SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange ___ Act of 1934 for the quarterly period ended June 30, 1997 ___ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________ to __________ Commission File Number 2-39621 UNITED FIRE & CASUALTY COMPANY (Exact Name of Registrant As Specified in its Charter) Iowa 42-0644327 (State of Incorporation) (IRS Employer Identification No.) 118 Second Avenue, S.E. Cedar Rapids, Iowa 52407 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (319) 399-5700 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO _______ _______ As of August 7, 1997, 10,727,322 shares of common stock were outstanding. UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES TABLE OF CONTENTS PART I: FINANCIAL INFORMATION Report of Independent Public Accountants . . . . . . . . . . . . . . . . 1 Consolidated Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Unaudited Consolidated Statements of Operations - Three-Month Periods Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . 3 Unaudited Consolidated Statements of Operations - Six-Month Periods Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . 4 Unaudited Consolidated Statements of Cash Flows - Six-Month Periods Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . 5 Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . 6 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 9 PART II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Exhibit 11. Computation of Net Income Per Common Share . . . . . . . . . 12 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of United Fire & Casualty Company: We have reviewed the accompanying consolidated balance sheet of UNITED FIRE & CASUALTY COMPANY (an Iowa corporation) AND SUBSIDIARIES as of June 30, 1997, and the related consolidated statements of operations for the three-month and six-month periods ended June 30, 1997 and 1996, and the consolidated statements of cash flows for the six-month periods ended June 30, 1997 and 1996. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of United Fire & Casualty Company and Subsidiaries as of December 31, 1996, and, in our report dated February 20, 1997, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1996, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Arthur Andersen LLP Chicago, Illinois August 7, 1997 1 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 1997 AND DECEMBER 31, 1996 - ------------------------------------------------------------------------------ (Dollars in Thousands) - ------------------------------------------------------------------------------ ASSETS 1997 1996 Unaudited Audited - ------------------------------------------------------------------------------ INVESTMENTS Fixed maturities Held-to-maturity, at amortized cost (market value $708,725 in 1997 and $668,541 in 1996) $ 691,031 $ 651,138 Available-for-sale, at market (cost $77,664 in 1997 and $69,317 in 1996) 76,156 67,902 Equity securities (cost $25,906 in 1997 and $25,898 in 1996) 106,687 91,314 Mortgage loans 2,915 2,959 Policy loans 7,978 7,591 Other long-term investments, at market (cost $8,258 in 1997 and $8,395 in 1996) 10,290 9,970 Short-term investments 13,260 29,330 - ------------------------------------------------------------------------------ $ 908,317 $ 860,204 Cash and Cash Equivalents 6,827 14,389 Accrued Investment Income 13,150 12,195 Accounts Receivable 52,059 43,433 Deferred Policy Acquisition Costs 59,393 56,083 Property and Equipment 12,330 12,630 Reinsurance Receivables 10,964 12,490 Prepaid Reinsurance Premiums 4,263 4,229 Intangibles 1,209 1,335 Income Taxes Receivable 1,775 709 Other Assets 6,669 7,138 - ------------------------------------------------------------------------------ TOTAL ASSETS $1,076,956 $1,024,835 ============================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Future policy benefits and losses, claims and settlement expenses Property and casualty insurance $ 224,820 $ 221,207 Life insurance 449,003 431,582 Unearned premiums 112,585 105,008 Accrued expenses and other liabilities 16,877 19,721 Employee benefit obligations 7,723 6,764 Deferred income taxes 18,626 12,694 - ------------------------------------------------------------------------------ TOTAL LIABILITIES $ 829,634 $ 796,976 - ------------------------------------------------------------------------------ STOCKHOLDERS' EQUITY Common stock $ 35,758 $ 35,759 Additional paid-in capital 9,331 9,342 Retained earnings 149,130 139,933 Net unrealized appreciation, net of applicable income taxes of $28,202 in 1997 and $22,750 in 1996 53,103 42,825 - ------------------------------------------------------------------------------ TOTAL STOCKHOLDERS' EQUITY $ 247,322 $ 227,859 - ------------------------------------------------------------------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,076,956 $1,024,835 ============================================================================== The Notes to Unaudited Consolidated Financial Statements are an integral part of these statements. 