusted operating income
(loss)(2) per diluted share |
$ |
(1.58 |
) |
|
| Net realized investment gains
per diluted share |
$ |
0.48 |
|
|
|
Net realized investment gains
(losses) per diluted share |
$ |
(1.97 |
) |
|
| Goodwill impairment |
$ |
(0.60 |
) |
|
|
Goodwill impairment |
$ |
(0.60 |
) |
|
| GAAP combined ratio |
124.4 |
|
% |
|
GAAP combined ratio |
113.5 |
|
% |
| |
|
|
Book value per share |
$ |
32.77 |
|
|
| |
|
|
Return on equity(3) |
(16.0 |
) |
% |
United Fire Group, Inc. (the "Company" or
"UFG") (Nasdaq: UFCS) today reported a consolidated net loss,
including net realized investment gains and losses and changes in
the fair value of equity securities, of $37.2 million ($1.49 per
diluted share) for the three-month period ended September 30, 2020
(the "third quarter of 2020"), compared to consolidated net loss of
$2.3 million ($0.09 per diluted share) for the same period in 2019.
For the nine-month period ended September 30, 2020
("year-to-date"), consolidated net loss, including realized
investment gains and losses and changes in the fair value of equity
securities, was $103.8 million ($4.15 per diluted share), compared
to net income of $38.0 million ($1.48 per diluted share) for the
same period in 2019.
The Company reported consolidated adjusted operating loss of
$1.37 per diluted share for the third quarter of 2020, compared to
consolidated adjusted operating loss of $0.40 per diluted share for
the same period in 2019. Year-to-date, consolidated adjusted
operating loss was $1.58 per diluted share compared to consolidated
adjusted operating loss of $0.06 per diluted share for the same
period in 2019.
"The third quarter of 2020, similar to the second quarter, was
once again impacted by historically high catastrophe losses,"
stated Randy A. Ramlo, President and Chief Executive Officer.
"Catastrophe losses in the third quarter of 2020 totaled $55.4
million and added 21.4 percentage points to the GAAP combined
ratio. The catastrophe losses were from 25 catastrophe events, with
the most notable catastrophe event being the August Midwest
derecho, causing widespread storms and high winds. The August
Midwest derecho was a full retention loss, with losses in excess of
our stated reinsurance retention of $20.0 million. Total losses
from this storm were $88.0 million with $68.0 million of
reinsurance recoveries."___________(1) Per share amounts are after
tax.(2) Adjusted operating income (loss) is a non-GAAP financial
measure of net income excluding net realized investment gains and
losses, changes in the fair value of equity securities and related
federal income taxes, and goodwill impairment. Management evaluates
this measure and ratios derived from this measure and the Company
provides this information to investors because we believe it better
represents the normal, ongoing performance of our business. See
Definitions of Non-GAAP Information and Reconciliations to
Comparable GAAP Measures for a reconciliation of adjusted operating
income (loss) to net income (loss). (3) Return on equity is
calculated by dividing annualized net income (loss) by average
year-to-date stockholders' equity.
"Removing the impact of catastrophe losses and favorable prior
year reserve development, our core loss ratio improved again in the
third quarter 2020 and year-to-date 2020, with improvements of 0.4
and 0.3 percentages points, respectively, to the combined ratio.
Year-to-date, our commercial auto loss ratio improved 4.8 points
compared to the same period in 2019. This improvement is being
driven by continuing decreases in the frequency of commercial auto
claims and a decrease in the number of commercial auto exposure
units, both positive signs of progress with our strategic
initiatives. However, we know we have work to do, as our commercial
auto loss ratio remains higher than acceptable with severity of
commercial auto losses and reserve strengthening continuing in the
third quarter of 2020."
"We continue to expect the impact of the COVID-19 pandemic to be
manageable. As we mentioned the last two quarters, there was some
impact to net premiums earned due to the impact of the COVID-19
pandemic but it was less significant than the impact from our focus
on improving the profitability of our commercial auto book in the
first nine months of 2020. As a reminder, nearly all of the
policies we have issued contain contract language that specifically
excludes business interruption coverage for losses due to viruses
such as the COVID-19 pandemic. However, we cannot determine how any
changes in legislation, regulations and interpretations by the
courts regarding these exclusions will impact the Company in the
future."
Financial Highlights
Net loss, including net realized investment gains and losses,
totaled $37.2 million ($1.49 per diluted share) for the third
quarter of 2020, compared to a net loss of $2.3 million ($0.09 per
diluted share) in the same period in 2019. The increase in the net
loss was primarily due to an increase in losses and loss settlement
expenses, namely from catastrophe losses, and a decrease in net
premiums earned. Year to date, consolidated net loss, including
realized investment gains and losses and changes in the fair value
of equity securities, was $103.8 million ($4.15 per diluted share),
compared to net income of $38.0 million ($1.48 per diluted share)
for the same period in 2019. The decrease in net income was
primarily due to a decrease in the fair value of equity securities,
a decrease in net investment income, a decrease in net premiums
earned and increases in losses and loss settlement expenses.
