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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): August 3, 2016
 United Fire Group, Inc.
(Exact name of registrant as specified in its charter)
 
Iowa
 
001-34257
 
45-2302834
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
118 Second Avenue, S.E.,
Cedar Rapids, Iowa
 
 
52401
(Address of principal executive offices)
 
(Zip Code)
 
 
Registrant's telephone number, including area code: (319) 399-5700
 
_________________________________________________________________
(Former name or former address, if changed since last report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 






Item 2.02. Results of Operations and Financial Condition.
 
On August 3, 2016, United Fire Group, Inc. ("UFG") issued a press release announcing its financial results for the quarter ended June 30, 2016. The release is attached as Exhibit 99.1 hereto and is incorporated herein by reference. The information in this Current Report and the exhibit attached hereto are being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following exhibits are furnished herewith:
Exhibit 99.1
Press Release, dated August 3, 2016, of UFG announcing its financial results for the quarter ended June 30, 2016.





Signatures
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
United Fire Group, Inc.
 
 
 
(Registrant)
 
 
 
 
Dated:
August 3, 2016
 
/s/ Randy A. Ramlo
 
 
 
Randy A. Ramlo, Chief Executive Officer






EXHIBIT INDEX
Exhibit Number
Description of Exhibit
 
 
99.1
Press Release, dated August 3, 2016 of UFG announcing its financial results for the quarter ended June 30, 2016.



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
United Fire Group, Inc. Reports Second Quarter 2016 Results

CEDAR RAPIDS, Iowa - (GLOBE NEWSWIRE) - United Fire Group, Inc. (Nasdaq: UFCS),
August 3, 2016 - FOR IMMEDIATE RELEASE

Consolidated Financial Results - Highlights:
Three Months Ended June 30, 2016
 
 
Six Months Ended June 30, 2016
 
Net income per diluted share(1)
$
0.12

 
Net income per diluted share(1)
$
1.00

Operating income(2) per diluted share(1)
$
0.08

 
Operating income(2) per diluted share(1)
$
0.91

Net realized investment gains per share(1)
$
0.04

 
Net realized investment gains per share(1)
$
0.09

GAAP combined ratio
104.8
%
 
GAAP combined ratio
98.7
%
 
 
 
Book value per share
$
37.85

 
 
 
Return on equity(3)
5.6
%

United Fire Group, Inc. (the “Company” or "UFG") (Nasdaq: UFCS) today reported consolidated net income, including net realized investment gains and losses, of $3.1 million ($0.12 per diluted share) for the three-month period ended June 30, 2016 (the "second quarter"), compared to consolidated net income of $15.0 million ($0.59 per diluted share) for the same period in 2015. For the six-month period ended June 30, 2016 ("year-to-date"), consolidated net income, including net realized investment gains and losses was $25.5 million ($1.00 per diluted share), compared to $38.7 million ($1.54 per diluted share) for the same period in 2015.

The Company reported consolidated operating income(2) of $0.08 per diluted share for the the second quarter, compared to consolidated operating income of $0.57 per diluted share for the same period in 2015. Year-to-date, consolidated operating income was $0.91, compared to consolidated operating income of $1.50 per diluted share for the same period in 2015.

"Our second quarter 2016 results were impacted by the increase in catastrophe losses," stated Randy Ramlo, President and Chief Executive Officer. "During second quarter 2016, we were affected by over a dozen catastrophe-designated storms dominated by hail and wind storms. A majority of these storms occurred in Texas and the Midwest."

"On a positive note, our book of business continues to grow organically," continued Ramlo. "Consolidated net premiums earned increased 10.6 percent and 11.8 percent, respectively, in the three- and six-month periods ended June 30, 2016 as compared to the same periods of 2015. Total revenues increased 9.3 percent and 10.3 percent, respectively, in the three- and six-month periods ended June 30, 2016 as compared to the same periods of 2015."

