UFCS - Earnings call transcript Q4 2017

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Operator

Good morning. My name is Brandon, and I'll be your conference operator today. At this time, I would like to welcome everyone to the United Fire Group Fourth Quarter and Full Year 2017 Financial Results Conference Call. [Operator Instructions]. Please note this event is being recorded. to Finance call and like Patten, to now of AVP Investor would turn over the Randy I Relations. Please go ahead.

Randy Patten

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

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

Randy Ramlo

per morning, reported $X.XX Quarter and to combined of welcome Call. consolidated share and net fourth share, UFG diluted $X.XX the XX.X% XXX.X% a the a Full Earlier GAAP operating fourth per quarter and operating share, everyone, of income with adjusted compares net diluted Fourth Conference of of of morning, income ratio of $X.XX share Insurance Good Randy. Thanks, income and Year ratio of XXXX per combined we GAAP diluted This of diluted XXXX. XXXX. per this the $X.XX adjusted quarter for income for

For per share diluted income full income adjusted GAAP combined This per a ratio net operating share compares income the of per and diluted of full net combined and per of income ratio of operating diluted GAAP of year share, a XXXX, with reported year $X.XX XXX%. XXX.X%. of we share, XXXX $X.XX $X.XX $X.XX adjusted

of quarter operating the which Act, Our operating Removing fourth adjusted law per the diluted quarter change, tax additional XXXX. the be on from and fourth per an passed change were increase share of to this providing diluted this fourth compared adjusted $X.XX Jobs impact of the to is share tax law $X.XX the changes which XXXX year-end Tax per and share financial will later impact for December Dawn on details earnings fourth into benefited the the results added $X.XX The of quarter, conference call. the quarter. XXXX. diluted Cuts of impact in XX, earnings in

improvement see began ratio, our quarter property in a auto During the in commercial loss commercial to decrease fourth losses. XXXX, we including our core and

traction continuing We a believe auto initiatives on we'll lines our to of and are return in business to in continue the As several we auto pricing going of which profitability, auto business. acceptable place have our our our company, line profitability initiatives includes level aggressively improve to we forward. to gaining increase

fourth our load percentage of the percentage lower fourth points XXXX with cats of compared X XXXX. average to adding quarter percentage XX-year XXXX, the in were is quarter X for During the catastrophes of points than to cat ratio points. combined X.X manageable, fourth the quarter historical The

percentage points The with our points to full cats line XXXX cats the XX-year XXXX, in average has right from been historical historical X.X percentage so percentage X.X in X.X was year combined points, XXXX. up performance. added For the for ratio,

million year total impact, for cat in For XX% XXXX, $XX significant full of XXXX. million approximately had $X losses during the the wildfires or XXXX our hurricanes the losses. the The third our cat in California for accounting quarter accounted of most

Moving on to expenses.

accelerates to of Our primarily of expense the deferred ratio due XXXX. XXXX in acquisition our profitability the the business, costs. as of quarter increased increase XX.X% our XX.X% lines fourth in of to to is of fourth deterioration in the quarter which amortization compared auto This

For to ratio the in year, XX.X% was compared expense our XX.X% XXXX.

to industry year full overall, that continues downs. XXXX and our So meet lines despite a its year definitely continue our our in the quarter, business. around fourth expense at UFG, percentage XXXX ups the battle in had to like commercial performance in expectations deterioration ratio points. XX auto of personal a increase the was and

California. incurred wildfires devastating level losses claims on hurricanes The diligent staff expect desired impact powerful of XXXX, and from them a us policyholders agents our to to the X efforts minimize other these normalcy rate and We to our and allowed and return return profitability sense in back quickly of initiatives. In as to lines proactive and possible. with also of increases our UFG as aggressive

convective majority most no costly these catastrophes, storm decade. a industry. of I individual minimized were any from in different losses in underwriting convective our losses industry it selective in was cases, storms. than in the these noting our UFG to our The addition severe cat the event. the in remaining XXXX In severe XXXX, from is that large catastrophe both believe U.S. endured the season second worth

auto us in in has direction. right underlying our lines the of headed core and signs ratio Finally, improvement commercial loss our property commercial in

are XXXX, in sale insurance announced the track our still half to our we of previously to life business XXXX. forward on close Looking of first

capital Wilkins. dividends repurchases, previously, future Mike? stated be extraordinary include initiatives, Mike to sale and we As With various will the potential which the I proceeds over may turn the will discussion share that, used regular and for acquisitions. from

Michael Wilkins

morning, Thanks, Randy, and good everyone.

