UFCS - Earnings call transcript Q2 2018

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

Operator

Good morning. My name is Stephen, and I'll be your conference operator today. At this time, I would like to welcome everyone to the UFG Insurance Second Quarter 2018 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. will opportunity there ask presentation today's be to an questions. After Instructions]. [Operator now I Finance over to and the Randy call Relations. will turn Patten, Investor AVP of

Randy Patten

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

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

Randy Ramlo

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

property casualty second quarter income per earning both know had second year, our just quarter with XXXX diluted insurance continue and operations, periods both level losses. we of last at to In comparable share, our we $X.XX core Looking our our to was need results. at efforts we an elevated periods, net improving although

in losses in of period operational were detail each However, second minutes. averages. losses discuss the as different. our non-catastrophe in quarter historical which results in losses period In experienced losses to severity XXXX, of the compared composition above increase catastrophe our few a Mike an will by of the XXXX, same these is more driven of

expenses. Moving on to

of the at the compared in XXXX XX.X% quarter quarter Our to in of expense second second was ratio higher XXXX. XX.X% as

As increase is expense two the we between in mentioned previous items. ratio in primarily conference calls, the split

First, analytics invested we platform, and to our in our technology our enhance to modernize productivity. upgrade decisions OASIS Project capabilities multiyear underwriting and have

two to the we anticipate Project duration expense OASIS As will one to approximately annually points of the for a reminder, the the add ratio project.

immediately Second, and timing net had acquisition the of experience, our commercial accelerate lines against loss we or required costs are auto since income. have our heightened to simply deferred those personal expense costs

experience of Our prior on view based a uses calculation the quarter end.

business, improvement through see costs of lines auto of acceleration immediate quarters we in the So in expensing decrease. will these as our future

cash for our a I special During that dividend. pursuing earnings mentioned were call, regulatory conference first approval quarter we

in our of XXXX, shareholders decision best the remain of that XXXX. release in is XXXX. interest X, July of As we and on aware, our agents, you UFG. may be Life XX, The confident which declared special of was announced employees a August per XX, cash We shareholders, a Directors our dividend $X payable United share, Board dividend as record for to press on to August previously sell

the UFG It are share cash discussion to million Wilkins. special over shareholders statutory dividend. $XXX in future repurchases share shareholders the Mike turn sale to the XXXX. property will pleased opportunities, important We recent from With With the quarterly dividend significance now that, dividend to this casualty shareholders, through repurchases returning this majority gain special and a cash and continue also profits cash special upon capital together and to the special benefits The to allowing success regular, of the over is since from through of I dividend, sale this note our the our has building history. and initiatives. while dividends of share our strategic UFG the returned with with our operations, Mike?

Michael Wilkins

Thanks, morning, good everyone. Randy,

improvement compared exposure of in As lines but claims. our primarily compensation Randy by and auto our unsatisfied in losses commercial define remain of liability with we we a related which were ratio in as quarter non-catastrophe other was prior of half second liability and in a the impacted level to note, these we were auto are book $XXX,XXX. claims results severity workers' in seeing mentioned increase increase of loss decrease On decrease in first This our positive in our a number year, We've had auto some our severity a of in of XXXX which losses, the losses an commercial units. of business, frequency than commercial greater of improvement. XXXX

our book. increase performance the injury an commercial However, improve in muted risk-control remain bodily by overall. is severity of claims We improvement the to committed auto to somewhat of initiatives

As on rates underwriting the targeting continue our risk-control with improving underwrite, we focus reach profit-driven few risk we guidelines to requirements, we including at the targeted we ensuring exposure. stricter expanding for quarters, are have the strategies, and past discussed adequate

second provide the quarter analytics for increases to were accounts and and underperforming are in XXXX, continues year-to-date catastrophe where our insights Our and models averages. refine auto to team the In commercial below enterprise designed more losses rates needed. historical

or ratio. Year-to-date, catastrophe of catastrophe million combined percentage $XX.X experienced points historical as ratio. points of $XX.X the combined second the averages percentage losses X.X X.X to XX.X of the losses quarter, compared were points of of ratio million or combined percentage our During the we

Looking in we XX catastrophe we July forward to Iowa. wildfire two Carr Central tornadoes have exposure and to the the events, know third quarter, California

early estimates appear events Our less point. than $X loss limited in this these at and million are

