United Fire Group (UFCS) AI Stock Analysis

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United Fire Group

(NASDAQ:UFCS)

78Outperform

United Fire Group's strong financial performance, marked by revenue growth and robust cash flow, along with favorable earnings call highlights, contribute to a solid stock score. The company's technical indicators suggest positive momentum, while its valuation remains reasonable. Despite some operational and industry challenges, the overall outlook is positive.

United Fire Group (UFCS) vs. S&P 500 (SPY)

Market Cap

$666.06M

Dividend Yield2.44%

Average Volume (3M)119.85K

Price to Earnings (P/E)11.0

Beta (1Y)0.60

Revenue Growth14.41%

EPS GrowthN/A

CountryUS

Employees877

SectorFinancial

Sector Strength83

IndustryInsurance - Property & Casualty

Share Statistics

EPS (TTM)2.39

Shares Outstanding25,393,131

10 Day Avg. Volume117,793

30 Day Avg. Volume119,846

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.58

Price to Cash Flow (P/CF)1.20

P/FCF Ratio1.20

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$29.00

Price Target Upside10.56% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering2

United Fire Group Business Overview & Revenue Model

Company DescriptionUnited Fire Group, Inc., together with its subsidiaries, provides property and casualty insurance for individuals and businesses in the United States. The company offers commercial and personal lines of property and casualty insurance; and commercial multiple peril and inland marine insurance, as well as assumed reinsurance products. Its commercial policies include fire and allied lines, other liability, automobile, workers' compensation, and fidelity and surety coverage; and personal lines comprise automobile, and fire and allied lines coverage, including homeowners. The company sells its products through a network of independent agencies. United Fire Group, Inc. was founded in 1946 and is headquartered in Cedar Rapids, Iowa.

How the Company Makes MoneyUnited Fire Group generates revenue primarily through the underwriting of insurance policies and the investment of premiums collected. The company earns money by charging premiums for the insurance coverage it provides to its customers. These premiums are calculated based on the perceived risk associated with insuring a particular client or asset. In addition to underwriting income, UFCS invests the premiums collected into a diversified portfolio of securities to generate investment income, which also contributes significantly to its overall revenue. The company's profitability is influenced by its ability to accurately assess risk, manage claims expenses, and achieve favorable investment returns. Key revenue streams for UFCS include commercial insurance premiums, investment income, and partnerships with independent insurance agents who help distribute its products.

United Fire Group Financial Statement Overview

Summary

United Fire Group has demonstrated strong revenue and cash flow growth, with significant improvements in net profit margin and return on equity. The absence of debt and solid cash flow generation underscore a robust financial position, although operational challenges remain due to weak EBIT and EBITDA margins.

Income Statement

Positive

United Fire Group has shown a strong revenue growth of 14.4% from 2023 to 2024. The gross profit margin remains consistent at 100%, as expected in the insurance industry. The net profit margin improved significantly from a negative position in 2023 to 4.9% in 2024, indicating a turnaround in profitability. However, the absence of positive EBIT and EBITDA margins in the latest reports suggests operational challenges.

Balance Sheet

Positive

The company has a solid equity position with a debt-to-equity ratio of 0, indicating no debt burden in 2024. The return on equity improved significantly to 7.9% in 2024 from a negative in the previous year, showing efficient use of equity. The equity ratio stands at 22.4%, reflecting a stable financial structure with a significant portion of assets financed by equity.

Cash Flow

Very Positive

United Fire Group's free cash flow grew by 104.2% from 2023 to 2024, demonstrating strong cash generation capabilities. The operating cash flow to net income ratio is healthy at 5.5, indicating robust cash flow relative to net earnings. The free cash flow to net income ratio is exceptionally strong at 5.3, further supporting the company's cash flow strength.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.25B	1.10B	980.29M	1.07B	1.07B
	Gross Profit
1.25B	1.10B	980.29M	1.07B	1.07B
	EBIT
0.00	-36.50M	15.27M	96.64M	-175.78M
	EBITDA
0.00	-25.95M	22.93M	106.60M	-162.73M
	Net Income Common Stockholders
61.96M	-29.70M	15.03M	80.59M	-112.71M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
201.05M	102.15M	96.92M	132.38M	88.12M
	Total Assets
3.49B	3.14B	2.88B	3.01B	3.07B
	Total Debt
117.06M	50.00M	50.00M	50.00M	50.00M
	Net Debt
-83.89M	-52.05M	-46.65M	-82.10M	-37.95M
	Total Liabilities
2.71B	2.41B	2.14B	76.75M	74.93M
	Stockholders Equity
781.53M	733.75M	740.11M	879.12M	825.15M
Cash Flow		Free Cash Flow
328.43M	160.85M	-3.39M	15.94M	22.57M
	Operating Cash Flow
340.30M	171.74M	-1.25M	29.92M	41.44M
	Investing Cash Flow
-292.49M	-149.89M	-19.17M	31.73M	-92.87M
	Financing Cash Flow
51.09M	-16.45M	-15.03M	-17.49M	18.66M

