1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 1996 -------------- 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 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (319) 399-5700 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 ----- ----- As of May 2, 1996, 10,829,399 shares of common stock were outstanding.
2 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES TABLE OF CONTENTS PART I: FINANCIAL INFORMATION Report of Independent Public Accountants................................. 1 Consolidated Balance Sheets for March 31, 1996 and December 31, 1995..... 2 Unaudited Consolidated Statements of Operations - Three-Month Periods Ended March 31, 1996 and 1995.................................... 3 Unaudited Consolidated Statements of Cash Flows - Three-Month Periods Ended March 31, 1996 and 1995.................................... 4 Notes to Unaudited Consolidated Financial Statements..................... 5 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................... 9 PART II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Signatures............................................................... 11 Exhibit 11. Computation of Net Income Per Common Share............................................................. 12
3 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To the Stockholders and Board of Directors of United Fire & Casualty Company: We have reviewed the accompanying consolidated balance sheet of UNITED FIRE & CASUALTY COMPANY (an Iowa corporation) AND SUBSIDIARIES as of March 31, 1996, and the related consolidated statements of operations and cash flows for the three-month periods ended March 31, 1996 and 1995. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above in order for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of United Fire & Casualty Company and Subsidiaries as of December 31, 1995, and, in our report dated February 22, 1996, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1995, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Arthur Andersen LLP Arthur Andersen LLP Chicago, Illinois May 2, 1996 1
4 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 1996 AND DECEMBER , 1995 <TABLE> <CAPTION> - ----------------------------------------------------------------------------------------------------------------------------------- (Dollars in Thousands) - ----------------------------------------------------------------------------------------------------------------------------------- ASSETS 1996 1995 UNAUDITED Audited - ----------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> INVESTMENTS Fixed maturities Held-to-maturity, at amortized cost (market value $622,130 in 1996 and $617,915 in 1995)...................................................................... $607,431 $589,687 Available-for-sale, at market (cost $79,857 in 1996 and $80,464 in 1995)............... 78,268 84,707 Equity securities (cost $24,941 in 1996 and $25,558 in 1995)............................. 79,339 75,678 Mortgage loans........................................................................... 3,021 3,041 Policy loans............................................................................. 7,275 7,163 Other long-term investments (cost $8,028 in 1996 and $7,563 in 1995)..................... 9,321 8,627 Short-term investments................................................................... 7,014 21,530 - -------------------------------------------------------------------------------------------------------------------------------- 791,669 790,433 CASH AND CASH EQUIVALENTS.................................................................. 6,429 6,998 ACCRUED INVESTMENT INCOME.................................................................. 11,454 11,517 ACCOUNTS RECEIVABLE........................................................................ 44,231 38,620 DEFERRED POLICY ACQUISITION COSTS.......................................................... 53,093 52,670 PROPERTY AND EQUIPMENT..................................................................... 13,130 13,252 REINSURANCE RECEIVABLES.................................................................... 16,935 15,996 PREPAID REINSURANCE PREMIUMS............................................................... 4,048 3,865 INTANGIBLES................................................................................ 1,525 1,589 INCOME TAXES RECEIVABLE.................................................................... -- 1,005 OTHER ASSETS............................................................................... 8,917 7,161 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $951,431 $943,106 ================================================================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY - -------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Future policy benefits and losses, claims and settlement expenses Property and casualty insurance........................................................ $208,626 $203,702 Life insurance......................................................................... 391,054 393,603 Unearned premiums........................................................................ 100,062 97,025 Accrued expenses and other liabilities................................................... 17,836 23,376 Employee benefit obligations............................................................. 5,870 5,693 Income taxes payable..................................................................... 2,736 -- Deferred income taxes.................................................................... 10,226 10,954 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES.......................................................................... $736,410 $734,353 - -------------------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY Common stock.............................................................................. $ 36,098 $ 36,098 Additional paid-in capital................................................................ 12,030 12,031 Retained earnings......................................................................... 131,560 124,430 Net unrealized appreciation, net of applicable income taxes of $18,769 in 1996 and $19,232 in 1995..................................................................... 35,333 36,194 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY................................................................. $215,021 $208,753 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................................. $951,431 $943,106 ================================================================================================================================ THE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS. </TABLE> 2
