EX-99.1 2 q42012-pressrelease.htm EXHIBIT Q42012-Press Release


Exhibit 99.1

United Fire Group, Inc. Reports Fourth Quarter and Year Ended 2012 Results

CEDAR RAPIDS, Iowa - (GLOBE NEWSWIRE) - United Fire Group, Inc. (NASDAQ OMX: UFCS), February 19, 2013 - FOR IMMEDIATE RELEASE

Consolidated Financial Results - Highlights:
Quarter Ended December 31, 2012
 
 
For the Year Ended December 31, 2012
 
Operating Losses(1) per diluted share
$
0.12

 
Operating Income(1) per diluted share
$
1.44

Net Loss per diluted share
$
0.10

 
Net Income per diluted share
$
1.58

Net Realized Investment Gain per share(2)
$
0.02

 
Net Realized Investment Gain per share(2)
$
0.14

Catastrophe losses per share(2)
$
0.77

 
Catastrophe losses per share(2)
$
1.65

Combined Ratio
111.1
%
 
Combined Ratio
101.2
%
 
 
 
Return on Equity
5.6
%
 
 
 
Book Value per share
$
28.90


United Fire Group, Inc. (the “Company”) (NASDAQ OMX: UFCS) today reported consolidated operating loss(1) of $0.12 per diluted share for the fourth quarter of 2012 compared to operating income(1) of $0.62 per diluted share for the fourth quarter of 2011. For the year ended December 31, 2012, the Company reported consolidated operating income of $1.44 per diluted share compared to a net operating loss of $0.16 per diluted share for the same period in 2011.

The Company reported consolidated net losses, including investment gains and losses, of $2.4 million ($0.10 per share) for the quarter ended December 31, 2012 and consolidated net income of $40.2 million ($1.58 per share) for the year ended December 31, 2012, compared to net income of $16.9 million ($0.66 per share) and $11.0 thousand ($0.00 per share), respectively, for the same periods in 2011.

Consolidated net investment income was $25.3 million and $111.9 million for the three- and twelve-month periods ended December 31, 2012, a decrease of (8.7) percent for the quarter and an increase of 2.2 percent for the year, compared to net investment income of $27.8 million and $109.5 million for the same periods in 2012.

The Company recognized consolidated net realized investment gains of $0.8 million and $5.5 million in the three- and twelve-month periods ended December 31, 2012, respectively, compared to net realized investment gains of $1.4 million and $6.4 million for the same periods in 2011.

Consolidated net unrealized investment gains, net of tax, totaled $144.1 million as of December 31, 2012, an increase of $19.7 million or 15.9 percent, since December 31, 2011. The increase in unrealized gains was driven by an increase in the fair value of both the fixed maturity and equity portfolios.

_____________________
(1) Operating income (loss) is a commonly used Non-GAAP financial measure of net income (loss) excluding realized capital gains and losses and related federal income taxes. Because our calculation may differ from similar measures used by other companies, investors should be careful when comparing our measure of operating income to that of other companies. Management evaluates this measure and ratios derived from this measurement because we believe it better represents the normal, ongoing performance of our business. See Supplemental Tables Financial Highlights for a reconciliation of operating income to net income.
(2) Per share amounts are after tax



1


Total consolidated assets as of December 31, 2012 were $3.7 billion, which included $3.0 billion of invested assets. The Company's book value was $28.90 per share, which is an increase of $1.61 per share or 5.9 percent from December 31, 2011 and is primarily attributed to net income of $40.2 million, unrealized investment appreciation of $19.7 million, net of tax, less the payment of stockholder dividends of $15.3 million. The return on equity was 5.6 percent.

P&C Segment

Net losses for the property and casualty insurance segment, including net realized investment gains and losses, totaled $4.1 million ($0.16 per diluted share) for the fourth quarter of 2012 compared to net income of $15.3 million ($0.60 per diluted share) for the fourth quarter of 2011. For the year ended December 31, 2012, net income totaled $33.5 million ($1.31 per diluted share), compared to net losses of $7.6 million ($0.30 per diluted share) for the same period in 2011.

