Jones Trading sets United Fire stock Buy rating, $32 target

Wednesday, Jones Trading initiated coverage on United Fire & Casualty (NASDAQ:UFCS) with a Buy rating and a price target of $32.00. The firm highlighted the company’s potential for growth in earned premiums and its strategic positioning in the property and casualty insurance sector.

United Fire Group, characterized as a traditional property and casualty insurance carrier, has been recognized for its expanding footprint in the commercial property and casualty (P&C) and surety bonds markets. With $3.5 billion in assets, the company’s focus is primarily on commercial lines, alternative distribution channels, and a selection of specialty lines.

Jones Trading analysts pointed out the opportunity for United Fire to increase its earned premiums annually at a low-teen rate. This growth is expected to be supported by a wide and growing network of over 1,000 agencies, at a time when many large-cap P&C competitors are reducing their coverage exposures.

The firm also noted the positive impact of United Fire’s refreshed management team and its new focus on profitability. These changes are anticipated to help the company lower its underwriting expense ratios from the last twelve months’ figure of 35.2% to well into the low 30s. The analysts believe this will significantly enhance the company’s earnings growth potential over the medium term.

In their coverage initiation, Jones Trading analysts shared their view that United Fire Group is poised for substantial revenue growth and improved earnings, thanks to its broad distribution network and strategic focus on cost efficiency.

In other recent news, United Fire Group reported impressive fourth-quarter earnings that exceeded analyst expectations. The company posted adjusted earnings per share of $1.25, significantly surpassing the consensus estimate of $0.61. Revenue for the quarter reached $333.18 million, outperforming the expected $294.8 million. Net income rose to $31.4 million, compared to $19.6 million in the same quarter last year. The combined ratio improved to 94.4%, with a strong underlying loss ratio of 55.7%. Net written premiums increased by 13% year-over-year, driven by strong performance in core commercial and assumed reinsurance business. For the full year 2024, net income increased to $62.0 million, with net investment income rising 37.5% to $82.0 million. The company anticipates its fixed maturity portfolio will generate over $80 million of annualized income in the future.

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