United Fire & Casualty P/C Unit Sees Decline in Premiums, Claims

United Fire & Casualty Co., headquartered in Cedar Rapids, Iowa, reported that net premiums written in its property/casualty sector declined in the three-month and six-month periods ended June 30, 2010, as compared with the same periods of the prior year.

For the second quarter of 2010 United Fire & Casualty had $117 million in P/C net premiums written with a combined ratio of 95.1, compared with $120.4 million and a combined ratio of 107.5 in the same period in 2009.

For the first six months of 2010, the company reported $224.2 million in P/C net premiums written with a combined ratio of 94.1, compared with $235 million and a combined ratio of 106.3 in the first half of 2009.

President and CEO Randy Ramlo said the company is “pleased with our second quarter results, posting two profitable quarters in a row this year, which is more typical of our historical results.” He added that in the the second quarter and first half of 2010, the company “benefited from improved claims experience and reduced investment write-downs, as compared with the same periods of 2009.”

United Fire & Casualty attributed the loss in written premium primarily to the weak economy, as some of its current and prospective commercial policyholders have been forced to reduce staff, cut vehicle fleets and, in some cases, go out of business. Also limiting the company’s ability to grow is the sustained soft-market in the insurance industry that continues downward pressure on pricing.

The company’s pricing levels were flat in our commercial lines business, while personal lines pricing levels increased slightly. To overcome these market challenges, underwriters continue to focus on writing good business at an adequate price, preferring quality over volume, according to the company’s announcement.

In the three-month and six-month periods ended June 30, 2010, United Fire & Casualty retained approximately 80 percent of its personal and commercial lines book of business, which was in line with retention goals.

Losses and loss settlement expenses decreased 21 percent in the second quarter of 2010 and 21.8 percent in the first six months of 2010, as compared with the same periods in 2009. This is due to an improvement in noncatastrophe claims experience and a reduction in Hurricane Katrina development.

Claims frequency decreased slightly in the six months ended June 30, 2010, as compared with the same prior-year period. There also was a decrease in claims severity in the first six months of 2010, as compared with the same period of 2009.

The company had no adverse development from Hurricane Katrina claims litigation in the second quarter of 2010, compared with $.5 million in the second quarter of 2009. For the six months ended June 30, 2010, losses and loss settlement expenses related to Hurricane Katrina were $5.4 million, versus $12.4 million in the first six months of 2009.

GAAP combined ratio improved by 15.5 percentage points in the second quarter of 2010 and 14.8 percentage points in the first six months of 2010, as compared with the same prior-year periods. This is due primarily to the aforementioned decrease in losses and loss settlement expenses.

Source: United Fire & Casualty Co.