The Company recognized consolidated net realized investment gains of $1.6 million during the second quarter, compared to consolidated net realized investment gains of $0.8 million for the same period in 2015.

__________________________
(1) Per share amounts are after tax.
(2) Operating income (loss) is a commonly used non-GAAP financial measure of net income (loss) excluding realized investment
gains and losses and related federal income taxes. 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 operating income to net income.
(3) Return on equity is calculated by dividing annualized net income by average year-to-date equity.




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Consolidated net investment income was $24.5 million for the second quarter, a decrease of 5.0 percent, as compared to net investment income of $25.8 million for the same period in 2015. Year-to-date, consolidated net investment income was $46.7 million, compared to net investment income of $50.2 million for the same period in 2015. The decrease in net investment income for the quarter was primarily driven by the change in value of our investments in limited liability partnerships as compared to the same periods in 2015 and declining interest rates. The valuation of these investments in limited liability partnerships varies from period to period due to current equity market conditions, specifically related to financial institutions.

Consolidated net unrealized investment gains, net of tax, totaled $187.4 million as of June 30, 2016, an increase of $59.1 million or 46.0 percent from December 31, 2015. The increase in net unrealized investment gains is primarily the result of a decrease in interest rates, which positively impacted the valuation of our fixed maturity security portfolio during 2016 and to a lesser extent an increase in the fair value of our equity security portfolio.

Total consolidated assets as of June 30, 2016 were $4.1 billion, which included $3.3 billion of invested assets. The Company's book value per share was $37.85, which is an increase of $2.91 per share or 8.3 percent from December 31, 2015 and is primarily attributed to net income of $25.5 million and an increase in net unrealized investment gains of $59.1 million, net of tax, during the first six-months of 2016, partially offset by shareholder dividends of $11.9 million.

The annualized return on equity was 5.6 percent for the six-months ended June 30, 2016.

P&C Segment

Net income for the property and casualty insurance segment, including net realized investment gains and losses, totaled $3.4 million ($0.13 per diluted share) for the second quarter, compared to net income of $13.3 million ($0.52 per diluted share) in the same period in 2015. Year-to-date, net income for the property and casualty insurance segment, including realized investment gains and losses, totaled $25.5 million ($1.00 per diluted share), compared to net income of $36.4 million ($1.45 per diluted share) in the same period of 2015.

Net premiums earned increased 11.0 percent to $232.3 million in the second quarter, compared to $209.3 million in the same period of 2015. Year-to-date, net premiums earned increased 10.5 percent to $452.5 million, compared to $409.4 million in the same period of 2015. The increases in both the three- and six-month periods ended June 30, 2016, were due to organic growth from new business writings and geographical expansion.

Catastrophes losses driven by hail and wind storms during the second quarter

Catastrophe losses totaled $35.5 million ($0.90 per diluted share) for the second quarter, compared to $20.2 million ($0.52 per diluted share) for the same period in 2015. Year-to-date, catastrophe losses totaled $39.9 million ($1.01 per share after tax), compared to $20.4 million ($0.53 per share) for the same period in 2015.

"Our 10-year historical average catastrophe load for the second quarter adds an average of 10.3 percentage points to the combined ratio," stated Ramlo. "However, in the second quarter of 2016 catastrophe losses added 15.3 percentage points to the combined ratio. The increase in catastrophe losses in the second quarter was driven by hail and wind storms primarily in Texas and the Midwest, impacting our commercial property, commercial auto, personal homeowners and personal auto lines of business. As a reminder, second and third quarters are typically the most significant quarters with storms and catastrophe events in geographic areas where we conduct much of our business due to spring and summer convective storms and hurricanes."

Rate increases on both commercial and personal lines in the low-single digits

"We continued to see rate increases on both commercial and personal lines renewal pricing during the second quarter," stated Ramlo. "For the commercial lines of business, the rate increases were primarily in commercial auto and commercial property."

