Business description of UNITED-FIRE-GROUP-INC from last 10-k form
United Fire Group, Inc. Form 10-K | 2011
PART I.
ITEM 1. BUSINESS
FORWARD-LOOKING INFORMATION
It is important to note that our actual results could differ materially from those projected in forward-looking statements. Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in Part I, Item 1A, “Risk Factors,” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
GENERAL DESCRIPTION
The terms “Company,” “we,” “us,” or “our” refer, as the context requires, to United Fire Group, Inc., United Fire & Casualty Company, United Fire Group, Inc. and its consolidated subsidiaries and affiliates, or to United Fire & Casualty Company and its consolidated subsidiaries and affiliates. We are engaged in the business of writing property and casualty insurance and life insurance and selling annuities. United Fire & Casualty Company was incorporated in Iowa in January 1946. Our principal executive office is located at 118 Second Avenue SE, P.O. Box 73909, Cedar Rapids, Iowa 52407-3909. Telephone: 319-399-5700.
Holding Company
On February 1, 2012, we completed a holding company reorganization (the "Reoganization") of United Fire Group, Inc., United Fire & Casualty Company, and UFC MergeCo, Inc., an Iowa corporation formed for the purpose of facilitating the Reorganization. The Reorganization Agreement was approved and adopted by United Fire & Casualty Company stockholders at a special meeting of stockholders, held on January 24, 2012.
The Reorganization Agreement provided for the merger of United Fire & Casualty Company with UFC MergeCo, Inc., with United Fire & Casualty Company surviving the Merger as a wholly owned subsidiary of United Fire Group, Inc.. Each share of common stock, par value $3.33 1/3 per share, of United Fire & Casualty Company issued and outstanding immediately prior to the effective time of the Merger into one duly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of United Fire Group, Inc. At the time of completion of the Reorganization, the separate existence of UFC MergeCo, Inc. terminated. In addition, each outstanding option to purchase or other right to acquire shares of United Fire & Casualty Company Common Stock was automatically converted into an option to purchase or right to acquire, upon the same terms and conditions, an identical number of shares of United Fire Group, Inc. Common Stock.
Upon completion of the Reorganization, United Fire Group, Inc., an Iowa corporation, replaced United Fire & Casualty Company, an Iowa corporation, as the publicly held corporation, and the holders of United Fire & Casualty Company Common Stock now hold the same number of shares and same ownership percentage of United Fire Group, Inc. as they held of United Fire & Casualty Company immediately prior to the Reorganization. On February 2, 2012, shares of United Fire Group, Inc. Common Stock commenced trading on the NASDAQ Global Select Market under the symbol “UFCS.”
The directors and executive officers of United Fire Group, Inc. immediately following the Reorganization are the same individuals who were directors and executive officers, respectively, of United Fire & Casualty Company immediately prior to the Reorganization.
Employees
As of December 31, 2011, we employed 868 full-time employees and 26 part-time employees. We are not a party to any collective bargaining agreement.
Reportable Segments
We report our operations in two business segments: property and casualty insurance and life insurance. Our property and casualty insurance segment is comprised of commercial lines insurance, including surety bonds, personal lines insurance and assumed insurance. Our life insurance segment is comprised of deferred and immediate annuities, universal life insurance products and traditional life insurance products. A table reflecting revenues, net income and assets attributable to our operating segments is included in Part II, Item 8, Note 10 “Segment Information.” All intercompany balances have been eliminated in consolidation.
All of our property and casualty insurance subsidiaries belong to one of two reinsurance pooling arrangement, with the exception of Texas General Indemnity Company, are members of an intercompany reinsurance pooling arrangement. The insurance entities of Mercer Insurance Group, Inc. ("Mercer Insurance Group") participated in their own pooling arrangement in 2011, which was in place when we acquired Mercer Insurance Group on March 28, 2011. Effective January 1, 2012, one pooling arrangement exists to cover all participating insurance subsidiaries of United Fire Group, Inc. Pooling arrangements permit the participating companies to rely on the capacity of the entire pool’s capital and surplus, rather than being limited to policy exposures of a size commensurate with each participant’s own surplus level. Under such arrangements, the members share substantially all of the insurance business that is written and allocate the combined premiums, losses and expenses based on percentages defined in the arrangement.