2 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS THREE-MONTH PERIODS ENDED JUNE 30, 1997 AND 1996 - ------------------------------------------------------------------------------ (Dollars in Thousands Except Per Share Data and Number of Shares) - ------------------------------------------------------------------------------ 1997 1996 - ------------------------------------------------------------------------------ Revenues Net premiums earned $ 60,403 $ 56,209 Investment income, net 15,137 14,078 Realized investment gains and other income 52 791 Commission and policy fee income 517 514 - ------------------------------------------------------------------------------ 76,109 71,592 - ------------------------------------------------------------------------------ Benefits, Losses and Expenses Losses and settlement expenses 40,793 39,753 Increase in liability for future policy benefits 1,339 1,541 Amortization of deferred policy acquisition costs 13,292 11,447 Other underwriting expenses 7,973 7,345 Interest on policyholders' accounts 6,154 5,054 - ------------------------------------------------------------------------------ 69,551 65,140 - ------------------------------------------------------------------------------ Income before income taxes 6,558 6,452 Federal income taxes 1,440 1,291 - ------------------------------------------------------------------------------ Net income $ 5,118 $ 5,161 ============================================================================== Net Income per common share $ 0.48 $ 0.48 ============================================================================== Weighted average common shares outstanding 10,727,408 10,794,675 ============================================================================== Cash dividends declared per common share $ 0.16 $ 0.15 ============================================================================== The Notes to Unaudited Consolidated Financial Statements are an integral part of these statements. 3 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS SIX-MONTH PERIODS ENDED JUNE 30, 1997 AND 1996 - ------------------------------------------------------------------------------ (Dollars in Thousands Except Per Share Data and Number of Shares) - ------------------------------------------------------------------------------ 1997 1996 - ------------------------------------------------------------------------------ Revenues Net premiums earned $ 119,659 $ 111,802 Investment income, net 30,174 28,098 Realized investment gains and other income 748 4,848 Commission and policy fee income 958 945 - ------------------------------------------------------------------------------ 151,539 145,693 - ------------------------------------------------------------------------------ Benefits, Losses and Expenses Losses and settlement expenses 77,758 75,490 Increase in liability for future policy benefits 2,602 2,594 Amortization of deferred policy acquisition costs 25,015 24,187 Other underwriting expenses 17,780 14,833 Interest on policyholders' accounts 11,653 10,169 - ------------------------------------------------------------------------------ 134,808 127,273 - ------------------------------------------------------------------------------ Income before income taxes 16,731 18,420 Federal income taxes 4,210 4,504 - ------------------------------------------------------------------------------ Net Income $ 12,521 $ 13,916 ============================================================================== Net Income per common share $ 1.17 $ 1.29 ============================================================================== Weighted average common shares outstanding 10,727,559 10,812,061 ============================================================================== Cash dividends declared per common share $ 0.31 $ 0.30 ============================================================================== The Notes to Unaudited Consolidated Financial Statements are an integral part of these statements. 4 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX-MONTH PERIODS ENDED JUNE 30, 1997 AND 1996 - ------------------------------------------------------------------------------ (Dollars in Thousands) 1997 1996 - ------------------------------------------------------------------------------ Cash Flows From Operating Activities Net income $ 12,521 $ 13,916 - ------------------------------------------------------------------------------ Adjustments to reconcile net income to net cash provided by operating activities Net bond discount accretion (9) (340) Depreciation and amortization 1,425 1,143 Realized investment gains (748) (2,791) Changes in: Accrued investment income (955) (165) Accounts receivable (8,626) (13,221) Deferred policy acquisition costs (3,310) (3,952) Reinsurance receivables 1,526 (2,173) Prepaid reinsurance premiums (34) (186) Income taxes receivable (1,066) 1,460 Other assets 469 (192) Future policy benefits and losses, claims and settlement expenses 5,701 12,757 Unearned premiums 7,577 11,059 Accrued expenses and other liabilities (1,233) 1,825 Employee benefit obligations 959 547 Deferred income taxes 480 (1,537) - ------------------------------------------------------------------------------ Total adjustments $ 2,156 $ 4,234 - ------------------------------------------------------------------------------ Net cash provided by operating activities $ 14,677 $ 18,150 - ------------------------------------------------------------------------------ Cash Flows From Investing Activities Proceeds from sale of available-for-sale investments $ 617 $ 18,894 Proceeds from call and maturity of held-to-maturity investments 27,657 34,539 Proceeds from call and maturity of available-for-sale investments 2,196 5,431 Proceeds from sale of other investments 28,046 17,176 Purchase of investments