<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
_ Act of 1934 for the fiscal year ended December 31, 1995
_ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to ________
Commission File Number 2-39621
UNITED FIRE & CASUALTY COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Iowa 42-0644327
________________________________________ ___________________________________
(State of Incorporation) (IRS Employer Identification No.)
118 Second Avenue, S.E.
Cedar Rapids, Iowa 52407-3909
________________________________________ ____________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (319) 399-5700
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
______ ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. X
____
As of March 1, 1996, 10,829,461 shares of common stock were outstanding.
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 1, 1996, was approximately $131,847,000.
<PAGE> 2
TABLE OF CONTENTS
PAGE
____
PART I:
Item 1. Business....................................1
Item 2. Properties..................................7
Item 3. Legal Proceedings...........................8
Item 4. Submission of Matters to a Vote of
Security Holders............................8
PART II:
Item 5. Market for Registrant's Common Stock and
Related Security Holder Matters.............8
Item 6. Selected Financial Data.....................9
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations...............................9
Item 8. Financial Statements and
Supplementary Data........................ 15
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure.......................40
PART III:
Item 10. Directors and Executive Officers of the
Registrant.................................40
Item 11. Executive Compensation.....................44
Item 12. Security Ownership of Certain Beneficial
Owners and Management......................46
Item 13. Certain Relationships and Related
Transactions...............................46
PART IV:
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K....................47
<PAGE> 3
PART I.
ITEM 1. BUSINESS
GENERAL
United Fire & Casualty Company and its insurance subsidiaries (the "Company")
are engaged in the business of property and casualty insurance and life
insurance. The Company is an Iowa corporation incorporated in January, 1946. Its
principal executive office is located at:
118 Second Avenue S.E.
P.O. Box 73909
Cedar Rapids, Iowa 52407-3909
(319-399-5700).
The Company's subsidiaries are: Lafayette Insurance Company, a wholly owned
property and casualty insurer, with its wholly owned subsidiary, a general
agency, Insurance Brokers & Managers, Inc.; Addison Farmers' Insurance Company,
a wholly owned property and casualty insurer, with its wholly owned
subsidiaries, a general agency, Addison Insurance Agency, and a premium finance
company, Crabtree Premium Finance Company; and United Life Insurance Company, a
wholly owned life insurance company. As of December 31, 1995, the Company and
its subsidiaries employed 563 full-time employees.
The Company and its property and casualty subsidiaries market most forms of
property and casualty insurance products, including fidelity and surety bonds
and reinsurance, through independent agencies and brokers. The Company and its
property and casualty subsidiaries also underwrite and broker a limited amount
of excess and surplus lines insurance.
United Life Insurance Company underwrites and markets ordinary life
(primarily universal life), annuities (primarily single premium) and credit life
products to individuals and groups through independent agencies.
A table reflecting premiums, operating results and assets attributable to the
property and casualty and life segments is included in Note 10 of the Notes to
Consolidated Financial Statements.
The following table shows the consolidated net premiums written and annuity
deposits during the last three years by major category.
<TABLE>
<CAPTION>
_______________________________________________________________________________
Years Ended December 31,
_______________________________________________________________________________
(Dollars in Thousands)
_______________________________________________________________________________
1995 1994 1993
_______________________________________________________________________________
<S> <C> <C> <C>
Fire and allied lines <F1> $ 57,049 $ 51,997 $ 47,395
Automobile 44,457 39,003 38,785
Other liability 31,025 27,467 25,109
Workers' compensation 24,807 22,215 20,930
Fidelity and surety 16,215 15,113 12,029
Reinsurance 23,259 18,346 17,830
Other 734 1,500 933
Life and accident and health 25,181 30,088 30,166
Annuities 54,515 35,371 37,540
_______________________________________________________________________________
$277,242 $241,100 $230,717
===============================================================================
<FN>
<F1> "Fire and allied lines" includes farmowners, homeowners, commercial
multiple peril and inland marine.
</FN>
</TABLE>
PROPERTY AND CASUALTY INSURANCE
The Company and its property and casualty subsidiaries underwrite both
commercial and personal lines of insurance. Homeowners and automobile insurance
comprise most of the personal lines of business. Business package policies,
workers' compensation, other liability and fidelity and surety bonds represent a
major part of the commercial business. Specialty policies written include the
Commercial Uni-Saver, a commercial package policy with a simplified rating plan,
blanket mortgage security, insurance on boats, outboard motors and recreational
vehicles, umbrella liability and some forms of errors and omissions insurance.
1
<PAGE> 4
The Company acts as a reinsurer assuming both property and casualty
reinsurance from approximately 415 companies. The bulk of the business assumed
is property reinsurance with the emphasis on catastrophe covers. The business
originates through approximately 45 brokers with the largest producer accounting
for approximately 15.5% of the reinsurance assumed.
The combined ratios below, which relate to the non-life segments, are the sum
of the following: the loss ratio, calculated by dividing net losses and net loss
adjustment expenses incurred by net premiums earned; and the expense ratio,
calculated by dividing underwriting expenses incurred by net premiums written.
The ratios in the table have been prepared on the basis of statutory financial
information and on a GAAP basis. Generally, if the combined ratio is below 100
percent, there is an underwriting profit; if it is above 100 percent, there is
an underwriting loss.
[A bar graph displaying statuatory combined ratios for the Company as compared
with the Insurance Industry from 1991 to 1995 appears here.]
<TABLE>
<CAPTION>
STATUTORY COMBINED RATIOS
Company Industry
<S> <C> <C>
1991 100.3% 108%
1992 115.5 114
1993 102.5 109
1994 97.6 109
1995 95.8 107
</TABLE>
<TABLE>
<CAPTION>
____________________________________________________________________________________________________________________________
Years Ended December 31,
____________________________________________________________________________________________________________________________
(Dollars in Thousands)
____________________________________________________________________________________________________________________________
Statutory GAAP
____________________________________________________________________________________________________________________________
1995 1994 1993 1995 1994 1993
____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Net premiums written $197,546 $175,641 $163,011 $197,546 $175,641 $163,011
Net premiums earned 185,994 166,852 158,336 185,994 166,852 158,336
____________________________________________________________________________________________________________________________
Ratio of net losses and net loss
adjustment expenses incurred to net
premiums earned 63.8% 65.6% 70.7% 63.6% 65.2% 70.4%
Ratio of underwriting expenses
incurred to net premiums written 32.0 32.0 31.8 31.0 31.9 30.8
Combined ratios 95.8 97.6 102.5 94.6 97.1 101.2
____________________________________________________________________________________________________________________________
Underwriting margin 4.2% 2.4% (2.5)% 5.4% 2.9% (1.2)%
============================================================================================================================
</TABLE>
The following table sets forth the aggregate direct and assumed premiums
written, ceded reinsurance and net premiums written for the three years ended
December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
_______________________________________________________________________________________________________
Years Ended December 31,
_______________________________________________________________________________________________________
(Dollars in Thousands)
PERCENT Percent Percent
OF of of
1995 TOTAL 1994 Total 1993 Total
_______________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Fire and allied lines <F1> $ 74,254 38% $ 66,640 38% $ 58,323 36%
Automobile 46,060 23 40,687 23 40,352 25
Other liability 34,101 17 30,116 17 27,360 17
Workers' compensation 25,246 13 22,836 13 21,614 13
Fidelity and surety 17,322 9 16,060 9 12,769 8
Reinsurance assumed 26,436 13 22,433 13 21,938 13
Other 1,011 1 3,692 2 2,250 1
_______________________________________________________________________________________________________
Aggregate direct and assumed
premiums written $224,430 114% $202,464 115% $184,606 113%
Reinsurance ceded 26,884 14 26,823 15 21,595 13
_______________________________________________________________________________________________________
Net premiums written $197,546 100% $175,641 100% $163,011 100%
=======================================================================================================
<FN>
<F1> "Fire and allied lines" includes farmowners, homeowners, commercial multiple peril and inland marine.
</FN>
</TABLE>
2
<PAGE> 5
The following table sets forth property and casualty net premiums earned, net
losses incurred (excluding net loss adjustment expenses) and the loss ratio
(ratio of net losses incurred to net premiums earned), by lines of insurance
written, for the three years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
___________________________________________________________________________________
Years Ended December 31,
___________________________________________________________________________________
(Dollars in Thousands)
1995 1994 1993
___________________________________________________________________________________
<S> <C> <C> <C>
Fire and allied lines <F1>
Premiums earned $ 54,150 $ 48,784 $ 46,190
Losses incurred 30,551 24,826 20,993
Loss ratio 56.4% 50.9% 45.4%
___________________________________________________________________________________
Automobile
Premiums earned $ 42,026 $ 38,369 $ 39,423
Losses incurred 30,682 28,833 26,261
Loss ratio 73.0% 75.1% 66.6%
___________________________________________________________________________________
Other liability
Premiums earned $ 29,282 $ 26,404 $ 24,227
Losses incurred 10,304 11,679 9,912
Loss ratio 35.2% 44.2% 40.9%
___________________________________________________________________________________
Workers' compensation - involuntary
Premiums earned $ 3,179 $ 3,735 $ 4,012
Losses incurred 1,357 1,732 2,983
Loss ratio 42.7% 46.4% 74.4%
___________________________________________________________________________________
Workers' compensation - voluntary
Premiums earned $ 20,776 $ 17,898 $ 16,750
Losses incurred 5,458 3,035 8,616
Loss ratio 26.3% 17.0% 51.4%
___________________________________________________________________________________
Workers' compensation - total
Premiums earned $ 23,955 $ 21,633 $ 20,762
Losses incurred 6,815 4,767 11,599
Loss ratio 28.4% 22.0% 55.9%
___________________________________________________________________________________
Fidelity and surety
Premiums earned $ 14,592 $ 12,592 $ 9,786
Losses incurred 1,269 468 958
Loss ratio 8.7% 3.7% 9.8%
___________________________________________________________________________________
Reinsurance
Premiums earned $ 21,117 $ 17,648 $ 17,193
Losses incurred 15,789 16,088 20,213
Loss ratio 74.8% 91.2% 117.6%
___________________________________________________________________________________
Other
Premiums earned $ 872 $ 1,422 $ 755
Losses incurred 334 734 (38)
Loss ratio 38.3% 51.6% (5.0)%
___________________________________________________________________________________
Total property and casualty
Premiums earned $185,994 $166,852 $158,336
Losses incurred 95,744 87,395 89,898
Loss ratio 51.5% 52.4% 56.8%
===================================================================================
<FN>
<F1> "Fire and allied lines" includes farmowners, homeowners, commercial multiple
peril and inland marine.
</FN>
</TABLE>
3
<PAGE> 6
LIFE INSURANCE
The principal life insurance product is universal life of which the Life
subsidiary has six different plans. The universal plans represent about
two-thirds of the total insurance in-force at December 31, 1995. The maximum
retention is $200,000 per life policy. Long-term disability is provided only for
the employees of the Company. The following table presents life insurance earned
premium information for the last five years.
<TABLE>
<CAPTION>
_____________________________________________________________________________________________________
Years Ended December 31,
_____________________________________________________________________________________________________
(Dollars in Thousands)
1995 1994 1993 1992 1991
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Universal life $ 7,926 $ 6,386 $ 6,887 $ 5,529 $ 5,454
Ordinary life (other than universal) 9,647 8,431 5,120 3,620 2,903
Accident and health 1,822 1,515 3,194 2,515 2,052
Annuities 902 441 927 930 336
Credit life 1,217 993 954 1,035 822
Group accident and health 125 130 200 167 172
_____________________________________________________________________________________________________
Total premiums earned $21,639 $17,896 $17,282 $13,796 $11,739
=====================================================================================================
</TABLE>
REINSURANCE CEDED
The Company follows the industry practice of reinsuring a portion of their
exposure and ceding to reinsurers a portion of the premium received on the
policies reinsured. Reinsurance is purchased to reduce the net liability on
individual risks to predetermined limits and to protect against catastrophic
losses such as hurricanes and tornadoes. Such catastrophe protection is
purchased on both direct and assumed business.
The ceding of reinsurance does not legally discharge the Company from primary
liability under its policies and the ceding company must pay the loss if the
reinsurer fails to meet its obligation. The Company is not aware of any of its
reinsurers experiencing financial difficulties that would result in a material
impact on the Company's financial statements. The Company follows the industry
practice of accounting for insurance written and losses incurred net of
reinsurance ceded.
The Company uses many reinsurers, both domestic and foreign. There are no
concentrations of credit risk associated with reinsurance. Principal reinsurers
include Swiss Re of America (formerly North American Reinsurance Corporation),
Munich American Assurance Company, General Reinsurance Corporation, ERC Life
Reinsurance Corporation, Transamerica Occidental Life and Employers Reinsurance
Corporation.
RESERVES
Applicable insurance laws require the Company's property and casualty segment
to maintain reserves for losses and loss adjustment expenses with respect to
both reported and unreported losses. With respect to life reserves, the reserves
are based upon applicable statutory Iowa insurance laws and actuarial analysis
determined by independent consulting actuaries.
The Company's property and casualty segment establishes reserves for reported
losses based upon historical experience and upon a case-basis evaluation of the
type of loss, knowledge of the circumstances surrounding each loss and the
policy provisions relating to the type of loss. The amount of reserves for
unreported losses is determined by estimating unreported losses on the basis of
historical and statistical information for each line of insurance with respect
to the probable number and nature of losses arising from occurrences which have
not yet been reported. Established reserves are closely monitored and are
adjusted as needed.
Loss reserves are estimates at a given time of the ultimate amount expected to
be paid on incurred losses based on facts and circumstances known when the
estimates are made. Reserves are not discounted. The loss settlement period on
insurance losses may be many years, and as additional facts regarding individual
losses become known, it often becomes necessary to refine and adjust the
estimates of liability on a loss. Inflation is implicitly provided for in the
reserving function through review of cost trends and historical reserving
results and projections of future economic conditions.
4
<PAGE> 7
Reserves for loss adjustment expenses are intended to cover the actual cost
of investigating losses and defending lawsuits arising from losses. These
reserves are established periodically based on historical analysis and
management's expectations.
The limits on risks retained by the Company's property and casualty segment
vary by line of business, and risks in excess of the retention limits are
reinsured. For the property lines of business, the retention is $1,000,000. For
the casualty lines of business, the Company has four retention levels which
depend on the accident year of the claim. For losses with an accident year of
1983 or prior, the retention is $225,000. The retention level was raised to
$300,000 on all losses in the casualty lines with accident dates of 1984 through
1986. Effective January 1, 1987, the retention was increased to $500,000 on all
losses with accident dates of 1987 through 1991. Effective January 1, 1992, the
retention was increased to $750,000 on all accident dates of 1992 through 1994.
Effective January 1, 1995, the retention was increased to $1,000,000 on all
losses in the casualty lines with accident dates of 1995 and later.
