UFCS - Earnings call transcript Q3 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, my name is Nicole, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the United Fire Group Third Quarter 2017 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] And please note, this event is being recorded. you. Thank now and over Investor will AVP Randy the Finance of Relations. turn I to call Patten, And Please go ahead.

Randy Patten

release To Good tab. Investor morning, document, releases today, news and Earlier joining please this our everyone, and at located thank we you visit our slides issued ufginsurance.com. of are a Relations copy find for website call. on this results. Press a the under

Officer. Michael in variety update Dawn we them. based XXXX. statements which today that Reform speakers some are result materially in may management’s our are also differ The financial to Financial non-GAAP actual use press we today, and and discussion Please note SEC of Our in Jaffray, no not of statements our described guarantee note filings. current include and obligation factors, Operating may Officer; as our release investors a due At our the release Reconciliations and assume available UFG. of these Securities also GAAP and to in Officer, presentation Ramlo; to Mr. Chief I’m our Chief The Wilkins, time, measures. Randy Act forward-looking are measures Chief Chief today that a the any of SEC are comparable These most Please Executive Officer pleased forward-looking to that include measures on company cautions filings. performance. present Litigation this Executive Ramlo, press Randy of may expectations, are uncertainties future Private defined risks statements forward-looking

Randy Ramlo

of operating the per combined quarter of ratio of compares of this a net income in a Insurance call. per third $X.XX share, diluted morning per with the net ratio GAAP of This diluted combined loss per XXXX. to UFG income quarter third XXXX loss diluted XXX.X% and morning, third of and $X.XX GAAP share for of XXXX. operating XXX.X% reported quarter Earlier and welcome $X.XX we Good Randy. share, share a everyone of $X.XX Thanks conference the

this. Texas, Puerto everyone hope thank speedy cause by recovery results economic The These that catastrophe Florida cause and business our sense and were ability insurers assist claim third Maria. impacted uncertainty which landfall, like to storms tremendous policyholders. our impacted hurricanes these and a Irma Harvey, handle claims quarter get and ready back response powerful or by all we displace to also in than in and of number stress help appreciated for back were three we those quick losses in Rico. as is get for families effected to the elevated more devastation during were timely I’d fashion, the normalcy, during Their large damage, an they results cause that of for storms also times our Florida quarter, the and by in a $XXX,XXX. above made and to those the claims, increase like impacted define commercial third teams CAT before in auto Along much with which the Texas

We XXXX to auto magazine, U.S. Review, alone. poor In in percentage from but loss have XX% not issue, for the auto ratios the X.X it XXXX of an points. commercial an end results the continued for writers average loss auto in the ratio increasing shows of the or commercial we this past insurance at believe We line, at Best’s are our are XXXX, adjusted commercial XX.X% of years. increase of the is couple October disappointed industry-wide been increased end

conference are place initiatives that of past calls. quarters number issue, few to address the we a have putting we have We our which this in discussed in

calling is campaign. is with – quarter, and driving is teach In the remind we This to we This agents, launched life new a drivers continued marketing the distracted worth industry’s be One educators educational interested is a and resources commercial are the is issues helping of basically collection a comprehensive of third driving. to not. distracted is of it, our auto owner, address worth any campaign anyone our in responses which to their or and driving to individuals, epidemic used distracted engage. fight insurance by designed driving. it, business program It can distracted

not Another rate commercial We across regions. plan all set execute out work increases, initiative we to an which but aggressive initially is increases we in rate for on with our continue on line. reality auto did it

to we need execution plan. refocus our So of on

sometime the think will we along We ongoing we forward but the initiatives we the given in will discuss line with see the reinforce in take before improvement profitability. our place to further in we will increases more confident underwriting return with of are can it we detail. results, importance the exposure. Moving rate adequacy line performance Mike this improve initiatives, other putting in to are this rate

third onto percentage quarter compared the quarter percentage the of load quarter three the combined The of of XXXX ratio XXXX. historical in the catastrophe XX-year result in added third points percentage to points. of Moving of The increase our the cat cats losses, X.X the cats which I hurricanes, is than for in third discussed. average this X.X previously higher points XXXX XX quarter is to

of the for losses During these $XX.X on the of reinsurance cat occurred quarter hurricanes. $XX million assumed million