the some improvement we Randy core ratio decrease As lines by quarter XXXX, of in property driven in auto and a commercial in loss our indicated, of had severity our fourth in business. commercial

and improve business been these a efforts with push continue all in close eye progress will personal to keeping to during on XXXX. making rate discussing we've commercial of we our are in profitability while increases year, initiatives the lines and lines ongoing our auto We

XX fourth of All quarter commercial of claims our fourth regions XXXX. underperforming rate our commercial accounts also compared XXXX, will to underwriting appropriate be In to we to necessary taking XX profitability. these and quarter auto in the auto actions reviewing lines the and claims had large large of return

large claims in frequency reduction full large XXXX. forward XX compared we quarter For This seeing XX losses claims had year, on in and commercial received year On the large Slide the the encouraging, deck, fourth of have into look for during to we auto to our carry provided benefits full of large our we XX commercial a breakdown the of auto auto the slide of XXXX. of XXXX. distribution claims the initiatives geographic is

Our recently, policies risk me, on efforts practices, our in use auto control include ensuring are enforced. commercial vehicle efforts policies Also to we screening representatives -- vehicle that driving with policyholders These they driven, distracted their will accounts that hard provide day, to excuse driven, continuing telematic provide implement and drive focus number practices, a exposure. and new have by distractions accounts on net-based a prevent place mobile acceleration and the locations, selected information drive miles drive to data and monitor of hours speed. app times solution routes, and practices driving on insured automobile drives, also durations, The stops, drivers. maintenance working driver with are being began significant acceptable hiring

department The We provide analytics guidance OASIS system continuing our and OASIS analytics to is capabilities to daily way which will teams and in is forward are support complete, the this ahead initial from multiyear employees the also incorporate substantial our to to is the expect and project in to look over data allowing processing XX additional and our underwriting serving business, in phase our initiative, a analytics enterprise year we also we project involved of selection team. on both pricing. risk us this make department progress with grow and directly into and modernize policy transform to the decision-making. our Enterprise do

commercial commercial For losses underperforming this began imaging we technology. particular, significant fire similar reduction we of XXXX. in see the address In line compared due that quarter fourth fire improvement to during in commercial the as XXXX, strategies of lost XXXX to an our in some XXXX believe control use In have benefiting are auto increased focus from to book. this our we infrared line, initiatives, to including initiatives. several We property property, to seen implemented results on on these

there of on older for business. been buildings focus an discipline Additionally, increased underwriting and classes certain has

Moving on to market conditions.

all regions. averaged auto mid-single commercial during Filed our also and with mid-single digits. workers' auto digits by average digits, by processed XXXX, the the on change of property quarter quarter primarily both and double competitive and pricing renewal commercial increase new single pricing. across conditions the increases lines During were in business commercial increases during rate in low fourth averaged an decreases compensation increases averaged nonrenewal for renewal continue increased digits address to the Filed renewal the low rate the driven commercial market All filed in in increases. low in quarter increased significant rate regions increases or lines single the in through percentage processed accounts poor-performing pricing rate averaged Personal digits. average the upper digits. single aggressively The

remained retention at quarter of and strong XX%, fourth and XX% policy premium the respectively. During XXXX,

on division, fourth success in similar this Our in success again quarter the a XX%. from third X percentage specialty from in driven This division resulting significant was to a decreased by drop to decrease, accounts of request large our the the increase quoted ratio the quarter. rate quote largely point for prior quarter,

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

Dawn Jaffray

Thanks, and morning. good Mike,

XXXX, net of reported to consolidated quarter of the quarter we fourth in fourth the XXXX. of $XX compared For million million $XX income

loss new simple prior income be the remeasuring and in opportunity liability in For was net In full rate, lower the benefit reflects our development, year a in the net to future and of taxable have beyond. deferred $XX.X is our tax the XXXX. period to consolidated and $XX.X balance the and income deferred liability effect the discussed, our reserve reflects in corporate future tax core with for deduction that in deferred realized terms, tax quarter under XXXX rates corporate over our year in in $XX net Randy UFG million on tax fourth due resulting changes in year sheet tax as will an Mike amount. million favorable adjustment income. onetime asset associated and increase tax ratio, the improvement the a ended million compared The XXXX, to comparable income

vary change rate and a or I corporate XX% as differences tax However, applying rules income XX%. from not is amount as note taxes the between of function rate, create pretax as UFG's simple historically tax temporary permanent other range has which and to loss, been it timing for actual XX% can in as just of payments. income various the of a income accounting effective

in tax to approximate Although subject anticipate code. to new variability the on under tax any we rate XX% will effective XX% average year, our