The property and casualty insurance segment experienced $2.5 million of favorable development in our net reserves for prior accident years during the second quarter, compared to $6.7 million of favorable reserve development in the same




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period in 2015. Year-to-date, favorable development in our net reserves for prior accident years was $26.4 million, compared to $23.4 million in the same period in 2015. Development amounts can vary significantly from quarter-to-quarter and year-to-year depending on a number of factors, including the number of claims settled and the settlement terms. At June 30, 2016, our total reserves were within our actuarial estimates.

The GAAP combined ratio increased by 7.1 percentage points to 104.8 percent for the second quarter, compared to 97.7 percent for the same period in 2015. We attribute the majority of this increase to higher catastrophe losses in the second quarter of 2016 compared to the same period in 2015.

Expense Levels

The expense ratio for the second quarter was 30.3 percentage points, compared to 29.3 percentage points for the second quarter of 2015.

"Our expense ratio, albeit higher than prior year second quarter, was within our expectations. The expense ratio was impacted by an increase in deferred acquisition cost amortization from continued organic growth, partially offset by a decrease in post-retirement benefit expenses," stated Ramlo. "We continue to look for efficiencies to manage our expenses."

Life Segment

The life insurance segment had a net loss of $0.3 million ($0.01 per diluted share) for the second quarter, compared to net income of $1.7 million ($0.07 per diluted share) for the second quarter of 2015. Year-to-date, net income for the life insurance segment totaled $0.1 million ($0.00 per share) compared to $2.3 million ($0.09 per share).

Net premiums earned increased 6.2 percent to $21.2 million for the second quarter, compared to $20.0 million for the second quarter of 2015. Year-to-date, net premiums earned increased to $42.3 million, compared to $33.0 million for the same period in 2015. The increase was primarily due to an increase in sales of single premium whole life policies.

Net investment income decreased 5.7 percent to $12.9 million for the second quarter, compared to $13.7 million for the second quarter of 2015. Year-to-date, net investment income decreased 5.7 percent to $25.7 million, compared to $27.3 million for the same period in 2015. The decrease is primarily due to lower invested assets from declining annuity deposits and from declining interest rates.

Losses and loss settlement expenses were flat and increased $1.9 million for the three- and six-month periods ended June 30, 2016, respectively, compared to the same periods in 2015. The increase in the six-month period ended June 30, 2016 was due to an increase in death benefits paid. Fluctuations in the timing of death benefits occur from quarter-to-quarter and year-to-year.

The increase in liability for future policy benefits increased by $3.9 million and $8.8 million during the three- and six-month periods ended June 30, 2016, respectively, compared to the same periods in 2015, due to an increase in sales of single premium whole life policies.

Deferred annuity deposits decreased 2.4 percent and 26.8 percent, respectively, for the three- and six-month periods ended June 30, 2016, compared to the same period of 2015. We continue to execute our strategy to maintain profitability rather than market share, as spreads increased 42 basis points in 2016 as compared to the same period of 2015.

Net cash outflow related to our annuity business was $20.1 million for the second quarter compared to a net cash outflow of $44.2 million in the same period in 2015. We attribute this to our strategy to maintain profitability on annuity products as previously described.









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Capital Management

During the second quarter, we declared and paid a $0.25 per share cash dividend to shareholders of record on June 1, 2016. We have paid a quarterly dividend every quarter since March 1968.

Under our share repurchase program, we may purchase the Company's common stock from time to time on the open market or through privately negotiated transactions. The amount and timing of any purchases will be at management's discretion and will depend upon a number of factors, including the share price, general economic and market conditions, and corporate and regulatory requirements. As of the date of this release, we are authorized by the Board of Directors to purchase an additional 1,528,886 shares of common stock under our share repurchase program, which expires in August 2016. During the second quarter, we did not repurchase any shares.