XX.X%. quarter three but Our September was to continues at was XX, for expectations month up XX.X% due in ended the XXXX XXXX then the is our quarter third the to expense which XXXX, items. of The higher increase two meet period third to ratio slightly

amortization which auto lines the profitability business, and accelerates and the First, costs. deterioration commercial deferred of the the acquisition of our personal of

partially technology expenses, decisions post-retirement by and to commission a our multi-year These contingent offset productivity. were Second, decrease upgrade in investing enhance project we in both platform core and to in the expenses. a decrease new underwriting a are benefit

both regulatory a life Company. personal to Life to we and for Kuvare to this our subject made subsidiary, aware, to to success As many agents we Kuvare, perspective. a US decision UFG, solid half a in our the our our is insurance occur best from definitive life we while interest on and established Life Kuvare of and are and XX, in insurance business to casualty sale and have subsidiary release selling sell build announcing life United on future Insurance property allowing a a was The had perspective customary continue currently press of of Life issued with customers, insurance us sell September shareholders of the you to United of reached agreement the first to expected conditions employees, Holdings its The approval. closing XXXX, operations. By United

the to Best affirmed my up A. of A expected. M. Wilkins. rating Excellent, turn of I discussion, we during third Finally, that quarter the the portion Mike? over Mike With wrap discussion will our to as

Michael Wilkins

good Randy and morning Thanks, everyone.

Slide large of in the we strengthening contributed indicated, were occurred we quarter increased commercial XX This commercial a XX of provided loss claims loss claims in catastrophe auto further Year-to-date, by our is had commercial auto of the the of claims driven is from losses in In of are received and increase commercial Randy to core of inflation auto commercial that we a deterioration in number in increase XX Many experiencing. and umbrella ratio in also have auto commercial XXXX on of the these partially commercial which industry year-to-date. an the our due large we geographic XXXX XXXX, three auto losses in large As business commercial This loss of quarter large year this auto as in core deterioration in of to our which reason the claims is the well. prior between compared of ratio. strengthening due loss with large number for had we of other of as our XX deterioration of auto hurricanes XX claims deck, quarter year-to-date. line business. third bodily the distribution increase breakdown to There XXXX. to the quarter the to third of this claims our auto liability primary in injury policies quarter, large ratio number the have third losses the second the severe quarter prior reserves. loss the ratio. third on line the the third reserve coverage, the Much compared our On

enough business. Randy diligent touched we been increases in pushing As regions the in have of approved rate all line not also on, commercial auto our

on forward Moving be this our with and of accounts. underperforming branches They performing more to will marginally our all our increases review our aggressive will continue rate especially also line, non-renew accounts. regions for and

practices, driver ensuring these and reps that other are efforts loss practices, work focus we use include that ensuring vehicle on Some continue they followed include policies auto with acceptable and their initiatives, our vehicle have enforce. hiring insurers and significant being maintenance having exposure, control efforts on accounts policies screen to

continues providing intelligence decisions. to department guidance acceptability as as assist and on pricing well assist auto making acceptability business analytics book commercial new to also underwriters by Our insights and pricing better us our and

increases commercial desired that to auto we our rate with our book confident are return continued We initiatives these in back level will profitability. of

negative during be aggressively the to is flat large conditions, increases retention smaller Premium All pricing digits. for new experience larger is the line upper both market XX% market pricing on in respectively we of accounts regions non-renewal accounts our single conditions mid and workers and during low renewal to average but XX% and through slightly, onto performing business. for and in competitive business. quarter and with by or continue continue at Renewal third Moving our lines with lines to rate on pricing it increase strong small address to Overall personal the remains depending pricing quarter increases. renewal auto for single-digits Overall the renewal increase. commercial Commercial region policy flat varying to accounts compensation commercial for increase and of continue size slightly auto property account. poor average a XXXX. increases on percentage rate pricing of changes to change driven pricing the slightly, commercial down

significant prior This on success our specialty in by rate due quoted accounts request a to quote from Our was of X% in quarter in to for large success the decreased this decrease ratio division driven largely increase September. XX%. the division a drop

discussion auto over expectation is that turn may the premium As deterioration the to business, Dawn I’ll our our of that, financial With policy in and continue impacted. negatively Jeffrey. be we book address retention to