Net premiums earned increased 12.5 percent to $167.5 million for the fourth quarter of 2012 compared to $148.9 million in the same period in 2011. For the year ended December 31, 2012, net premiums earned increased 17.9 percent to $629.4 million compared to $533.8 million for the same period in 2011.

“Fourth quarter 2012 was yet another quarter of positive rate increases in our property and casualty insurance segment,” stated Randy Ramlo, President and Chief Executive Officer. “Commercial lines renewal pricing increased in all regions with average increases in the mid-single digits on most small and mid-market accounts and double digit increases on underperforming accounts. Competitive market conditions persisted on new business during the quarter; however, premium written from new business remained strong,” continued Ramlo. “Personal lines pricing remains consistent with double-digit increases for homeowners' lines of business and low single-digit increases for personal auto lines of business. Policy retention was up slightly in both personal and commercial lines of business,” continued Ramlo.

“We continue to see signs of improvement in the economy,” stated Ramlo. “Since the second half of 2011, we have experienced modest growth in premium audit collections and that trend continued through fourth quarter 2012. Premium from policy changes declined slightly from the previous quarter, but remained positive, and the number of out-of-business policy cancellations varied by region, but remained unchanged overall.”

Catastrophe losses totaled $30.2 million ($0.77 per share after tax) and $64.7 million ($1.65 per share after tax) for three- and twelve-month periods ended December 31, 2012, respectively, compared to $9.8 million ($0.25 per share after tax) and $80.8 million ($2.03 per share after tax) for the same periods in 2011.

Super Storm Sandy

“At September 30, 2012, we were on track for a more normal catastrophe loss year; however, all that changed on October 29th when the East Coast was pounded by Super Storm Sandy,” stated Ramlo. “More than 2,750 claims have been filed as a result of the storm representing $25.0 million ($20.0 million direct, $5.0 million assumed) of incurred losses. Our response teams were in the field immediately after the storm and remained until every claim with our Company had been visited. I'm happy to report that more than 83% of those claims have been settled and closed. The trauma to those affected, however, continues,” stated Ramlo. “Our hearts go out to those still suffering from one of the East Coast's most severe natural events in decades. We will remain committed to our core value of prompt and fair claims service for as long as our policyholders are affected. Looking ahead we don't anticipate Sandy will have any material negative effects on our 2013 results."

GAAP combined ratio increased 17.1 percentage points to 111.1 percent for the three-month period ended December 31, 2012, compared to 94.0 percent percent for the same period of 2011. For the year ended December 31, 2012, the combined ratio decreased by 10.9 percentage points to 101.2 percent as compared to 112.1 percent for the same period of 2011.

“The most significant contributing factor for the increase in the fourth quarter loss ratio was Super Storm Sandy,” stated Ramlo. “All catastrophe losses, including Super Storm Sandy, added 18.0 percentage points to the loss ratio for the quarter and 10.3 percentage points for the year.”




2


Expense Levels and Other Items

The expense ratio decreased 3.5 percentage points for the quarter ended December 31, 2012 and 4.2 percentage points for the year, as compared to the same periods in 2011. The expenses associated with the acquisition of the Mercer Insurance Group increased the expense ratio reported for 2011. Accounting rule changes in 2012 related to the deferral of policy acquisition costs have increased the amount of underwriting expenses recognized in 2012 by more than one percentage point.

“In 2012, we experienced favorable prior year development in most lines of business, which is consistent with our history,” stated Ramlo. “With the exception of 2009, we have reported favorable reserve development each year since at least 1993. We did experience adverse development in our commercial multiple peril line due to increases in reserves for loss adjustment expenses and in our assumed reinsurance line due to additional reported losses from 2010 and 2011. Our most favorable experience was seen in our products liability and other liability lines due to decreases in loss and loss adjustment expenses as a result of lower levels of incurred but not reported loss reserves, a continued reduction in our legal expenses, and reasonably stable overall underwriting results.” Favorable prior year development for 2012 was $73.4 million compared to $61.1 million in 2011.