Earnings Call Access Information

An earnings call will be held at 9:00 a.m. Central Time on August 3, 2016 to allow securities analysts, shareholders and other interested parties the opportunity to hear management discuss the Company's second quarter 2016 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 August 17, 2016. The replay access information is toll-free 1-877-344-7529; conference ID no. 10088391.

Webcast: An audio webcast of the teleconference can be accessed at the Company's investor relations page at
http://ir.unitedfiregroup.com/event or http://services.choruscall.com/links/ufcs160803. The archived audio webcast will be available until August 17, 2016.

Transcript: A transcript of the teleconference will be available on the Company's website soon after the completion of the teleconference.

About United Fire Group, Inc.

Founded in 1946 as United Fire & Casualty Company, United Fire Group, Inc., through its insurance company subsidiaries, is engaged in the business of writing property and casualty insurance and life insurance and selling annuities.

Through our subsidiaries, we are licensed as a property and casualty insurer in 46 states, plus the District of Columbia, and we are represented by approximately 1,200 independent agencies. A.M. Best Company assigns a rating of “A” (Excellent) for the members of United Fire & Casualty Group.

Our subsidiary, United Life Insurance Company, is licensed in 37 states, represented by approximately 1,300 independent life agencies and rated "A-" (Excellent) by A.M. Best Company.

For more information about United Fire Group, Inc. visit www.unitedfiregroup.com. or contact:

Randy Patten, Assistant Vice President of Finance and Investor Relations, 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




4



our company, the industry in which we operate, and beliefs and assumptions made by management. Words such as "expect(s)," "anticipate(s)," "intends(s)," "plan(s)," "believe(s)" "continue(s)," "seek(s)," "estimate(s)," "goal(s)," "remain 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, 2015, filed with the Securities and Exchange Commission ("SEC") on February 26, 2016. The risks identified in our Form 10-K 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.




5


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 Unites 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: operating income and net written premiums. The company has also disclosed certain data according to statutory accounting rules as defined by the National Association of Insurance Commissioners' ("NAIC") Accounting Practices and Procedures Manual. The Company has provided the following definitions and reconciliations of the non-GAAP financial measures:

Operating income: Operating income is calculated by excluding net realized investment gains and losses after applicable federal and state income taxes from net income. Management believes operating income is a meaningful measure for evaluating insurance company performance. Investors and equity analysts who invest and report on the insurance industry and the Company generally focus on this metric in their analyses because it represents the results of the Company's normal, ongoing performance. The Company recognizes that operating income is not a substitute for measuring GAAP net income, but believes it is a useful supplement to GAAP information.

Net Income Reconciliation
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In Thousands, Except Per Share Data and Ratios)
2016
 
2015
Change %
 
2016
 
2015
Change %
Income Statement Data
 
 
 
 
 
 
 
 
 
Operating income
$
2,077

 
$
14,519

(85.7
)%
 
$
23,168

 
$
37,621

(38.4
)%
After-tax net realized investment gains
1,037

 
499

107.8
 %
 
2,373

 
1,076

120.5
 %
Net income
$
3,114

 
$
15,018

(79.3
)%
 
$
25,541

 
$
38,697

(34.0
)%
Diluted Earnings Per Share Data
 
 
 
 
 
 
 
 
 
Operating income
$
0.08

 
$
0.57

(86.0
)%
 
$
0.91

 
$
1.50

(39.3
)%
After-tax net realized investment gains
0.04

 
0.02

100.0
 %
 
0.09

 
0.04

125.0
 %
Net income
$
0.12

 
$
0.59

(79.7
)%
 
$
1.00

 
$
1.54

(35.1
)%


Net Written premium: State laws require us to calculate and report certain data according to statutory accounting rules as defined by the NAIC Accounting Practices and Procedures Manual. While not a substitute for any GAAP measure of performance, statutory data is publicly available and is frequently used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies. Under statutory accounting rules, written premiums 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 written premiums are a meaningful measure for evaluating insurance company sales performance and geographical expansion efforts. Net written premium for an insurance company consists of direct premiums written and reinsurance assumed, less reinsurance ceded. Net earned premium is calculated on a pro rata basis over the terms of the respective policies. Unearned premium reserves are established for the portion of premium written applicable to the unexpired term of insurance policy in force. The difference between net written premium and net earned premium is the change in unearned premiums.