Dawn Jaffray

good Mike Thanks morning. and

by per quarter loss to share third the million or consolidated $X.XX reported of a of discussed year-over-year net Randy per $X.XX and we quarter-over-quarter our income of $XX.X primarily of ratio to in income net For net in or elevated and net losses as $XX.X consolidated million decrease share loss both total X.X% in is of quarter with XXXX due as the in diluted $XX.X diluted per core X.X%. increased with compared premiums XXXX. $X.XX diluted net million period $X.XX year-to-date third net diluted share The third or increased in same XXXX previously Consolidated the Year-to-date Through total or compared share income million per quarter and XXXX. earned consolidated X.X% earned was of $X compared XXXX Mike. XXXX. consolidated the and premiums catastrophe compared deterioration revenues revenues and nine-months increased to XXXX

Randy mentioned, from press the the required our Throughout our XX-Q as reached continuing third accounting by agreement business we results sell guidance. a as quarter, we As operations to and quarter, as subsidiary definitive classified operations from our this subsidiary. release the during life results and have P&C life discontinued our

and the $X.XX reported respectively continuing per $X.XX of diluted and Just compared and in operations our respectively continuing we of net quarter a loss periods and by third the earned XXXX. net looking in to consolidated premiums year-to-date X.X% in in XXXX grew to X.X% as share income quarter share XXXX. the per operations, year-to-date per the Net share $X.XX diluted of period share at diluted $X.XX diluted XXXX compared as per from third same and same

our prior that pursuing growth XXXX expectation conference XX% in line premium business. with for in our are is discussed we initiatives our the calls, we’ve auto aggressively of As in commercial

reserve to $XX of $XXX,XXX favorable will development quarter per nine million the $X.XX share decrease premium The $X.XX income was of of with the the Year-to-date development slow we of quarter in a $X.X net of XXXX third XXXX third fourth in our in the compared diluted XXXX. million $X.XX $X.XX of experienced as a an compared quarter XXXX. development compared expectations. result, unfavorable in these the XXXX. We in growth quarter $XX.X increase of expect year-to-date per an million to of meet share first for and favorable of on impact And in We the was reserve increase development diluted respectively periods same in and XXXX. months and

by commercial fire website, percentage deteriorated primary number quarter. XXX.X% was of the our the in of of in decrease X XXXX XXXX two points reconciliation provided commercial net and last lines and XXXX, core reserve development of auto XX.X% X.X% on slide ratio loss core impact The XXX.X% as in impact loss on in auto previously in compared unfavorable XXXX. the ratio lines. as losses development catastrophes combined return partially catastrophe by is was majority and liability compared in to other XXXX. of of the auto, quarter the period deterioration combined in other Year-to-date Slide is an which development to third Return primarily majority X.X% our in increase XXXX. workers reserves deck third The the on commercial same XXXX and X.X equity development was to XXXX, we’ve in the the ratio third ratio severe XXXX, for the ratio. was the offset allied quarter favorable of strengthening of compared of the and to for points for the in at the X.X the to commercial more Referring the combined liability our third of compensation Year-to-date a compensation. offset lines to from compared Looking as equity was discussed. driver our year-to-date due year-to-date the detail, of on development percentage and losses development reserve and loss the in to quarter was year same XXX.X% The compared detailed quarter quarter Removing XXXX. workers the from favorable partially the

Our equity XXXX. on return was investments unrealized for excluding gains X.X%

to quarter, on During dividend and $X.XX we stockholders declared September share a of X, paid record cash the third per XXXX.