The following table shows the calendar year development of the unpaid losses
and loss adjustment expenses of the Company and its property and casualty
segment for 1986 through 1995. The top line of the table shows the estimated
liability for unpaid losses and loss adjustment expenses recorded at the balance
sheet date for each of the indicated years. This liability represents the
estimated amount of losses and loss adjustment expenses for losses arising in
all prior years that are unpaid at the balance sheet date, including losses that
had been incurred but not yet reported, net of applicable ceded reinsurance. The
upper portion of the table shows the reestimated amount of the previously
recorded liability based on experience as of the end of each succeeding year.
The estimate is increased or decreased as more information becomes known.
<TABLE>
<CAPTION>
Years Ended December 31,
____________________________________________________________________________________________________________________________________
(Dollars in thousands)
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Liability for unpaid
losses and loss $ 60,779 $71,067 $85,012 $103,607 $113,572 $123,219 $158,825 $170,798 $180,653 $188,700
adjustment expenses
Liability reestimated
as of:
One year later 58,011 69,417 79,869 96,487 111,804 128,042 154,572 153,691 160,776
Two years later 58,093 67,948 80,395 96,976 112,390 125,888 148,507 142,572
Three years later 57,685 68,357 76,698 97,295 111,276 124,428 144,159
Four years later 58,200 67,322 76,469 95,752 113,898 122,384
Five years later 57,518 66,735 75,368 96,345 113,703
Six years later 57,343 66,058 75,257 97,159
Seven years later 57,423 66,599 75,912
Eight years later 58,375 67,526
Nine years later 59,200
Redundancy
(deficiency) $ 1,579 $ 3,541 $9,100 $ 6,448 $ (131) $ 835 $ 14,666 $ 28,226 $ 19,877
____________________________________________________________________________________________________________________________________
Cumulative amount of
liability paid through:
One year late $ 22,589 $23,681 $27,277 $ 37,598 $ 39,497 $ 44,694 $ 54,291 $ 51,550 $ 54,862
Two years later 33,575 39,028 41,865 56,574 63,589 69,296 84,074 80,246
Three years later 41,310 46,139 52,551 69,767 77,141 87,052 102,637
Four years later 44,305 51,404 57,658 76,443 87,627 96,976
Five years later 46,989 54,061 61,795 82,013 95,059
Six years later 48,662 56,292 64,912 85,379
Seven years later 50,054 58,425 67,021
Eight years later 51,968 60,026
Nine years later 52,990
</TABLE>
5
<PAGE> 8
INVESTMENTS
The management of the investment portfolio is handled internally. The Company
primarily invests in fixed income securities. The Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," effective
January 1, 1994 and reassessed this position in December, 1995. The Company has
classified a majority of its fixed income securities as held-to-maturity. See
Notes 1 and 2 of the Notes to Consolidated Financial Statements for discussion
of SFAS No. 115.
Historically, the property and casualty segment has emphasized investments in
tax-exempt fixed income securities, but attempts to maintain a balanced
portfolio that reflects its changing tax situation, as well as changes in the
tax law. Based on the Company's underwriting philosophy and goals, the emphasis
toward tax-exempt securities will continue.
The life insurance segment has emphasized investing in high quality, taxable,
fixed income securities (primarily bonds issued by corporations, mortgage
pass-through securities and collateralized mortgage obligations ("CMOs")).
Investment results for the years indicated are summarized in the following
table.
<TABLE>
<CAPTION>
________________________________________________________________________________
Average Annualized Yield
Years Ended Invested Net Investment on Average
December 31, Assets <F1> Income <F2> Invested Assets
________________________________________________________________________________
(Dollars in Thousands)
________________________________________________________________________________
<S> <C> <C> <C>
1995 $733,608 $53,603 7.3%
1994 635,948 46,420 7.3
1993 560,442 40,233 7.2
================================================================================
<FN>
<F1> Average of amounts at beginning and end of year.
<F2> Investment income after deduction of investment expenses, but before
applicable income tax.
</FN>
</TABLE>
MARKETING
The Company markets its products principally through independent agencies.
The Company is licensed as a property and casualty insurer in 34 states,
primarily in the Midwest and West. Approximately 1,700 independent agencies
represent the Company's property and casualty segment. The life insurance
subsidiary is licensed in 24 midwestern and western states and is represented by
approximately 1,000 independent agencies. The Home Office and branch offices of
the Company and the offices of the insurance subsidiaries are staffed with
underwriting, claims and marketing representatives, and administrative
technicians, all of whom provide support and assistance to the independent
agencies.
In addition, Home Office staff technicians and specialists provide support to
the subsidiaries and branch offices as well as to independent agencies. The
Company's Home Office also monitors subsidiary and branch offices for overall
results and conformity to Company policy through the use of management reports.
6
<PAGE> 9
In 1995, direct premium writings on a statutory basis by state were as follows.
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________
Property and Casualty Insurance Life, Accident and Health Insurance, Including Annuities
_________________________________________________________________________________________________________________________
(Dollars in Thousands)
_________________________________________________________________________________________________________________________
Percent Percent
Amount of Total Amount of Total
=========================================================================================================================
<S> <C> <C> <C> <C>
California $ 9,292 4.9% $ -- --%
Colorado 10,335 5.4 4,323 5.3
Idaho 3,030 1.6 261 .3
Illinois 21,091 11.1 5,508 6.8
Iowa 40,235 21.2 35,178 43.2
Kansas 7,671 4.0 2,041 2.5
Louisiana 25,127 13.2 55 .1
Minnesota 13,273 7.0 13,857 17.0
Missouri 18,708 9.8 3,317 4.1
Nebraska 13,072 6.9 4,833 5.9
South Dakota 8,778 4.6 1,850 2.3
Wisconsin 6,971 3.7 7,409 9.1
Wyoming 2,974 1.6 346 .4
Other 9,475 5.0 2,495 3.0
_________________________________________________________________________________________________________________________
$190,032 100.0% $81,473 100.0%
=========================================================================================================================
</TABLE>
The insurance industry is highly competitive, and the Company competes not
only with other stock insurance companies, but also with mutual companies, the
underwriters at Lloyds of London and reinsurance reciprocals.
Since the Company relies heavily on independent agencies, it utilizes a
profit sharing contract with the agencies as an incentive to place high quality
business with the Company. For 1995, 332 agencies will receive profit sharing
commissions of an estimated $5,137,000.
ITEM 2. PROPERTIES
The Company owns two buildings in Cedar Rapids, Iowa, which it occupies as
its Home Office. One building is a five-story building which is occupied
entirely by the Company except for certain tenants on the second floor. The
other is an eight-story office building in which the first floor is leased to
tenants. The Company occupies the fourth through eighth floors of this building
and rents the third floor and an office on the second floor to its subsidiary,
United Life Insurance Company. The two buildings are connected with a skywalk.
The Company owns a small parking lot adjacent to the eight-story building
and a parking lot adjacent to the five-story building.
Lafayette Insurance Company owns one building in New Orleans, Louisiana
which serves as its Home Office. The building consists of two floors of office
space and a floor of parking, as well as a parking lot located adjacent to the
building.
Management believes that the properties of the Company are adequate for
conducting its business.
7
<PAGE> 10
ITEM 3. LEGAL PROCEEDINGS
The registrant has no pending legal proceedings other than ordinary routine
litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's Common Stock is traded in the over-the-counter market under
the NASDAQ symbol UFCS. On March 1, 1996, there were 948 holders of record of
the Company's Common Stock. The following table sets forth, for the calendar
periods indicated, the high and low bid quotations for the Common Stock and cash
dividends declared. These quotations reflect inter-dealer prices without retail
markups, markdowns or commissions and may not necessarily represent actual
transactions.
The Company's policy has been to pay quarterly cash dividends and the
Company intends to continue that policy. Payments of any future dividends and
the amounts of such dividends, however, will depend upon factors such as net
income, financial condition, capital requirements and general business
conditions. The Company has paid dividends every quarter since March, 1968.
State law permits the payment of dividends only from statutory accumulated
earned profits arising from business. The Company's subsidiaries are also
subject to state law restrictions on dividends. See Note 7 in the Notes to
Consolidated Financial Statements.
<TABLE>
<CAPTION>
________________________________________________________________________________
Share Price Cash
High Low Dividends Declared
________________________________________________________________________________
<S> <C> <C> <C>
1995
Quarter Ended
March 31 $ 19 3/8 $ 18 1/8 $ .133
June 30 19 1/2 18 1/8 .133
September 30 24 5/8 22 1/8 .133
December 31 29 1/8 23 7/8 .150
1994
Quarter Ended
March 31 $ 19 1/2 $16 $ .120
June 30 18 7/8 17 3/8 .120
September 30 18 1/4 17 1/2 .120
December 31 19 7/8 18 1/8 .133
________________________________________________________________________________
</TABLE>
Share prices and cash dividends declared per common share have been
retroactively restated for additional shares issued as a result of a three for
two stock split to stockholders of record as of December 18, 1995.
8
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
_____________________________________________________________________________________________
Years Ended December 31,
_____________________________________________________________________________________________
(Dollars in thousands except per share data)
1995 1994 1993 1992 1991
_____________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Total assets $943,106 $828,126 $733,020 $644,394 $510,624
Operating revenues
Premiums earned 207,528 184,748 174,137 170,434 154,127
Investment income, net 53,603 46,420 40,233 36,312 28,811
Realized investment gains 1,698 796 1,860 3,133 1,208
Other income 1,761 1,881 1,713 1,387 1,257
Cumulative effect of change in
accounting principles, net of
applicable income taxes -- -- -- -- (656)
Net income 28,803 22,521 18,645 1,702 15,040
Net income per common share
Income before cumulative effect of
change in accounting principles 2.66 2.08 1.72 .16 1.45
Cumulative effect of change in
accounting principles, net of
applicable income taxes -- -- -- -- (.06)
_____________________________________________________________________________________________
Net income per common share 2.66 2.08 1.72 .16 1.39
Cash dividends declared
per common share .55 .49 .45 .43 .39
=============================================================================================
</TABLE>
Net income per common share and cash dividends declared per common share have
been retroactively restated for additional shares issued as a result of a three
for two stock split to stockholders of record as of December 18, 1995.
The selected financial data herein has been derived from the financial
statements of the Company and its subsidiaries. The data should be read in
conjunction with "The Chairman's Report," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated Financial
Statements and related Notes.
[A bar graph displaying net income per common share and dividends for the five
years ended December 31, 1995.]
<TABLE>
<CAPTION>
NET INCOME PER COMMON SHARE
Net Income Per
Common Share Dividends
<S> <C> <C>
1991 1.39 .39
1992 .16 .43
1993 1.72 .45
1994 2.08 .49
1995 2.66 .55
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ASSETS
The Company's fixed income portfolio grew by 14% in 1995, when compared to
1994. As it has in the past, the Company continues to invest primarily in
investment grade securities, and it is the Company's intention to hold a
majority of its fixed income securities to maturity. The portion of the
portfolio that was investment grade (defined by the National Association of
Insurance Commissioners - Securities Valuation Office and issued with NAIC code
class 1 or class 2), as of December 31, 1995 and 1994, was 94% and 92%,
respectively, for the property and casualty segment, and 92% in both years for
the life segment.
9
<PAGE> 12
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," ("SFAS No.
115"), the Company is required to classify its investments in debt and equity
securities into one of three categories: 1) held-to-maturity 2)
available-for-sale and 3) trading (the Company has no trading securities). In
the fourth quarter of 1995, concurrent with its adoption of the implementation
guide on SFAS No. 115, the Financial Accounting Standards Board allowed a
one-time reassessment of the SFAS No. 115 classifications of all securities
currently held. Any reclassifications would be accounted for at fair value in
accordance with SFAS No. 115 and any reclassifications from the held-to-maturity
portfolio that resulted from this one-time reassessment would not call into
question the intent of the Company to hold other debt securities to maturity in
the future. Though the Company primarily utilizes a buy and hold philosophy for
all securities (we are long-term investors), we did use the opportunity under
this one-time reassessment to reclassify $79,131,000 in securities from
held-to-maturity to the available-for-sale category. In connection with this
reclassification, gross unrealized gains of $5,145,000 and gross unrealized
losses of $908,000 were recorded in available-for-sale securities and in
stockholders' equity.
Approximately 31% of the fixed income portfolio is collateralized mortgage
obligations ("CMOs"), compared to 28% at December 31, 1994. The Company's
ongoing review of the fixed income market has shown that for asset and credit
quality, CMOs still offer the best yield available. The Company minimizes its
prepayment risk by buying most issues priced at a slight discount. While buying
at a discount does not prevent prepayment, the yield is not penalized as is the
case when a premium is paid. In addition, although the stated maturity is longer
than the average life of the issues, the Company is concentrating on buying
issues with expected maturity in the seven- to- twelve- year range. The Company
also monitors the FLUX ratios of the CMOs it is purchasing, looking to add less
volatile positions to its portfolio. FLUX measures cashflow variability about a
predefined set of interest rate scenarios.
The Company also invests in readily marketable common and preferred stocks,
all of which are classified as available-for-sale. Other long-term investments
are primarily holdings in limited partnership funds investing in banks.
Unrealized appreciation on available-for-sale fixed maturities, stocks and other
long-term investments, net of applicable income taxes, increased between 1995
and 1994 by $15,273,000.
The Company's short-term investments, comprised of money market accounts,
overnight repurchase agreements and fixed maturities are utilized to meet
anticipated short-term cash requirements. In addition, the Company also
maintains a $5 million line of credit with a local bank. In 1995, short-term
investments increased from $9,954,000 to $21,530,000, as the Company increased
the liquidity of its life insurance subsidiary to meet an anticipated withdrawal
of a block of single premium business.
Most of the cash that the Company receives is generated from insurance
premiums paid by policyholders. The premiums are invested in assets maturing at
regular intervals in order to meet the Company's obligations to pay policy
benefits, claims and claim adjusting expenses. Accounts receivable are balances
due from property and casualty insurance agents and brokers for premiums
written, net of commissions. In 1995, this asset grew by $4,756,000 or 14%.
Increased premium writings and continued utilization by insureds of the
Company's deferred billing plan contributed to this growth.
Under generally accepted accounting principles ("GAAP"), the Company is
allowed to establish an asset called deferred policy acquisition costs ("DAC")
for expenses such as commissions, premium taxes and policy issue expenses
associated with underwriting premiums. The asset is then amortized over the
lives of the respective policy terms to attain a matching of expenses to
revenue. As premium volume increases, the resulting deferrable expenses also
increase, which was the case in 1995.
Reinsurance receivables are loss and expense payments and ceded reserves that
are due the Company from reinsurers. The balance in this asset decreased by
$8,226,000 or 34% in 1995, when compared to 1994. In 1994, the Company had
reinsurance receivables related to the Northridge earthquake and $4,413,000 in
the reinsurance receivables related to a claim issued against the Company, which
was settled favorably in March, 1995. The Company does not anticipate collection
problems with regard to any of its reinsurance receivables.
