United Fire Group, Inc. – Value Analysis (NASDAQ:UFCS) : December 12, 2017

Capitalcube gives United Fire Group, Inc. a score of 50.

Our analysis is based on comparing United Fire Group, Inc. with the following peers – Loews Corporation, Cincinnati Financial Corporation, Travelers Companies, Inc., CNA Financial Corporation, American Financial Group, Inc., Arch Capital Group Ltd., RLI Corp., White Mountains Insurance Group Ltd, Hanover Insurance Group, Inc. and Erie Indemnity Company Class A (L-US, CINF-US, TRV-US, CNA-US, AFG-US, ACGL-US, RLI-US, WTM-US, THG-US and ERIE-US).

Fundamental Overview

United Fire Group, Inc. has a fundamental score of 50 and has a relative valuation of UNDERVALUED.

Fundamental Score

Company Overview

  • It’s current Price/Book of 1.22 is about median in its peer group.
  • The market expects faster earnings growth from UFCS-US than from its peers and also a turnaround in its current ROE.
  • UFCS-US has relatively low net profit margins while its capital efficiency is relatively high.
  • Changes in annual revenues (relative to peers) are better than the change in its earnings (relative to peers), implying the company is focused more on revenues.
  • Over the last five years, UFCS-US‘s return on equity has declined from about median to less than the median among its peers suggesting that the company’s historical competitiveness in operations is slipping away.
  • Compared with the peers chosen, UFCS-US has had faster revenue growth in prior years and a current P/E ratio that suggests faster growth in the future suggesting superior growth expectations.
  • The company is likely overinvesting in a business with only median returns.
  • UFCS-US currently does not have any debt.

Drivers of Margin

  • Margins suggest relatively less discipline in both writing policies and controlling operating costs.
  • The company’s comparatively low underwriting margins (i.e. premiums earned minus insurance losses, expressed as a percentage of premiums earned) of 21.12% versus a peer median of 27.29% suggests that it follows a non-differentiated strategy and/or has not been conservative in writing policies. In addition, UFCS-US‘s pre-tax margins are below the peer median (pre-tax margin of 0.58% compared to 11.72%) suggesting relatively high operating costs.
Drivers of Margins

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Differentiated; High Cost, Commodity; High Cost, Commodity; Low Cost

Company Profile

United Fire Group, Inc. operates as a holding company, which is engaged in the business of writing property, casualty insurance, life insurance and selling annuities through a network of independent agencies. It provides insurance protection to individuals, businesses and organizations. The company operates its business through two segments: Property and Casualty Insurance, and Life Insurance. The Property and Casualty Insurance segment is comprised of commercial lines insurance, including surety bonds, personal lines insurance and assumed reinsurance. The Life Insurance segment is comprised of deferred and immediate fixed annuities, universal life insurance products and traditional life insurance products. United Fire Group was founded in January 1946 and is headquartered in Cedar Rapids, IA.