Net premiums earned decreased 5.8 percent to $259.1 million in
the third quarter of 2020, compared to $274.9 million in the same
period in 2019. Year-to-date net premiums earned decreased 2.7
percent to $791.5 million compared to $813.7 million in the same
period in 2019. The decrease in both the three- and nine-month
periods ended September 30, 2020 was primarily due to our focus on
improving profitability through non-renewal of under-performing
accounts in our commercial auto line of business. Also, during the
third quarter of 2020, we paid $9.0 million of reinstatement
premium with our reinsurance program as a result of the August
Midwest derecho catastrophe exceeding the reinsurance contract
stated retention. There was also some impact to net premiums earned
from the COVID-19 pandemic but it was less significant than the
impact from our commercial auto profitability initiatives in the
three- and nine-month periods ended September 30, 2020.
The average renewal pricing increases were driven by commercial
auto and commercial property. During the third quarter of 2020, the
commercial auto average renewal rate increase remained in the
double digits at 11.5 percent. The commercial property average
renewal rate increase was 5.8 percent, remaining in the mid-single
digits again in the third quarter of 2020.
Net investment income was $7.2 million for the third
quarter of 2020, as compared to net investment income of
$13.3 million for the same period in 2019. Year-to date, net
investment income was $22.3 million, compared to net investment
income of $43.9 million for the same period in 2019. The decrease
in net investment income in both periods in 2020 as compared to the
same periods in 2019 was due to a combination of a decrease in the
fair value of our investments in limited liability partnerships and
a decrease in invested assets. The valuation of these investments
in limited liability partnerships varies from period to period due
to the current equity market conditions, specifically related to
financial institutions.
The Company recognized net realized investment gains of $15.2
million during the third quarter of 2020, compared to net realized
investment gains of $9.8 million for the same period in 2019.
Year-to-date, the Company recognized net realized investment losses
of $62.4 million compared to net realized gains of $50.1 million.
The change in the three- and nine-month periods ended September 30,
2020 as compared to the same periods in 2019 was primarily due to
the change in the fair value of equity securities.
Losses and loss settlement expenses increased by 10.8 percentage
points and by 5.1 percentage points during the three- and
nine-month periods ended September 30, 2020, compared to the same
periods of 2019. The increase in losses and loss settlement
expenses primarily was due to an increase in catastrophe losses as
compared to the same period in 2019.
A one-time adjustment to write off goodwill of $15.1 million was
made during the third quarter of 2020 after completing a
quantitative goodwill analysis. This goodwill related to the
acquisition of Mercer Insurance Group, Inc. in 2011.
Consolidated net unrealized investment gains, net of tax,
totaled $82.5 million as of September 30, 2020, an increase of
$35.2 million from December 31, 2019. The increase in net
unrealized investment gains was primarily the result of a decrease
in interest rates in the nine-month period ended September 30,
2020.
Total consolidated assets as of September 30, 2020 were
$3.0 billion, which included $2.0 billion of invested assets. The
Company's book value per share was $32.77, which is a decrease of
$3.63 per share, or 10.0 percent, from December 31, 2019. This
decrease is primarily attributed to a net loss of $103.8 million,
shareholder dividends of $24.8 million and share repurchases of
$2.7 million, partially offset by an increase in net unrealized
investment gains on fixed maturity securities of $35.2 million, net
of tax, during the first nine months of 2020.
The annualized return on equity was (16.0) percent year-to-date
compared to 5.5 percent for the same period in 2019. The change in
the annualized return on equity was primarily driven by a net loss
of $103.8 million in the first nine months of 2020 compared to net
income of $38.0 million in the same period in 2019.
Reserve Development
We experienced favorable development in our net reserves for
prior accident years of $6.3 million in the third quarter of 2020,
compared to favorable development of $5.5 million in the same
period in 2019. The favorable prior year reserve development in the
three-month period ended September 30, 2020 came primarily from our
workers' compensation and commercial liability lines of business.
Year-to-date, favorable development in our net reserves for prior
accident years was $30.0 million, compared to $0.8 million
favorable development in the same period in 2019. The favorable
prior year reserve development in the nine-month period ended
September 30, 2020 came primarily from our workers' compensation
and commercial fire and allied lines of business. Development
amounts can vary significantly from quarter- to- quarter depending
on a number of factors, including the number of claims settled and
the settlement terms. At September 30, 2020, our total reserves
were within our actuarial estimates.
GAAP Combined Ratio
The GAAP combined ratio increased by 14.4 percentage points to
124.4 percent for the third quarter of 2020, compared to 110.0
percent in the same period in 2019. For the nine-month period
ended September 30, 2020, the GAAP combined ratio increased 7.5
percentage points to 113.5 percent compared to 106.0 percent for
the nine-month period ended September 30, 2019. The increase in the
combined ratio during the three- and nine-month periods ended
September 30, 2020 as compared to the same periods in 2019 was
primarily driven by an increase in the net loss ratio.
