UniCare Invests in Own Future With Stock Buy : * Insurance: The workers’ comp underwriter believes its share price, which has fallen sharply, is a good investment. It calls long-term prospects good.

IRVINE —  UniCare Financial Corp., which underwrites workers’ compensation insurance in California, said on Thursday that it plans to buy back about 7% of its own stock, or 400,000 shares.

The company believes its stock is underpriced at current levels and represents a good investment, said Russell E. Leatherby, chairman and chief executive. The stock closed Thursday at $9.50 a share, down 38 cents, on the New York Stock Exchange. UniCare announced the stock repurchase program after the market closed. Earlier this year, the stock was trading at $21.125.

Leatherby said the low price reflects the short-term effects of the recession and not the company’s longer-term prospects.

He said UniCare’s earnings have suffered because the company is receiving an unusually high number of disability claims, which he believes is a result of the recession. People are leaving jobs due to injury and then finding there is no job to return to. Or they are laid off and claiming injury, he said.

“When people are out of work, they’re looking for income,” Leatherby said.

Claims of stress-related injuries, for example, are rising, he said.

For the quarter ending Sept. 30, the company reported a loss ratio of 83.8%, compared to 76.4% a year ago. Loss ratio is the amount the company pays out in claims divided by the premium payments coming in.

But Leatherby said Wall Street is failing to take into account some favorable indicators of the company’s long-term prospects: for example, new accounts are increasing and renewals remain high. He said the company also has maintained its selectivity about which accounts it underwrites.

For the third quarter that ended Sept. 30, UniCare’s earnings dropped 13% to $1.9 million from a year earlier, while revenue rose 31% to $34.4 million.

Leatherby said earnings for the current quarter are also expected to be down from last year.

For the nine months ending Sept. 30, UniCare reported earnings of $6.8 million on revenue of $91.9 million.