During fourth quarter 2012, we continued to experience an increase in the severity of losses. The trend mostly impacted the other liability line of business, but the workers' compensation line of business was also modestly affected. Included in the increase were several unusually large non-catastrophe losses. Super Storm Sandy had no effect on severity.   Frequency, on the other hand, was directly impacted by Super Storm Sandy in the fourth quarter and trended slightly upward; however, frequency trended downward in fourth quarter and for the year when Super Storm Sandy claims were excluded.

Mercer Integration

The integration of Mercer Insurance Group continues to move forward. The Company remains on track to convert the East Coast claims processes onto the United Fire platforms in the first quarter of 2013.

Accounting for DAC

Effective January 1, 2012, we prospectively adopted the change in accounting rules related to deferred policy acquisition costs. As a result of the change, the amount of underwriting expenses eligible for deferral has decreased. After consideration of our normal recovery assessment and the amortization pattern of our deferred policy acquisition costs, we recognized approximately $0.4 million and $10.3 million of additional expense in the three- and twelve-month periods, respectively, ended December 31, 2012 than we would have recognized had the rules remained the same. The net impact to the combined ratio was slightly more than one percent. With the prospective adoption, the most significant effect on net income per share occurred in the first three quarters of 2012 with a diminishing effect on net income per share in the fourth quarter of 2012 as shown below:

P&C Segment -- $0.1 million in fourth quarter; $8.7 million YTD; effect on YTD net income per share $0.22
Life Segment -- $0.3 million in fourth quarter; $1.6 million YTD; effect on YTD net income per share $0.04

Life Segment

Net income for the life insurance segment totaled $1.7 million ($0.07 per share) and $6.7 million ($0.26 per share) in the three- and twelve-month periods ended December 31, 2012, respectively, compared to $1.6 million ($0.06 per share) and $7.7 million ($0.30 per share), respectively, for the same periods of 2011.

Net premiums earned increased 52.1 percent and 23.7 percent in the three- and twelve-month periods ended December 31, 2012, respectively, compared to the same periods of 2011, primarily due to increased sales of single premium whole life products.

“Our life subsidiary continues to experience robust sales of its traditional life insurance products and to grow its geographical footprint,” stated Ramlo. “In 2012, traditional life insurance sales became more directly aligned with our


3


long-term goal of equalizing the sale of traditional life insurance products (including single-premium whole life) and annuities. Traditional life insurance products now account for more than 40 percent of our statutory life premiums.”

Net investment income decreased 8.9 percent and 5.3 percent for the three- and twelve-month periods ended December 31, 2012, respectively, compared to the same periods of 2011.

“The historically low interest rates continue to reduce our investment income and margin on earnings,” stated Ramlo. “We continue to address this by diligently pricing our products appropriately and maintaining a disciplined asset liability management strategy that focuses on high quality investments.”

Loss and loss settlement expenses decreased 25.4 percent and 8.8 percent in the three- and twelve-month periods ended December 31, 2012, respectively, compared to the same periods of 2011.

The liability for future policy benefits doubled in the quarter ended December 31, 2012 and increased 32.3 percent in the twelve-month period ended December 31, 2012, compared to the same periods of 2011, due to the increase in sales of single premium whole life products and the demographics of current insureds.

Deferred annuity deposits decreased 34.1 percent and 24.8 percent for the three- and twelve-month periods ended December 31, 2012 compared with the same periods of 2011. We believe it's prudent to lower the credited rate offered during the low investment return environment, thus affecting current deposits. Sales of single premium deferred annuities have also decreased in regard to overall portfolio production, due to strong sales of traditional life products.

Net cash outflow related to the Company's annuity business was $23.5 million and $42.3 million in the three- and twelve-month periods ended December 31, 2012 compared to a net cash inflow of $0.7 million and $17.6 million in the same periods of 2011. This result is attributed to the activity described previously.