5 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 <TABLE> <CAPTION> - ---------------------------------------------------------------------------------------------------------------------------------- (Dollars in Thousands) - ---------------------------------------------------------------------------------------------------------------------------------- 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Revenues Premiums earned.......................................................................... $ 55,593 $ 51,447 Investment income, net................................................................... 14,020 12,311 Realized investment gains and other income............................................... 4,057 373 Commission and policy fee income......................................................... 431 462 - ---------------------------------------------------------------------------------------------------------------------------------- 74,101 64,593 - ---------------------------------------------------------------------------------------------------------------------------------- Benefits, Losses and Expenses Losses and settlement expenses........................................................... 35,737 31,047 Increase in liability for future policy benefits......................................... 1,053 2,927 Amortization of deferred policy acquisition costs........................................ 14,304 11,524 Other underwriting expenses.............................................................. 5,924 6,626 Interest on policyholders' accounts...................................................... 5,115 4,828 - ---------------------------------------------------------------------------------------------------------------------------------- 62,133 56,952 - ---------------------------------------------------------------------------------------------------------------------------------- Income before income taxes............................................................... 11,968 7,641 Federal income taxes..................................................................... 3,213 1,393 - ---------------------------------------------------------------------------------------------------------------------------------- Net Income............................................................................... $ 8,755 $ 6,248 ================================================================================================================================== Net Income per common share ............................................................. $ .81 $ .58 ================================================================================================================================== Weighted average common shares outstanding................................................. 10,829,448 10,829,706 ================================================================================================================================== Cash dividends declared per common share................................................... $ .15 $ .13 ================================================================================================================================== THE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS. </TABLE> 3
6 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 <TABLE> <CAPTION> - ---------------------------------------------------------------------------------------------------------------------------------- (Dollars in Thousands) - ---------------------------------------------------------------------------------------------------------------------------------- 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Cash Flows From Operating Activities Net income................................................................................. $ 8,755 $ 6,248 - ---------------------------------------------------------------------------------------------------------------------------------- Adjustments to reconcile net income to net cash provided by operating activities Net bond discount accretion.............................................................. (199) (529) Depreciation and amortization............................................................ 597 654 Realized investment gains................................................................ (2,000) (373) Changes in: Accrued Investment income............................................................. 63 565 Accounts receivable................................................................... (5,611) (4,869) Deferred policy acquisition costs..................................................... (423) (754) Reinsurance receivables............................................................... (939) 5,714 Prepaid reinsurance premiums.......................................................... (183) (664) Income taxes receivable/payable....................................................... 3,741 1,005 Other assets.......................................................................... (1,756) (586) Future policy benefits and losses, claims and settlement expenses...................................................... 5,340 (214) Unearned premiums..................................................................... 3,037 3,735 Accrued expenses and other liabilities................................................ (3,915) 1,161 Employee benefit obligations.......................................................... 177 383 Deferred income taxes................................................................. (265) (36) - ---------------------------------------------------------------------------------------------------------------------------------- Total adjustments........................................................................ $(2,336) $ 5,192 - ---------------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities................................................ $ 6,419 $11,440 - ---------------------------------------------------------------------------------------------------------------------------------- Cash Flows From Investing Activities Proceeds from sale of available-for-sale investments..................................... $ 9,169 $ 85 Proceeds from call and maturity of held-to-maturity investments.......................... 17,364 7,585 Proceeds from call and maturity of available-for-sale investments........................ 4,297 514 Proceeds from sale of other investments.................................................. 15,359 4,641 Purchase of investments held-to-maturity................................................. (34,888) (17,132) Purchase of investments available-for-sale............................................... (10,264) -- Purchase of other investments............................................................ (1,399) (4,740) Proceeds from sale of property and equipment............................................. 