Business

United Fire Group cites auto losses for fourth-quarter results

Insurer will cut back on 'auto heavy' business: CEO

#x201c;From a profitability standpoint, the fourth quarter was disappointing and an unacceptable end to a year in which
“From a profitability standpoint, the fourth quarter was disappointing and an unacceptable end to a year in which we failed to meet expectations and failed to make an operational profit,” United Fire Group CEO Randy Ramlo (center) says. (Liz Martin/The Gazette)

Commercial auto losses were a major factor in United Fire Group posting a fourth quarter loss and a sharply lower profit for all of 2019.

In a statement accompanying the earnings release, Randy Ramlo, UFG president and chief executive officer of the Cedar Rapids-based property-and-casualty insurer, said the 2019 financial results were negatively affected by commercial auto losses and previous year claims reserve strengthening in the company’s Gulf Coast region.

“From a profitability standpoint, the fourth quarter was disappointing and an unacceptable end to a year in which we failed to meet expectations and failed to make an operational profit,” Ramlo said.

Despite efforts to manage poor-performing commercial auto accounts with double-digit rate increases and non-renewals, Ramlo said the company was not able to return that line of business to underwriting profitability in 2019.

The insurer reported a consolidated net loss, including investment gains and losses, of $23.2 million, or 93 cents per diluted share, for the three months that ended on Dec. 31, 2019. That’s compared with a net loss of $29.3 million, or $1.17 per diluted share, for the same period in 2018.

For the year, UFG recorded consolidated net income, including investment gains and losses, of $14.8 million, or 58 cents per diluted share, down 46.4 percent from net income of $27.7 million, or $1.08 per diluted share, for all of 2018.

With the continued escalation of commercial auto losses industrywide and no signs of improvement in factors tracked by UFG, such as miles driven, driver shortages and distracted driving, Ramlo said the company decided to take several difficult but necessary actions.

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“Our plans include to be even more aggressive with non-renewals in 2020, which will reduce our commercial auto unit counts, especially in poor-performing segments, and not write new classes of business that are auto heavy,” Ramlo said.

“Although we stand to lose some of our commercial package policy business as a consequence of this action, we believe it will have the most immediate and profound impact on our profitability.”

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