February 13, 2002

United Fire & Casualty Company’s Net Income 
Increased 55 percent to $24,093,000 in 2001

CEDAR RAPIDS, IA – United Fire & Casualty Company (the “Company”), one of the country’s 100 largest property and casualty insurers as measured by net premiums written, today reported net operating income, which excludes net realized gains and losses on securities, of $12,189,000, or $1.21 per share, for the fourth quarter of 2001, compared to $4,693,000, or $.47 per share, for the fourth quarter of 2000. The improvement between quarters was driven primarily by premium growth and a decrease in underwriting expenses. The Company did not have direct exposure related to the September 11 national events. However, the fourth quarter 2001 results include $1,531,000 in after-tax charges related to the terrorist attacks from assumed property reinsurance. Incurred losses and expenses on all catastrophes totaled $3,992,000 after-tax, or $.40 per share, for the three months ended December 31, 2001, compared to $2,924,000, or $.29 per share, for the same period of 2000.

Net income (net operating income plus net realized gains and losses) for the fourth quarter of 2001 was $12,158,000, or $1.21 per share, compared to net income of $4,102,000, or $.41 per share, for the fourth quarter of 2000. Net premiums earned increased between the fourth quarters of 2000 and 2001 by $7,939,000 (9 percent) to $96,907,000. During 2001, the property and casualty segment implemented rate increases and generated new business, both of which contributed to the premium growth. Net investment income grew by $2,811,000 (12 percent), due to growth in the Company’s investment portfolio. The Company recorded net realized investment losses, after tax, of $31,000 in the fourth quarter of 2001, compared to $591,000 in the same period of 2000. Realized losses in the fourth quarters of 2001 and 2000 resulted primarily from other-than-temporary impairments on a small number of fixed maturity securities.

Year-to-date results
For the year ended December 31, 2001, net operating income was $24,214,000, or $2.41 per share, compared to $16,713,000, or $1.67 per share, for the year ended December 31, 2000. The results of the Company’s property and casualty segment improved, due primarily to an increase in premiums earned. The Company’s life insurance segment also contributed to its earnings growth, as annuity deposits drove an increase in net investment income. The Company’s exposure to the September 11 catastrophes resulted in $4,479,000 of after-tax charges in 2001, or $.45 per share.

Net income was $24,093,000 or $2.40 per share in 2001, compared to $15,527,000 or $1.55 per share in 2000. The Company recorded net realized losses, after-tax, of $121,000 and $1,186,000, in 2001 and 2000, respectively. In both years, other-than-temporary impairments on a small number of fixed maturity securities contributed to realized losses.

Property and casualty insurance segment: 
The property and casualty insurance segment recorded net income of $15,559,000 in 2001, compared to net income of $9,810,000 in 2000. Net premiums earned grew by $39,311,000 (13 percent) to $346,582,000. Much of the net premium written growth was generated by premium rate increases throughout a majority of the Company’s lines of business. In 2001, the Company’s combined ratio was 102.9 percent, compared to 105.3 percent in 2000. After-tax charges in 2001 for catastrophes (including the September 11 events) were $17,524,000, or $1.75 per share, compared to $15,778,000 or $1.57 per share in 2000. Without the effect of catastrophes, the Company’s combined ratio was 95.2 percent in 2001, and 97.4 percent in 2000. Much of the improvement in the combined ratio was in the Company’s underwriting ratio (underwriting expenses incurred divided by net premiums written). In 2001, the Company’s underwriting ratio improved to 29.0 percent, compared to 31.7 percent in 2000. Through a consolidation of functions and other cost-saving measures, the Company has been able to reduce the underwriting expenses incurred, relative to net premiums written.

Life insurance segment: 
The life insurance segment recorded net income of $8,534,000 in 2001, compared to net income of $5,717,000 in 2000, which was primarily driven in both years by investment results. Net investment income earned in 2001 was $70,682,000, compared to $61,468,000 in 2000. Annuity deposits increased the Company’s life segment’s investment portfolio, leading to higher investment earnings. In both 2001 and 2000, there were a small number of fixed maturity securities held by the life segment which were written down as the result of other-than-temporary declines in market value. These write-downs were the primary factor for the net realized losses, after tax, of $1,346,000 and $3,089,000 recorded in 2001 and 2000.

Net premiums earned by the life segment (after intercompany eliminations) in 2001 totaled $25,437,000, compared to $26,094,000 in 2000. Annuity deposits collected are not reflected in net premiums earned. Rather, revenues for annuities consist of policy surrender charges and investment income earned. Annuity deposits are recorded as liabilities for future policyholder benefits, and the funds are invested. In 2001, annuity deposits were $163,115,000, compared to $165,181,000 in 2000.

In 2001, the Company credited interest of $48,213,000 to annuity (and universal life) policyholder accounts, compared to interest credited of $42,410,000 in 2000. While the interest crediting rates were decreased during 2001 for new deposits, the increase in the Company’s expense for interest on policyholders’ accounts for the year was primarily a result of the interest credited on the existing account balances at January 1, 2001.

United Fire & Casualty Company is headquartered in Cedar Rapids, Iowa, and offers personal and commercial property and casualty insurance and life insurance with regional offices in Cedar Rapids, Iowa; New Orleans, Louisiana; Lincoln, Nebraska; Denver, Colorado; and Galveston, Texas. 

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. Such risks and uncertainties include the following: 

1. the uncertainties of the loss reserving process;
2. the occurrence of catastrophic events or other insured or reinsured events with a frequency or severity exceeding the Company’s estimates;
3. the actual amount of new and renewal business;
4. the competitive environment in which the Company operates;
5. developments in global financial markets that could affect the Company’s investment portfolio and financing plans;
6. estimates of the financial statement impact due to regulatory actions;
7. uncertainties relating to government and regulatory policies; 
8. legal developments; 
9. changing rates of inflation and other economic conditions; and 
10. the impact of mergers and acquisitions, including the ability to successfully integrate acquired businesses and achieve cost savings. The words "believe," "anticipate," "estimate," "expect," "intend," or "will continue" and variations thereof and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.