91 15 Purchase of property and equipment....................................................... (502) (353) - ---------------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities.................................................... $ (773) $(9,385) - ---------------------------------------------------------------------------------------------------------------------------------- Cash Flows From Financing Activities Policyholders' account balances Deposits to investment and universal life type contracts............................. $23,385 $19,005 Withdrawals from investment and universal life type contracts........................ (26,350) (19,614) Purchase and retirement of common stock.................................................. (2) (6) Payment of cash dividends................................................................ (3,248) (2,744) - ---------------------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities.................................................... $(6,215) $(3,359) - ---------------------------------------------------------------------------------------------------------------------------------- Decrease in Cash and Cash Equivalents...................................................... $ (569) $(1,304) Cash and Cash Equivalents at Beginning of Year............................................. 6,998 10,255 - ---------------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Period................................................. $ 6,429 $ 8,951 ================================================================================================================================== The Notes to Unaudited Consolidated Financial Statements are an integral part of these statements. </TABLE> 4
7 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. In the opinion of the management of United Fire & Casualty Company and Subsidiaries (the "Company"), the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, the results of operations, and cash flows for the periods presented. The results for the interim periods are not necessarily indicative of the results of operations that may be expected for the year. The financial statements contained herein should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 1995. The review report of Arthur Andersen LLP accompanies the unaudited consolidated financial statements included in Item 1 of Part I. NOTE 2. The Company maintains its records in conformity with the accounting practices prescribed or permitted by the Insurance Department of the State of Iowa. To the extent that certain of these practices differ from generally accepted accounting principles, adjustments have been made in order to present the accompanying financial statements on the basis of generally accepted accounting principles. The preparation of financial statements in conformity with generally accepted accounting principles ("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 financial statements for the previous year have been reclassified to conform with the financial statement presentation at March 31, 1996. NOTE 3. 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, net of refunds for the three months ended March 31, 1996 and 1995 were $(263,000), and $400,000, respectively. There were no significant payments of interest through March 31, 1996 and 1995, other than interest credited to policyholders' accounts. NOTE 4. 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. 5
8 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 5. Included in realized gains and other income is $2,057,000 in interest in connection with the settlement of a Federal income tax Revenue Agent Review for previous tax years. NOTE 6. Effective January 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No. 115"). 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 net income; 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 net income and reported as a separate component of stockholders' equity. The Company classifies a majority of its investments in fixed income securities as held-to-maturity. 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. 6
9 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 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 March 31, 1996 is as follows. <TABLE> <CAPTION> - ---------------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands) - ---------------------------------------------------------------------------------------------------------------------------------- MARCH 31, 1996 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")................... $ 30,674 $ 293 $1,028 $ 29,939 Mortgage-backed securities.................................... 26,914 2,255 -- 29,169 All others.................................................... 4,084 329 33 4,380 States, municipalities and political subdivisions............... 191,312 8,735 1,177 198,870 Foreign........................................................ 6,853 242 -- 7,095 Public utilities............................................... 58,265 106 1,497 56,874 Corporate bonds Collateralized mortgage obligations ("CMOs").................. 98,113 1,900 1,441 98,572 All other corporate bonds..................................... 191,216 7,022 1,007 197,231 - ---------------------------------------------------------------------------------------------------------------------------------- Total held-to-maturity.............................................. $607,431 $20,882 $6,183 $622,130 ================================================================================================================================== AVAILABLE-FOR-SALE Fixed Maturities Bonds United States Government, government agencies and authorities Collateralized mortgage obligations ("CMOs").................... $ 64,406 $ 1,114 $2,011 $ 63,509 Mortgage-backed securities...................................... 70 5 -- 75 All others...................................................... 336 -- 7 329 Public utilities................................................. 206 -- 22 184 Corporate bonds Collateralized mortgage obligations ("CMOs").................... 14,229 436 1,105 13,560 All other corporate bonds....................................... 610 14 13 611 - ---------------------------------------------------------------------------------------------------------------------------------- Total available-for-sale fixed maturities........................ $ 79,857 $ 1,569 $3,158 $ 78,268 - ---------------------------------------------------------------------------------------------------------------------------------- Equity securities Common stocks Public utilities................................................ $ 3,561 $ 4,948 $ -- $ 8,509 Banks, trust and insurance companies............................ 11,964 33,475 102 45,337 All other common stocks......................................... 8,566 16,372 264 24,674 Nonredeemable preferred stocks.................................... 850 -- 31 819 - ---------------------------------------------------------------------------------------------------------------------------------- Total equity securities........................................... $ 24,941 $54,795 $ 397 $ 79,339 - ---------------------------------------------------------------------------------------------------------------------------------- Total available-for-sale............................................ $104,798 $56,364 $3,555 $157,607 ================================================================================================================================== Other long-term investments......................................... $ 8,028 $ 1,444 $ 151 $ 9,321 ================================================================================================================================== </TABLE> 7