United Fire Group Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price26.23

Price Trends

50DMA

27.32

Negative

100DMA

27.76

Negative

200DMA

24.16

Positive

Market Momentum

MACD

-0.41

Positive

RSI

43.43

Neutral

STOCH

29.38

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For UFCS, the sentiment is Neutral. The current price of 26.23 is below the 20-day moving average (MA) of 28.22, below the 50-day MA of 27.32, and above the 200-day MA of 24.16, indicating a neutral trend. The MACD of -0.41 indicates Positive momentum. The RSI at 43.43 is Neutral, neither overbought nor oversold. The STOCH value of 29.38 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for UFCS.

United Fire Group Risk Analysis

United Fire Group disclosed 20 risk factors in its most recent earnings report. United Fire Group reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

United Fire Group Peers Comparison

Overall Rating

UnderperformOutperform

Sector (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
UFCS	78 Outperform	$666.06M	10.97	8.18%	2.44%	14.41%	―
UVE	74 Outperform	$619.51M	10.96	16.49%	2.90%	9.27%	-8.09%
DGICA	73 Outperform	$630.86M	11.76	9.92%	3.84%	6.71%	1000.07%
HRTG	72 Outperform	$496.77M	8.09	24.08%	―	10.84%	16.40%
GBLI	66 Neutral	$426.75M	9.58	6.46%	4.68%	-16.46%	69.94%
Sector *	63 Neutral	$13.51B	9.48	9.36%	4.87%	16.09%	-8.30%
ACIC	45 Neutral	$536.22M	7.09	37.69%	―	1.00%	-77.16%

* Financial Sector Average

Performance Comparison

UFCS

United Fire Group

26.85

5.96

28.53%

DGICA

Donegal Group

18.32

5.63

44.37%

GBLI

Global Indemnity

29.89

-1.07

-3.46%

UVE

Universal Insurance Holdings

22.65

4.23

22.96%

ACIC

American Coastal Insurance

11.10

0.77

7.45%

HRTG

Heritage Insurance Holdings

17.43

7.99

84.64%

United Fire Group Earnings Call Summary

Earnings Call Date: Feb 11, 2025 | % Change Since: 5.26% | Next Earnings Date: May 13, 2025

Earnings Call Sentiment Positive

The earnings call highlighted significant achievements, including record net written premiums, improved underwriting profitability, and strong investment portfolio performance. However, challenges such as social inflation and an elevated expense ratio were noted, indicating areas of concern. Overall, the positive aspects outweighed the negative, suggesting favorable progress.

Highlights

Record Net Written Premiums

In 2024, United Fire Group achieved the highest level of net written premium in its 79-year history.

Strong Combined Ratio and Operating Income

The company produced the best annual combined ratio and the highest adjusted operating income since 2000.

Improvement in Underwriting Profitability

The fourth quarter underlying loss ratio improved by 4.3 points from the fourth quarter of 2023.

Successful Catastrophe Management

The fourth quarter catastrophe loss ratio was 1.6%, well below historical averages. Full-year catastrophe loss ratio was 5.4%, below historical averages by 3.3 and 1.8 points.

Enhanced Investment Portfolio

Annualized book yield improved by more than 80 basis points. Net investment income grew by 21% in the fourth quarter compared to 2023.

Lowlights

Social Inflation Challenges

The industry faces significant challenges due to increased litigation activity, delaying claim reporting and settlement timelines.

Elevated Expense Ratio

Increased performance-based compensation costs impacted the fourth quarter and full-year underwriting expense ratio.

Company Guidance

During the United Fire Group, Inc. 2024 Fourth Quarter Conference Call, the company highlighted several key metrics that marked a successful year. United Fire Group achieved its highest net written premium in its 79-year history, coupled with the best annual combined ratio and highest adjusted operating income since 2000. The fourth quarter underlying loss ratio improved to 55.7%, a 4.3-point improvement from the previous year. The company also reported a fourth quarter catastrophe loss ratio of 1.6%, well below its historical averages. Total net investment income for the fourth quarter was $23.2 million, reflecting a 21% increase from the previous year, while full-year net investment income rose to $82 million. Additionally, the company added $175 million in reserves for general liability, umbrella, and excess casualty lines for accident years 2023 and prior. Fourth quarter net income was reported at $1.21 per diluted share, with a full-year figure of $2.39. The adjusted book value per share increased by $1.95, reaching $33.64 by year-end.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.