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United Fire Group Inc. (UFCS - Snapshot Report) reported fourth-quarter operating loss of 12 cents per share, narrower than the Zacks Consensus Estimate loss of 23 cents. Results compare unfavorably with 62 cents per share earned in the year-ago quarter.

Including after-tax net realized investment gains of 2 cents, United Fire reported a net loss of 10 cents per share in the fourth quarter, compared to a net income of 66 cents per share in the year-ago period.

Quarterly Operational Update

Total revenues increased 11.4% year over year to $213.3 million in the fourth quarter driven by an improvement in net premiums earned (up 15.6% year over year). It surpassed the Zacks Consensus Estimate of $205 million.

Net written premiums in the quarter increased 15.1% year over year to $174.4 million.

Net premiums written by the Commercial line of business including the Mercer Insurance Group premiums were $135.2 million, up 13.6% year over year. Net premiums written in the Personal line of business was $15 million, up 0.6% year over year.

Net investment income decreased 8.7% year over year to $25.3 million in the reported quarter.

Total benefits, losses and expenses in the quarter increased 30.4% year over year to $221.3 million. The increase was driven by higher loss and loss settlement expenses (up 45.3% year over year), increase in liability for future policy benefits (up 101.5% year over year) and other underwriting expenses (up 30.4% year over year).

The combined ratio deteriorated 1710 basis points year over year to 111.1%.

Quarterly Segment Update

The Property and Casualty segment reported net loss of $4.1 million compared to a net income of $15.3 million in the prior-year period. Net premiums written in the segment were $155.0 million, up 11.7% year over year. Combined ratio deteriorated 1940 basis points to 112.6%.

The Life Insurance segment reported net income of $1.7 million, up 2.6% year over year. Net premiums written in the segment were $19.4 million, up 52.2% year over year.

Full Year Highlights

In 2012, the company reported operating earnings of $1.44 per share rebounding from an operating loss of 16 cents in the year-ago period,

Including after-tax net realized investment gains of 14 cents, United Fire reported net income of $1.58 per share in 2012. The company broke even in 2011.

Total revenues for full year 2012 increased 15.4% year over year to $813.2 million.

Combined ratio improved 1090 basis points to 101.2% in 2012.

Share Repurchase Update

In the fourth quarter, United Fire spent $4.4 million to buy back 0.2 million shares at an average price of $21.75. In 2012, it spent $7.3 million to repurchase 0.3 million shares at an average price of $21.46 per share. The board of directors has authorized a share buyback program, expiring in Aug 2014, to repurchase an additional 1.1 billion shares.

Financial Position

United Fire exited 2012 with cash and investments of $3.2 billion, up 3.3% year over year.

As of Dec 31, 2012, total assets of the company were $3.7 billion, up 2.1% year over year.

Shareholders’ equity increased 4.7% year over year to $729.2 million at 2012 end.

Performance of Few Other Property and casualty Insurers

Navigators Group Inc.’s (NAVG - Snapshot Report) fourth-quarter adjusted earnings of 59 cents breezed past the Zacks Consensus Estimate loss of 25 cents Results were up 43.9% year over year from 41 cents earned in the year-ago quarter.

American Financial Group Inc.'s (AFG - Analyst Report) fourth-quarter adjusted earnings of 67 cents breezed past the Zacks Consensus Estimate by 3.1%. However, results were down 36.2% year over year from $1.05 earned in the year-ago quarter.

XL Group Plc’s (XL - Analyst Report) fourth-quarter 2012 operating income of 13 cents per share outpaced the Zacks Consensus Estimate of a loss of 35 cents. Earnings rebounded from a loss of 25 cents incurred in the year-ago quarter.

Zacks Rank

United Fire currently carries a Zacks Rank #3 (Hold).
 

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