10
<PAGE> 13
LIABILITIES
The property and casualty segment's gross reserves before ceded reinsurance
for losses and settlement expenses decreased $209,000 between 1995 and 1994.
While 1995 produced a record number of hurricanes, the Company did not have much
exposure related to any of these storms. Gross reserves remaining on the
Northridge earthquake were $3,733,000 as of December 31, 1995, compared to
$8,341,000 at December 31, 1994.
The Company is not aware of any significant contingent liabilities as far as
environmental issues are concerned. Because of the type of business the Company
writes, i.e. property coverage, there exists the potential for exposure for
environmental pollution and asbestos claims. The Company's underwriters are
aware of these exposures and use limited riders or endorsements to limit
exposure. The one assumed reinsurance contract with a significant known
environmental exposure was commuted with a complete release of further liability
during 1994.
The increase in the liability for future policy benefits and interest on
policyholders' accounts grew in 1995 when compared to 1994 due to the addition
of new premiums and growth in existing account balances.
RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1995,
COMPARED TO YEAR ENDED DECEMBER 31, 1994
PROPERTY AND CASUALTY OPERATIONS
The Company's property and casualty segment reported record operating
earnings of $30,718,000 in 1995, compared to $22,922,000 in 1994. Premiums
earned increased 11%, or $19,142,000. Much of the growth was direct business
concentrated in four midwestern states. In addition, the Company has had to pay
less for its ceded protection due to a decrease in ceded premium rates.
Loss and loss adjustment expenses increased 9% over 1994. An absence of
significant exposure to 1995 catastrophes and a reduction in loss expenses have
contributed to the Company's favorable results. Gross losses incurred related to
the Northridge earthquake were $3,847,000 in 1995, compared to $10,342,000 in
1994. Ceded losses incurred related to this catastrophe were $3,005,000 in 1995,
compared to $4,319,000 in 1994. Gross incurred on other catastrophe losses for
the years ending 1995, 1994 and 1993 were $10,089,000, $5,784,000 and
$13,876,000 respectively. Ceded incurred on all other catastrophes for the years
ending 1995, 1994 and 1993 were $114,000, $(17,000) and $158,000, respectively.
The increase in the property and casualty segments' other underwriting
expenses, (including amortization of deferred acquisition costs) of $4,904,000
or 9% resulted primarily from an increase in commissions paid to our agents, due
to the increase in premium writings.
LIFE OPERATIONS
The increase of $3,743,000 in premiums earned is comprised mainly of a
$1,181,000 increase in collected traditional life premiums and a $1,479,000
increase in collected credit premiums. During 1995, we increased our anticipated
future lapses and wrote off $1,300,000 of deferred acquisition costs due to the
withdrawal of one block of universal life business totaling $15,559,000 in the
first two months of 1996.
Interest credited increased $3,468,000 due to an increase in total universal
life and annuity balances from an average of $281,000,000 during 1994 to
$322,000,000 during 1995. Note that the interest credited increased by around
20%, while total average assets increased by only 15%. The balance of the
increase was due to higher rates credited during 1995.
INVESTMENT RESULTS
Investment income rose 15% in 1995, over 1994, which is largely attributable
to a growing fixed income portfolio. The Company's investment yield was a
consistent 7% for 1995, 1994 and 1993. Realized gains increased by $902,000,
most of which was due to the sale of an available-for-sale preferred stock
holding.
11
<PAGE> 14
RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1994,
COMPARED TO YEAR ENDED DECEMBER 31, 1993
The Company's net premiums earned were increasing at a moderate rate. A soft
market in the workers' compensation and personal auto lines presented challenges
to the Company and the insurance industry as a whole. The Company believed that
continued refinement in pricing, classification and exposure assessment would be
the key to profitable results in these lines of business. Investment income rose
15.4% in 1994, over 1993, which was attributable to a larger fixed maturity
portfolio. The Company's realized gains decreased by $1,064,000. Fixed maturity
calls were prevalent in 1993, when interest rates were declining. Increasing
interest rates in 1994 reduced the number of calls and resulting investment
gains.
The Company's major losses in 1994 included three large fire losses, two
large commercial auto liability losses, and losses related to the Los Angeles
Northridge earthquake. Gross losses related to Hurricane Andrew tapered off to
$369,000 from $6,643,000 in 1993 and $23,522,000 in 1992. Gross losses related
to the Northridge earthquake were $10,342,000 in 1994. Gross incurred on other
catastrophe losses for the years ending 1994, 1993 and 1992 were $5,042,000,
$7,233,000, and $8,520,000, respectively. Ceded incurred on Hurricane Andrew
losses for the years ending 1994, 1993 and 1992 were $(4,000), $(30,000) and
$8,644,000, respectively. Ceded incurred on the Northridge earthquake losses
were $4,319,000 in 1994. Ceded incurred on all other catastrophes for the years
ending 1994, 1993 and 1992 were $(13,000), $188,000 and $124,000, respectively.
The increase in other underwriting expenses of $3,798,000 or 15.5% resulted
primarily from an increase in commissions paid to our agents. In addition, prior
to 1994, the Company purchased its health insurance from its subsidiary (United
Life Insurance Company) and the applicable premium revenue and insurance expense
was eliminated in the consolidation process. At December 31, 1993, $1,481,000 of
other underwriting expenses were eliminated. In 1994, the Company began
self-insuring its employee health insurance and no elimination was necessary.
The increase in the liability for future policy benefits and interest on
policyholders' accounts grew in 1994 when compared to 1993 due to the addition
of new premiums and growth in existing account balances.
INSURANCE REGULATION
The Company is required by the National Association of Insurance
Commissioners ("NAIC") and governing state insurance departments to calculate a
risk-based capital formula. This calculation establishes minimum capital
requirements based on an individual company's insurance risk. The results are
used by the NAIC and state insurance departments to identify companies that
merit regulatory attention or the initiation of regulatory action. At December
31, 1995 and 1994, the property and casualty segments and the life segment each
had adjusted capital well in excess of the required capital levels.
The Company is not aware of any current recommendations by the NAIC or other
regulatory authorities in the states in which the Company conducts business
which, if or when implemented, would have a material effect on the Company's
liquidity, capital resources or operations.
CHAIRMAN'S REPORT
It has been said that good profits do not need much explanation, only losses
and disappointing results require long-winded letters from the Chairman. By that
criteria, this should be one of the shortest Chairman's Reports you receive this
year, for your Company had a very good year earning a record $28,803,000 or
$2.66 per share adjusted for the three for two stock split effective December
18, 1995. 1995 earnings exceeded 1994's, which was also a record year, by 28%.
Stockholders' equity now exceeds two hundred million dollars and the book value
of your shares as of December 31 was $19.28 per share.
In 1996, your Company will celebrate its fiftieth anniversary and while in
this report we do not intend to dwell on nostalgia or ancient history (there may
be some old photographs but no baby pictures), we would like to tell you a
little about what your Company and its people have been doing to prepare the
United Fire Group for its second half century.
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<PAGE> 15
Organizationally, wherever it is appropriate, work units have been arranged
into teams to improve service to our customers, accountability of the
individuals and create more interesting and challenging jobs. As a result, we
have been able to cultivate a good team spirit and morale has never been higher.
We believe the staff is as professional and competent as it has ever been.
Good progress continues to be made in upgrading our data processing systems
for the twenty-first century. Early this year we introduced a new claims
processing system that was developed in-house and is fully integrated into our
other systems. Our commercial lines policy processing is now nearly completely
automated and a contract has been let and work is progressing on completely
revising our personal lines systems which are antiquated and lack flexibility. A
pilot project in which selected agencies are "on-line" to our main-frame
computer is under way. Ultimately, our goal is to have the capability to upload
from and download to the agent's computer in his office and process most normal
routine transactions paperlessly.
1995's earnings were driven by the outstanding underwriting results of our
property and casualty operations where our statutory combined ratio (i.e. losses
incurred to premiums earned, plus expenses incurred to premiums written)
improved nearly two points to 96% and premiums written increased 12% to
$198,000,000 producing a return on equity of 18%. For the industry as a whole it
is estimated that the combined ratio was 107% and written premiums increased
only 4%. Even though there were a record number of named hurricanes in 1995 the
insured losses were not substantial and your Company survived relatively
unscathed. Loss experience improved for a number of lines with surety, workers'
compensation, other liability and reinsurance producing outstanding results. The
commercial property lines continue to be profitable. The development gain on
prior year's loss reserves increased 16% to $20,000,000.
Life insurance earnings increased 26% to $7,332,000, producing a return on
equity of 8%. Statutory premiums increased 22% to $80,000,000, of which
$55,000,000 were annuities. Primarily because of the growth in its annuity
business, United Life Insurance Company's assets increased $73,000,000 to
$484,000,000. To maintain its leverage at an acceptable level United Fire &
Casualty Company contributed an additional $10,000,000 to its surplus.
A substantial portion of our life insurance assets are invested in
collateralized mortgage obligations ("CMOs") and other mortgage-backed
securities. In purchasing these types of securities particular attention is paid
to the characteristics of the underlying mortgages, their age, maturity, coupon,
geographical location, etc. Generally speaking less can go wrong with a 15- year
mortgage than a 30-year one and a 10-year mortgage is better still. As we have
tracked the performance of these securities we have found they have performed
about as we anticipated and provided a return sufficient for us to provide our
policyholders a reasonable return on their money. Yet because of the controversy
these securities have generated and pressure from some of the rating agencies,
several life insurance companies have over the past year sold or substantially
reduced their holdings of them even when it meant selling into a weak market. We
have never understood this lemming-like approach to investing; selling on bad
news rarely makes good sense.
During the year the Lafayette had an opportunity to substantially expand its
business in Mississippi and Arkansas transforming it into the regional insurer
we had always envisioned. The business we are picking up is principally personal
lines, seasoned and with good experience. With our commercial lines underwriting
capabilities we believe it offers a good base for future growth. No, we are not
going to insure the Madison Guaranty Savings & Loan and, yes, we realize that
there may be an abundance of unemployed attorneys in Little Rock next year. Some
of them may even decide to go straight and take up selling insurance.
Last year when we reported on the Lafayette's 125th anniversary we mentioned
a fine old southern gentleman, George Wegmann. Mr. George died on January 26,
1996.
With the Addison Farmers' hiring of a field underwriter located in Franklin,
Indiana we are also expanding into that state. Indiana should be a good state
for your Company and some of the domestic companies no longer seem as invincible
as they once did.
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<PAGE> 16
Direct and assumed fidelity and surety premiums increased 8% to $17,000,000
solidifying your Company's position as a major writer of contract bonds in our
territory. Mike Hansen and his staff continue to strive to give excellent
service and the results speak for themselves.
On December 1 our Lincoln regional office moved into newly remodeled
quarters at 1314 "O" Street with all new furniture. Since acquiring the
Protective Fire & Casualty Co. in 1981 our Lincoln offices have been in their
old building which was a converted night club. Finally, old age and the ADA made
a move a necessity. If you are in the vicinity we invite you to stop in and see
our new quarters. We know "Spike" Hulit and his staff would be pleased to meet
you and show off their new offices. Oh, incidentally, we sold the old building
at a profit within a week after moving out.
Readers of previous reports will be aware of the importance we attach to the
success of your Company in Iowa, our back yard. Last year business was good for
your Company in Iowa with total statutory premiums, property, casualty, life,
accident and health including annuities increasing 20% to $75,000,000.
$2,700,000 of the increase in stockholders' equity is an accounting trick.
Two years ago the powers that be in the accounting world decreed an intellectual
mish-mash called SFAS No. 115. It proclaimed that henceforth all debt
securities, like Gaul, would be divided into three parts, held-to-maturity,
available-for-sale and trading. Your Company, taking what we assumed was the
most conservative approach at the time, classified nearly all of its bonds as
held-to-maturity. Last fall Caesar came to the conclusion it wasn't working (it
wasn't, it was a mess), called "olly, olly, oxen free!" and let everyone go back
to square one and start all over again. That gave every one a chance to
rearrange their hands, we did, reclassifying about $80,000,000 as
available-for-sale, and hence the gain; it increased book value by $.25 per
share.
One of our problems with the whole affair is that the underlying decision
was a subjective one that most readers of financial statements are not aware of
nor appreciate the importance. Another troubling aspect of many of these recent
"Accounting Principles" is that their effect is the introduction of more and
more "soft numbers" into the financial statements that can easily be manipulated
if management is so inclined.
For the third consecutive year, your Company was named one of the 50
outstanding property and casualty companies by Ward Financial Group, a firm of
financial consultants specializing in the insurance business. One of the reasons
we prize this recognition so highly is the other companies on the list. We are
pleased to be able to count among our peers organizations like the Cincinnati
and the St. Paul.
At its meeting on February 16, 1996, your Board of Directors appointed Jack
Evans, President of the Hall Foundation of Cedar Rapids, Iowa. Prior to joining
the Hall Foundation, Mr. Evans had been President of Securities Corporation of
Iowa. One of my goals has been the transformation of your Board into an "outside
board" and while we still have two retired officers of the Company on its Board,
your chairman is now the only active company officer on the Board.
On December 8, 1995, your Board of Directors voted to pay a 50% stock
dividend in the form of a three for two stock split for the second time in two
years (please don't assume this will become an annual affair) and at the same
time voted to increase the cash dividend 12.5 % to 15 cents on the new shares.
Both were payable January 5, 1996. This is the eighth time since 1971 that your
Company has split its shares and all but one of these was a three for two stock
split.
Your Company's policy has been to pay between one-fourth and one-third of
our earnings to our stockholders in dividends which we feel is being very
prudent, even though we have been criticized by one of the rating agencies for
paying out too much in dividends. Over the past six years the actual payout has
ranged between 21 and 31 percent of the preceding year's earnings except in 1993
when the preceding year's earnings had been devastated by Hurricane Andrew.
While we, of course, have no idea as to whether or not 1996 will be another
record year for earnings it appears that your Company has achieved a new
earnings plateau on which to build and that probably by the close of 1996 the
assets of the Company my father mortgaged his home fifty years ago to help to
finance will exceed one billion dollars. More importantly, you have one of the
best teams working for you any insurance investor has.