held-to-maturity (67,380) (63,919) Purchase of investments available-for-sale (10,578) (18,773) Purchase of other investments (12,185) (5,610) Proceeds from sale of property and equipment - 229 Purchase of property and equipment (999) (1,168) - ------------------------------------------------------------------------------ Net cash used in investing activities $(32,626) $ (13,201) - ------------------------------------------------------------------------------ Cash Flows From Financing Activities Policyholders' account balances Deposits to investment and universal life type contracts $ 59,657 $ 41,238 Withdrawals from investment and universal life type contracts (44,324) (38,297) Purchase and retirement of common stock (12) (2,713) Payment of cash dividends (4,934) (4,861) - ------------------------------------------------------------------------------ Net cash provided by (used in) financing activities $ 10,387 $ (4,633) - ------------------------------------------------------------------------------ Increase (Decrease) in Cash and Cash Equivalents $ (7,562) $ 316 Cash and Cash Equivalents at Beginning of Year 14,389 6,998 - ------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Period $ 6,827 $ 7,314 ============================================================================== The Notes to Unaudited Consolidated Financial Statements are an integral part of these statements. 5 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. In the opinion of the management of United Fire & Casualty Company and Subsidiaries (the "Company"), the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, the results of operations, and cash flows for the periods presented. The results for the interim periods are not necessarily indicative of the results of operations that may be expected for the year. The financial statements contained herein should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 1996. The review report of Arthur Andersen LLP accompanies the unaudited consolidated financial statements included in Item 1 of Part I. NOTE 2. The Company maintains its records in conformity with the accounting practices prescribed or permitted by the Insurance Department of the State of Iowa. To the extent that certain of these practices differ from generally accepted accounting principles ("GAAP"), adjustments have been made in order to present the accompanying financial statements on the basis of GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain amounts included in the financial statements for the previous year have been reclassified to conform with the financial statement presentation at June 30, 1997. NOTE 3. For purposes of reporting cash flows, cash and cash equivalents include cash and non-negotiable certificates of deposit with original maturities of three months or less. Income taxes paid, net of refunds for the six month periods ended June 30, 1997 and 1996 were $4,794,000 and $(263,000), respectively. There were no significant payments of interest through June 30, 1997 and 1996, other than interest credited to policyholders' accounts. NOTE 4. Included in realized gains and other income for the six-month period ended June 30, 1996, is $2,057,000 of interest in connection with the settlement of a Federal income tax Revenue Agent Review for previous tax years. 6 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 5. A reconciliation of the amortized cost to fair values of investments in held-to-maturity and available-for-sale fixed maturities, marketable equity securities and other long-term investments as of June 30, 1997 is as follows. - --------------------------------------------------------------------------------------------------------------------------------- (Dollars in Thousands) - --------------------------------------------------------------------------------------------------------------------------------- JUNE 30, 1997 Gross Gross Amortized Unrealized Unrealized Fair TYPE OF INVESTMENT Cost Appreciation Depreciation Value - --------------------------------------------------------------------------------------------------------------------------------- HELD-TO-MATURITY Fixed Maturities Bonds United States Government, government agencies and authorities Collateralized mortgage obligations $ 27,327 $ 336 $ 650 $ 27,013 Mortgage-backed securities 20,963 1,802 2 22,763 All others 3,366 273 29 3,610 States, municipalities and political subdivisions 226,611 9,256 681 235,186 Foreign 6,835 194 23 7,006 Public utilities 90,126 422 892 89,656 Corporate bonds Collateralized mortgage obligations 96,543 2,876 721 98,698 All other corporate bonds 219,260 6,613 1,080 224,793 - --------------------------------------------------------------------------------------------------------------------------------- Total held-to-maturity $691,031 $21,772 $ 4,078 $708,725 ================================================================================================================================= AVAILABLE-FOR-SALE Fixed Maturities Bonds United States Government, government agencies and authorities Collateralized mortgage obligations $ 53,290 $ 616 $ 1,324 $ 52,582 Mortgage-backed securities 59 4 - 63 All others 9,633 26 14 9,645 Public utilities 206 - 1 205 Corporate bonds Collateralized mortgage obligations 13,956 80 902 13,134 All other corporate bonds 520 11 4 527 - --------------------------------------------------------------------------------------------------------------------------------- Total