6


Net Earned Premium Reconciliation
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In Thousands, Except Per Share Data and Ratios)
2016
 
2015
Change %
 
2016
 
2015
Change %
Premiums:
 
 
 
 
 
 
 
 
 
Net written premium
$
293,296

 
$
262,692

11.7
 %
 
$
555,274

 
$
495,103

12.2
 %
Change in unearned premiums
(39,809
)
 
(33,467
)
(19.0
)%
 
(60,489
)
 
(52,707
)
(14.8
)%
Net earned premiums
$
253,487

 
$
229,225

10.6
 %
 
$
494,785

 
$
442,396

11.8
 %






7



Supplemental Tables

Financial Highlights
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In Thousands, Except Per Share Data and Ratios)
2016
 
2015
Change %
 
2016
 
2015
Change %
Revenue Highlights
 
 
 
 
 
 
 
 
 
Net premiums earned
$
253,487

 
$
229,225

10.6
 %
 
$
494,785

 
$
442,396

11.8
 %
Net investment income
24,507

 
25,792

(5.0
)%
 
46,731

 
50,155

(6.8
)%
Total revenues
279,773

 
255,918

9.3
 %
 
545,458

 
494,402

10.3
 %
Income Statement Data
 
 
 
 
 
 
 
 
 
Operating income(1)
2,077

 
14,519

(85.7
)%
 
23,168

 
37,621

(38.4
)%
After-tax net realized investment gains
1,037

 
499

107.8
 %
 
2,373

 
1,076

120.5
 %
Net income
$
3,114

 
$
15,018

(79.3
)%
 
$
25,541

 
$
38,697

(34.0
)%
Diluted Earnings Per Share Data
 
 
 
 
 
 
 
 
 
Operating income(1)
$
0.08

 
$
0.57

(86.0
)%
 
$
0.91

 
$
1.50

(39.3
)%
After-tax net realized investment gains
0.04

 
0.02

100.0
 %
 
0.09

 
0.04

125.0
 %
Net income
$
0.12

 
$
0.59

(79.7
)%
 
$
1.00

 
$
1.54

(35.1
)%
Catastrophe Data
 
 
 
 
 
 
 
 
 
Pre-tax catastrophe losses
$
35,524

 
$
20,170

76.1
 %
 
$
39,866

 
$
20,381

95.6
 %
Effect on after-tax earnings per share
0.90

 
0.52

73.1
 %
 
1.01

 
0.53

90.6
 %
Effect on combined ratio
15.3
%
 
9.6
%
59.4
 %
 
8.8
%
 
5.0
%
76.0
 %
 
 
 
 
 
 
 
 
 
 
Favorable reserve development experienced on prior accident years
$
2,460

 
$
6,701

(63.3
)%
 
$
26,362

 
$
23,443

12.5
 %
 
 
 
 
 
 
 
 
 
 
Combined ratio
104.8
%
 
97.7
%
7.3
 %
 
98.7
%
 
93.8
%
5.2
 %
Return on equity
 
 
 
 
 
5.6
%
 
9.4
%
(40.8
)%
Cash dividends declared per share
$
0.25

 
$
0.22

13.6
 %
 
$
0.47

 
$
0.42

11.9
 %
Diluted weighted average shares
 outstanding
25,795,476

 
25,287,630

2.0
 %
 
25,629,577

 
25,132,339

2.0
 %
(1) Operating income is an non-GAAP Financial measure of net income. See Definitions of Non-GAAP Information and Reconciliations to Comparable GAAP Measures for a reconciliation of operating income to net income.