10 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS The amortized cost and fair value of held-to-maturity and available-for-sale fixed maturities at March 31, 1996 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) - ---------------------------------------------------------------------------------------------------------------------------------- MARCH 31, 1996 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............................................. $ 6,566 $ 6,638 $ -- $ -- Due after one year through five years............................... 67,414 70,724 536 529 Due after five year through ten years............................... 172,810 179,131 616 595 Due after ten years................................................. 204,940 207,957 -- -- Mortgage-backed securities.......................................... 26,914 29,169 70 75 Collateralized mortgage obligations ("CMOs")........................ 128,787 128,511 78,635 77,069 - ---------------------------------------------------------------------------------------------------------------------------------- $607,431 $622,130 $79,857 $78,268 ================================================================================================================================== </TABLE> 8
11 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION AND LIQUIDITY ASSETS The Company's fixed income portfolio increased $11,305,000 between March 31, 1996 and December 31, 1995. Net unrealized losses of $1,589,000 were recorded on the available-for-sale fixed income securities. Approximately 30% of the fixed income portfolio are collateralized mortgage obligations ("CMOs"), compared to 31% at December 31, 1995. 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 stocks and other long-term investments, net of applicable income taxes, increased between 1996 and 1995 by $4,507,000. 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. The decrease in this asset of $14,516,000 was due primarily to the life insurance segment's withdrawal of a block of single premium business during the first quarter of 1996. The Company's accounts receivable are balances due from property and casualty insurance agents and brokers for premiums written, net of commissions. In 1996, this asset grew by $5,611,000 or 15%. Premiums writings are increasing, as is utilization of the Company's deferred billing plan. The balance in the Company's deferred acquisition costs asset remained relatively flat between years, due to an increase in premium writings with a less than comparable increase in associated underwriting expenses. Reinsurance receivables are loss and expense payments and ceded reserves that are due the Company from reinsurers. The balance in this asset increased $939,000 or 6%. The Company does not anticipate collection problems with regard to any of its reinsurance receivables. LIABILITIES The property and casualty segment's gross reserves before ceded reinsurance for losses and settlement expenses increased $4,924,000 or 2% between 1996 and 1995. The largest catastrophe reserve continues to be the Northridge earthquake, with gross reserves remaining of $5,109,000, compared to $3,733,000 at December 31, 1995. 9
12 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION AND LIQUIDITY (CONTINUED) The Company is not aware of any significant environmental liabilities. Because the Company writes property coverage, there does exist the potential for exposure to environmental pollution and asbestos claims. The Company's underwriters are aware of these exposures and use limited riders or endorsements to limit exposure. The liability for future policy benefits and interest on policyholders' accounts decreased $2,549,000 due to the full fund withdrawal of one block of universal life business totaling $15,600,000 during the first quarter. MATERIAL CHANGES IN RESULTS OF OPERATIONS PROPERTY AND CASUALTY OPERATIONS Property and casualty premiums earned increased 13%, or $5,682,000 through March 31, 1996, when compared to March 31, 1995. Much of the growth came from our direct business and was concentrated in four midwestern states. In addition, ceded premium rates remain flat, which has the effect of increasing net premium writings. Loss and loss adjustment expenses increased 14% or $4,038,000 over the first quarter of 1995 due to general growth and winter storms that occurred in the first two months of 1996. The increase in the property and casualty segments' other underwriting expenses, (including amortization of deferred acquisition costs) of $2,323,000 or 15%, resulted primarily from an increase in commissions incurred. LIFE OPERATIONS A decrease of $1,509,000 in premiums earned is completely attributed to a decrease in collected traditional life products. Interest credited increased by only $287,000 compared to $1,140,000 at March 31, 1995. This is a result of the withdrawal of one block of universal life business totaling $15,600,000 during the first quarter. The Company anticipates a similar comparison throughout 1996. INVESTMENT RESULTS Investment income rose 14% in 1996, over 1995, which is largely attributable to a growing fixed income portfolio. In the first quarter of 1996, the Company took advantage of market conditions and sold a few of its available-for-sale fixed income securities, contributing to the realized gain increase of $1,627,000. 10
13 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits-Exhibit 11 - Computation of Net Income Per Common Share (Page 12). SIGNATURES Pursuant to the requirements 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 - ------------------------------------------------------------------------------- (REGISTRANT) MAY 2, 1996 - ------------------------------------------------------------------------------- (DATE) /s/ SCOTT MCINTYPRE, JR. - ------------------------------------------------------------------------------- SCOTT MCINTYRE, JR. CHAIRMAN AND CHIEF EXECUTIVE OFFICER /S/ K.G. BAKER - ------------------------------------------------------------------------------- K.G. BAKER, VICE PRESIDENT CHIEF FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING OFFICER 11