casualty XXX% our of or may increase be One patterns more base. items being longer to a permitted. potentially using we for With depreciable based writeoff to life discount investments commercial bonus on payment and will and be less, company companies with across will client assets capital the increased see solely years of the reserves loss IRS significant factors requirement XX no impacting property depreciation

view positive commercial So as as development the well of for as in analyzing we tax it new our UFG bill, policyholders. the for impact a

more continue as We calculations will guidance our definitive issued. refine is to

quarter net earned revenues XXXX, in fourth was the quarter a operations Moving increased property X.X% with compared fourth the on increased Year-to-date offset to Consolidated XXXX discontinued million. premium casualty $XX.X net fourth continuing X.X% XXXX, premium. premiums to net business compared investment premiums earned X.X%. decrease and by life $XX.X to being million flat. Total compared to while premiums. as decreases increases XXXX consolidated XXXX, resulting the increased Consolidated in quarter in income total insurance for as revenues with were

and and a as XXXX, period was or only XXXX full the quarter income investment full limited P&C per income change diluted the the by the year casualty fourth per investment million philosophy. and from in year fourth in XXXX. $X.XX same investment due partnerships $X.XX driven quarter full of the share in in property And investments per The year compared by decrease to the and X.X% value primarily full in our our $X.XX XXXX reported year For period to our to XXXX. operations, a we per decrease $XXX.X was XXXX our operations net over income net looking and share business net compared consolidated XXXX, in or respectively, not of diluted earned in same same Net continuing and income quarter and change in at insurance premiums compared our liability as diluted XXXX. in diluted continuing grew periods $X.XX and the share X.X% of of fourth X.X% and share to the as

in As we our expectation XXXX premium X% to X%. have discussed conference growth our previous calls, in for was

XXXX. development increases, favorable quarter fourth We We initiatives similar reserve of development the million of XXXX remain expecting growth will rate range profitable year-over-year to growth of experienced with in in emphasize to compared of quarter $XX.X rate favorable fourth the a $X.X XXXX. in along continued for million

compared expand compared favorable and the on further biggest in year to impact in and same in the fire an our $X.XX share $X.XX driver in reserve per for the the of share $XX.X The on fourth income the line diluted of full of $X.XX XXXX, net development an XXXX. was year $XX.X quarter development for million quarter increase same of fourth our was XXXX. $X.XX favorable XXXX the and allied For XXXX, of and period in million To to diluted reserve development per period was business. full increase

reinsurance partially XXXX, in the lines. of liability workers' development the assumed For reserves lines offset other and by strengthening was full a majority our year compensation, favorable from

fourth and percentage XX.X% year of XXX.X% development Our X.X is in points estimates. was The X.X averages our percentage XXXX. to X.X combined actual and were of our combined total compared XXXX, December fourth X-year ratio the within slightly the quarter below At ratio XX-year reserve of full for points. XXXX the XX, quarter reserves

to the deteriorated losses in improved in combined ratio percentage commercial XXX.X% XXXX ratio deck of quarter the Return Even fourth increase year core points number same is reserve slightly auto X.X with impact by to year detailed the X.X% reconciliation in full the base. our combined Slide first the on the development, in as was X our higher compared website, equity the discussed. quarters for in previously XXXX provided full XXXX, equity compared points XXXX was on of development deterioration a X.X% in ratio percentage Removing For driver in XXX% attributed XXXX. period and losses the core to X to the of catastrophe impact of the higher X.X XXXX. was slide in ROE ratio. and in the in primary XXXX, we XXXX, though loss catastrophes The as net a is Referring to severe the the compared and of an compared for loss XXXX. of on of decrease denominator income

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

every We of March XXXX. have since paid quarter quarterly dividends

our shares stock. repurchase fourth we the any not During common of did quarter,

repurchased market full XXX,XXX stock cost the through stock open million. for of as at arises. time time total common a the share management's of privately general conditions to purchases Fire we transactions amount discretion For XXXX, our and purchased regulatory economic of market negotiated the the shares We and on from corporate number is depends price, timing on year common and $XX.X opportunity or United a of and requirements. including factors The any and

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

Operator

Instructions]. [Operator

Brian Hollenden comes from question Sidoti. with first Our

Brian Hollenden

in guess, Coast? Coast The East on auto Gulf the worse improve from large there going the What's anything by the is than, -- particularly much be losses commercial Great so region, I any commercial why region auto, Coast results? West and Can to West there Coast? Lakes and done those say, the let's

Randy Ramlo

differs Well, little of the branches. by there's mean, answer underwriting. slightly of a of type I little more bit factors think but bit a maybe a kind of I'll it's lot of detail, the let looks business I Mike to in

little it fact add vehicles things the And maybe? some is part then that of you to more are a or have bit heavy of written. X. Mike, Some jurisdictions to do court