8



Consolidated Income Statement
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In Thousands)
2016
 
2015
 
2016
 
2015
Revenues
 
 
 
 
 
 
 
Net premiums written(1)
$
293,296

 
$
262,692

 
$
555,274

 
$
495,103

Net premiums earned
$
253,487

 
$
229,225

 
$
494,785

 
$
442,396

Investment income, net of investment expenses
24,507

 
25,792

 
46,731

 
50,155

Net realized investment gains
1,596

 
769

 
3,651

 
1,656

Other income
183

 
132

 
291

 
195

Total Revenues
$
279,773

 
$
255,918

 
$
545,458

 
$
494,402

 
 
 
 
 
 
 
 
Benefits, Losses and Expenses
 
 
 
 
 
 
 
Losses and loss settlement expenses
$
180,412

 
$
150,362

 
$
322,540

 
$
276,771

Increase in liability for future policy benefits
16,002

 
12,096

 
28,554

 
19,719

Amortization of deferred policy acquisition costs
52,585

 
44,357

 
102,816

 
86,829

Other underwriting expenses
24,772

 
23,546

 
51,525

 
47,080

Interest on policyholders’ accounts
5,138

 
6,024

 
10,385

 
12,639

Total Benefits, Losses and Expenses
$
278,909

 
$
236,385

 
$
515,820

 
$
443,038

 
 
 
 
 
 
 
 
Income before income taxes
864

 
19,533

 
29,638

 
51,364

Federal income tax expense (benefit)
(2,250
)
 
4,515

 
4,097

 
12,667

Net income
$
3,114

 
$
15,018

 
$
25,541

 
$
38,697

(1) Data prepared in accordance with statutory accounting principles, which is a comprehensive basis of accounting other than U.S. GAAP.

Consolidated Balance Sheet
 
June 30, 2016
 
December 31, 2015
(In Thousands)
 
Total invested assets:
 
 
 
Property and casualty segment
$
1,723,641

 
$
1,647,666

Life insurance segment
1,547,765

 
1,495,094

Total cash and investments
3,391,106

 
3,249,209

Total assets
4,105,838

 
3,890,376

Future policy benefits and losses, claims and loss settlement expenses
$
2,418,855

 
$
2,376,253

Total liabilities
3,144,807

 
3,011,479

Net unrealized investment gains, after-tax
$
187,428

 
$
128,369

Total stockholders’ equity
961,031

 
878,897






9



Property & Casualty Insurance Financial Results
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In Thousands, Except Ratios)
2016
 
2015
 
2016
 
2015
Revenues
 
 
 
 
 
 
 
Net premiums written(1)
$
272,094

 
$
242,740

 
$
513,003

 
$
462,118

Net premiums earned
$
232,282

 
$
209,266

 
$
452,507

 
$
409,403

Investment income, net of investment expenses
11,618

 
12,119

 
20,990

 
22,866

Net realized investment gains (losses)
966

 
(177
)
 
2,703

 
(416
)
Total Revenues
$
244,866

 
$
221,208

 
$
476,200

 
$
431,853

 
 
 
 
 
 
 
 
Benefits, Losses and Expenses
 
 
 
 
 
 
 
Losses and loss settlement expenses
$
173,128

 
$
143,053

 
$
306,265

 
$
262,391

Amortization of deferred policy acquisition costs
50,563

 
42,649

 
98,976

 
83,458

Other underwriting expenses
19,803

 
18,716

 
41,422

 
38,120

Total Benefits, Losses and Expenses
$
243,494

 
$
204,418

 
$
446,663

 
$
383,969

 
 
 
 
 
 
 
 
Income before income taxes
$
1,372

 
$
16,790

 
$
29,537

 
$
47,884

Federal income tax expense (benefit)
(2,063
)
 