Capital Management

In the three-month period ended December 31, 2012, we purchased 202,367 shares of our common stock for $4.4 million, at an average cost of $21.75 per share. In the the year ended December 31, 2012, we purchased 340,159 shares of our common stock for $7.3 million, at an average cost of $21.46 per share. We are authorized by the Board of Directors to purchase an additional 1,129,720 shares of common stock under our share repurchase program, which expires in August 2014.

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. Our company's net premiums written totaled $720.9 million for the the year ended December 31, 2012, and our market capitalization was $551.0 million at December 31, 2012.

Through our subsidiaries, we are licensed as a property and casualty insurer in 43 states, plus the District of Columbia, and we are represented by approximately 1,200 independent agencies. The United Fire pooled group is rated "A" (Excellent) by A.M. Best Company.

Our subsidiary, United Life Insurance Company, is licensed in 36 states, represented by approximately 900 independent life agencies and rated an "A-" (Excellent) by A.M. Best Company.

For more information about United Fire Group, Inc. visit www.unitedfiregroup.com. The United Fire Group, Inc. Logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=11691.

Contacts:

Anita Novak, Director of Investor Relations, 319-399-5251 or alnovak@unitedfiregroup.com



4


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 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),” “target(s),” “forecast(s),” “project(s),” “predict(s),” “should,” “could,” “may,” “will continue,” “might,” “hope,” “can” and other words and terms of similar meaning or expression in connection with a discussion of future operating, 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 results to differ materially from those in the forward-looking statements is contained in Part I Item IA “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 15, 2012 and in our report on Form 10-Q for the quarter ended September 30, 2012, filed with the SEC on November 7, 2012. The risks identified on 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 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.



5


Supplemental Tables

Financial Highlights
 
Three Months Ended December 31,
 
Years Ended December 31,
(In Thousands Except Shares and Per Share Data)
2012
 
2011
Change %
 
2012
 
2011(1)
Change %
Revenue Highlights
 
 
 
 
 
 
 
 
 
Net premiums earned
$
186,870

 
$
161,665

15.6
 %
 
$
694,994

 
$
586,783

18.4
 %
Net investment income
25,345

 
27,764

(8.7
)%
 
111,905

 
109,494

2.2
 %
Total revenues
213,317

 
191,554

11.4
 %
 
813,243

 
705,008

15.4
 %
Income Statement Data
 
 
 
 
 
 
 
 
 
Operating income (loss)
(2,935
)
 
15,952

(118.4
)%
 
36,668

 
(4,175
)
NM

After-tax net realized investment gains
517

 
939

(44.9
)%
 
3,544

 
4,186

(15.3
)%
Net income (loss)
$
(2,418
)
 
$
16,891

(114.3
)%
 
$
40,212

 
$
11

NM

Diluted Earnings Per Share Data
 
 
 
 
 
 
 
 
 
Operating income (loss)
$
(0.12
)
 
$
0.62

(119.4)%
 
$
1.44

 
$
(0.16
)
NM

After-tax net realized investment gains
0.02

 
0.04

(50.0
)%
 
0.14

 
0.16

(12.5
)%
Net income (loss)
$
(0.10
)
 
$
0.66

(115.2
)%
 
$
1.58

 
$
—

NM

Catastrophe Data
 
 
 
 
 
 
 
 
 
Pre-tax catastrophe losses
$
30,176

 
$
9,768

208.9
 %
 
$
64,722

 
$
80,793

(19.9
)%
Effect on after-tax earnings per share
0.77

 
0.25

208.0
 %
 
1.65

 
2.03

(18.7
)%
Effect on combined ratio
18.0
%
 
6.6
%
172.7
 %
 
10.3
%
 
15.1
%
(31.8
)%
 
 
 
 
 
 
 
 
 
 
Combined ratio
111.1
%
 
94.0
%
18.2
 %
 
101.2
%
 
112.1
%
(9.7
)%
Return on equity
 
 
 
 
 
5.64
%
 
—
%
NM

Cash dividends declared per share
$
0.15

 
$
0.15

—
 %
 
$
0.60

 
$
0.60

—
 %
Diluted weighted average shares
 outstanding
25,387,237

 
25,566,914

(0.7
)%
 
25,504,526

 
25,878,535

(1.4
)%
(1) The information presented for 2011 includes Mercer Insurance Group's results after the March 28, 2011 acquisition date.
NM = Not meaningful.





















