CEDAR RAPIDS, Iowa, Oct. 29, 2020 (GLOBE NEWSWIRE) -- United Fire Group, Inc.(the "Company" or "UFG") (Nasdaq: UFCS) announced today that the third quarter 2020 results include pre-tax catastrophe losses of $55.4 million. Catastrophe losses for the third quarter added 21.4 percentage points to the GAAP combined ratio. Our 10-year historical average for the third quarter is 8.9 percentage points of the GAAP combined ratio. The higher than average catastrophe losses in the third quarter of 2020 are primarily the result of 25 catastrophe events, with the most notable catastrophe event being the August Midwest derecho, causing widespread storms and high winds. The August Midwest derecho was a full retention loss, with losses in excess of our stated reinsurance retention of $20.0 million. Total losses from this event are estimated at $88.0 million with $68.0 million of reinsurance recoveries.
With respect to the COVID-19 pandemic, we continue to expect the impact to be manageable. Nearly all of the policies we have issued contain contract language that specifically excludes business interruption coverage for losses due to viruses such as the COVID-19 pandemic. However, we cannot determine how any changes in legislation, regulations and interpretations by the courts will impact the enforceability or continued use of these coverage exclusions in the future.
Including the impact of the catastrophe losses, the estimated GAAP combined ratio will be in the range of 123 percent to 126 percent in the third quarter of 2020. The Company estimates reporting a net loss in the range of $1.48 to $1.50 per diluted share and an adjusted operating loss(1) in the range of $1.35 to $1.39 per diluted share in the third quarter of 2020. These numbers are unaudited.
United Fire Group, Inc. will report third quarter 2020 earnings before the market opens on November 4, 2020, and will host a conference call to discuss its financial results at 9:00 a.m. Central Time on that date.
(1) Adjusted operating income (loss) is a non-GAAP financial measure of net income excluding net realized investment gains and losses, changes in the fair value of equity securities and related federal income taxes, and goodwill write offs. Management evaluates this measure and ratios derived from this measure and the Company provides this information to investors because we believe it better represents the normal, ongoing performance of our business. See Definitions of Non-GAAP Information and Reconciliations to Comparable GAAP Measures.
Founded in 1946 as United Fire & Casualty Company, UFG, through its insurance company subsidiaries, is engaged in the business of writing property and casualty insurance.
Through our subsidiaries, we are licensed as a property and casualty insurer in 48 states, plus the District of Columbia, and we are represented by approximately 1,000 independent agencies. A.M. Best Company assigns a rating of "A" (Excellent) for members of the United Fire & Casualty Group.
For more information about UFG visit www.ufginsurance.com.
Contact: Randy Patten, AVP & Controller, 319-286-2537 or email@example.com
Disclosure of Forward-Looking Statements
This release may contain forward-looking statements about our operations, anticipated performance and other similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor under the Securities Act of 1933 and the Securities Exchange Act of 1934 for forward-looking statements. The forward-looking statements are not historical facts and involve risks and uncertainties that could cause actual results to differ from those expected and/or projected. Such forward-looking statements are based on current expectations, estimates, forecasts and projections about the Company, the industry in which we operate, and beliefs and assumptions made by management. Words such as "expect(s)," "anticipate(s)," "intend(s)," "plan(s)," "believe(s)," "continue(s)," "seek(s)," "estimate(s)," "goal(s)," "remain(s) optimistic," "target(s)," "forecast(s)," "project(s)," "predict(s)," "should," "could," "may," "will," "might," "hope," "can" and other words and terms of similar meaning or expression in connection with a discussion of future operations, financial performance or financial condition, are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed in such forward-looking statements. Information concerning factors that could cause actual outcomes and results to differ materially from those expressed in the forward-looking statements is contained in Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission ("SEC") on February 28, 2020, as updated in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May 6, 2020. The risks identified in our Annual Report on Form 10-K (as updated) and in our other SEC filings are representative of the risks, uncertainties, and assumptions that could cause actual outcomes and results to differ materially from what is expressed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release or as of the date they are made. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
Definitionsof Non-GAAP Information and Reconciliations to Comparable GAAP Measures
The Company prepares its public financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Management also uses certain non-GAAP measures to evaluate its operations and profitability. As further explained below, management believes that disclosure of certain non-GAAP financial measures enhances investor understanding of our financial performance. Non-GAAP financial measures disclosed in this release include adjusted operating income (loss). The Company has provided the following definitions and reconciliations of adjusted operating income (loss):
Adjusted operating income (loss): Adjusted operating income (loss) is calculated by excluding net realized investment gains and losses, after applicable federal and state income taxes from net income and goodwill write offs. Management believes adjusted operating income (loss) is a meaningful measure for evaluating insurance company performance and a useful supplement to GAAP information because it better represents the normal, ongoing performance of our business. Investors and equity analysts who invest and report on the insurance industry and the Company generally focus on this metric in their analyses. The difference between estimated net loss in the range of $1.48 to $1.50 per diluted share and adjusted operating loss in the range of $1.35 to $1.39 per diluted share in the third quarter of 2020 is estimated after-tax net realized investment gains in the range of $0.47 to $0.49 per diluted share and goodwill write off of $0.60 per share.
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