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<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF UNITED FIRE & CASUALTY COMPANY:
We have audited the accompanying consolidated balance sheets of United Fire &
Casualty Company (an Iowa corporation) and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These consolidated financial statements and the schedules referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements and schedules
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United Fire & Casualty Company
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary data (Schedule III -
Supplementary insurance information, Schedule IV - Reinsurance, and VI -
Supplemental information concerning property and casualty insurance operations)
are presented for purposes of additional analysis and are not a required part of
the basic financial statements. This information has been subjected to the
auditing procedures applied in our audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Chicago, Illinois
February 22, 1996
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<PAGE> 18
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
_______________________________________________________________________________________________________
(Dollars in Thousands)
_______________________________________________________________________________________________________
ASSETS 1995 1994
_______________________________________________________________________________________________________
<S> <C> <C>
INVESTMENTS (Notes 2 and 3)
Fixed maturities
Held-to-maturity, at amortized cost (market value $617,915 in 1995 and
$569,380 in 1994) $589,687 $591,712
Available-for-sale, at market (cost $80,464 in 1995 and $1,794 in 1994) 84,707 1,926
Equity securities (cost $25,558 in 1995 and $24,914 in 1994 75,678 56,197
Mortgage loans 3,041 3,120
Policy loans 7,163 6,802
Other long-term investments (cost $7,563 in 1995 and $6,557 in 1994) 8,627 7,072
Short-term investments 21,530 9,954
_______________________________________________________________________________________________________
790,433 676,783
CASH AND CASH EQUIVALENTS 6,998 10,255
ACCRUED INVESTMENT INCOME (Note 3) 11,517 10,411
ACCOUNTS RECEIVABLE (net of allowance for doubtful accounts of $282, in 1995
and $183 in 1994) 38,620 33,864
DEFERRED POLICY ACQUISITION COSTS 52,670 47,545
PROPERTY AND EQUIPMENT, primarily land and buildings, at cost, less accumulated
depreciation of $13,253 in 1995 and $12,181 in 1994) 13,252 12,738
REINSURANCE RECEIVABLES (Note 5) 15,996 24,222
PREPAID REINSURANCE PREMIUMS 3,865 3,034
INTANGIBLES 1,589 1,882
INCOME TAXES RECEIVABLE (Note 8) 1,005 --
OTHER ASSETS 7,161 7,392
_______________________________________________________________________________________________________
TOTAL ASSETS $943,106 $828,126
=======================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
_______________________________________________________________________________________________________
LIABILITIES
Future policy benefits and losses, claims and settlement
expenses (Notes 5 and 6)
Property and casualty insurance $203,702 $203,911
Life insurance (Note 3) 393,603 344,096
Unearned premiums 97,025 83,450
Accrued expenses and other liabilities 23,376 19,805
Employee benefit obligations (Note 9) 5,693 4,886
Income taxes payable (Note 8) -- 826
Deferred income taxes (Note 8) 10,954 499
_______________________________________________________________________________________________________
TOTAL LIABILITIES $734,353 $657,473
_______________________________________________________________________________________________________
STOCKHOLDERS' EQUITY
Common stock, $3.33 1/3 par value; authorized 20,000,000 shares; (Note 12)
10,829,461 shares issued and outstanding in 1995
10,829,706 shares issued and outstanding in 1994 $ 36,098 $ 24,066
Additional paid-in capital 12,031 12,049
Retained earnings (Note 7) 124,430 113,617
Net unrealized appreciation, net of applicable income taxes of $19,232 in 1995
and $11,009 in 1994 (Note 2) 36,194 20,921
_______________________________________________________________________________________________________
TOTAL STOCKHOLDERS' EQUITY $208,753 $170,653
_______________________________________________________________________________________________________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $943,106 $828,126
=======================================================================================================
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
________________________________________________________________________________________________
(Dollars in Thousands)
________________________________________________________________________________________________
1995 1994 1993
________________________________________________________________________________________________
<S> <C> <C> <C>
Revenues
Premiums earned (Note 5) $207,528 $184,748 $174,137
Investment income, net (Note 2) 53,603 46,420 40,233
Realized investment gains (Note 2) 1,698 796 1,860
Commission and policy fee income 1,761 1,881 1,713
________________________________________________________________________________________________
264,590 233,845 217,943
________________________________________________________________________________________________
Benefits, Losses and Expenses
Losses and settlement expenses 125,548 115,558 118,625
Increase in liability for future policy benefits 7,695 6,804 4,242
Amortization of deferred policy acquisition costs 47,163 37,364 33,405
Other underwriting expenses 25,606 28,310 24,513
Interest on policyholders' accounts 20,528 17,060 15,006
________________________________________________________________________________________________
226,540 205,096 195,791
________________________________________________________________________________________________
Income before income taxes 38,050 28,749 22,152
Federal income taxes (Note 8) 9,247 6,228 3,507
________________________________________________________________________________________________
Net Income $28,803 $22,521 $18,645
================================================================================================
Net Income per common share (Note 12) $ 2.66 $ 2.08 $ 1.72
================================================================================================
Weighted average common shares outstanding (Note 12) 10,829,606 10,829,706 10,829,706
================================================================================================
Cash dividends declared per common share (Note 12) $ .55 $ .49 $ .45
================================================================================================
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
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<PAGE> 20
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
_______________________________________________________________________________________________________________
(Dollars in Thousands)
_______________________________________________________________________________________________________________
Additional Net
Common Paid-In Retained Unrealized
Stock Capital Earnings Appreciation Total
_______________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $16,045 $12,049 $ 90,725 $20,574 $139,393
Net income -- -- 18,645 -- 18,645
Cash dividend declared on
common stock, $.45 per share -- -- (4,910) -- (4,910)
Change in net unrealized
appreciation, net of
applicable income taxes -- -- -- 1,464 1,464
_______________________________________________________________________________________________________________
Balance, December 31, 1993 $16,045 $12,049 $104,460 $22,038 $154,592
Net income -- -- 22,521 -- 22,521
Cash dividend declared on
common stock, $.49 per share -- -- (5,343) -- (5,343)
Change in net unrealized
appreciation, net of
applicable income taxes -- -- -- (1,117) (1,117)
Three for two stock split
(Note 12) 8,021 -- (8,021) -- --
_______________________________________________________________________________________________________________
Balance, December 31, 1994 $24,066 $12,049 $113,617 $20,921 $170,653
Net income -- -- 28,803 -- 28,803
Cash dividend declared on
common stock, $.55 per share -- -- (5,957) -- (5,957)
Change in net unrealized
appreciation, net of
applicable income taxes -- -- -- 15,273 15,273
Three for two stock split
(Note 12) 12,033 -- (12,033) -- --
Purchase and retirement of
372 shares of common stock (1) (18) -- -- (19)
_______________________________________________________________________________________________________________
Balance, December 31, 1995 $36,098 $12,031 $124,430 $36,194 $208,753
===============================================================================================================
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
_________________________________________________________________________________________________________________
(Dollars in Thousands)
_________________________________________________________________________________________________________________
1995 1994 1993
_________________________________________________________________________________________________________________
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income $ 28,803 $ 22,521 $ 18,645
_________________________________________________________________________________________________________________
Adjustments to reconcile net income to net cash
provided by operating activities
Net bond discount accretion (1,244) (357) (553)
Depreciation and amortization 1,229 2,115 899
Realized investment gains (1,698) (796) (1,860)
Changes in:
Accrued investment income (1,106) (243) (546)
Accounts receivable (4,756) (3,001) (2,580)
Deferred policy acquisition costs (5,125) (4,894) (4,572)
Reinsurance receivables 8,226 (8,773) 815
Prepaid reinsurance premiums (831) (567) 1,553
Income taxes receivable/payable (1,831) 1,047 485
Other assets 231 258 (1,043)
Future policy benefits and losses,
claims and settlement expenses 7,430 26,425 16,950
Unearned premiums 13,575 9,538 3,367
Accrued expenses and other liabilities 3,391 1,517 1,821
Employee benefit obligations 807 1,199 811
Deferred income taxes 2,232 (70) (961)
_________________________________________________________________________________________________________________
Total adjustments $ 20,530 $ 23,398 $ 14,586
_________________________________________________________________________________________________________________
Net cash provided by operating activities $ 49,333 $ 45,919 $ 33,231
_________________________________________________________________________________________________________________
Cash Flows From Investing Activities
Proceeds from sale of available-for-sale investments $ 1,344 $ 246 $ --
Proceeds from call and maturity of held-to-maturity investments 33,154 51,054 116,807
Proceeds from call and maturity of available-for-sale investments 3,313 1,956 --
Proceeds from sale of other investments 2,593 18,296 20,490
Purchase of investments held-to-maturity (108,582) (124,050) (196,123)
Purchase of investments available-for-sale (3,793) (957) --
Purchase of other investments (15,456) (28,524) (7,356)
Proceeds from sale of property and equipment 2,133 381 2,158
Purchase of property and equipment (3,368) (2,382) (2,036)
_________________________________________________________________________________________________________________
Net cash used in investing activities $(88,662) $(83,980) $(66,060)
_________________________________________________________________________________________________________________
Cash Flows From Financing Activities
Policyholders' account balances
Deposits to investment and universal life type contracts $ 87,041 $ 72,680 $ 73,616
Withdrawals from investment and universal life type contracts (45,173) (32,869) (23,028)
Purchase and retirement of common stock (19) -- --
Payment of cash dividends (5,777) (5,198) (4,813)
_________________________________________________________________________________________________________________
Net cash provided by financing activities $ 36,072 $ 34,613 $ 45,775
_________________________________________________________________________________________________________________
Increase (Decrease) in Cash and Cash Equivalents (3,257) $ (3,448) $ 12,946
Cash and Cash Equivalents at Beginning of Year 10,255 13,703 757
_________________________________________________________________________________________________________________
Cash and Cash Equivalents at End of Year $ 6,998 $ 10,255 $ 13,703
=================================================================================================================
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
19
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.
SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS,
PRINCIPLES OF CONSOLIDATION AND BASIS OF REPORTING
United Fire & Casualty Company and its insurance subsidiaries (the "Company")
are engaged in the business of property and casualty insurance and life
insurance.
The Company and its property and casualty subsidiaries market most forms of
commercial and personal property and casualty insurance products, including
fidelity and surety bonds and reinsurance. The business is generated through
approximately 1,700 independent agencies and brokers in 34 states, with 64% of
the Company's direct premiums originating in seven Midwestern states in 1995.
United Life Insurance Company underwrites and markets ordinary life (primarily
universal life), annuities (primarily single premium) and credit life products
to individuals and groups through independent agencies.
The accompanying consolidated financial statements include United Fire &
Casualty Company and its wholly owned subsidiaries, United Life Insurance
Company, Lafayette Insurance Company, Insurance Brokers & Managers, Inc.,
Addison Farmers' Insurance Company, Addison Insurance Agency and Crabtree
Premium Finance Company. All material intercompany items have been eliminated in
consolidation.
The Consolidated Financial Statements have been prepared on the basis of
generally accepted accounting principles ("GAAP") which differ in some respects
from those followed in reports to insurance regulatory authorities.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Certain amounts included in the Consolidated Financial Statements for prior
years have been reclassified to conform with the 1995 financial statement
presentation.
PROPERTY AND CASUALTY OPERATIONS
Premiums are reflected in income on a daily pro rata basis over the terms of
the respective policies. Unearned premium reserves are established for the
portion of premiums written applicable to the unexpired term of policies in
force.
Certain costs of underwriting new business, principally commissions, premium
taxes and variable underwriting and policy issue expenses, have been deferred.
Such costs are being amortized as premium revenue is recognized. The method
followed in computing deferred policy acquisition costs limits the amount of
such deferred costs to their estimated realizable value, which gives effect to
the premium to be earned, losses and expenses, and certain other costs expected
to be incurred as the premium is earned.
Unpaid losses and settlement expenses are based on estimates of reported and
unreported claims and related settlement expenses. While management believes the
reserve for claims and settlement expenses is adequate, the reserve is
continually reviewed and as adjustments become necessary, they are reflected in
current operations.
LIFE OPERATIONS
On traditional business, premiums are reported as earned when due, and
benefits and expenses are associated with premium income so as to result in the
recognition of profits over the lives of the related contracts. On universal
life and annuity (nontraditional) business, income and expenses are reported as
charged and credited to policyholder account balances through the use of the
retrospective deposit method. This method results in the recognition of profits
over the lives of the related contracts. These associations are accomplished by
means of the provision for future policy benefits and the deferral and
subsequent amortization of life policy acquisition costs.
20
<PAGE> 23
The costs of acquiring new life business, principally commissions and certain
variable underwriting, agency and policy issue expenses, have been deferred and
are being amortized to income over the premium paying period of the related
traditional policies in proportion to the ratio of the expected annual premium
revenue to the expected total premium revenue and over the anticipated lives of
nontraditional policies in proportion to the ratio of the expected annual gross
margins to the expected total gross margins. The expected premium revenue and
gross margins are based upon the same mortality and withdrawal assumptions used
in determining future policy benefits.
Liabilities for future policy benefits are computed by the net level premium
method using interest assumptions ranging from 4.5% to 8.0% and withdrawal,
mortality and morbidity assumptions appropriate at the time the policies were
issued. Health reserves are stated at amounts determined by estimates on
individual cases and estimates of unreported claims based on past experience.
Liabilities for universal life-type and investment contracts are stated at
policyholder account values before surrender charges. Liabilities for
traditional immediate annuities are based primarily upon statutory reserves.
Policy claim liabilities are determined using actuarial estimates. These
estimates are based on historical information along with certain assumptions
about future events. Changes in assumptions for such things as medical costs,
environmental hazards, and legal actions, as well as changes in actual
experience could cause these estimates to change in the near term.
The Company expects to realize a spread of approximately 1.5% between interest
earned and interest credited on its Universal Life Plans and deferred annuities,
for which the liability is equal to total policy account values plus deferred
front-end loads.
INVESTMENTS
Investments in held-to-maturity fixed maturities are recorded at amortized
cost. The Company has the ability and intent to hold these investments until
maturity. If, however, a permanent impairment occurs in a security, the Company
writes the security down to the new value. Available-for-sale fixed maturities,
equity securities and other long-term investments are recorded at fair value.
Mortgage loans are recorded at the unpaid balance amount. Policy loans and
short-term investments are recorded at cost. Included in investments at December
31, 1995 and 1994 are securities on deposit with various regulatory authorities
as required by law with carrying values of $434,605,000 and $373,432,000,
respectively.
Realized gains or losses on disposition of investments are included in the
computation of net income. Cost of investments sold is determined by the
specific identification method. Changes in unrealized appreciation and
depreciation resulting from available-for-sale fixed maturities, equity
securities and other long-term investments, are reported as direct increases or
decreases in stockholders' equity, less applicable income taxes.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash
and non-negotiable certificates of deposit with original maturities of three
months or less. Income taxes paid during 1995, 1994 and 1993 were $8,801,000,
$5,784,000, and $3,503,000, respectively. The Company paid $532,000 in interest
on Federal income taxes in 1994. There were no other significant payments of
interest other than interest credited on policyholders' accounts in 1995, 1994
or 1993.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment is carried at cost less accumulated depreciation.
Depreciation is computed primarily by the straight-line method over the
estimated useful lives of the underlying assets.
AMORTIZATION OF INTANGIBLES
Intangibles, including goodwill and agency relationships, are being amortized
by the straight-line method over periods of up to twenty-eight years.
21
<PAGE> 24
INCOME TAXES
The Company accounts for income taxes under Statement of financial Accounting
Standard ("SFAS") No. 109. The Company files a consolidated Federal income tax
return.
BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all
employees. Under the plan, retirement benefits are primarily a function of the
number of years of service and the level of compensation. It is the Company's
policy to fund the plan on a current basis to the extent deductible under
existing tax regulations.
