United Fire earnings drop sharply in first quarter

CEDAR RAPIDS - United Fire & Casualty Co.'s earnings dropped sharply in the first quarter, in part reflecting the indirect impact of the Japanese tsunami on company profits through its assumed reinsurance business.

The Cedar Rapids-based insurance company estimates losses for the early April storms across the U.S. to be between $7 to $9 million. It does not have an estimate of losses from tornados that swept the south U.S. last week.

On Monday, United Fire reported net income of 22 cents per share in the quarter that ended March 31 compared to earnings of 73 cents per share for the first quarter of 2010. Net premiums earned were flat at $114.2 million, however net income declined 70 percent to $5.8 million from $19.4 million a year earlier.

Pre-tax catastrophe losses for the quarter were placed at $12.4 million versus $3.1 million in the first quarter of 2010. Of that amount, $10 million were catastrophe losses in the company's assumed reinsurance portfolio.

Most of the business in the assumed reinsurance portfolio is property insurance, with an emphasis on catastrophe coverage. The losses were related to the February 2011 earthquake in New Zealand and the March 2011 earthquake and tsunami in Japan.  Catastrophe losses on insurance written through agents declined to $400,000 cmpared with $800,000 a year earlier.

Randy Ramlo, United Fire chairman and CEO, said catastrophe losses and expenses related to the company's March 28 merger with Mercer Insurance Group make comparisons to the first quarter of 2010 difficult. He said the company's claims staff is busy helping clients recover from recent storms.

“The unusual activity this year masked otherwise healthy results driven by our strung underwriting culture that provides us with a stable base and allows us to continue to achieve good results, even in the soft market conditions that have continued to plague the insurance industry,” Ramlo said.

With the Mercer acquisition complete, Ramlo said United Fire plans to use its disciplined underwriting, local market knowledge and strong agent relationships to grow in the coming year.

United Fire has targeted several market segments with growth potential, Ramlo said, and will work with agents who already market United Fire insurance to improve the company's business in those markets. In promising markets where United Fire is underrepresented, he said the company sees opportunities to appoint new agencies.