6



Consolidated Income Statement
 
Three Months Ended December 31,
 
Years Ended December 31,
(In Thousands)
2012
 
2011
 
2012
 
2011(1)
Revenues
 
 
 
 
 
 
 
Net premiums written(2)
$
174,381

 
$
151,476

 
$
720,881

 
$
604,867

Net premiums earned
$
186,870

 
$
161,665

 
$
694,994

 
$
586,783

Investment income, net of investment expenses
25,345

 
27,764

 
111,905

 
109,494

Other-than-temporary impairment charges
—

 
(395
)
 
(4
)
 
(395
)
All other net realized gains
795

 
1,839

 
5,457

 
6,835

Net realized investment gains
795

 
1,444

 
5,453

 
6,440

Other income
307

 
681

 
891

 
2,291

Total Revenues
$
213,317

 
$
191,554

 
$
813,243

 
$
705,008

 

 
 
 
 
 
 
Benefits, Losses and Expenses

 
 
 
 
 
 
Losses and loss settlement expenses
$
141,700

 
$
97,535

 
$
459,706

 
$
430,389

Increase in liability for future policy benefits
14,786

 
7,338

 
43,095

 
32,567

Amortization of deferred policy acquisition costs
36,937

 
40,376

 
141,834

 
153,176

Other underwriting expenses
18,094

 
13,879

 
81,125

 
58,757

Interest on policyholders’ accounts
9,799

 
10,610

 
41,409

 
42,834

Total Benefits, Losses and Expenses
$
221,316

 
$
169,738

 
$
767,169

 
$
717,723

 

 
 
 
 
 
 
Income (loss) before income taxes
(7,999
)
 
21,816

 
46,074

 
(12,715
)
Federal income tax expense (benefit)
(5,581
)
 
4,925

 
5,862

 
(12,726
)
Net income (loss)
$
(2,418
)
 
$
16,891

 
$
40,212

 
$
11

(1) The information presented for 2011 includes Mercer Insurance Group's results after the March 28, 2011 acquisition date.
(2) Net premiums written is a financial measure prepared in accordance with statutory practices, which is a comprehensive basis of accounting other than U.S. GAAP.

Consolidated Balance Sheet
 
December 31, 2012
 
December 31, 2011
(In Thousands)
 
Total invested assets:
 
 
 
Property and casualty segment
$
1,343,295

 
$
1,257,357

Life insurance segment
1,701,068

 
1,650,651

Total cash and investments
3,151,829

 
3,052,535

Total assets
3,694,653

 
3,618,924

Future policy benefits and losses, claims and loss settlement expenses
$
2,470,087

 
$
2,421,332

Total liabilities
2,965,476

 
2,922,783

Net unrealized investment gains, after-tax
$
144,096

 
$
124,376

Total stockholders’ equity
729,177

 
696,141

 
 
 
 
Property and casualty insurance statutory capital and surplus (1)
$
585,986

 
$
565,843

Life insurance statutory capital and surplus
158,720

 
167,174

(1) Because United Fire & Casualty Company owns United Life Insurance Company, property and casualty insurance statutory capital and surplus includes life insurance statutory capital and surplus and therefore represents our total consolidated statutory capital and surplus.