Net Loss Ratio
The GAAP net loss ratio deteriorated 13.6 percentage points and
5.8 percentage points, respectively, during the three- and
nine-month periods ended September 30, 2020, as compared to the
same periods in 2019. The increase in the net loss ratio was
primarily due to an increase in catastrophe losses.
Pre-tax catastrophe losses in the third quarter of 2020 were
higher when compared to third quarter of 2019, with catastrophe
losses adding 21.4 percentage points to the combined ratio in 2020,
as compared to 7.0 percentage points in 2019. During the third
quarter, the Company incurred losses from 25 catastrophe events,
with the most significant losses from the August Midwest derecho
and Hurricane Laura. Our 10-year historical average for third
quarter catastrophe losses is 8.9 percentage points added to the
combined ratio. Year-to-date, catastrophe losses totaled $121.3
million ($3.83 per diluted share) compared to $44.9 million ($1.38
per diluted share) for the same period in 2019.
The GAAP net loss ratio excluding catastrophe losses and prior
accident year reserve development improved by 0.4 percentage points
in the three-month period ended September 30, 2020 and 0.3
percentage points in the nine-month period ended September 30, 2020
as compared to the same periods of 2019. This decrease in the GAAP
net loss ratio in the three- and nine-month periods ended September
30, 2020 compared to the same periods of 2019 was due to an
improvement in the performance of our core book of business.
Expense Ratio
The expense ratio for the third quarter of 2020 was 33.8 percent
compared to 33.0 percent for the third quarter in 2019.
Year-to-date, the expense ratio was 34.4 percent compared to 32.7
percent in the same period in 2019. The increase in the expense
ratio during the three- and nine-month periods ended September 30,
2020 as compared to the same periods in 2019 was primarily due to
our continued investment in technology, including our multi-year
Oasis project, an upgrade to our technology platform designed to
enhance core underwriting decisions, selection of risks and
productivity.
Capital Management
During the third quarter of 2020, we declared and paid a $0.33
per share cash dividend to shareholders of record as of September
4, 2020. We have paid a quarterly dividend every quarter since
March 1968. During the third quarter of 2020, we did not repurchase
any shares of our common stock. Year-to-date, we repurchased 70,467
shares of our common stock for a total purchase price of
approximately $2.7 million.
Earnings Call Access Information
An earnings call will be held at 9:00 a.m. Central Time on
November 4, 2020 to allow securities analysts, shareholders
and other interested parties the opportunity to hear management
discuss the Company's third quarter of 2020 results.
Teleconference: Dial-in information for the call is toll-free
1-844-492-3723. The event will be archived and available for
digital replay through November 18, 2020. The replay access
information is toll-free 1-877-344-7529; conference ID no.
10148230.
Webcast: An audio webcast of the teleconference can be accessed
at the Company's investor relations page at
http://ir.ufginsurance.com/event or
https://services.choruscall.com/links/ufcs201104. The archived
audio webcast will be available until November 18, 2020.
Transcript: A transcript of the teleconference will be available
on the Company's website soon after the completion of the
teleconference.
About UFG
Founded in 1946 as United Fire & Casualty Company, UFG,
through its insurance company subsidiaries, is engaged in the
business of writing property and casualty insurance.
Through our subsidiaries, we are licensed as a property and
casualty insurer in 48 states, plus the District of Columbia, and
we are represented by approximately 1,000 independent agencies.
A.M. Best Company assigns a rating of “A” (Excellent) for members
of the United Fire & Casualty Group.
For more information about UFG, visit www.ufginsurance.com or
contact:
Randy Patten, AVP and Controller, 319-286-2537 or
IR@unitedfiregroup.com.
Disclosure of Forward-Looking Statements
This release may contain forward-looking statements about our
operations, anticipated performance and other similar matters. The
Private Securities Litigation Reform Act of 1995 provides a safe
harbor under the Securities Act of 1933 and the Securities Exchange
Act of 1934 for forward-looking statements. The forward-looking
statements are not historical facts and involve risks and
uncertainties that could cause actual results to differ from those
expected and/or projected. Such forward-looking statements are
based on current expectations, estimates, forecasts and projections
about the Company, the industry in which we operate, and beliefs
and assumptions made by management. Words such as "expect(s),"
"anticipate(s)," "intend(s)," "plan(s)," "believe(s),"
"continue(s)," "seek(s)," "estimate(s)," "goal(s)," "remain(s)
optimistic," "target(s)," "forecast(s)," "project(s),"
"predict(s)," "should," "could," "may," "will," "might," "hope,"
"can" and other words and terms of similar meaning or expression in
connection with a discussion of future operations, financial
performance or financial condition, are intended to identify
forward-looking statements. These statements are not guarantees of
future performance and involve risks, uncertainties and assumptions
that are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed in such
forward-looking statements. Information concerning factors that
could cause actual outcomes and results to differ materially from
those expressed in the forward-looking statements is contained in
Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K
for the year ended December 31, 2019, filed with the
Securities and Exchange Commission ("SEC") on February 28,
2020, as updated in our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2020, filed with the SEC on May 6, 2020.