3,493

 
4,082

 
11,484

Net income
$
3,435

 
$
13,297

 
$
25,455

 
$
36,400

 
 
 
 
 
 
 
 
GAAP combined ratio:
 
 
 
 
 
 
 
Net loss ratio - excluding catastrophes
59.2
%
 
58.8
%
 
58.9
%
 
59.1
%
Catastrophes - effect on net loss ratio
15.3

 
9.6

 
8.8

 
5.0

Net loss ratio
74.5
%
 
68.4
%
 
67.7
%
 
64.1
%
Expense ratio
30.3

 
29.3

 
31.0

 
29.7

Combined ratio
104.8
%
 
97.7
%
 
98.7
%
 
93.8
%
(1) Data prepared in accordance with statutory accounting principles, which is a comprehensive basis of accounting other than U.S. GAAP.




10



Life Insurance Financial Results
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In Thousands)
2016
 
2015
 
2016
 
2015
Revenues
 
 
 
 
 
 
 
Net premiums written(1)
$
21,202

 
$
19,952

 
$
42,271

 
$
32,985

Net premiums earned
$
21,205

 
$
19,959

 
$
42,278

 
$
32,993

Investment income, net of investment expenses
12,889

 
13,673

 
25,741

 
27,289

Net realized investment gains
630

 
946

 
948

 
2,072

Other income
183

 
132

 
291

 
195

Total Revenues
$
34,907

 
$
34,710

 
$
69,258

 
$
62,549

 
 
 
 
 
 
 
 
Benefits, Losses and Expenses
 
 
 
 
 
 
 
Losses and loss settlement expenses
$
7,284

 
$
7,309

 
$
16,275

 
$
14,380

Increase in liability for future policy benefits
16,002

 
12,096

 
28,554

 
19,719

Amortization of deferred policy acquisition costs
2,022

 
1,708

 
3,840

 
3,371

Other underwriting expenses
4,969

 
4,830

 
10,103

 
8,960

Interest on policyholders’ accounts
5,138

 
6,024

 
10,385

 
12,639

Total Benefits, Losses and Expenses
$
35,415

 
$
31,967

 
$
69,157

 
$
59,069

 
 
 
 
 
 
 
 
Income (loss) before income taxes
$
(508
)
 
$
2,743

 
$
101

 
$
3,480

Federal income tax expense (benefit)
(187
)
 
1,022

 
15

 
1,183

Net income (loss)
$
(321
)
 
$
1,721

 
$
86

 
$
2,297

(1) Net premiums written is a financial measure prepared in accordance with statutory principles, which is a comprehensive basis of accounting other than U.S. GAAP.






11



Net Premiums Written by Line of Business
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
(In Thousands)
 
 
 
Net Premiums Written
 
 
 
 
 
 
 
Commercial lines:
 
 
 
 
 
 
 
Other liability(1)
$
83,473

 
$
75,775

 
$
159,673

 
$
144,282

Fire and allied lines(2)
62,993

 
56,547

 
119,799

 
109,314

Automobile
64,730

 
53,797

 
118,612

 
100,862

Workers’ compensation
30,703

 
25,878

 
60,444

 
53,156

Fidelity and surety
7,789

 
7,103

 
13,258

 
11,907

Miscellaneous
509

 
726

 
966

 
1,451

Total commercial lines
$
250,197

 
$
219,826

 
$
472,752

 
$
420,972

 
 
 
 
 
 
 
 
Personal lines:
 
 
 
 
 
 
 
Fire and allied lines(3)
$
11,681

 
$
11,551

 
$
21,239

 
$
21,321

Automobile
6,622

 
6,213

 
13,021

 
12,280

Miscellaneous
300

 
283

 
576

 
538

Total personal lines
$
18,603

 
$
18,047

 
$
34,836

 
$
34,139

Reinsurance assumed
3,294

 
4,867

 
5,415

 
7,007

Total
$
272,094

 
$
242,740

 
$
513,003

 
$
462,118

(1) 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.
(2) Commercial lines “Fire and allied lines” includes fire, allied lines, commercial multiple peril and inland marine.
(3) Personal lines “Fire and allied lines” includes fire, allied lines, homeowners and inland marine.





