7


Property & Casualty Insurance Financial Results
 
Three Months Ended December 31,
 
Years Ended December 31,
(In Thousands)
2012
 
2011
 
2012
 
2011(1)
Revenues
 
 
 
 
 
 
 
Net premiums written(2)
$
155,028

 
$
138,758

 
$
655,331

 
$
551,923

Net premiums earned
$
167,509

 
$
148,933

 
$
629,411

 
$
533,771

Investment income, net of investment expenses
8,470

 
9,240

 
41,879

 
35,513

Net realized investment gains (losses)
(89
)
 
788

 
1,676

 
3,081

Other income
139

 
550

 
316

 
1,592

Total Revenues
$
176,029

 
$
159,511

 
$
673,282

 
$
573,957

 
 
 
 
 
 
 
 
Benefits, Losses and Expenses
 
 
 
 
 
 
 
Losses and loss settlement expenses
$
136,761

 
$
90,915

 
$
439,137

 
$
407,831

Amortization of deferred policy acquisition costs
36,089

 
38,289

 
134,444

 
143,952

Other underwriting expenses
13,267

 
10,828

 
63,620

 
46,404

Total Benefits, Losses and Expenses
$
186,117

 
$
140,032

 
$
637,201

 
$
598,187

 


 
 
 
 
 
 
Income (Loss) before income taxes
$
(10,088
)
 
$
19,479

 
$
36,081

 
$
(24,230
)
Federal income tax expense (benefit)
(5,993
)
 
4,223

 
2,569

 
(16,591
)
Net income (loss)
$
(4,095
)
 
$
15,256

 
$
33,512

 
$
(7,639
)
 
 
 
 
 
 
 
 
GAAP combined ratio:
 
 
 
 
 
 
 
Net loss ratio - excluding catastrophes
63.6
%
 
54.4
%
 
59.4
%
 
61.3
%
Catastrophes - effect on net loss ratio
18.0

 
6.6

 
10.3

 
15.1

Net loss ratio
81.6
%
 
61.0
%
 
69.7
%
 
76.4
%
Expense ratio
29.5

 
33.0

 
31.5

 
35.7

Combined ratio
111.1
%
 
94.0
%
 
101.2
%
 
112.1
%
 
 
 
 
 
 
 
 
Statutory combined ratio:
 
 
 
 
 
 
 
Net loss ratio - excluding catastrophes
64.3
%
 
54.4
%
 
60.2
%
 
61.3
%
Catastrophes - effect on net loss ratio
18.0

 
6.6

 
10.3

 
15.1

Net loss ratio
82.3
%
 
61.0
%
 
70.5
%
 
76.4
%
Expense ratio
30.3

 
32.2

 
31.3

 
32.2

Combined ratio
112.6
%
 
93.2
%
 
101.8
%
 
108.6
%
(1) The information presented for 2011 includes Mercer Insurance Group's results after the March 28, 2011 acquisition date.
(2) Net premiums written is a financial measure prepared in accordance with statutory practices, which is a comprehensive basis of accounting other than U.S. GAAP.











8


Life Insurance Financial Results
 
Three Months Ended December 31,
 
Years Ended December 31,
(In Thousands)
2012
 
2011
 
2012
 
2011
Revenues
 
 
 
 
 
 
 
Net premiums written(1)
$
19,353

 
$
12,718

 
$
65,550

 
$
52,944

Net premiums earned
$
19,361

 
$
12,732

 
$
65,583

 
$
53,012

Investment income, net of investment expenses
16,875

 
18,524

 
70,026

 
73,981

Net realized investment gains
 
 
 
 
 
 
 
Other-than-temporary impairment charges
—

 
(395
)
 
(4
)
 
(395
)
All other net realized gains
884

 
1,051

 
3,781

 
3,754

Net realized investment gains
884

 
656

 
3,777

 
3,359

Other income
168

 
131

 
575

 
699

Total Revenues
$
37,288

 
$
32,043

 
$
139,961

 
$
131,051

 

 
 
 
 
 
 
Benefits, Losses and Expenses

 
 
 
 
 
 