available-for-sale fixed maturities $ 77,664 $ 737 $ 2,245 $ 76,156 - --------------------------------------------------------------------------------------------------------------------------------- Equity securities Common stocks Public utilities $ 3,525 $ 5,313 $ - $ 8,838 Banks, trust and insurance companies 11,903 53,022 - 64,925 All other common stocks 9,628 22,546 187 31,987 Nonredeemable preferred stocks 850 91 4 937 - --------------------------------------------------------------------------------------------------------------------------------- Total equity securities $ 25,906 $80,972 $ 191 $106,687 - --------------------------------------------------------------------------------------------------------------------------------- Total available-for-sale $103,570 $81,709 $ 2,436 $182,843 ================================================================================================================================= Other long-term investments $ 8,258 $ 2,042 $ 10 $ 10,290 ================================================================================================================================= 7 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS The amortized cost and fair value of held-to-maturity and available-for-sale fixed maturities at June 30, 1997 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. - ------------------------------------------------------------------------------ (Dollars in Thousands) - ------------------------------------------------------------------------------ JUNE 30, 1997 Held-to-maturity Available-for-sale - ------------------------------------------------------------------------------ Amortized Fair Amortized Fair Cost Value Cost Value - ------------------------------------------------------------------------------ Due in one year or less $ 8,973 $ 9,126 $ 80 $ 80 Due after one year through five years 106,090 110,381 631 639 Due after five years through ten years 189,634 194,454 6,314 6,298 Due after ten years 241,501 246,290 3,334 3,360 Mortgage-backed securities 20,963 22,763 59 63 Collateralized mortgage obligations 123,870 125,711 67,246 65,716 - ------------------------------------------------------------------------------ $691,031 $708,725 $ 77,664 $ 76,156 ============================================================================== NOTE 6. In February, 1997, the Financial Accounting Standards Board ("FASB") issued two Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" and No. 129, "Disclosure of Information about Capital Structure." These statements are effective for both interim and annual periods ending after December 15, 1997. In management's opinion, the adoption of these statements will not have a material impact on the Consolidated Financial Statements. In June, 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" governing the reporting and display of comprehensive income and its components which includes items previously recorded directly in equity, such as unrealized gains or losses on securities available-for-sale and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" requiring that public businesses report financial and descriptive information about its reportable operating segments. Both Statements are effective for interim and annual periods beginning after December 15, 1997. The impact of adopting these Statements is not expected to be material to the Consolidated Financial Statements or Notes to Consolidated Financial Statements. 8 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ASSETS Favorable market conditions resulted in a 24% increase in net unrealized appreciation to $53,103,000, on the Company's available-for-sale securities and other long-term investments. Available-for-sale holdings include 10% of the fixed maturity portfolio, and 100% of the common and preferred stocks. A majority of fixed maturities are classified as held-to-maturity, and the Company has not classified any investments as trading securities. Collateralized mortgage obligations account for approximately 25% of the current fixed maturities compared to 26% at December 31, 1996. The Company minimizes its prepayment risk by buying most issues priced at a slight discount. While buying at a discount does not prevent prepayment, the yield is not penalized as is the case when a premium is paid. In addition, although the stated maturity is longer than the average life of the issues, the Company's strategy has been to purchase issues with expected maturity in the seven-to-twelve-year range. Equity securities consist of readily marketable common and preferred stocks, all of which are classified as available-for-sale. Other long-term investments are primarily holdings in limited partnership funds investing in banks. The Company's short-term investments, comprised of money market accounts, overnight repurchase agreements and fixed maturities are utilized to meet anticipated short-term cash requirements. In addition, the Company also maintains a $6 million line of credit with a local bank, which was not utilized through June 30, 1997, or during 1996. Short-term investments decreased $16,070,000 between December 31, 1996 and June 30, 1997, due to purchases of fixed maturity securities. Accounts receivable are balances due from property and casualty insurance agents and brokers for premiums written less commissions, and losses receivable. In 1997, this