United Fire Group (UFCS) Misses Q4 EPS by 40c, Revenues Beat

United Fire Group (NASDAQ: UFCS) reported Q4 EPS of ($1.04), $0.40 worse than the analyst estimate of ($0.64). Revenue for the quarter came in at $293.37 million versus the consensus estimate of $290 million.

"Our 2019 results were negatively impacted by commercial auto losses and prior year reserve strengthening in our Gulf Coast Region," stated Randy A. Ramlo, President and Chief Executive Officer. "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. Commercial auto losses continued to be the main driver of the net operating loss in the fourth quarter. We know we have work to do and are focused on aggressively moving forward with our strategic plan to improve profitability."________________(1) Per share amounts are after tax.(2) Adjusted operating income is a non-GAAP financial measure of net income excluding net realized investmentgains and losses, changes in the fair value of equity securities 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 adjusted operating income to net income.(3) Return on equity is calculated by dividing annualized net income by average year-to-date equity.

"As part of our strategic plan, we currently have several initiatives underway in underwriting, claims, analytics, portfolio management and technology innovation, to name some of our focus areas. One example of a noteworthy development at UFG is within our portfolio management strategy, specifically related to our commercial auto book. Despite our best efforts to manage poor-performing commercial auto accounts with double-digit rate increases and non-renewals, these efforts proved insufficient to return this line of business to underwriting profitability in 2019. With the continued escalation of commercial auto losses industry-wide and no signs of improvement in the key auto metrics we track, such as miles driven, driver shortages, distracted driving and social inflation, we decided to take several difficult but necessary actions beginning in the fourth quarter. 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. By taking these actions, we’re confident we’ll achieve a better balance in our overall book of business, which has become too heavily weighted in commercial auto in recent years. 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. As we move forward with our strategic plan we will closely monitor key metrics and make adjustments accordingly."

For earnings history and earnings-related data on United Fire Group (UFCS) click here.

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