Losses and loss settlement expenses
$
4,939

 
$
6,620

 
$
20,569

 
$
22,558

Increase in liability for future policy benefits
14,786

 
7,338

 
43,095

 
32,567

Amortization of deferred policy acquisition costs
848

 
2,087

 
7,390

 
9,224

Other underwriting expenses
4,827

 
3,051

 
17,505

 
12,353

Interest on policyholders’ accounts
9,799

 
10,610

 
41,409

 
42,834

Total Benefits, Losses and Expenses
$
35,199

 
$
29,706

 
$
129,968

 
$
119,536

 

 
 
 
 
 
 
Income before income taxes
$
2,089

 
$
2,337

 
$
9,993

 
$
11,515

Federal income tax expense
412

 
702

 
3,293

 
3,865

Net income
$
1,677

 
$
1,635

 
$
6,700

 
$
7,650

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


























9


Net Premiums Written by Line of Business
Three Months Ended December 31,
2012
 
2011
(In Thousands)
Including Mercer Insurance Group Premiums (1)
Net Premiums Written
 
 
 
Commercial lines:
 
 
 
Other liability
$
46,817

 
$
43,483

Fire and allied lines
33,376

 
30,051

Automobile
34,298

 
29,363

Workers’ compensation
16,750

 
13,139

Fidelity and surety
3,753

 
2,712

Miscellaneous
187

 
210

Total commercial lines
$
135,181

 
$
118,958

 

 
 
Personal lines:

 
 
Fire and allied lines
$
10,992

 
$
9,772

Automobile
3,760

 
4,928

Miscellaneous
218

 
188

Total personal lines
$
14,970

 
$
14,888

Reinsurance assumed
4,877

 
4,912

Total
$
155,028

 
$
138,758


Years Ended December 31,
2012
 
2011
 
2012
 
2011
(In Thousands)
Excluding Mercer Insurance Group Premiums
 
Including Mercer Insurance Group Premiums (1)
Net Premiums Written
 
 
 
 
 
 
 
Commercial lines:
 
 
 
 
 
 
 
Other liability
$
141,376

 
$
120,709

 
$
205,344

 
$
166,330

Fire and allied lines
111,843

 
101,576

 
137,997

 
120,825

Automobile
111,066

 
98,605

 
140,065

 
120,502

Workers’ compensation
66,399

 
53,261

 
73,501

 
57,194

Fidelity and surety
17,160

 
16,206

 
18,166

 
15,771

Miscellaneous
1,003

 
898

 
1,003

 
898

Total commercial lines
$
448,847

 
$
391,255

 
$
576,076

 
$
481,520

 
 
 
 
 

 
 
Personal lines:
 
 
 
 

 
 
Fire and allied lines
$
26,989

 
$
25,760

 
$
42,279

 
$
37,142

Automobile
17,477

 
16,101

 
21,622

 
19,191

Miscellaneous
602

 
551

 
945

 
800

Total personal lines
$
45,068

 
$
42,412

 
$
64,846

 
$
57,133

Reinsurance assumed
14,409

 
13,270

 
14,409

 
13,270

Total
$
508,324

 
$
446,937

 
$
655,331

 
$
551,923

(1) The information presented for 2011 includes Mercer Insurance Group's results after the March 28, 2011 acquisition date.





10


Net Premiums Earned, Losses and Loss Settlement Expenses and Loss Ratio by Line of Business
Three Months Ended December 31,
2012
 
2011
 
 
 
Losses
 
 
 
 
 
Losses
 
 
 
 
 
and Loss
 
 
 
 
 
and Loss
 
 
 
Net
 
Settlement
 
 
 
Net
 
Settlement
 
 
(In Thousands)
Premiums
 
Expenses
 
Loss
 
Premiums
 
Expenses
 
Loss
Unaudited
Earned
 
Incurred
 
Ratio
 
Earned
 
Incurred
 
Ratio
Commercial lines
 
 
 
 
 
 
 
 
 
 
 