The Company has a defined benefit postretirement health care plan that covers
substantially all full-time employees. The plan pays stated percentages of most
necessary medical and dental expenses incurred by retirees, after subtracting
payments by Medicare or other providers and after a stated deductible has been
met. Participants become eligible for the benefits if they retire from the
Company after reaching age 59 1/2 with ten or more years of service and were a
member of the group medical plan for ten consecutive years. The plan is
contributory, with retiree contributions adjusted annually.
ACCOUNTING CHANGES
Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". SFAS No. 115 addresses the
accounting and reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities. The
statement requires that those investments be classified into the following three
categories: 1) debt securities that the enterprise has the positive intent and
ability to hold to maturity are classified as held-to-maturity securities and
reported at amortized cost; 2) debt and equity securities that are bought and
held principally for the purpose of selling them in the near term are classified
as trading securities and reported at fair value, with unrealized gains and
losses included in earnings; and 3) debt securities and marketable equity
securities not classified as either held-to-maturity securities or trading
securities are classified as available-for-sale securities and reported at fair
value, with unrealized gains and losses excluded from earnings and reported in a
separate component of stockholders' equity. Pursuant to the adoption of an
implementation guide on SFAS No. 115, the Company has reclassed a portion of its
held-to-maturity securities to the available-for-sale portfolio. Gross
unrealized gains and losses were recorded in available-for-sale securities. See
Note 2 for discussion of the reclassification.
Effective December 31, 1994, the Company adopted SFAS No. 119, "Disclosure
about Derivative Financial Instruments and Fair Value of Financial Instruments".
SFAS No. 119 expands disclosure requirements concerning derivative investments,
including whether investments are held for trading or other purposes, such as
hedging. The Company does not own any derivative investments as defined by SFAS
No. 119, and therefore is not subject to the expanded disclosure requirements.
NOTE 2.
SUMMARY OF INVESTMENTS
In the fourth quarter of 1995, concurrent with the adoption of its
implementation guide on SFAS No. 115, the Financial Accounting Standards Board
allowed a one-time reassessment of the SFAS No. 115 classifications of all
securities currently held. Any reclassifications would be accounted for at fair
value in accordance with SFAS No. 115 and any reclassifications from the
held-to-maturity portfolio that resulted from this one-time reassessment would
not call into question the intent of the Company to hold other debt securities
to maturity in the future. The Company used the opportunity under this one-time
reassessment to reclassify $79,131,000 in securities from held-to-maturity to
the available-for-sale portfolio. In connection with this reclassification,
gross unrealized gains of $5,145,000 and gross unrealized losses of $908,000
were recorded in available-for-sale securities and in stockholders' equity.
22
<PAGE> 25
Approximately 31% of the fixed maturity portfolio is collateralized mortgage
obligations ("CMOs"), compared to 28% at December 31, 1994. The Company's
ongoing review of the fixed income market has shown that for asset and credit
quality, CMOs still offer the best yield available. The Company minimizes its
prepayment risk by buying most issues priced at a slight discount. While buying
at a discount does not prevent prepayment, the yield is not penalized as is the
case when a premium is paid. In addition, although the stated maturity is longer
than the average life of the issues, the Company is concentrating on buying
issues with expected maturity in the seven- to- twelve- year range.
A reconciliation of the amortized cost to fair values of investments in
held-to-maturity and available-for-sale fixed maturities, marketable equity
securities and other long-term investments as of December 31, 1995 and 1994 is
as follows.
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________
(Dollars in thousands)
_________________________________________________________________________________________________________________
YEAR ENDED DECEMBER 31, 1995 Gross Gross
Amortized Unrealized Unrealized Fair
TYPE OF INVESTMENT Cost Appreciation Depreciation Value
_________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
HELD-TO-MATURITY
Fixed Maturities
Bonds
United States
Government, government agencies and
authorities
Collateralized mortgage obligations ("CMOs") $ 27,751 463 $ 183 $28,031
Mortgage-backed securities 28,141 2,394 -- 30,535
All others 4,075 451 2 4,524
States, municipalities and political subdivisions 183,924 11,355 312 194,967
Foreign 6,856 535 -- 7,391
Public utilities 52,178 653 509 52,322
Corporate bonds
Collateralized mortgage obligations ("CMOs") 98,900 2,580 847 100,633
All other corporate bonds 187,862 12,124 474 199,512
_________________________________________________________________________________________________________________
Total held-to-maturity $589,687 $30,555 $2,327 $617,915
=================================================================================================================
AVAILABLE-FOR-SALE
Fixed Maturities
Bonds
United States
Government, government agencies and
authorities
Collateralized mortgage obligations ("CMOs") 67,976 $ 4,626 $ 85 $ 72,517
Mortgage-backed securities 70 5 -- 75
All others 331 8 1 338
Public utilities 206 -- 7 199
Corporate bonds
Collateralized mortgage obligations ("CMOs") 11,173 500 822 10,851
All other corporate bonds 708 23 4 727
________________________________________________________________________________________________________________
Total available-for-sale fixed maturities $ 80,464 $ 5,162 $ 919 $ 84,707
________________________________________________________________________________________________________________
Equity securities
Common stocks
Public utilities $ 3,561 $ 5,093 $ -- $ 8,654
Banks, trust and insurance companies 11,964 30,142 102 42,004
All other common stocks 9,183 15,328 304 24,207
Nonredeemable preferred stocks 850 1 38 813
________________________________________________________________________________________________________________
Total equity securities $ 25,558 $50,564 $ 444 $ 75,678
________________________________________________________________________________________________________________
Total available-for-sale $106,022 $55,726 $1,363 $160,385
================================================================================================================
Other long-term investments $ 7,563 $ 1,215 $ 151 $ 8,627
================================================================================================================
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
________________________________________________________________________________________________________________
(Dollars in thousands)
________________________________________________________________________________________________________________
YEAR ENDED DECEMBER 31, 1994 Gross Gross
Amortized Unrealized Unrealized Fair
TYPE OF INVESTMENT Cost Appreciation Depreciation Value
________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
HELD-TO-MATURITY
Fixed Maturities
Bonds
United States
Government, government agencies and
authorities
Collateralized mortgage obligations ("CMOs") $ 77,496 $ 72 $ 9,159 $ 68,409
Mortgage-backed securities 32,998 1,051 292 33,757
All others 5,238 174 297 5,115
States, municipalities and political1 subdivisions 73,546 5,540 2,873 176,213
Foreign 4,528 -- 224 4,304
Public utilities 38,598 73 4,385 34,286
Corporate bonds
Collateralized mortgage obligations ("CMOs") 88,932 294 5,915 83,311
All other corporate bonds 170,376 1,877 8,268 163,985
________________________________________________________________________________________________________________
Total held-to-maturity $591,712 $ 9,081 $31,413 $569,380
================================================================================================================
AVAILABLE-FOR-SALE
Fixed Maturities
Bonds
United States
Government, government agencies and
authorities
Mortgage-backed securities $ 205 $ 2 $ -- $ 207
All others 313 -- 37 276
Public utilities 206 -- 10 196
Corporate bonds 1,070 212 35 1,247
________________________________________________________________________________________________________________
Total available-for-sale fixed maturities $ 1,794 $ 214 $ 82 $ 1,926
________________________________________________________________________________________________________________
Equity securities
Common stocks
Public utilities $ 3,561 $ 3,192 $ -- $ 6,753
Banks, trust and insurance companies 11,965 18,009 177 29,797
All other common stocks 8,234 10,609 317 18,526
Nonredeemable preferred stocks 1,154 66 99 1,121
________________________________________________________________________________________________________________
Total equity securities $ 24,914 $31,876 $ 593 $ 56,197
________________________________________________________________________________________________________________
Total available-for-sale $ 26,708 $32,090 $ 675 $ 58,123
================================================================================================================
Other long-term investments $ 6,557 $ 661 $ 146 $ 7,072
================================================================================================================
</TABLE>
24
<PAGE> 27
The amortized cost and fair value of held-to-maturity and available-for-sale
fixed maturities at December 31, 1995, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
___________________________________________________________________________________________
(Dollars in thousands)
___________________________________________________________________________________________
DECEMBER 31, 1995 Held-to-maturity Available-for-sale
___________________________________________________________________________________________
Amortized Amortized
Cost Fair Value Cost Fair Value
___________________________________________________________________________________________
<S> <C> <C> <C> <C>
Due in one year or less $ 8,108 $ 8,163 $ 100 $ 102
Due after one year through five years 65,770 69,271 490 495
Due after five year through ten years 166,380 177,676 655 667
Due after ten years 194,637 203,606 -- --
Mortgage-backed securities 28,141 30,535 70 75
Collateralized mortgage obligations (CMOs") 126,651 128,664 79,149 83,368
___________________________________________________________________________________________
$589,687 $617,915 $80,464 $84,707
===========================================================================================
</TABLE>
Proceeds from sales of available-for-sale investments during 1995, 1994 and
1993 were $1,344,000, $246,000, and $78,000, respectively. Gross gains of
$790,000, $10,000, and $4,000, respectively, were realized on those sales. No
losses were realized on those sales.
A summary of realized investment gains (losses) resulting from sales, calls
and maturities and net changes in unrealized investment appreciation
(depreciation), less applicable income taxes, is as follows.
<TABLE>
<CAPTION>
______________________________________________________________________________________
(Dollars in thousands)
______________________________________________________________________________________
Years Ended December 31, 1995 1994 1993
______________________________________________________________________________________
<S> <C> <C> <C>
Realized investment gains (losses)
Fixed maturities $ 692 $ 1,055 $ 1,999
Equity securities 791 (82) 50
Other investments 215 (177) (189)
______________________________________________________________________________________
$ 1,698 $ 796 $ 1,860
______________________________________________________________________________________
Net changes in unrealized investment appreciation
Available-for-sale fixed maturities,
equity securities and other long-term investments $23,496 $ (1,462) $ 2,219
Income taxes (8,223) 345 (755)
______________________________________________________________________________________
$15,273 $ (1,117) $ 1,464
======================================================================================
Net changes in unrealized investment appreciation
(depreciation), fixed maturities $54,671 $(52,761) $ 9,550
======================================================================================
</TABLE>
25
<PAGE> 28
The net investment income for the years ended December 31, 1995, 1994 and
1993 is composed of the following:
<TABLE>
<CAPTION>
________________________________________________________________________________
(Dollars in thousands)
________________________________________________________________________________
Years Ended December 31, 1995 1994 1993
________________________________________________________________________________
<S> <C> <C> <C>
Investment income
Interest on fixed maturities $50,913 $43,833 $38,639
Dividends on equity securities 2,276 1,986 1,727
Interest on other long-term investments 1,075 1,696 712
Interest on mortgage loans 239 260 483
Interest on policy loans 530 497 460
Other 1,734 1,088 646
________________________________________________________________________________
Total investment income $56,767 $49,360 $42,667
Less investment expenses 3,164 2,940 2,434
________________________________________________________________________________
Net investment income $53,603 $46,420 $40,233
================================================================================
</TABLE>
NOTE 3.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimated the fair value of its financial instruments, based on
relevant market information or by discounting estimated future cash flows at
estimated current market discount rates appropriate to the particular asset or
liability shown.
In most cases, quoted market prices were used in determining the fair value
of fixed maturities, equity securities and short-term investments. Where quoted
market prices were unavailable, the estimate was based on recent trading. Market
values for collateralized mortgage obligations were provided by a custodian.
Other long-term investments, consisting primarily of holdings in limited
partnership funds, are valued by the Fund Manager based on quoted market prices
for the underlying equity securities. In management's opinion, these values
reflect fair value at December 31, 1995 and 1994.
The estimated fair value of mortgage loans was based on the estimated
discounted future cash flows using 7.0% at December 31, 1995 and 7.5% at
December 31, 1994.
The book value of policy loans is considered to be fair value as the interest
rate is fixed and in management's opinion the interest rates in the existing
portfolio are comparable to current policy loan interest rates.
Accrued investment income is from a short-term financial instrument and
considering credit risk, carrying value approximates fair value.
The fair value of the liabilities for annuity products which are in a benefit
payment phase, guaranteed investment contracts and structured settlements are
based on a discount rate of 6.5% at December 31, 1995 and 7.5% at December 31,
1994. The fair value of annuities currently in an accumulation phase is based on
the net cash surrender value.
26
<PAGE> 29
A summary of the carrying value and estimated fair value of assets and
liabilities meeting the definition of financial instruments at December 31, 1995
and 1994 is as follows.
<TABLE>
<CAPTION>
____________________________________________________________________________________
(Dollars in thousands)
____________________________________________________________________________________
AT DECEMBER 31, 1995 At December 31, 1994
____________________________________________________________________________________
FAIR CARRYING Fair Carrying
Assets VALUE VALUE Value Value
____________________________________________________________________________________
<S> <C> <C> <C> <C>
Investments
Held-to-maturity fixed maturities $617,915 $589,687 $569,380 $591,712
Available-for-sale fixed maturities 84,707 84,707 1,926 1,926
Equity securities 75,678 75,678 56,197 56,197
Mortgage loans 3,683 3,041 3,902 3,120
Policy loans 7,163 7,163 6,802 6,802
Other long-term investments 8,627 8,627 7,072 7,072
Short-term investments 21,530 21,530 9,954 9,954
Other Assets
Accrued investment income 11,517 11,517 10,411 10,411
____________________________________________________________________________________
$830,820 $801,950 $665,644 $687,194
====================================================================================
Liabilities
____________________________________________________________________________________
Policy Reserves
Annuity (Accumulations) $226,154 $232,718 $176,929 $182,515
Annuity (On-Benefits) 2,609 2,621 2,743 2,727
Structured settlements 359 325 312 295
Guaranteed investment contracts 1,287 1,617 986 1,009
____________________________________________________________________________________
$230,409 $237,281 $180,970 $186,546
====================================================================================
</TABLE>
NOTE 4.
SHORT-TERM BORROWINGS
The Company maintains a $5 million line of credit with a local bank. Under
the terms of the agreement, interest on outstanding notes would be payable at
the lender's then prevailing prime rate.
The following is a summary of the Company's short-term borrowings that were
payable to a bank for the years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
________________________________________________________________________________
(Dollars in thousands)
________________________________________________________________________________
Years Ended December 31, 1995 1994 1993
________________________________________________________________________________
<S> <C> <C> <C>
Balance at end of year $ -- $ 25 $50
Maximum outstanding during the year 35 925 60
Average amount outstanding during the year 28 63 59
________________________________________________________________________________
Weighted average interest rate 8.50% 7.46% 6.00%
Weighted average interest rate during the year 8.50 7.46 6.00
================================================================================
</TABLE>
27
<PAGE> 30
NOTE 5.