The risks identified in our Annual Report on Form 10-K (as updated)
and in our other SEC filings are representative of the risks,
uncertainties, and assumptions that could cause actual outcomes and
results to differ materially from what is expressed in the
forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date of this release or as of the date they are
made. Except as required under the federal securities laws and the
rules and regulations of the SEC, we do not have any intention or
obligation to update publicly any forward-looking statements,
whether as a result of new information, future events, or
otherwise.
Definitions of Non-GAAP Information and Reconciliations
to Comparable GAAP Measures
The Company prepares its public financial statements in
conformity with accounting principles generally accepted in the
United States of America ("GAAP"). Management also uses certain
non-GAAP measures to evaluate its operations and profitability. As
further explained below, management believes that disclosure of
certain non-GAAP financial measures enhances investor understanding
of our financial performance. Non-GAAP financial measures disclosed
in this report include: adjusted operating income (loss) and net
premiums written. The Company has provided the following
definitions and reconciliations of the non-GAAP financial
measures:
Adjusted operating income (loss): Adjusted
operating income (loss) is calculated by excluding net realized
investment gains and losses, after applicable federal and state
income taxes, and goodwill impairment from net income. Management
believes adjusted operating income (loss) is a meaningful measure
for evaluating insurance company performance and a useful
supplement to GAAP information because it better represents the
normal, ongoing performance of our business. Investors and equity
analysts who invest and report on the insurance industry and the
Company generally focus on this metric in their analyses.
|
Net Income Reconciliation |
| |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| (In
Thousands, Except Per Share Data) |
2020 |
|
2019 |
Change % |
|
2020 |
|
2019 |
Change % |
|
Income Statement Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(37,241 |
) |
|
|
$ |
(2,342 |
) |
|
NM |
|
$ |
(103,815 |
) |
|
|
$ |
37,983 |
|
|
NM |
|
Less: after-tax net realized investment gains (losses) |
12,017 |
|
|
|
7,760 |
|
|
54.9 |
% |
|
(49,309 |
) |
|
|
39,600 |
|
|
(224.5 |
) |
% |
|
Less: goodwill impairment |
(15,091 |
) |
|
|
— |
|
|
NM |
|
(15,091 |
) |
|
|
— |
|
|
NM |
|
Adjusted operating income (loss) |
$ |
(34,167 |
) |
|
|
$ |
(10,102 |
) |
|
NM |
|
$ |
(39,415 |
) |
|
|
$ |
(1,617 |
) |
|
NM |
| Diluted Earnings Per
Share Data |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(1.49 |
) |
|
|
$ |
(0.09 |
) |
|
NM |
|
$ |
(4.15 |
) |
|
|
$ |
1.48 |
|
|
NM |
|
Less: after-tax net realized investment gains (losses) |
0.48 |
|
|
|
0.31 |
|
|
54.8 |
% |
|
(1.97 |
) |
|
|
1.54 |
|
|
(227.9 |
) |
% |
|
Less: goodwill impairment |
(0.60 |
) |
|
|
— |
|
|
NM |
|
(0.60 |
) |
|
|
— |
|
|
NM |
|
Adjusted operating income (loss) |
$ |
(1.37 |
) |
|
|
$ |
(0.40 |
) |
|
NM |
|
$ |
(1.58 |
) |
|
|
$ |
(0.06 |
) |
|
NM |
NM = Not meaningful.
Net premiums written: While not a substitute
for any GAAP measure of performance, net premiums written is
frequently used by industry analysts and other recognized reporting
sources to facilitate comparisons of the performance of insurance
companies. Net premiums written are the amount charged for
insurance policy contracts issued and recognized on an annualized
basis at the effective date of the policy. Management believes net
premiums written are a meaningful measure for evaluating insurance
company sales performance and geographical expansion efforts. Net
premiums written for an insurance company consists of direct
premiums written and reinsurance assumed, less reinsurance ceded.
Net premiums earned is calculated on a pro rata basis over the
terms of the respective policies. Unearned premium reserves are
established for the portion of premiums written applicable to the
unexpired term of insurance policy in force. The difference between
net premiums earned and net premiums written is the change in
unearned premiums and change in prepaid reinsurance premiums.
|
Net Premiums Earned Reconciliation |
| |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| (In
Thousands, Except Ratios) |
2020 |
|
2019 |
Change % |
|
2020 |
|
2019 |
Change % |
|
Premiums: |
|
|
|
|
|
|
|
|
|
|
Net premiums earned |
$ |
259,061 |
|
|
|
$ |
274,942 |
|
|
(5.8 |
) |
% |
|
$ |
791,519 |
|
|
$ |
813,742 |
|
|
(2.7 |
) |
% |
|
Less: change in unearned premiums |
31,072 |
|
|
|
11,766 |
|
|
164.1 |
|
% |
|
5,433 |
|
|
(35,296 |
) |
|
115.4 |
|
% |
|
Less: change in prepaid reinsurance premiums |
(2,222 |
) |
|
|
(163 |
) |
|
NM |
|
2,734 |
|
|
886 |
|
|
208.6 |
|
% |
|
Net premiums written |
$ |
230,211 |
|
|
|
$ |
263,339 |
|
|
(12.6 |
) |
% |
|
$ |
783,352 |
|
|
$ |
848,152 |
|
|
(7.6 |
) |
% |
NM = Not meaningful.