Other liability
$
52,238

 
$
27,432

 
52.5
 %
 
$
45,459

 
$
24,420

 
53.7
 %
Fire and allied lines
34,610

 
28,461

 
82.2

 
31,964

 
10,346

 
32.4

Automobile
35,897

 
27,343

 
76.2

 
31,646

 
26,432

 
83.5

Workers' compensation
18,575

 
21,757

 
117.1

 
15,052

 
14,022

 
93.2

Fidelity and surety
4,933

 
1,431

 
29.0

 
4,385

 
405

 
9.2

Miscellaneous
256

 
(13
)
 
(5.1
)
 
227

 
(661
)
 
NM

Total commercial lines
$
146,509

 
$
106,411

 
72.6
 %
 
$
128,733

 
$
74,964

 
58.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
Personal lines
 
 
 
 
 
 
 
 
 
 
 
Fire and allied lines
$
10,795

 
$
16,686

 
154.6
 %
 
$
9,982

 
$
5,615

 
56.3
 %
Automobile
4,994

 
4,373

 
87.6

 
5,070

 
4,547

 
89.7

Miscellaneous
237

 
(581
)
 
(245.1
)
 
226

 
(96
)
 
(42.5
)
Total personal lines
$
16,026

 
$
20,478

 
127.8
 %
 
$
15,278

 
$
10,066

 
65.9
 %
Reinsurance assumed
$
4,974

 
$
9,872

 
198.5
 %
 
$
4,922

 
$
5,885

 
119.6
 %
Total
$
167,509

 
$
136,761

 
81.6
 %
 
$
148,933

 
$
90,915

 
61.0
 %
NM = Not meaningful
Years Ended December 31,
2012
 
2011(1)
 
 
 
Losses
 
 
 
 
 
Losses
 
 
 
 
 
and Loss
 
 
 
 
 
and Loss
 
 
 
Net
 
Settlement
 
 
 
Net
 
Settlement
 
 
(In Thousands)
Premiums
 
Expenses
 
Loss
 
Premiums
 
Expenses
 
Loss
Unaudited
Earned
 
Incurred
 
Ratio
 
Earned
 
Incurred
 
Ratio
Commercial lines
 
 
 
 
 
 
 
 
 
 
 
Other liability
$
197,842

 
$
98,225

 
49.6
 %
 
$
159,977

 
$
75,659

 
47.3
 %
Fire and allied lines
131,975

 
110,429

 
83.7

 
117,812

 
123,418

 
104.8

Automobile
134,682

 
103,234

 
76.7

 
115,230

 
84,151

 
73.0

Workers' compensation
68,643

 
52,017

 
75.8

 
54,404

 
47,153

 
86.7

Fidelity and surety
17,713

 
3,038

 
17.2

 
16,665

 
1,349

 
8.1

Miscellaneous
991

 
265

 
26.7

 
854

 
(410
)
 
(48.0
)
Total commercial lines
$
551,846

 
$
367,208

 
66.5
 %
 
$
464,942

 
$
331,320

 
71.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
Personal lines
 
 
 
 
 
 
 
 
 
 
 
Fire and allied lines
$
41,274

 
$
39,319

 
95.3
 %
 
$
36,027

 
$
36,086

 
100.2
 %
Automobile
20,890

 
15,372

 
73.6

 
18,744

 
15,542

 
82.9

Miscellaneous
928

 
(423
)
 
(45.6
)
 
797

 
97

 
12.2

Total personal lines
$
63,092

 
$
54,268

 
86.0
 %
 
$
55,568

 
$
51,725

 
93.1
 %
Reinsurance assumed
$
14,473

 
$
17,661

 
122.0
 %
 
$
13,261

 
$
24,786

 
186.9
 %
Total
$
629,411

 
$
439,137

 
69.8
 %
 
$
533,771

 
$
407,831

 
76.4
 %
(1) The information presented for 2011 includes Mercer Insurance Group's results after the March 28, 2011 acquisition date.




11