Would You Rather Be a Firefighter or Insurance Agent?

Have you ever wanted to be a firefighter when you were a little kid? As a small child, you probably never thought about what happened to buildings after the carnage. You probably figured that your parents happened to get it done. In the real world, insurance companies are crucial for these disasters. Despite being a part of financial services, insurance companies are a little more detached from the economy, unlike banks and diversified financials.

One interesting insurance company that investors may want to consider is United Fire & Casualty UFCS. As the name implies, this insurance company write property and casualty fire insurance as well as life insurance. The firm operates several subsidiaries, and has a market cap of $454 million.

One of the most interesting things about the company is that it increased revenues significantly in the second quarter of 2011. Compared to stagnant revenues of about $117 million, revenues were boosted to $152 million. Investment income and other capital gains remained fairly status, and so overall, revenues jumped quite high in the last quarter. Along with a jump in revenues, expenses increased significantly, jumping from $118 million to $194 million. As a result, United Fire & Casualty took a net loss of -$18 million. It used to operate at a net income between $5 million $10 million. As such, EPS dropped to -$0.69 in the last quarter. Does this performance represent a hiccup in the company's financials or is it a signal of a longer term downtrend?

United Fire & Casualty's cash flows look a bit more positive. While 2010 was a better year for the company, it improved operating cash flows in 2011. Although net income was negative, working capital turned around, including claims paid out and accrued liabilities. The company seems to have found ways to free up cash, but working capital changes are not necessarily a positive thing in the long run. The company's capital expenditures appear to be consistent, quarter over quarter. Despite being an insurance company, whose overhead is not typically office building or physical equipment, United seems to be purchase between $150 million to $500 million each quarter on property, plant, and equipment. Cash from financing activities appear to be minimal, as the company has not been issuing debt or equity or pursuing stock repurchase programs.

Despite dismal operating performance in Q2 2011, the company's cash position increased along with other assets, like PP&E, equity securities, premiums, and short term investments. Liabilities increased as well, with future policy benefits increasing. While some investors may not view this line item as positive, it may mean that United is experiencing a serious influx of business. Unearned premiums have trended similarly, which may corroborate increased business for United. In the end, retained earnings decreased a bit, which may mean that future investors have to really consider what to do going into the future.

Investors need to be aware of all aspects. Knowing the company's geographic presence, its potential outreach, and the demographic that it tends to target is extremely important. All these pieces of information are necessary to make an unbiased decision. However, the books seem to show an interesting story for United Fire & Casualty, and things seem to be picking up for the insurance company in 2011.

United Fire & Casualty is currently trading at about $19.77, down over 2% for 2012.