Moving on to market conditions.

in remains and high the average average second with quarter primarily past Filed first pricing the single during line peers During filed have second pricing the rate increase an the compensation remaining of the Consistent quarters of to in with lines the pricing. mid-single increases compensation quarter varying the with XXXX, increase XXXX, driven rates slightly digits. the in digits. region of commercial our rate depending The account. on quarter from Filed XXXX workers' commercial auto during was rates lines of with for XXXX, the pricing of decreased renewal much many reported, workers the by first quarter filed XXXX, commercial auto from increase in size change very processed several quarter averaged like decrease. competitive increases commercial continuing the

to including continue workers' walking that compensation away unprofitable moving accounts. forward due decrease to will is and decisions, pricing Our our underwriting premiums from expectation

within loss XXs, the perform same the to ratio our in comparable to low is year-to-date which expectations in continues prior period compensation workers' with Our the net year.

digits. during lines average quarter, percentage with mid-single the in Our the personal increased increases pricing renewal

the through to or increases. rate accounts aggressively address performing continue our We country non-renewal significant across poor

Our retention discuss of respectively, quarter let and Dawn? strong during premium financials. second remained at Dawn I'd the to retention quarter With and policy our XX% second that, XX%, XXXX. Jaffray

Dawn Jaffray

everyone. morning, good and Mike, Thanks,

of of quarter second million million. Year-to-date, XXXX, to second income $XX.X quarter the year-to-date For income XXXX. from million consolidated $X $XXX,XXX net was was compared million compared which consolidated in income Life our of discontinued XXXX, to included in net business the net $XX.X $X.X

net Company of consolidated As Life includes and gain a associated a of quarter the of Life million onetime year-to-date $X.X net from after-tax business. with the first discontinued United sale reminder, $XX.X million the income our loss Insurance

Looking property casualty at operations insurance only and results.

to income of XXXX income X.X% respectively, premiums our to in $XX.X XXXX. million in XXXX. year-to-date of quarter quarter the X.X%, reported the of to both second with net Year-to-date $XXX,XXX $XX.X in compared quarter increased increased to with the XXXX. XXXX, income net the was in second For and XXXX, second periods, net quarter XXXX, second $XXX,XXX comparable in million net compared earned and of compared In year-to-date

in invested limited-liability of net from achieving in the quarter value periods reported As new of in our net our and million compared investment Net low the was and we XXXX increased million Included related investment not losses quarter mentioned realized and to previously, the due the to our the due increased $X.X of and in to XXXX initiatives the in specifically and gains year-to-date in year-to-date focus in investment partnerships $X.X to growth in change income respectively, valuation investment and X% XXXX. accounting at varies gains these market rate X% partnerships year-to-date in with of the growth. to for compared with premiums quarter and of adopted to to and period profitable on to in $X.X in investments are and statement increases, value investments We realized equity income of same growth $XX limited-liability net in million recognized equity XX% $X.X the an requirements in XXXX. securities, gains now The our conditions, $XX second continued realized million second institutions. period of range by the which change increase guidance of philosophy. investment periods driven be and current estimate a will of end of the investment XXXX net million to net XXXX. change in is due losses our XXXX million, for financial XXXX same investment realized income beginning The increase in in assets XX% of

X in For the and equity the value a $XXX,XXX, months securities second of $X.X gain quarter for change loss of first of XXXX, resulted million. of the a in of XXXX,

favorable per that diluted $XX.X quarter Year-to-date reserve and year-to-date XXXX $XX.X $X.XX and and the reserve on in in same The XXXX. in second second to quarter share in Moving further $XX.X the same in the favorable development. to XXXX, we on of experienced compared second Expanding million favorable periods million for compared $X.XX of share of to was on experienced of impact development XXXX of million reserve $XX.X of the diluted per development development million to the $X.XX XXXX. in XXXX. income We of quarter $X.XX development. compared period

in second followed the biggest by reinsurance. was workers' our line some the of our During compensation favorable development quarter driver of of XXXX, business,

was XXXX reserve development primarily of driven business: XXXX. ratio combined X in points development On in four to other quarter development points quarter year-to-date workers' second percentage X.X was in was auto of lines points XXXX we reserve of percentage percentage of by the same the basis, Our the reported to in period of a percentage below reserve The and first XXXX. the six combined ratio months the impact X.X compensation. compared liability, commercial points second of X.X