Supplemental Tables
|
Consolidated Financial Highlights |
| (unaudited) |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| (In
Thousands, Except Share and Per Share Data and Ratios) |
2020 |
|
2019 |
Change % |
|
2020 |
|
2019 |
Change % |
| Revenue
Highlights |
|
|
|
|
|
|
|
|
|
|
Net premiums earned |
$ |
259,061 |
|
|
|
$ |
274,942 |
|
|
(5.8 |
) |
% |
|
$ |
791,519 |
|
|
|
$ |
813,742 |
|
|
(2.7 |
) |
% |
|
Net investment income |
7,244 |
|
|
|
13,291 |
|
|
(45.5 |
) |
% |
|
22,303 |
|
|
|
43,923 |
|
|
(49.2 |
) |
% |
|
Net realized investment gains (losses) |
15,212 |
|
|
|
9,822 |
|
|
54.9 |
|
% |
|
(62,416 |
) |
|
|
50,126 |
|
|
(224.5 |
) |
% |
|
Other income |
604 |
|
|
|
— |
|
|
NM |
|
6,323 |
|
|
|
— |
|
|
NM |
|
Total revenues |
282,121 |
|
|
|
298,055 |
|
|
(5.3 |
) |
% |
|
$ |
757,729 |
|
|
|
$ |
907,791 |
|
|
(16.5 |
) |
% |
| Income Statement
Data |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
(37,241 |
) |
|
|
(2,342 |
) |
|
NM |
|
$ |
(103,815 |
) |
|
|
$ |
37,983 |
|
|
NM |
|
After-tax net realized investment gains (losses) |
12,017 |
|
|
|
7,760 |
|
|
54.9 |
|
% |
|
(49,309 |
) |
|
|
39,600 |
|
|
(224.5 |
) |
% |
|
Goodwill impairment |
(15,091 |
) |
|
|
— |
|
|
NM |
|
(15,091 |
) |
|
|
— |
|
|
NM |
|
Adjusted operating income (loss)(1) |
$ |
(34,167 |
) |
|
|
$ |
(10,102 |
) |
|
NM |
|
$ |
(39,415 |
) |
|
|
$ |
(1,617 |
) |
|
NM |
| Diluted Earnings Per
Share Data |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(1.49 |
) |
|
|
$ |
(0.09 |
) |
|
NM |
|
$ |
(4.15 |
) |
|
|
$ |
1.48 |
|
|
NM |
|
After-tax net realized investment gains (losses) |
0.48 |
|
|
|
0.31 |
|
|
54.8 |
|
% |
|
(1.97 |
) |
|
|
1.54 |
|
|
(227.9 |
) |
% |
|
Goodwill impairment |
(0.60 |
) |
|
|
— |
|
|
NM |
|
(0.60 |
) |
|
|
— |
|
|
NM |
|
Adjusted operating income (loss)(1) |
$ |
(1.37 |
) |
|
|
$ |
(0.40 |
) |
|
NM |
|
$ |
(1.58 |
) |
|
|
$ |
(0.06 |
) |
|
NM |
| Catastrophe
Data |
|
|
|
|
|
|
|
|
|
|
Pre-tax catastrophe losses |
$ |
55,361 |
|
|
|
$ |
19,292 |
|
|
187.0 |
|
% |
|
$ |
121,261 |
|
|
|
$ |
44,927 |
|
|
169.9 |
|
% |
|
Effect on after-tax earnings per share |
1.75 |
|
|
|
0.61 |
|
|
186.9 |
|
% |
|
3.83 |
|
|
|
1.38 |
|
|
177.5 |
|
% |
|
Effect on combined ratio |
21.4 |
|
% |
|
7.0 |
|
% |
205.7 |
|
% |
|
15.3 |
|
% |
|
5.5 |
|
% |
178.2 |
|
% |
| |
|
|
|
|
|
|
|
|
|
| Favorable reserve development
experienced on prior accident years |
$ |
6,269 |
|
|
|
$ |
5,513 |
|
|
13.7 |
|
% |
|
$ |
30,038 |
|
|
|
$ |
770 |
|
|
NM |
| |
|
|
|
|
|
|
|
|
|
| GAAP combined ratio |
124.4 |
|
% |
|
110.0 |
|
% |
13.1 |
|
% |
|
113.5 |
|
% |
|
106.0 |
|
% |
7.1 |
|
% |
| Return on equity |
|
|
|
|
|
(16.0 |
) |
% |
|
5.5 |
|
% |
NM |
| Cash dividends declared per
share |
$ |
0.33 |
|
|
|
$ |
0.33 |
|
|
— |
|
|
|
$ |
0.99 |
|
|
|
$ |
0.97 |
|
|
2.1 |
|
% |
| Diluted
weighted average shares outstanding |
25,031,234 |
|
|
|
25,176,334 |
|
|
(0.6 |
) |
% |
|
25,023,401 |
|
|
|
25,643,744 |
|
|
(2.4 |
) |
% |
NM = Not meaningful(1) Adjusted operating income (loss) is a
non-GAAP financial measure of net income (loss). See Definitions of
Non-GAAP Information and Reconciliations to Comparable GAAP
Measures for a reconciliation of adjusted operating income (loss)
to net income (loss).
