United Fire & Casualty Earned Premiums Down in Q1, Net Income Up

Cedar Rapids, Iowa-based insurance company United Fire & Casualty Co. reported a dip in premiums earned in the first quarter of 2010 compared with that in the same period in 2009, but total revenues and net income rose.

In the company’s property/casualty segment, premium revenues for were generated from 91 percent commercial lines business and 9 percent personal lines business during the quarter. The top five states for direct premiums written were Iowa, Texas, Missouri, Louisiana and Illinois.

“In the first quarter of 2010, we had no material investment write downs, the weather was fairly cooperative, we had manageable Hurricane Katrina claims development and we can finally let our core book results tell the story — we performed well,” said President and CEO Randy Ramlo. “We know the business is still very competitive, but our first quarter shows that if we can avoid some of the major catastrophic events of the last two years, we can still produce some pretty good numbers.”

He said the company continues its effort to “conclude unresolved Katrina related litigation with our policyholders, with approximately 23 percent of the Katrina claims outstanding at year-end concluded during the first quarter of 2010. In total, we have concluded 97 percent of our Katrina claims.”

According to the company, the decline in net P/C premiums written for the three-months ended March 31, 2010, was largely attributable to the following:

• Economy – Premium writings continue to be affected by the weak economy as businesses reduce staff and their vehicle fleets and in some cases go out of business.
• Policy retention – The aggregate policy retention rate for personal and commercial lines of business remained at approximately 80 percent, as underwriters continue to focus on writing good business at an adequate price, preferring quality over volume.
• Pricing pressure – The insurance marketplace remains competitive. Accordingly, the company’s pricing level remains relatively flat, with personal lines up slightly and commercial lines flat to slightly lower. United Fire & Casualty increased pricing on a small percentage of commercial renewals and has continued to write new business.

The company’s GAAP combined ratio improved by 14.0 percentage points in the first quarter of 2010, as compared with the first quarter of 2009, due to a decrease in loss and loss settlement expenses. Loss and loss settlement expenses decreased 22.7 percent from $82.3 million in the first quarter of 2009 to $63.6 million in the first quarter of 2010, due to a reduction in Hurricane Katrina development and an improvement in our non-catastrophe experience.

Not including Hurricane Katrina development, United Fire & Casualty incurred $3.2 million in catastrophe losses and loss settlement expenses in the first quarter of 2010, compared to $3.0 million in the first quarter of 2009.

Hurricane Katrina loss and loss settlement expenses contributed $5.4 million to the losses incurred in the first quarter of 2010, compared to $11.9 million in the first quarter of 2009. The losses in both 2009 and 2010 are due to the continued adverse development from Katrina claims litigation.

Overall claims frequency decreased in the first quarter of 2010 as compared to the first quarter of 2009, which is a trend the company has been seeing for several quarters. Claims severity has remained stable during the first quarter of 2010 since Dec. 31, 2009.

Source: United Fire & Casualty

Topics Trends Catastrophe Profit Loss Claims Pricing Trends Hurricane Casualty