repurchase Also quarter dividend of our quarterly since active We a have program. March remained third with paid of share every we quarter XXXX. during XXXX,

will of purchase During shares the total an XXX,XXX at cost $XX.X United common our common cost of our price million. of for year-to-date repurchased And we’ve million. $X.X XXX,XXX stock of $XX.XX stock Fire at third of quarter, we We stock September, repurchased total average through the price, and shares a a on on at through common The market privately transactions opportunity arises. of and time-to-time will be and number requirements. factors and including management’s from economic a amount regulatory purchases discretion the and/or negotiated corporate timing as and open conditions any share general depend of market the

additional We are XXXX. in open authorized share shares Operator? our stock for now will by which our expires of line program, Board with of I Directors to of question. August repurchase purchase the that X.X an under common And

Operator

you. Thank

Paul [Operator from begin our We And Please session. Instructions] will Newsome the question Sandler of now question-and-answer comes go ahead. first O’Neill.

Paul Newsome

of in of to payback time the for Could kind give call. of me or the the that sort by for reinsurance Thanks morning. overtaken sense business. you of about Good just loss many us how years tell a trying I’m of think the were profit business? assumed period

Randy Ramlo

Mike. Take that

Michael Wilkins

morning $XX Wilkins. at our including XX-year Yesterday, assumed I looking Mike I a think underwriting this years but with was the me, don’t on think business, XX the is the for around business last it total results Paul million. have good – of I year, this we’re our Yes. for profit that and

have does volatility a it. It’s but So our to lot segment it’s profitable it profitable. very most been of

or segment in. year it’s tsunami, those a when bad the So have long years over But year Japan definitely in like earthquake the you to this have result you be and years. good the of run,

Paul Newsome

on the the and this actually moment, business? raising rate about mean, Obviously, the And it time doing I is you’ve sense what’s while? commercial Are auto for a fix at thing. you implementation the do then rates going Great. been rates really you have for any to

rate just that business. through curious just your to also And to commercial go as So line? how let getting know like in you’re fast auto willingness to the I’d business

Michael Wilkins

again, Mike is This Yes. Paul.

momentum. We’re gaining

regions board, said he I the corrected quarter. think we’ve comments, Randy’s all think maybe are last in I not that that but on

on done we’re – a auto of group us Some our metrics rate. what achieving analytics solid has getting commercial on job nice

Going X.X%. back all was July three to overall X.X%, this the August increases July, rate is regions. was was X.X%, months, last across September

as momentum increases. is being everybody those on there board rate nice gained getting So with

firm. market think to continues I

top I So we’re line that I we north in forward, think get XX% don’t that’s of at so yet, think the can going encouraging.

more loss The other we rate will do ratio, have thing to probably the to than I would where is that help, we to wanted. improve say we certainly the get thing and it to do can fastest but

get really we we in really large is that’s West work that Coast losses. did help a So help, share well. as some by things through the deck, positives can on fairly I to Insurance you go fair finally thing areas other approval One trends quarter, encouraging. breakdown We losses to California we our of as going so see think than as coming and continue that large of and large their well. rate region, we will this mentioned some Department the And forward through out there contributing showed more are our that slide

Randy Ramlo

rate Paul, is to kind I We cure Ramlo. of one let Mike this. accounts of some said the go. know just to we this for reiterate will of Randy have our things alone not poor-performing that UFG, wanted

that’s have absolutely up, the something So all price a you area looking win. and we we’re of – to message it, this grow our to that not and regions have in lose

Michael Wilkins

those lines. Paul, maybe And, comment more one along

tend perspective. with there’s most safety get to I the because a larger accounts accounts reasons up, And just not they credit policy accounts. on don’t accounts, programs analytics Bigger there’s credits of an or accounts just fundamental because have the A and be but over not because – It’s training larger our them from we’ve applied. – larger driver just accounts they’re why our auto, think fleets, times better intelligence underwriting some more that tendency credits. or lot down. accounts things of not necessarily account to is they’re one good screening. those units, our found in have those unprofitable And of on business with more they is should have our driver our better they the large auto were So count unit

And not those credits account. size the at types because the So those they’re just have past, when of are in things really some large look you credit the think, large accounts got to and of unfortunately, of applying accounts. I

think I there, tend adequately too, we to fewer with units on profitable, progress So we’re but more accounts as correct. making the focus priced. more adequately more More

Paul Newsome

Operator Thank Thank you. Great. very much. you

Randy Ramlo

Paul. Thank you,

Operator

comes next Our Please Brian of question go from Sidoti. Hollenden ahead.