|
Income Statement |
| (unaudited) |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| (In
Thousands, Except Ratios) |
2020 |
|
2019 |
|
2020 |
|
2019 |
| Revenues |
|
|
|
|
|
|
|
|
Net premiums earned |
$ |
259,061 |
|
|
|
$ |
274,942 |
|
|
|
$ |
791,519 |
|
|
|
$ |
813,742 |
|
| Investment income, net of
investment expenses |
7,244 |
|
|
|
13,291 |
|
|
|
22,303 |
|
|
|
43,923 |
|
| Net realized investment gains
(losses) |
15,212 |
|
|
|
9,822 |
|
|
|
(62,416 |
) |
|
|
50,126 |
|
| Other
income |
604 |
|
|
|
— |
|
|
|
6,323 |
|
|
|
— |
|
| Total
Revenues |
$ |
282,121 |
|
|
|
$ |
298,055 |
|
|
|
$ |
757,729 |
|
|
|
$ |
907,791 |
|
| |
|
|
|
|
|
|
|
| Benefits, Losses and
Expenses |
|
|
|
|
|
|
|
| Losses and loss settlement
expenses |
$ |
234,693 |
|
|
|
$ |
211,752 |
|
|
|
$ |
626,169 |
|
|
|
$ |
596,001 |
|
| Amortization of deferred
policy acquisition costs |
52,095 |
|
|
|
54,828 |
|
|
|
158,440 |
|
|
|
161,842 |
|
| Other underwriting
expenses |
35,470 |
|
|
|
36,003 |
|
|
|
114,020 |
|
|
|
104,370 |
|
|
Goodwill impairment |
15,091 |
|
|
|
— |
|
|
|
15,091 |
|
|
|
— |
|
| Total Benefits, Losses
and Expenses |
$ |
337,349 |
|
|
|
$ |
302,583 |
|
|
|
$ |
913,720 |
|
|
|
$ |
862,213 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
(55,228 |
) |
|
|
(4,528 |
) |
|
|
(155,991 |
) |
|
|
45,578 |
|
| Federal
income tax expense (benefit) |
(17,987 |
) |
|
|
(2,186 |
) |
|
|
(52,176 |
) |
|
|
7,595 |
|
|
Net income (loss) |
$ |
(37,241 |
) |
|
|
$ |
(2,342 |
) |
|
|
$ |
(103,815 |
) |
|
|
$ |
37,983 |
|
|
|
|
|
|
|
|
|
|
|
GAAP combined ratio: |
|
|
|
|
|
|
|
| Net loss ratio - excluding
catastrophes |
69.2 |
|
% |
|
70.0 |
|
% |
|
63.8 |
|
% |
|
67.8 |
% |
|
Catastrophes - effect on net loss ratio |
21.4 |
|
|
|
7.0 |
|
|
|
15.3 |
|
|
|
5.5 |
|
| Net
loss ratio |
90.6 |
|
% |
|
77.0 |
|
% |
|
79.1 |
|
% |
|
73.3 |
% |
| Expense
ratio |
33.8 |
|
|
|
33.0 |
|
|
|
34.4 |
|
|
|
32.7 |
|
| GAAP
combined ratio |
124.4 |
|
% |
|
110.0 |
|
% |
|
113.5 |
|
% |
|
106.0 |
% |
|
Balance Sheet |
| (In Thousands) |
September 30, 2020 |
|
December 31, 2019 |
|
|
(unaudited) |
|
|
|
Invested assets |
$ |
2,041,452 |
|
|
$ |
2,155,099 |
|
| Cash |
99,604 |
|
|
120,722 |
|
| Total assets |
3,048,480 |
|
|
3,013,472 |
|
| Losses and loss settlement
expenses |
1,555,083 |
|
|
1,421,754 |
|
| Total liabilities |
2,228,198 |
|
|
2,103,000 |
|
| Net unrealized investment
gains, after-tax |
82,492 |
|
|
47,279 |
|
| Total
stockholders’ equity |
820,282 |
|
|
910,472 |
|
|
Net Premiums Written by Line of Business |
| (unaudited) |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
| (In
Thousands) |
|
|
|
| Net Premiums
Written(1) |
|
|
|
|
|
|
|
|
Commercial lines: |
|
|
|
|
|
|
|
|
Other liability(2) |
$ |
71,140 |
|
|
$ |
76,090 |
|
|
$ |
238,330 |
|
|
$ |
247,573 |
|
|
Fire and allied lines(3) |
