Mother nature and management not knowing the risks to take and how to take them. They are reactive instead of proactive in the way the manage risk. According to employees and other investors I've talked to maybe the million dollar board room will help them make these decisions. We need revenue.
You sound like you are familiar with UFCS' operation; I am not. I absolutely agree with you on the "revenue" argument. I do not know the qualitative aspects of your "manage risk" argument; I could only make a quantitative analysis based on the published reports.
There are a few things that bother me about UFCS, not in particular order listed below:
1) Randy (CEO), along with Dianne (CFO) do not have enough skin in the game; other board members do, but it's the CEO and CFO I would like to see with more exposure.
2) Investment portfolio is heavily invested in fixed securities potentially at risk of a continually falling interest rate environment, translating to less investment income - my biggest fear - this would be disastrous for many insurance operations so UFCS is not alone.
3) Underwriting margins industry wide for a number of years has made insurance companies, in general, less attractive of an investment
4) UFCS inability to grow prior to the Mercer acquisition.
What I would like to see:
Improving underwriting margins or quantitative proof of it. On a side note, I sure hope UFCS is nor scared away from the previous disasters; that's where others are scared off while the prudent ones stay and charge higher premiums, accordingly; that is, if it makes sense, knowing when to risk on when the probability is highly in your favor, from an actuarial standpoint.
Mercer was a plus. UFCS needs to grow either organically (I don't see happening), or through acquisitions. Fixed investment income stays fixed; buying income with growth is key; I would really reeeely love to see more smaller acquisitions at a slow clip, say, companies with a market cap of $100 mil or less. I am not a big fan of stock buy backs, but with UFCS' stock deeply below book value, it's definitely a plus-too for me.
I am going to give UFCS another 2-3 years to see if they are attempting to grow. A company that simply self-sustains itself is rewarding for those who collect nice salaries and bonuses, not good for a shareholder. (I would not have made my initial purchase if the UFCS had not paid dividends during my waiting period)
I believe once some of the improvements I'd just outline begin to occur, UFCS should be trading above book value. From a probability standpoint, I placed UFCS as a "high probability bet" for success. I'll add more to my position depending the reports as they come in.