Brian Hollenden

Good talk challenges and taking uses the segment Can life you thanks likely core for in the given about sale, from morning insurance capital my the the questions. of business?

Randy Ramlo

we consider dividend, will track continue past. look – our would in Dawn on slightly paying part stock This the close, XXXX. depending think to even have will, than Ramlo. life a repurchases that dividends. at our committee for a share obviously and wait we We before, our special but sometime I kind our Randy of to capital less And record of at is as deal look capital at early of insurance which is. where of do mentioned in we we’ll board, our hope kind We’ve aggressively we committee more price we’ll time, just outside acquisitions, developed maybe have to mentioned

those to or multipronged approach a So use funds we’ll returning I shareholders. to to think the some putting take

Brian Hollenden

little California you exposure your And your perhaps a or about Thanks. then direct reinsurance wildfires? to talk the can bit

Randy Ramlo

one. that handle Mike let I’ll

Michael Wilkins

as not Maria as the event, to is too reinsure yet. think as a say Wilkins. the the updates Harvey, that. to early reinsurer Irma, be would the we I feel good and that it But This have near anywhere exposure. quarter we from it’s Mike gotten I for – fourth don’t yet companies Yes. a significant would know have impact

Randy Ramlo

that U.S. guess, cats general, on to, minimalize exposure because In the reinsurance we exposure have try to primary we side. I

which Rican our exposure, on So any don’t Maria side. came would Puerto primary mostly the from we have

do any because we we say So kind have kind of of the not U.S. business already. to primary but watch on we won’t cat have exposure to any, try side to that it

Brian Hollenden

Would this reserve the of And expect a marks additional in developments? sort number unfavorable of quarter first development unfavorable you quarters. reserve

Randy Ramlo

from We in That’s one. hope came, line. we’ve the think that but diligent auto getting always commercial lot a tough caught a I of been not. up, this obviously,

but we’ll we’ve quarter that third follow, we in got more – to hope that everything the belongs So there.

Brian Hollenden

implementing. new Can And last new did capabilities. old the one about not? then platform technology platform Just your has any additional you you’re for just just talk that me, the the this features platform perhaps that that

Michael Wilkins

better underwriters is that Mike the that tackle I’ll data and This come is just we better big access to will one. to pieces And think this with Wilkins. try from transformational I think insight, decision-making. probably our analytics,

automated, come. will improve transform underwriting Of the things course, be through advantages of manual through entry, use things data. come productivity we There’ll we But more think better are really our decisions think straight make and business while the gains the will that more process. profitability will the better less really ability to help to UFG,

Brian Hollenden

That’s to equal? in helpful. way impact terms all mean, else that any to quantify of of kind ratio, combined I

Michael Wilkins

don’t states to timeframe implement for of is year like couple Part timeframe. be just up, We time of – years. I willing probably And would expect project. processing. not to wrapped the probably It’s about a at this a talk first whole project on it’s probably, long it’ll that’s more we’re this by the that anything time. think policy the the not five the

also underwriters. and that it’s data the data access So structure, analytics for the to

we’d So talk yet. about I that to don’t think want it’s quantifiable numbers anything

Brian Hollenden

Thank you.

Operator

no [Operator like we questions, as turn have over would to I conference to any closing the further Patten And back Randy for Instructions] remarks.

Randy Patten

call. conference our concludes now This

have this will you hope great of UFG, of all the a ufginsurance.com. of transcript On the management be behalf a company available at the call on day. reminder, website a As I

Operator

program. Ladies today’s and this gentlemen, Thank concludes you.

You this may at disconnect time. your lines

United Fire (UFCS) 8 Nov 172017 Q3 Earnings call transcript