54,766 |
|
|
61,846 |
|
|
185,769 |
|
|
189,361 |
|
|
Automobile |
63,419 |
|
|
75,222 |
|
|
214,447 |
|
|
246,801 |
|
|
Workers’ compensation |
16,325 |
|
|
18,988 |
|
|
57,481 |
|
|
67,893 |
|
|
Fidelity and surety |
7,535 |
|
|
6,644 |
|
|
23,146 |
|
|
20,147 |
|
|
Miscellaneous |
320 |
|
|
363 |
|
|
1,127 |
|
|
1,281 |
|
|
Total commercial lines |
$ |
213,505 |
|
|
$ |
239,153 |
|
|
$ |
720,300 |
|
|
$ |
773,056 |
|
| |
|
|
|
|
|
|
|
|
Personal lines: |
|
|
|
|
|
|
|
|
Fire and allied lines(4) |
$ |
3,065 |
|
|
$ |
11,255 |
|
|
$ |
21,205 |
|
|
$ |
31,015 |
|
|
Automobile |
4,838 |
|
|
8,396 |
|
|
19,548 |
|
|
24,113 |
|
|
Miscellaneous |
203 |
|
|
337 |
|
|
813 |
|
|
961 |
|
|
Total personal lines |
$ |
8,106 |
|
|
$ |
19,988 |
|
|
$ |
41,566 |
|
|
$ |
56,089 |
|
|
Reinsurance assumed |
8,600 |
|
|
4,198 |
|
|
21,486 |
|
|
19,007 |
|
|
Total |
230,211 |
|
|
263,339 |
|
|
$ |
783,352 |
|
|
$ |
848,152 |
|
(1) Net premiums written is a non-GAAP financial measure of net
premiums earned. See Definitions of Non-GAAP Information and
Reconciliations to Comparable GAAP Measures for a reconciliation of
net premiums written to net premiums earned.(2) Commercial lines
“Other liability” is business insurance covering bodily injury and
property damage arising from general business operations, accidents
on the insured’s premises and products manufactured or sold.(3)
Commercial lines “Fire and allied lines” includes fire, allied
lines, commercial multiple peril and inland marine.(4) Personal
lines “Fire and allied lines” includes fire, allied lines,
homeowners and inland marine.
|
Net Premiums Earned, Net Losses and Loss Settlement
Expenses and Net Loss Ratio by Line of Business |
| Three
Months Ended September 30, |
2020 |
|
2019 |
| |
|
|
Net Losses |
|
|
|
|
|
Net Losses |
|
|
| |
|
|
and Loss |
|
|
|
|
|
and Loss |
|
|
| |
Net |
|
Settlement |
|
Net |
|
Net |
|
Settlement |
|
Net |
| (In Thousands, Except
Ratios) |
Premiums |
|
Expenses |
|
Loss |
|
Premiums |
|
Expenses |
|
Loss |
|
(unaudited) |
Earned |
|
Incurred |
|
Ratio |
|
Earned |
|
Incurred |
|
Ratio |
| Commercial lines |
|
|
|
|
|
|
|
|
|
|
|
|
Other liability |
$ |
78,302 |
|
|
$ |
45,111 |
|
|
|
57.6 |
|
% |
|
$ |
80,421 |
|
|
$ |
50,656 |
|
|
|
63.0 |
|
% |
|
Fire and allied lines |
59,267 |
|
|
52,436 |
|
|
|
88.5 |
|
|
|
61,628 |
|
|
49,628 |
|
|
|
80.5 |
|
|
|
Automobile |
73,403 |
|
|
82,675 |
|
|
|
112.6 |
|
|
|
80,574 |
|
|
85,227 |
|
|
|
105.8 |
|
|
|
Workers' compensation |
19,245 |
|
|
10,250 |
|
|
|
53.3 |
|
|
|
22,041 |
|
|
3,076 |
|
|
|
14.0 |
|
|
|
Fidelity and surety |
7,356 |
|
|
(128 |
) |
|
|
(1.7 |
) |
|
|
6,755 |
|
|
1,437 |
|
|
|
21.3 |
|
|
|
Miscellaneous |
378 |
|
|
78 |
|
|
|
20.6 |
|
|
|
428 |
|
|
63 |
|
|
|
14.7 |
|
|
| Total
commercial lines |
$ |
237,951 |
|
|
$ |
190,422 |
|
|
|
80.0 |
|
% |
|
$ |