Michael Wilkins

one for say Brian, there Yes. -- is a write. would is correlations thing I how of these much regions, lot premium based on they are

So by far for example, Great largest second Lakes is is auto and East region Coast our smallest.

is there. playing the outlier One, West wheel national than the as that then they state, tend Randy in jurisdiction the frequency a more look you and lot statistics, which more heavy issues of of second part of congestion, just of would And if lot to California auto couple thing, the tend lot mentioned, be higher a The just reason there's difference Coast one that. exposures, other things been the to and that state, tend to of office states. losses. severity more generate of in into state that's a write at severe a So see and

Brian Hollenden

then And on Anything significant by I in improvements? fire are workers' mean, doing ratio. underwriting pretty there's lines significant in that comp, the the good side and guys and segment, net you those -- loss generate to allied different particular just improvement

Randy Ramlo

of And then property, I probably in down line. we're is comp, older work the the thing think lot the on kind on become that more age strict on biggest building. of a We've buildings.

we've down. as probably I down want line, to pricing anything premiums got from business are in goes Mike, more you to walked think else, that add? away if going that the anything as

Michael Wilkins

between the with reduction Yes. we're line and most in for a fire of particular, been has focus and ratio pleased XXXX. loss Property, XXXX probably in us,

so some the still were quite that. feel good up about in had in the bit year but improvement Our line, storm we losses a

other there the got at is analytics side, only think there, comp which helping. play work I'd the throw thing is On I in we've

So and we progress. that we're to focus think try making I within some the severity on reducing book,

Brian Hollenden

And and then X% XX%. Did for you Dawn, to -- effective you in XX% of I one between tax did and correctly? last me, premium mentioned to 'XX hear just X% growth confirm. that rate

Dawn Jaffray

Yes, Brian, that is correct.

Operator

comes next Sandler Paul from Newsome Our with O'Neill. question

Jon Newsome

big you'll at about some you a life approach of we look management and you maybe statistics cetera? versus and of sale as et special bit specific more mechanics the that Could how the the of operation, little go of buyback about the talk how capital dividend,

Randy Ramlo

Yes. Sure, Paul.

think of Capital our assembled the until chosen we've the wait We've areas conference the part We've we'll board. in kind sale a to Committee best I the be. past mentioned of the decide use are going as after we've listed some of that call the So what to of to in consider. proceeds

we've we're a the not we maybe full little M&A for as in you think acquisitions we list opportunities more have told look And to continue bit, as we for the in focusing organic past, use. looking as growth. past on I But that still. still not

well. where of kind system will will be a also stock we capital use I stock price look bit capital to lower. that -- but BCAR that judgments refine trading, future. that's share into to going is to done, some new make see Our stays a price something stand at And is minimum share And kind where are has then the else The talking little of a we'll about like heavily, continuing from have we new analysis would kind so going that that help wise our a something we our that exactly capital traditionally function our we're and if our obviously, to buybacks of more A.M. us depend. as of not take and of special required Best dividends know a we're

Jon Newsome

materially whether places of the of separately, related California well, sort I the filings, regulatory or the reform. of more rates question state? in and of to give other they which is particularly, sort clawback impact your problem is then is as XXXX thoughts the benefits not us obviously you will a than rate corporate think as guess, you issue, tax of And -- your Could to

Randy Ramlo

you have tax your should've rates. to up. when load probably I for rates, looked file Obviously, in we you're Yes, --

I I policyholders, if rolling, within to -- that So X-year be X our if It but a it's don't cut X-year will passed certainly a could be on years. know that or tax the or in continue X file but it's be there. tax think reflected is than in that maybe to benefit there going new we But new to quicker that, shorter will some run. rate be rates, as

the know to tax I ensure So happens relatively of California returned the quickly. is kind going the cut policyholders, that, I has that talked think mandating but market that be to about

Michael Wilkins

Mike. points of is this add I a there. would Paul, couple

be. of I we've think with the which pressure I'm there'll our say we auto, than want will the will second on very calculations, the to side. where premiums line results regulatory auto commercial the a I the still you we book be have more confident from back indicated we personal had, our tax is at forward on get auto part X% the with when look of small is thing rate going bodies And numbers be them would that increased and for that until justification in

Operator

concludes [Operator Randy session. to like Instructions]. turn Patten would the our closing back This over remarks. any conference to for question-and-answer I

Randy Patten

and our day. now for a conference concludes you joining Thank This have us, great call.

Operator

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

this your at time. lines may disconnect You

United Fire (UFCS) 14 Feb 182017 Q4 Earnings call transcript