REINSURANCE
PROPERTY AND CASUALTY OPERATIONS
The property and casualty insurance companies cede portions of their
insurance business to other insurance companies on both a pro rata and excess of
loss basis. Insurance ceded by the property and casualty insurance companies
does not relieve their primary liability as the originating insurers. Earned
premiums ceded were $26,053,000, $26,256,000 and $23,148,000 for the years ended
December 31, 1995, 1994 and 1993, respectively. The Company believes all amounts
are collectible with regard to reinsurance receivables. There are no
concentrations of credit risk associated with reinsurance.
The property and casualty insurance companies also assume portions of their
insurance business from other insurance companies. Assumed premiums earned for
the years ended December 31, 1995, 1994 and 1993 were $33,014,000, $31,152,000
and $30,741,000, respectively.
LIFE OPERATIONS
United Life Insurance Company follows the policy of reinsuring that portion
of the risk in excess of $200,000 on the life of any individual. Policy benefit
reserves and claims are stated after deduction of reserves and claims applicable
to reinsurance ceded to other companies; however, United Life Insurance Company
is contingently liable for these amounts in the event such companies are unable
to pay their portion of the claims. The Company is contingently liable for ceded
insurance in force of $455,422,000 and $531,558,000 at December 31, 1995 and
1994, respectively. The Company believes all amounts are collectible with regard
to reinsurance receivables.
NOTE 6.
LIABILITY FOR PROPERTY AND CASUALTY LOSSES AND SETTLEMENT EXPENSES
The following table provides an analysis of losses and loss adjustment
expenses ("LAE"), including a reconciliation of beginning and ending liability
balances for 1995 and 1994.
<TABLE>
<CAPTION>
___________________________________________________________________________________________________
(Dollars in thousands)
___________________________________________________________________________________________________
At December 31, 1995 1994
___________________________________________________________________________________________________
<S> <C> <C>
Gross liability for losses and LAE at beginning of year $203,911 $184,755
Less reinsurance receivables 23,258 13,957
___________________________________________________________________________________________________
Net liability for losses and LAE at beginning of year $180,653 $170,798
Provision for losses and LAE for claims occurring in the current year 138,109 125,918
Decrease in estimated losses and LAE for claims occurring in prior years (19,877) (17,107)
___________________________________________________________________________________________________
$298,885 $279,609
___________________________________________________________________________________________________
Losses and LAE payments for claims occurring during
Current year $ 55,323 $ 47,406
Prior years 54,862 51,550
___________________________________________________________________________________________________
$110,185 $ 98,956
___________________________________________________________________________________________________
Net liability for losses and LAE at end of year $188,700 $180,653
Plus reinsurance receivables 15,002 23,258
___________________________________________________________________________________________________
Gross liability for losses and LAE at end of year $203,702 $203,911
===================================================================================================
</TABLE>
The Consolidated Financial Statements include the estimated liability for
unpaid losses and LAE of the property and casualty lines of business. The
liabilities for losses and LAE are determined using case-basis evaluations and
represent estimates of the ultimate net cost of all unpaid losses and LAE
incurred (both reported and not reported) through December 31 of each year.
These estimates are continually reviewed and, as experience develops and new
information becomes known, the liability is adjusted as necessary. Such
adjustments, if any, are reflected in current operations.
28
<PAGE> 31
The decrease of $19,877,000 in estimated losses and LAE for claims occurring
in prior years resulted from both the Company's direct and assumed business.
Favorable claims settlements on the Company's direct business contributed to the
decrease for prior accident years in the workers' compensation, commercial
liability and other liability lines. The Company establishes assumed loss
reserves based on reporting by insurance intermediaries. In addition, the
Company establishes reserves for those assumed losses that have occurred, but
have not yet been reported. When assumed anticipated losses and settlement
expenses are lower than anticipated, a redundancy results, as was the case in
1995.
The Company is not aware of any significant contingent liabilities as far as
environmental issues are concerned. Because of the type of business the Company
writes, i.e. property coverage, there exists the potential for exposure for
environmental pollution and asbestos claims. The Company's underwriters are
aware of these exposures and use limited riders or endorsements to limit
exposure. The one assumed reinsurance contract with a significant known
environmental exposure was commuted with a complete release of further liability
during 1994.
NOTE 7.
STATUTORY REPORTING, CAPITAL REQUIREMENTS AND DIVIDEND AND RETAINED EARNINGS
RESTRICTIONS
Statutory stockholders' surplus and net income at December 31, 1995, 1994 and
1993 and for the years then ended are as follows.
<TABLE>
<CAPTION>
______________________________________________________________________________
Statutory Statutory
Stockholders' Net
Surplus Income
______________________________________________________________________________
(Dollars in thousands)
______________________________________________________________________________
<S> <C> <C>
1995
PROPERTY AND CASUALTY $158,055 $23,213
LIFE, ACCIDENT AND HEALTH 45,911 2,224
______________________________________________________________________________
1994
Property and casualty $125,317 $19,621
Life, accident and health 34,450 2,042
______________________________________________________________________________
1993
Property and casualty $111,284 $ 8,608
Life, accident and health 32,811 3,143
==============================================================================
</TABLE>
The Company and its insurance subsidiaries prepare their statutory financial
statements in conformity with practices prescribed or permitted by their state
of domicile. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations, and general administrative rules. Permitted
statutory accounting practices are used when prescribed statutory practices do
not address the accounting for transactions. The Company does not use permitted
practices that individually or in the aggregate materially affect statutory
surplus or risk-based capital.
The State of Iowa Insurance Department imposes certain capital requirements
on insurance companies on a statutory basis. Under the applicable regulations,
United Fire & Casualty Company is required to maintain minimum capital stock of
$2,500,000 and minimum additional paid-in capital and retained earnings in the
aggregate amount of $2,500,000. At December 31, 1995, United Fire & Casualty
Company's capital stock was $36,098,000 and total statutory paid-in capital and
retained earnings were $121,956,000.
The amount of dividends that may be paid to stockholders without prior
approval by the State of Iowa Insurance Department is limited to the excess of
statutory retained earnings over contributed surplus. Contributed surplus as of
December 31, 1995, was $10,766,000. Based upon this restriction, the Company
could make a maximum of $100,423,000 in dividend distributions to stockholders
in 1996. Dividend payments by the insurance subsidiaries to the Company are
subject to similar restrictions in the states in which they are domiciled. The
Company received no dividends from its subsidiaries in 1995, and $500,000 in
dividends in 1994.
29
<PAGE> 32
In addition, the insurance departments governing the Company and its
subsidiaries have imposed risk-based capital ("RBC") requirements. The
regulation is based on a model adopted by the NAIC. An RBC formula establishes
capital requirements for insurance companies based on an individual company's
major areas of risk, including assets, credit, underwriting and off-balance
sheet risk. The results are used by the NAIC and state insurance departments to
identify companies that merit regulatory attention or the initiation of
regulatory action. At December 31, 1995 and 1994, the life and property and
casualty segments had adjusted capital well in excess of the required capital
levels.
NOTE 8.
FEDERAL INCOME TAXES
Federal income tax expense is composed of the following.
<TABLE>
<CAPTION>
________________________________________________________________________________
(Dollars in thousands)
________________________________________________________________________________
Years Ended December 31, 1995 1994 1993
________________________________________________________________________________
<S> <C> <C> <C>
Current $7,015 $6,298 $4,468
Deferred 2,232 (70) (961)
________________________________________________________________________________
Total $9,247 $6,228 $3,507
================================================================================
</TABLE>
A reconciliation of income tax expense computed at the applicable Federal tax
rate of 35% in 1995 and 1994 and 34% in 1993 to the amount recorded in the
Consolidated Financial Statements is as follows.
<TABLE>
<CAPTION>
________________________________________________________________________________________
(Dollars in thousands)
________________________________________________________________________________________
Years Ended December 31, 1995 1994 1993
________________________________________________________________________________________
<S> <C> <C> <C>
Computed expected rate $13,318 $10,062 $ 7,532
Reduction for tax-exempt municipal bond interest income (4,057) (4,015) (4,208)
Reduction for nontaxable dividend income (520) (458) (381)
Other, net 506 639 564
________________________________________________________________________________________
Federal income taxes, as provided $ 9,247 $ 6,228 $ 3,507
========================================================================================
</TABLE>
30
<PAGE> 33
The significant components of the net deferred tax liability at December 31,
1995 and 1994 are as follows.
<TABLE>
<CAPTION>
______________________________________________________________________________________
(Dollars in thousands)
______________________________________________________________________________________
Years Ended December 31, 1995 1994
______________________________________________________________________________________
<S> <C> <C>
Deferred tax assets
Financial statement reserves in excess of income tax reserves $15,848 $16,890
Unearned premium adjustment 6,240 5,351
Alternative minimum tax (AMT) credit carryforwards -- 2,140
Postretirement benefits other than pensions 1,024 816
Salvage and subrogation 536 428
Net operating loss carryforwards (NOL) -- 39
Pension 969 869
Other 3,827 1,816
______________________________________________________________________________________
Gross deferred tax assets 28,444 28,349
Valuation allowance -- 39
______________________________________________________________________________________
Gross deferred tax assets, net of valuation allowance $28,444 $28,310
______________________________________________________________________________________
Deferred tax liabilities
Deferred acquisition costs $16,370 $14,651
Net unrealized appreciation 19,232 11,009
Depreciation on assets 1,191 1,182
Net bond discount accretion and premium amortization 1,613 1,136
Other 992 831
______________________________________________________________________________________
Gross deferred tax liability $39,398 $28,809
______________________________________________________________________________________
Net deferred tax liability $10,954 $ 499
======================================================================================
</TABLE>
The Company had tax net operating loss ("NOL") carryforwards totaling
$115,000 as of December 31, 1994. These NOL carryforwards were purchased by the
Company when it acquired Addison Farmers' Insurance Company in 1990. The Company
also had alternative minimum tax credit ("AMT") carryforwards for Federal income
tax purposes as of December 31, 1994. Such AMT credit carryforward were recorded
as a deferred tax benefit for financial reporting purposes. The Company did not
have any NOL or AMT carryforwards at December 31, 1995.
The valuation allowance for deferred tax assets in 1994 related to the
purchased NOL's. The net change in the total valuation allowance for the years
ended December 31, 1995 and 1994, was a decrease of $39,000 and $106,000,
respectively due to the utilization and expiration of NOL carryforwards.
NOTE 9.
EMPLOYEE BENEFIT OBLIGATIONS
As permitted by SFAS No. 87, "Employers' Accounting for Pensions", the
Company uses September 30 as the date for measuring plan assets and liabilities
in order to obtain information necessary for the preparation of the financial
statements on a timely basis.
31
<PAGE> 34
The following table sets forth the funded status of the Company's qualified
pension plan and amounts recognized in the Consolidated Financial Statements.
<TABLE>
<CAPTION>
______________________________________________________________________________________________
Years Ended December 31,
______________________________________________________________________________________________
(Dollars in thousands)
______________________________________________________________________________________________
Years Ended December 31, 1995 1994 1993
______________________________________________________________________________________________
<S> <C> <C> <C>
Actuarial present value of accumulated obligation at
September 30, 1995, 1994 and 1993
Vested benefit obligation $(10,697) $ (7,955) $(10,409)
==============================================================================================
Accumulated benefit obligation $(11,122) $ (8,466) $(10,601)
==============================================================================================
Projected benefit obligation $(14,307) $(10,264) $(13,417)
Plan assets at fair value at September 30, 1995, 1994
and 1993 13,318 11,520 10,550
______________________________________________________________________________________________
Plan assets in excess of (less than) projected benefit
obligation at September 30, 1995, 1994 and 1993 $ (989) $ 1,256 $ (2,867)
Unrecognized net asset (established January 1, 1987) (185) (232) (280)
Unrecognized prior service cost 4 4 135
Unrecognized net gain (loss) (1,598) (3,548) 1,255
______________________________________________________________________________________________
Pension liability $ (2,768) $ (2,520) $ (1,757)
==============================================================================================
Net pension cost includes the following components
Service cost - benefits earned during the period $ 505 $ 958 $ 554
Interest cost on projected benefit obligations 806 817 675
Actual return on plan assets (2,165) (980) (429)
Net amortization and deferral 1,102 331 (218)
______________________________________________________________________________________________
Net periodic pension cost $ 248 $ 1,126 $ 582
==============================================================================================
</TABLE>
The weighted average discount rate used in determining the actuarial present
value of projected benefit obligation was 7.0% at September 30, 1995, 8.25% at
September 30, 1994, and 6.0% at September 30, 1993. The rate of increase in
future compensation levels was 4.0% at September 30, 1995, 1994 and 1993. The
expected long-term rate of return on plan assets was 7.5% at September 30, 1995
and 1994 and 6.0% at September 30, 1993.
The Company has a profit sharing plan in which employees who meet age and
service requirements are eligible to participate. The amount of the Company's
contribution is discretionary and is determined annually but cannot exceed the
amount deductible for Federal income tax purposes. The Company's contribution to
the plan for the years ended December 31, 1995, 1994 and 1993 was $1,561,000,
$649,000 and $626,000, respectively.
The Company also has an Employee Stock Ownership Plan for the benefit of
eligible employees and their beneficiaries. All employees are eligible to
participate in the plan upon completion of one year of service and attaining age
twenty-one. Contributions to this plan are made at the discretion of the Board
of Directors. These contributions are based upon a percentage of total payroll
and are allocated to participants on the basis of compensation. Contributions
are made in cash which is used by the Trustee to acquire shares of the Company
stock to allocate to participants' accounts. As of December 31, 1995, 1994 and
1993, the Trustee owned 86,712, 86,306 and 65,421 shares of Company stock,
respectively. The Company's incurred contribution to the Plan was zero for the
years ended December 31, 1995 and 1994 and $403,000 for the year ended December
31, 1993.
32
<PAGE> 35
The following table reconciles the accrued postretirement benefit liability
and amounts recognized in the Consolidated Financial Statements.
<TABLE>
<CAPTION>
________________________________________________________________________________________
(Dollars in thousands)
________________________________________________________________________________________
Years Ended December 31, 1995 1994 1993
________________________________________________________________________________________
<S> <C> <C> <C>
Accumulated Postretirement Benefit Obligation
Retirees $(1,411) $(1,064) $(1,348)
Other fully eligible participants (901) (523) (649)
Other active participants (2,578) (1,374) (2,324)
________________________________________________________________________________________
(4,890) (2,961) (4,321)
Unrecognized prior service cost 247 287 337
Unrecognized actuarial loss 1,718 308 2,054
________________________________________________________________________________________
Accrued postretirement benefit liability $(2,925) $(2,366) $(1,930)
========================================================================================
________________________________________________________________________________________
Service cost - benefits attributed to service during the
year $239 $201 $227
Interest cost on accumulated postretirement benefit
obligation 286 222 267
Amortization of prior service cost 40 40 23
Amortization of actuarial loss 45 79 65
________________________________________________________________________________________
Net postretirement benefit expense $610 $542 $582
========================================================================================
</TABLE>
The unrecognized prior service cost and actuarial loss are being amortized on
a straight-line basis over an average period of eight years. This period
represents the average remaining employee service period until the date of full
eligibility.