251,847 |
|
|
$ |
190,087 |
|
|
|
75.5 |
|
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Personal lines |
|
|
|
|
|
|
|
|
|
|
|
|
Fire and allied lines |
$ |
5,144 |
|
|
$ |
29,451 |
|
|
|
NM |
|
$ |
10,370 |
|
|
$ |
13,469 |
|
|
|
129.9 |
|
% |
|
Automobile |
7,055 |
|
|
8,322 |
|
|
|
118.0 |
|
|
|
7,870 |
|
|
6,946 |
|
|
|
88.3 |
|
|
|
Miscellaneous |
295 |
|
|
(97 |
) |
|
|
(32.9 |
) |
|
|
312 |
|
|
(130 |
) |
|
|
(41.7 |
) |
|
| Total
personal lines |
$ |
12,494 |
|
|
$ |
37,676 |
|
|
|
NM |
|
$ |
18,552 |
|
|
$ |
20,285 |
|
|
|
109.3 |
|
% |
|
Reinsurance assumed |
$ |
8,616 |
|
|
$ |
6,595 |
|
|
|
76.5 |
|
% |
|
$ |
4,543 |
|
|
$ |
1,380 |
|
|
|
30.4 |
|
% |
|
Total |
$ |
259,061 |
|
|
$ |
234,693 |
|
|
|
90.6 |
|
% |
|
$ |
274,942 |
|
|
$ |
211,752 |
|
|
|
77.0 |
|
% |
NM = Not Meaningful
|
Net Premiums Earned, Net Losses and Loss Settlement
Expenses and Net Loss Ratio by Line of Business |
| Nine
Months Ended September 30, |
2020 |
|
2019 |
| |
|
|
Net Losses |
|
|
|
|
|
Net Losses |
|
|
| |
|
|
and Loss |
|
|
|
|
|
and Loss |
|
|
| |
Net |
|
Settlement |
|
Net |
|
Net |
|
Settlement |
|
Net |
| (In Thousands, Except
Ratios) |
Premiums |
|
Expenses |
|
Loss |
|
Premiums |
|
Expenses |
|
Loss |
|
(unaudited) |
Earned |
|
Incurred |
|
Ratio |
|
Earned |
|
Incurred |
|
Ratio |
| Commercial lines |
|
|
|
|
|
|
|
|
|
|
|
|
Other liability |
$ |
235,018 |
|
|
$ |
135,748 |
|
|
57.8 |
% |
|
$ |
238,300 |
|
|
$ |
146,513 |
|
|
61.5 |
% |
|
Fire and allied lines |
183,528 |
|
|
171,416 |
|
|
93.4 |
|
|
181,417 |
|
|
142,265 |
|
|
78.4 |
|
|
Automobile |
225,103 |
|
|
205,994 |
|
|
91.5 |
|
|
234,280 |
|
|
225,564 |
|
|
96.3 |
|
|
Workers' compensation |
57,873 |
|
|
24,205 |
|
|
41.8 |
|
|
66,537 |
|
|
18,399 |
|
|
27.7 |
|
|
Fidelity and surety |
20,106 |
|
|
14 |
|
|
0.1 |
|
|
19,276 |
|
|
536 |
|
|
2.8 |
|
|
Miscellaneous |
1,158 |
|
|
266 |
|
|
23.0 |
|
|
1,291 |
|
|
63 |
|
|
4.9 |
|
| Total
commercial lines |
$ |
722,786 |
|
|
$ |
537,643 |
|
|
74.4 |
% |
|
$ |
741,101 |
|
|
$ |
533,340 |
|
|
72.0 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Personal lines |
|
|
|
|
|
|
|
|
|
|
|
|
Fire and allied lines |
$ |
24,933 |
|
|
$ |
55,372 |
|
|
222.1 |
% |
|
$ |
30,892 |
|
|
$ |
34,137 |
|
|
110.5 |
% |
|
Automobile |
22,203 |
|
|
15,935 |
|
|
71.8 |
|
|
23,050 |
|
|
19,422 |
|
|
84.3 |
|
|
Miscellaneous |
905 |
|
|
2,561 |
|
|
283.0 |
|
|
920 |
|
|
354 |
|
|
38.5 |
|
| Total
personal lines |
$ |
48,041 |
|
|
$ |
73,868 |
|
|
153.8 |
% |
|
$ |
54,862 |
|
|
$ |
53,913 |
|
|
98.3 |
% |
|
Reinsurance assumed |
$ |
20,692 |
|
|
$ |
14,658 |
|
|
70.8 |
% |
|
$ |
17,779 |
|
|
$ |
8,748 |
|
|
49.2 |
% |
|
Total |
$ |
791,519 |
|
|
$ |
626,169 |
|
|
79.1 |
% |
|
$ |
813,742 |
|
|
$ |
596,001 |
|
|
73.3 |
% |
United Fire (NASDAQ:UFCS)
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