12



Net Premiums Earned, Losses and Loss Settlement Expenses and Loss Ratio by Line of Business
Three Months Ended June 30,
2016
 
2015
 
 
 
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
$
71,454

 
$
35,303

 
49.4
 %
 
$
63,466

 
$
36,122

 
56.9
 %
Fire and allied lines
56,012

 
52,758

 
94.2

 
49,708

 
40,366

 
81.2

Automobile
52,544

 
44,848

 
85.4

 
45,447

 
37,928

 
83.5

Workers' compensation
25,660

 
19,690

 
76.7

 
23,263

 
10,423

 
44.8

Fidelity and surety
5,316

 
(423
)
 
(8.0
)
 
4,566

 
894

 
19.6

Miscellaneous
450

 
113

 
25.1

 
675

 
123

 
18.2

Total commercial lines
$
211,436

 
$
152,289

 
72.0
 %
 
$
187,125

 
$
125,856

 
67.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
Personal lines
 
 
 
 
 
 
 
 
 
 
 
Fire and allied lines
$
11,090

 
$
12,531

 
113.0
 %
 
$
10,996

 
$
9,066

 
82.4
 %
Automobile
6,216

 
6,335

 
101.9

 
5,967

 
4,658

 
78.1

Miscellaneous
270

 
412

 
152.6

 
253

 
(99
)
 
(39.1
)
Total personal lines
$
17,576

 
$
19,278

 
109.7
 %
 
$
17,216

 
$
13,625

 
79.1
 %
Reinsurance assumed
$
3,270

 
$
1,561

 
47.7
 %
 
$
4,925

 
$
3,572

 
72.5
 %
Total
$
232,282

 
$
173,128

 
74.5
 %
 
$
209,266

 
$
143,053

 
68.4
 %

Net Premiums Earned, Losses and Loss Settlement Expenses and Loss Ratio by Line of Business
Six Months Ended June 30,
2016
 
2015
 
 
 
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
$
140,788

 
$
68,664

 
48.8
 %
 
$
123,973

 
$
68,679

 
55.4
%
Fire and allied lines
108,052

 
86,737

 
80.3

 
97,819

 
69,068

 
70.6

Automobile
101,995

 
87,067

 
85.4

 
89,126

 
71,262

 
80.0

Workers' compensation
50,243

 
31,334

 
62.4

 
46,503

 
21,810

 
46.9

Fidelity and surety
10,510

 
(476
)
 
(4.5
)
 
9,321

 
2,625

 
28.2

Miscellaneous
839

 
318

 
37.9

 
1,349

 
124

 
9.2

Total commercial lines
$
412,427

 
$
273,644

 
66.3
 %
 
$
368,091

 
$
233,568

 
63.5
%
 
 
 
 
 
 
 
 
 
 
 
 
Personal lines
 
 
 
 
 
 
 
 
 
 
 
Fire and allied lines
$
21,808

 
$
18,836

 
86.4
 %
 
$
21,906

 
$
15,069

 
68.8
%
Automobile
12,300

 
10,544

 
85.7

 
11,798

 
7,855

 
66.6

Miscellaneous
531

 
595

 
112.1

 
499

 
112

 
22.4

Total personal lines
$
34,639

 
$
29,975

 
86.5
 %
 
$
34,203

 
$
23,036

 
67.4
%
Reinsurance assumed
$
5,441

 
$
2,646

 
48.6
 %
 
$
7,109

 
$
5,787

 
81.4
%
Total
$
452,507

 
$
306,265

 
67.7
 %
 
$
409,403

 
$
262,391

 
64.1
%





13
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