asset grew by $8,626,000 or 20%. Premium growth and use of a deferred payment plan have contributed to this increase. In addition, the Company pays a deposit premium to one of its reinsurers in June of each year, which has the effect of increasing accounts receivable. The Company's deferred policy acquisition costs ("DAC") are expenses such as commissions, premium taxes and other costs associated with procuring insurance policies. The asset is established at the beginning of the policy period and is then amortized over the lives of the respective policy terms to achieve a matching of expenses to revenue. Premium growth has created a corresponding increase in deferred policy acquisition costs. Reinsurance receivables are losses, expenses and reserves that are due the Company from reinsurers. This asset will fluctuate due to the timing of payments between the Company and the reinsurers. Management does not anticipate collection problems with regard to any of its reinsurance receivables. LIABILITIES The property and casualty segment's gross liability before reinsurance for losses and settlement expenses increased $3,613,000 or 2% between 1997 and 1996. Gross reserves remaining on the 1994 Northridge earthquake were $3,348,000 as of June 30, 1997, compared to $4,599,000 at December 31, 1996. The Company is not aware of any significant contingent liabilities as far as environmental issues are concerned. Because of the type of business the Company writes, i.e. property coverage, there exists the potential for exposure for environmental pollution and asbestos claims. The Company's underwriters are aware of these exposures and use riders or endorsements to limit exposure. 9 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The liability for future policy benefits and interest on policyholders' accounts saw an increase of $17,421,000 or 4% for 1997 due to the addition of new premiums and growth in existing account balances. MATERIAL CHANGES IN RESULTS OF OPERATIONS PROPERTY AND CASUALTY OPERATIONS The property and casualty segment had a statutory combined ratio (i.e., losses incurred to premiums earned, plus expenses incurred to premiums written) of 100% compared to 102% through the first half of 1996. For the three months ended June 30, 1997, the combined ratio was 101% compared to 106% for the second quarter of 1996. The improved underwriting experience is the result of an increase in premiums, coupled with a small increase in the Company's property and casualty losses and expenses incurred. The Addison Insurance Company, under new management since September, 1996, has made a considerable improvement in its results, reporting a 96% combined ratio at June, 30, 1997, compared to 146% at June, 30, 1996. Premium growth of 8% or $8,247,000 was primarily due to an increase in the Company's direct business for the six months ended June 30, 1997 compared to June 30, 1996. Much of the increase originated in Louisiana, Mississippi and in several midwestern states. Loss and settlement expenses incurred by the property and casualty segment through June, 1997 increased 4% or $3,133,000 over 1996. Although overall claim counts have remained relatively stable for the year, the second quarter saw several storms pass through the midwest resulting in an estimated $4,000,000 in flood, wind and hail losses. In addition, the workers' compensation, commercial auto and personal auto lines saw an increase in claims severity. As an offset to these loss increases, Addison Insurance Company has shown greatly improved results, with a decrease in losses and settlement expenses incurred of over $4,000,000 or 52%. An increase of $2,386,000 in property and casualty amortization of deferred acquisition costs and underwriting and acquisition expenses was primarily due to an increase in commissions, premium taxes and other policy issue expenses, associated with growth in premiums. LIFE OPERATIONS Premiums earned decreased $387,000, or 4% for the six months ended June 30, 1997 compared to June 30, 1996. A 54% increase of $500,000 in accident and health business was offset by a $546,000 increase in unearned premiums and a decrease of $342,000 in life premiums. The increase of $1,365,000 in amortization of deferred acquisition costs and other underwriting expenses is due primarily to an increase in commission expense. INVESTMENT RESULTS Growth in the Company's fixed maturity portfolio contributed to the 7% increase in investment income. Two factors contributed to the decrease of $4,100,000 in realized investment gains and other income. During the first half of 1996, the Company took advantage of market conditions and sold a few of its available-for-sale fixed income securities. In addition, in 1996, the settlement of a Federal income tax Revenue Agent Review for previous tax years resulted in the receipt of $2,057,000 in interest, which was included in realized investment gains and other income. 10 UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits-Exhibit 11 - Computation of Net Income Per Common Share (Page 12). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNITED FIRE & CASUALTY COMPANY ______________________________ (REGISTRANT) AUGUST 7, 1997 ______________________________ (DATE) ______________________________ JOHN A. RIFE PRESIDENT ______________________________ K.G. BAKER VICE PRESIDENT , CHIEF FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING OFFICER 11