Our life insurance segment consists solely of the operations of United Life Insurance Company.
Available Information
United Fire Group provides free and timely access to all Company reports filed with the Securities and Exchange Commission (“SEC”) in the Investor Relations section of our website at www.unitedfiregroup.com. Select “SEC Filings” to view the list of filings, which includes:
Such reports are made available as soon as reasonably practicable after they are filed with or furnished to the SEC.
Our Code of Ethics is also available at www.unitedfiregroup.com in the Investor Relations section. To view it, select “Corporate Governance” and then “Code of Ethics.”
Free paper copies of any materials that we file with or furnish to the SEC can also be obtained by writing to Investor Relations, United Fire Group, Inc., P.O. Box 73909, Cedar Rapids, Iowa 52407-3909. In addition, you may read and copy any materials we file with or furnish to the SEC at the SEC Public Reference Room, 100 F Street, NE, Washington, D.C. 20549. For more information on the operation of the SEC Public Reference Room, call the SEC at 1-800-SEC-0330.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Acquisition of Mercer Insurance Group, Inc.
On March 28, 2011, we acquired 100 percent of the outstanding common stock of Mercer Insurance Group for $191.5 million; the acquisition was funded through a combination of cash and $79.9 million of short-term debt. Accordingly, the results of operations for Mercer Insurance Group have been included in the accompanying
Consolidated Financial Statements from that date forward. After the acquisition, we market our products through over 1,300 independent property and casualty agencies. In addition, the acquisition allows us to diversify our exposure to weather and other catastrophe risks across our geographic markets.
This transaction was accounted for under the acquisition method using Mercer Insurance Group historical financial information and applying fair value estimates to the acquired assets, liabilities and commitments as of the acquisition date. For additional information related to this acquisition, see Note 16 “Business Combinations” contained in Part II, Item 8, “Financial Statements and Supplementary Data.”
Our organizational structure as of December 31, 2011 is as follows:
Our organizational structure as of February 1, 2012 is as follows:
GEOGRAPHIC DISTRIBUTION
We market our products through our home office in Cedar Rapids, Iowa, and four regional locations: Westminster, Colorado, a suburb of Denver; Galveston, Texas; Pennington, New Jersey; and Rocklin, California.
We are licensed as a property and casualty insurer in 43 states, primarily in the Midwest, West and South, plus the District of Columbia. We have 1,302 independent agencies representing us and our property and casualty insurance subsidiaries. In 2011, 2010 and 2009 the direct premiums written by our property and casualty insurance operations were distributed as follows:
Years Ended December 31,
% of Total
(In Thousands)
2011
2010
2009
Texas
$
74,845
$
68,655
69,900
12.9
%
15.8
%
15.4
Iowa
73,762
68,373
69,515
12.7
15.7
15.3
California
61,500
13
6
10.6
—
Missouri
42,202
40,342
41,185
7.3
9.3
9.1
Louisiana
36,685
37,263
41,743
6.3
8.6
9.2
New Jersey
33,793
5.8
Illinois
32,241
31,330
33,465
5.6
7.2
7.4
Colorado
29,250
28,775
33,938
5.0
6.6
7.5
All Other States
196,610
160,955
164,294
33.8
36.8
36.1
Direct Premiums Written (1)
580,888
435,706
454,046
100.0
100.0
Our life insurance subsidiary is licensed in 33 states, primarily in the Midwest and West, and is represented by 950 independent agencies. In 2011, 2010 and 2009 the direct statutory premiums written by our life insurance operations were distributed as follows: