Introduction
Insurer United Fire Group Inc.’s stock (UFCS) experienced a significant downfall of 14% on Tuesday following the issuance of a profit warning for its second quarter. The Cedar Rapids, Iowa-based company cited elevated catastrophe claims as the main reason for the warning.
Bleak Second Quarter Outlook
United Fire Group Inc. announced that it anticipates a loss of $2.23 per share and an adjusted loss of $2.27 per share for the second quarter. These figures differ significantly from the estimates provided by two analysts to FactSet, who predicted a loss of $1.11 per share before Monday’s announcement.
Impact of Catastrophe Losses
The company also disclosed that the second quarter results would include pretax reserve strengthening of $53 million for previous accident years, as well as pretax catastrophic losses of $33 million due to 18 separate weather events. This year, the United States has been plagued by numerous weather catastrophes. Severe flooding in California persisted from Christmas until March, resulting in heavy rainfall and record-breaking snowfall in parts of the Sierra and Southern California. Furthermore, New England experienced a cold wave in early February that caused extensive damage to trees and power lines. Additionally, tornadoes, severe thunderstorms, and hail wreaked havoc in the Southeast and Midwest during March and April.
Future Earnings Report
United Fire Group Inc. is due to report its second-quarter earnings on August 7th. As of now, the company’s stock has declined by 24% year-to-date, while the S&P 500 has seen a 19% increase.