For measurement purposes, the following table displays the annual rate of
increase in the per capita cost of covered medical and dental claims assumed.
<TABLE>
<CAPTION>
____________________________________________
Medical Dental
____________________________________________
<S> <C> <C> <C>
1995 9.50% 1995 7.00%
1996 9.00 1996 6.50
1997 8.50 1997 6.25
1998 8.00 1998 6.00
1999 7.50 1999 5.75
2000 7.00 2000 5.50
2001 6.50 2001 5.25
2002 6.00 2002+ 5.00
2003+ 5.50
</TABLE>
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1995 by $1,089,000 and the
aggregate of the service and interest cost components of net postretirement
benefit expense for the year then ended by $122,000. The weighted-average
discount rate used in determining the accumulated postretirement benefit
obligation was 7.00% and 8.25% as of December 31, 1995 and 1994, respectively.
33
<PAGE> 36
NOTE 10.
OPERATIONS IN DIFFERENT INDUSTRIES
The Company conducts its operations principally in two industries, property
and casualty insurance and life insurance.
Total revenue by industry includes sales to both outside customers and
intersegment sales which are eliminated to arrive at the total revenues as
reported in the Company's Consolidated Statements of Operations. Intersegment
sales are accounted for on the same basis as sales to outside customers. The
following table sets forth certain data for each of the Company's business
segments.
<TABLE>
<CAPTION>
________________________________________________________________________________________
(Dollars in thousands)
________________________________________________________________________________________
Years Ended December 31, 1995 1994 1993
________________________________________________________________________________________
<S> <C> <C> <C>
Property and casualty insurance
Premiums earned $185,994 $166,852 $158,336
Loss and loss adjustment expenses 118,231 108,810 111,532
Underwriting and acquisition expenses 61,091 56,187 51,763
________________________________________________________________________________________
Underwriting income (loss) $ 6,672 $ 1,855 $ (4,959)
Net investment income 21,009 19,006 15,452
Realized investment gains 1,174 172 452
Other income 1,863 1,889 1,769
________________________________________________________________________________________
Operating earnings $ 30,718 $ 22,922 $ 12,714
========================================================================================
Assets $459,366 $417,546 $374,595
========================================================================================
Life insurance
Premiums earned $ 21,639 $ 17,896 $ 17,282
Net investment income 32,609 27,659 24,895
Realized investment gains 524 624 1,408
________________________________________________________________________________________
Total revenues $ 54,772 $ 46,179 $ 43,585
Benefits, underwriting and acquisition expenses 47,440 40,352 34,147
________________________________________________________________________________________
Operating earnings $ 7,332 $ 5,827 $ 9,438
========================================================================================
Assets $483,740 $410,580 $358,424
========================================================================================
Premium revenue between segments $ 105 $ 100 $ 1,481
========================================================================================
</TABLE>
Depreciation expense and property and equipment acquisitions for the years ended
December 31, 1995, 1994 and 1993, are reflected in the property and casualty
insurance segment.
34
<PAGE> 37
NOTE 11.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth selected quarterly financial information of
the Company.
<TABLE>
<CAPTION>
_____________________________________________________________________________________________
(Dollars in thousands except per share data)
_____________________________________________________________________________________________
Quarters First Second Third Fourth Total
_____________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1995
TOTAL REVENUES $64,593 $64,362 $66,902 $68,733 $264,590
=============================================================================================
NET INCOME $6,248 $7,243 $6,561 $8,751 $28,803
=============================================================================================
NET INCOME PER COMMON SHARE $ .58 $ .67 $ .60 $ .81 $ 2.66
=============================================================================================
Fiscal year ended December 31, 1994
Total revenues $54,076 $56,083 $60,769 $62,917 $233,845
=============================================================================================
Net income $4,119 $5,339 $3,483 $9,580 $22,521
=============================================================================================
Net income per common share $ .38 $ .50 $ .32 $ .88 $ 2.08
=============================================================================================
</TABLE>
Net income per common share has been retroactively restated for additional
shares issued as a result of a three for two stock split to stockholders of
record as of December 18, 1995.
NOTE 12.
NET INCOME AND DIVIDENDS PER COMMON SHARE
The Company declared a three for two stock split in the form of a 50% stock
dividend to stockholders of record as of December 15, 1994 and again, as of
December 18, 1995. Cash dividends per common share of $.55 and $.49 were
declared in 1995 and 1994, respectively. Net income per common share, weighted
average common shares outstanding and cash dividends declared per common share
have been retroactively restated for all periods presented.
INDEX TO SUPPLEMENTARY SCHEDULES
Consolidated Schedules
III -- Supplementary insurance information. 37
IV -- Reinsurance. 38
VI -- Supplemental information concerning property and casualty
insurance operations. 39
All other schedules have been omitted as not required, not applicable, not
deemed material or because the information is included in the Consolidated
Financial Statements.
35
<PAGE> 38
<TABLE>
<CAPTION>
SCHEDULE III. SUPPLEMENTARY INSURANCE INFORMATION
(Dollars in thousands)
Future
Policy
Deffered Benefits Benefits Amortization Interest
Policy Losses, Realized Net Claims, of Deffered Other on
Year Ended Acquisi- Claims Earned Invest- Invest- Losses and Policy Under- Policy-
December 31, tion and Loss Unearned Premium ment ment Settlement Acquisition writing holders' Premiums
1995 Costs Expenses Premiums Revenue Gains Income Expenses Costs Expenses Accounts Written
____________ ________ ________ ________ ________ ________ _______ __________ ____________ ________ _________ _________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Property and
casualty $19,266 $203,702 $93,011 $185,994 $1,174 $20,994 $118,231 $41,814 $19,169 $ -- $197,546
Life, accident
and health 33,404 393,603 4,014 21,534 524 32,609 15,012 5,349 6,437 20,528 22,072<F1>
________ ________ _______ ________ ________ _______ __________ ____________ ________ _________ _________
Total $52,670 $597,305 97,025 $207,528 $1,698 $53,603 $133,243 $47,163 $25,606 $ 20,528 $219,618
======== ======== ======= ======== ======== ======= ========== ============ ======== ========= =========
<FN>
<F1> Accident and health insurance premiums written.
</FN>
Year Ended
December 31,
1994
____________
Property and
casualty $15,870 $203,911 $80,629 $166,852 $172 $18,761 $108,810 $33,950 $22,099 $ -- $175,641
Life, accident
and health 31,675 344,096 2,821 17,896 624 27,659 13,552 3,414 6,211 17,060 18,338<F1>
________ ________ _______ ________ ________ _______ __________ ____________ ________ _________ _________
Total $47,545 $548,007 $83,450 $184,748 $796 $46,420 $122,362 $37,364 $28,310 $ 17,060 $193,979
======== ======== ======= ======== ======== ======= ========== ============ ======== ========= =========
<FN>
<F1> Accident and health insurance premiums written.
</FN>
Year Ended
December 31,
1993
____________
Property and
casualty $13,080 $184,755 $71,273 $158,336 $ 452 $15,338 $111,532 $31,337 $18,873 $ -- $163,011
Life, accident
and health 29,571 297,016 2,640 15,801 1,408 $24,895 11,335 2,068 5,640 15,006 1,913<F1>
________ ________ _______ ________ ________ _______ __________ ____________ ________ _________ _________
Total $42,651 $481,771 $73,913 $174,137 $1,860 $40,233 $122,867 $33,405 $24,513 $ 15,006 $164,924
======== ======== ======= ======== ======== ======= ========== ============ ======== ========= =========
<FN>
<F1> Accident and health insurance premiums written.
</FN>
Certain amounts included in this schedule for earlier years have been reclassified to conform with the 1995 financial statement
presentation.
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
SCHEDULE IV. REINSURANCE
(Dollars in thousands)
Percentage of
Ceded to Assumed Amount
Gross Amount Other From Other Net Amount Assumed to
Year Ended Decmeber 31,1995 Earned Companies Companies Earned Net Earned
___________________________ ____________ _________ __________ __________ _____________
<S> <C> <C> <C> <C> <C>
Life insurance in force $3,133,052 $455,422 $ -- $2,677,630 --%
============ ========= ========== ========== =============
Premiums:
________
Property and casualty $ 179,033 $ 26,053 $ 33,014 $ 185,994 17.75%
Life insurance 20,881 1,066 -- 19,815 --
Accident and health insurance 1,915 196 -- 1,719 --
____________ _________ __________ __________ ____________
Total $ 201,829 $ 27,315 $ 33,014 $ 207,528 15.91%
============ ========= ========== ========== ============
Year Ended Decmeber 31,1994
___________________________
Life insurance in force $3,222,695 $531,558 $ -- $2,691,137 --%
============ ======== ========== ========== ============
Premiums:
________
Property and casualty $ 161,956 $ 26,256 $ 31,152 $ 166,852 18.67%
Life insurance 18,218 1,837 -- 16,381 --
Accident and health insurance 1,692 177 -- 1,515 --
____________ ________ __________ __________ ____________
Total $ 181,866 $ 28,270 $ 31,152 $ 184,748 16.86%
============ ======== ========== ========== ============
Year Ended Decmeber 31,1993
___________________________
Life insurance in force $3,116,538 $524,326 $ -- $2,592,212 --%
============ ======== ========== ========== ============
Premiums:
________
Property and casualty $ 150,743 $ 23,148 $ 30,741 $ 158,336 19.41%
Life insurance 15,528 1,559 -- 13,969 --
Accident and health insurance 2,050 218 -- 1,832 --
____________ ________ __________ __________ ____________
Total $ 168,321 $ 24,925 $ 30,741 $ 174,137 17.65%
============ ======== ========== ========== ============
</TABLE>
37
<PAGE> 40
<TABLE>
<CAPTION>
SCHEDULE VI. SUPPLEMENTAL INFORMATION CONCERNING PROPERTY AND CASUALTY INSURANCE OPERATIONS
(Dollars in thousands)
Reserves for
Unpaid
Deferred Claims and
Policy Claim Realized Net
Acquisition Adjustment Unearned Earned Investment Investment
Affiliation With Registrant Costs Expenses Premiums Premiums Gains Income
___________________________ ___________ ____________ ________ ________ __________ __________
<S> <C> <C> <C> <C> <C> <C>
Company and
consolidated property and
casualty subsidiaries
Year Ended
December 31, 1995 $19,266 $203,702 $93,011 $185,994 $1,174 $20,994
=========== ============ ======== ======== ========== ==========
Year Ended
December 31, 1994 $15,870 $203,911 $80,629 $166,852 $ 172 $18,761
=========== ============ ======== ======== ========== ==========
Year Ended
December 31, 1993 $13,080 $184,755 $71,273 $158,336 $ 452 $15,338
=========== ============ ======== ======== ========== ==========
Certain amounts included in this schedule for earlier years have been reclassified to conform with the
1995 financial statement presentation.
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE VI. SUPPLEMENTAL INFORMATION CONCERNING PROPERTY AND CASUALTY INSURANCE OPERATIONS
(continued)
(Dollars in thousands)
Claims and Claim Amoritization
Adjustment Expenses of Deferred Paid Claims
Incurred Related to Policy and Claim
(1) (2) Acquisition Adjustment Premiums
Affiliation With Registrant Current Year Prior Years Costs Expenses Written
___________________________ ____________ ____________ ___________ ___________ ________
<S> <C> <C> <C> <C> <C>
Company and
consolidated property and
casualty subsidiaries
Year Ended
December 31, 1995 $138,109 $(19,877) $41,814 $110,185 $197,546
============ ============ =========== =========== =========
Year Ended
December 31, 1994 $125,918 $(17,107) $33,950 $ 98,956 $175,641
============ ============ =========== =========== =========
Year Ended
December 31, 1993 $115,785 $ (4,253) $31,337 $ 99,559 $163,011
============ ============ =========== =========== =========
Certain amounts included in this schedule for earlier years have been reclassified to conform with the
1995 financial statement presentation.
</TABLE>
38
<PAGE> 41
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE COMPANY:
NAME (AGE) PRESENT POSITION, NAME AND PRINCIPAL BUSINESS OF
DIRECTOR
Scott McIntyre Jr. (62) Chairman of the Board and Chief Executive Officer,
United Fire & Casualty Company
James T. Brophy (68) Vice Chairman of the Board
Robert J. Bevenour (67) Retired
Roy L. Ewen (73) Retired
Harold A. Hagen (69) Retired
Casey D. Mahon (44) Vice President and General Counsel, McLeod, Inc.,
Cedar Rapids, Iowa
Leonard J. Marshall (66) Retired
Thomas K. Marshall (62) Retired
Byron G. Riley (65) Attorney, Firm of Bradley & Riley, P.C.
EXECUTIVE OFFICERS OF THE COMPANY:
NAME (AGE) OFFICE HELD (TENURE IN YEARS)
Scott McIntyre Jr. (62) Chairman of the Board and Chief Executive Officer,
General Manager (29) and Director (39)
Gary L. Huber (53) President and Chief Operating Officer (7)
Kent G. Baker (52) Vice President and Chief Financial Officer (11)
John R. Cruise (54) Vice President, Reinsurance (9)
E. Dean Fick (51) Vice President, Claims (4), employed by Grinnell
Mutual Reinsurance Company 24 years prior, serving as
Senior Vice President, Claims (1987-1991)
Marianna D. Hall (44) Vice President, Human Resources (3), employed by the
Company for the past 4 years, employed by AMEX Life
Assurance Company from September 1991 to April 1992;
Training Director of Brenton Banks from July 1991 to
September 1991; and Vice President, Human Resources
and Training, American Federal Savings Association for
the 4 years prior
Maynard L. Hansen (64) Vice President, Fidelity and Surety (7)
E. Addison Hulit (56) Vice President, Lincoln Branch Office (2), employed by
the Company for the past 3 years, employed by
Transamerica Insurance from 1991 to 1993; and
Traveler's Insurance for the 21 years prior
David L. Hellen (43) Vice President, Denver Branch Office (8)
Robert B. Kenward (53) Vice President, Data Processing (3), employed by the
Company for the past 17 years
Stanely A. Wiebold (51) Vice President, Underwriting (10)
Mary D. Schoop (64) Corporate Secretary (8)
Gerald D. Seidl (62) General Counsel (27)
Galen E. Underwood (55) Treasurer (17)
39
<PAGE> 42
DIRECTORS OF SUBSIDIARY COMPANIES:
UNITED LIFE INSURANCE ADDISON FARMERS' INSURANCE BROKERS &
COMPANY INSURANCE COMPANY MANAGERS, INC.
C. Richard Ekstrand James T. Brophy Maurice F. Eagan
Scott McIntyre Jr. Gary L. Huber Gary L. Huber
John A. Rife Jack M. LiCausi Scott McIntyre Jr.
Byron G. Riley Scott McIntyre Jr. Gerald D. Seidl
Gerald D. Seidl Randall J. Scheive George J. Wegmann
LAFAYETTE INSURANCE COMPANY CRABTREE PREMIUM FINANCE COMPANY
Gary L. Huber Gary L. Huber
Scott McIntyre Jr. Jack M. LiCausi
Gerald D. Seidl Scott McIntyre Jr.
George J. Wegmann Randall J. Scheive
Leo F. Wegmann Jr.
OFFICERS OF THE COMPANY:
UNITED FIRE & CASUALTY COMPANY
Chairman and Chief Executive Officer
Scott McIntyre Jr.
President and Chief Operating Officer
Gary L. Huber
General Counsel Secretary
Gerald D. Seidl Mary D. Schoop
Vice Presidents Assistant Secretaries
Kent G. Baker Lucretia L. Canning
John R. Cruise Donna M. Fugate
E. Dean Fick
Marianna D. Hall Treasurer
Maynard L. Hansen Galen E. Underwood
David L. Hellen
E. Addison Hulit Assistant Vice Presidents
Robert B. Kenward John T. Anderson Jr.
Stanley A. Wiebold Robert J. DeCamp
Dayton E. Roberts
40
<PAGE> 43
OFFICERS OF SUBSIDIARY COMPANIES:
UNITED LIFE INSURANCE COMPANY CRABTREE PREMIUM FINANCE COMPANY
Chairman Chairman
Scott McIntyre Jr. Scott McIntyre Jr.
President President
John A. Rife Jack M. LiCausi
Vice Presidents Vice President
Ronald D. Brandt Randall J. Scheive
Rickey L. Pettyjohn
Secretary
Secretary Christine Prete
Jean N. Newlin Schnake
Treasurer
Treasurer Kent G. Baker
Samuel E. Hague
LAFAYETTE INSURANCE COMPANY INSURANCE BROKERS & MANAGERS, INC.
Chairman President
Scott McIntyre Jr. Gary L. Huber
Vice Chairman Vice President
George J. Wegmann P. Eric Croussilac
President Secretary
Carlyn K. Lewis Betty S. Castro
Secretary Treasurer
Leo F. Wegmann Jr. Kent G. Baker
ADDISON FARMERS' INSURANCE
COMPANY
Chairman
Scott McIntyre Jr.
President
Randall J. Scheive
Vice Presidents
Robert A. Andretich
Jack M. LiCausi
Russell P. Shulfer
Secretary
Linda J. Pearson
Treasurer
Kent G. Baker
41
<PAGE> 44
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation includes the amount expensed for financial reporting
purposes under the Company's qualified profit sharing (401(k)) plan. All
employees of the Company are eligible to participate after they have completed
one year of service, attained twenty-one years of age and have met hourly
requirements with the Company. The plan is not integrated with social security,
and provides for employer contributions in such amounts as the Board of
Directors may annually determine. The benefit payable under the plan is equal to
the vested account balance.
Executive Compensation includes the amounts expensed for financial reporting
purposes as contributions to the Company's pension plan for the named
individuals. The pension plan is a noncontributory plan which is not integrated
with social security. All employees of the Company are eligible to participate
after they have completed one year of service, attained twenty-one years of age
and have met hourly requirements with the Company. The normal retirement pension
payable under the plan is based on the employee's highest average monthly
earnings for five (5) consecutive years of employment, and is equal to one and
one-quarter of one percent (1 1/4 of 1%) of the employee's highest average
monthly earnings multiplied by the number of years of continuous service. The
maximum normal retirement benefit shall not exceed forty percent (40%) of the
employee's highest average monthly earnings, and in no event shall an employee's
annual benefit exceed the lesser of: 1) Ninety Thousand Dollars ($90,000.00); or
2) one hundred percent of the employee's average compensation for the highest
consecutive three (3) calendar years during which the employee was an active
participant in the plan.
The pension plan owned 101,029 shares of the Company common stock as of
December 31, 1995, and has made deposits with United Life Insurance Company to
be used by the plan to purchase retirement annuities from that company. The
annuity fund maintained by United Life Insurance Company is credited with
compound interest on the average fund balance for the year. The interest rate
will be equivalent to the ratio of net investment income to mean assets of
United Life Insurance Company.
In 1983, the Company adopted the United Lafayette Employee Stock Ownership
Plan. Effective January 1, 1988, the Plan was amended to convert the Tax Credit
Employee Stock Ownership Plan to an Employee Stock Ownership Plan. The Plan is
for the benefit of eligible employees and their beneficiaries. All employees are
eligible to participate in the Plan upon completion of one year of service,
attaining age twenty-one and have met hourly requirements with the Company.
Contributions to this plan are made at the discretion of the Board of Directors.
These contributions are based upon a percentage of total payroll and are
allocated to participants on the basis of compensation. Contributions are made
in cash which is used by the Trustee to acquire shares of the Company stock to
allocate to participants' accounts. As of December 31, 1995, 1994 and 1993, the
Trustee owned 86,712, 86,306 and 65,421 shares of Company common stock,
respectively. The Company's incurred contribution to the Plan was zero for the
years ended December 31, 1995 abd 1994 and $403,000 for the year ended December
31, 1993.
42
<PAGE> 45
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
(a) (b) (c) (d) (e)
All Other
Name and Principal Position Year Salary Bonus Compensation
___________________________ ____ ______ _____ ____________
<S> <C> <C> <C> <C>
Scott McIntyre, Jr.
Chairman and CEO 1996 $270,000.00 <F1> $75,000.00 <F2> $ --
1995 250,000.00 <F1> 57,500.00 <F2> 11,806.22 <F3>
1994 230,000.00 <F1> -- 11,145.19 <F3>
Gary L. Huber
President and COO 1996 160,000.00 <F4> -- --
1995 150,000.00 <F4> 21,150.00 <F5> 7,980.20 <F3>
1994 141,000.00 <F4> -- 8,018.80 <F3>
E. Dean Fick
Vice President - Claims 1996 120,000.00 <F4> -- --
1995 109,500.00 <F4> 7,799.99 <F6> 4,767.59 <F3>
1994 103,999.93 <F4> -- 4,547.14 <F3>
<FN>
<F1> Determined by Compensation Committee in February of each year. Present
salary was determined at February, 1996 meeting.
<F2> Bonus, if any, determined at the regular meeting of the Directors in
February of each year based on prior year's performance. Present bonus
determined at February, 1996 meeting.
<F3> Contributions on behalf of named executive to Company 401K Plan, ESOP, and
Benefit Credits.
<F4> Determined by Chairman and CEO. Present salary was determined in December,
1995 and will be reviewed in December, 1996.
<F5> Determined at the meeting of the Board of Directors in February, 1995, and
based on the performance for the preceding year.
<F6> Determined by the bonus plan in effect for all salaried employees based on
the performance for the preceding year.
</FN>
</TABLE>
43
<PAGE> 46
PERFORMANCE GRAPH
Following is a comparison of five year cumulative total return amount United
Fire & Casualty Company, S&P 500 Index and S&P Property/Casualty Index.
[Performance graph appears here]
<TABLE>
<CAPTION>
Indexed Returns
Years Ending
Company/Index Dec90 Dec91 Dec92 Dec93 Dec94 Dec95
___________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
UNITED FIRE & CAS CO 100 134.44 183.89 184.17 201.50 313.86
S&P 500 Index 100 130.47 140.41 154.56 156.60 215.45
S&P Property-Casualty Insurance 100 125.19 146.61 144.02 151.07 204.54
</TABLE>
44
<PAGE> 47
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
The following table sets forth information as of March 1, 1996, with
respect to ownership of the Company's $3.33 1/3 par value Common Stock by
principal security holders. Except as otherwise indicated, each of the
persons named below has sole voting and investment powers with respect to
the shares indicated.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP <F1> CLASS <F1>
___________________ ____________________________ __________
<S> <C> <C>
Scott McIntyre Jr. <F1> 1,550,083 14.31%
Cedar Rapids, Iowa
Mildred R. McIntyre <F1> 1,183,021 10.92%
Cedar Rapids, Iowa
General Accident 2,650,680 24.48%
Corporation of America
Philadelphia, Pennsylvania
Susan M. Carlton <F1> 366,236 3.38%
Orchard Park, New York
Margaret Pless <F1> 337,477 3.11%
Durham, North Carolina
<FN>
<F1> Scott McIntyre Jr., Mildred McIntyre, Susan M. Carlton and Margaret
Pless are all members of the same family. Included in the number of shares
owned by Scott McIntyre, Jr. are 371,812 shares which he owns in his
capacity as trustee of three trusts, one of which his children are the
beneficiaries, one of which his wife is the beneficiary, and the other of
which all of Mildred R. McIntyre's grandchildren are the beneficiaries.
Included in the number of shares owned by Mildred R. McIntyre are 533,245
shares which she owns in her capacity as trustee of a trust in which she
also has a life interest. Scott McIntyre Jr., Susan M. Carlton and Margaret
Pless each have an equal interest in the remainder interest of the trust.
</FN>
</TABLE>
(B) SECURITY OWNERSHIP OF MANAGEMENT.
The following table sets forth information as of March 1, 1996, with
respect to ownership of the Company's $3.33 1/3 par value Common Stock by
management. Except as otherwise indicated, each of the persons named below
has sole voting and investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE PERCENT OF
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS
________________ _______________________ __________
<S> <C> <C>
Scott McIntyre Jr.<F1> 1,550,083 14.31%
Roy L. Ewen 87,601 .81%
Harold A. Hagen 4,282 .04%
Robert J. Bevenour 3,000 .03%
Byron G. Riley, Jr. 2,706 .02%
James T. Brophy 11,500 .11%
Thomas K. Marshall 2,192 .02%
Leonard J. Marshall 900 .01%
Casey D. Mahon 1,500 .01%
Jack B. Evans 3,134 .03%
27 Officers and
Directors as a group 1,706,236 15.76%
_________________________
<FN>
<F1> Included in the number of shares owned by Scott McIntyre Jr., are
121,500 shares held in the name of J. Scott McIntyre, Trustee of the
Mildred Reynolds McIntyre Trust, and 225,000 shares held in the name of
Scott McIntyre Jr., or successor, Dee Ann McIntyre Trust.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
45
<PAGE> 48
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page
____
(a) 1. and 2. Financial statements and supplementary data.................. 15
(b) No reports on Form 8-K were filed during the last
quarter of the period covered by this report
(c) Exhibit 11, Computation of earnings per common share
Exhibit 22, Subsidiaries of the registrant
Exhibit 27, Financial Data Schedule
Exhibit 29, Information from reports furnished to
State Insurance Regulatory Authorities
1995 Consolidated Schedule P of Annual Statements
provided to the state regulatory authorities
(Filed by Paper)
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT
(1) Four copies of the annual stockholders report for the year ended
December 31, 1995 will be furnished to the Securities Exchange
Commission by April 1, 1996.
(2) Proxy statements will be furnished to security holders subsequent
to the filing of the 10-K. Four copies of the proxy statement
will be furnished to the Securities Exchange Commission when they
are mailed to security holders.
46
<PAGE> 49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNITED FIRE & CASUALTY COMPANY
By /s/ Scott McIntyre, Jr.
______________________________________________________________
Scott McIntyre Jr., Chairman and Chief Executive Officer
Date March 29, 1996
By /s/ Kent G. Baker
______________________________________________________________
Kent G. Baker, Vice-President,Principal Accounting Officer and
Chief Financial Officer
Date March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
By /s/ Scott McIntyre, Jr.
______________________________________________________________
Scott McIntyre, Jr., Chairman and Director
Date March 29, 1996
By /s/ Harold A. Hagen
______________________________________________________________
Harold A. Hagen, Director
Date March 29, 1996
By /s/ Roy L. Ewen
______________________________________________________________
Roy L. Ewen, Director
Date March 29, 1996
By /s/ Thomas K. Marshall
______________________________________________________________
Thomas K. Marshall, Director
Date March 29, 1996
By /s/ Robert J. Bevenour
______________________________________________________________
Robert J. Bevenour, Director
Date March 29, 1996
47
<PAGE> 1
EXHIBIT 11. COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Column A Column B Column C
___________ ________ _________
Weighted Earnings
Average Per
Number Common
Of Shares Net Share
Outstanding Income B/A
___________ ________ _________
<S> <C> <C> <C>
Years Ended December 31
1995...............................10,829,606 $ 28,803 $ 2.66
1994...............................10,829,706 22,521 2.08
1993...............................10,829,706 18,645 1.72
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
__________________________________
1995 1994 1993
____________ ____________ ____________
<S> <C> <C> <C>
Computation of weighted average number of
common and common equivalent shares
Common shares outstanding beginning of
the period 10,829,706 10,829,706 10,829,706
Weighted average of the common shares
purchased and retired or reissued (100) -- --
____________ ____________ ____________
Weighted average number of common shares 10,829,606 10,829,706 10,829,706
============ ============ ============
</TABLE>
Earnings per common share, common shares outstanding and weighted average common
shares outstanding have been retroactively restated for additional shares issued
as a result of a three for two stock split to stockholders of record as of
December 18, 1995.
<PAGE> 1
EXHIBIT 22. SUBSIDIARIES OF THE REGISTRANT
United Life Insurance Company is an Iowa Corporation.
Lafayette Insurance Company is a Louisiana Corporation.
Addison Farmers' Insurance Company is an Illinois Corporation.
The Registrant owns 100% of the voting common stock of United Life Insurance
Company, Lafayette Insurance Company and Addison Farmers' Insurance Company.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This legend contains summary information extracted from the Form 10-Q and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000101199
<NAME> UNITED FIRE & CASUALTY COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<DEBT-HELD-FOR-SALE> 84,707
<DEBT-CARRYING-VALUE> 589,687
<DEBT-MARKET-VALUE> 617,915
<EQUITIES> 75,678
<MORTGAGE> 3,041
<REAL-ESTATE> 0
<TOTAL-INVEST> 790,433
<CASH> 6,998
<RECOVER-REINSURE> 15,996
<DEFERRED-ACQUISITION> 52,670
<TOTAL-ASSETS> 943,106
<POLICY-LOSSES> 597,305
<UNEARNED-PREMIUMS> 97,025
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 36,098
<OTHER-SE> 172,655
<TOTAL-LIABILITY-AND-EQUITY> 943,106
207,528
<INVESTMENT-INCOME> 53,603
<INVESTMENT-GAINS> 1,698
<OTHER-INCOME> 1,761
<BENEFITS> 133,243
<UNDERWRITING-AMORTIZATION> 47,163
<UNDERWRITING-OTHER> 46,134
<INCOME-PRETAX> 38,050
<INCOME-TAX> 9,247
<INCOME-CONTINUING> 28,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,803
<EPS-PRIMARY> 2.66
<EPS-DILUTED> 2.66
<RESERVE-OPEN> 180,653
<PROVISION-CURRENT> 138,109
<PROVISION-PRIOR> (19,877)
<PAYMENTS-CURRENT> 55,323
<PAYMENTS-PRIOR> 54,862
<RESERVE-CLOSE> 188,700
<CUMULATIVE-DEFICIENCY> (19,877)
</TABLE>