with of we philosophy, quarter combined since was XXXX, period in XXXX discussion The in core flat XXXX. compared every months X a ratio and in remained development, XXXX At loss As the was and activity. in the I in XXX.X% We've capital-management reserving and have impact to actual year-to-date reserves quarter was of our our XXXX. to of to during of annual Referring return Removing first in compared year-to-date conservative of periods equity will X.X% Annualized compared X the slide XXX% catastrophe remarks continue deck and same impact favorable total the and in XXXX X.X% on reconciliation catastrophe a second and the respectively, our for website. with estimates. development XX, provided a XXX.X%, to combined on reminder, prepared on end Slide a development June ratio. losses the in year my XXXX. today within XXXX. with detailed portion ratio our same XXX.X% on reserve the the second

on during Fire arises. the the add, dividend purchase and to X. the dividend share to mentioned, quarter, we second a open a United million. paid Also during transactions stock of time-to-time per months from repurchases, of the as of regular cash XXX,XXX over of of shares the privately average $XX million cash total shareholders Randy share XXXX. in special per negotiated far at of through the special to $X dividend, common stock quarterly opportunity also shareholders note history six company's declared as so During common as might of the an we've We first repurchased $XX.XX, Also, returned $X.XX of market June as we've record Including shareholders announced X, cash which first XXXX. dividend, I price and $X.X record XXXX, August of or we share

any and any market open and the purchasing on regulatory and a As within purchases purchases the discretion when on number depends SEC share the always, amount and factors, general timing associated economic of available remain including of float conditions of including will requirements, in the price, amount the corporate rules and with management's market. restricting

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

Operator

you. Thank

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

Paul Newsome

some bit of the improvement and you commercial catastrophe outside net business. at problems was apologize losses, in exclude the cut that was but auto and insurance a suggest would out the year-over-year if a to about that like especially of I you products can hoping having least of basis outside basis, everyone. time. some that so deteriorated have a that here, those morning, a and may little talk things, bit me I It Good that, missed I a so was on and was of on year-over-year bit? few of more phone most fair, you deterioration, why could talk book someplace products the the I little about I is hoping, there year-over-year Is that ahead times business commercial looks business. auto,

Michael Wilkins

I'll take Paul, shot this Wilkins. a that. Mike is at

few think line, most some that some exhibit liability, general there, of you'll had in is back You severity business shown at the look One lines that a by - know, and our year-to-date on it improvement. if the release press mentioned you we've in we've we some our have claims. I the and see of the comments has hasn't seen results large

the thing The increase that's XXth, the months three our big core year, a drove disaster, but look and year, XX.X a we we're in from the not XX.X you ended was so And of year in what our last and periods. for loss the still at June six-month the primarily three-month other for a progress for lack ratio, both if is it year ago. ratio. loss This were XXs

we said deteriorated. you think I

loss I think we were last to ratio about flat in this year the year. core

Paul Newsome

there that unusual unusual nature? The that suggests are anything large nature in is losses, they or in not

Michael Wilkins

class Well, I related. were would region. saw we note say those that they auto that of were random. They We weren't commercial several any or X that did

So even the business, of was lines the a were though other root they accident. may commercial of impacting be auto loss

Randy Ramlo

court. large element going had and do other had more Paul, the if seem don't we those court this area distracted up Randy. they of several more One is very of them, end be and is seeing decisions. We've to auto to well adverse driver losses a to

Paul Newsome

on investing the Life run to touched sit? alternatives the Should rate? obviously, that we income cash going from net Was quarter operation? think the further rate as we run because a there know flow fair investment this in reasonable NII, of Okay. some a Or you around. investments as of the the I happen the increase. Is bumped

Barrie Ernst

Life this that increase investment did it's Dawn And Company This our out. the quarter philosophy believe the lot sales LLCs invested The that. a of rate. the assets we is I Barrie. as a with haven't in run Yes, pointed with our reasonable changed better and too,

normal. pretty this think is I So

Paul Newsome

but questions, there Great. a to somebody case ask is I've got wants couple question. re-queue I'll who in a else

Operator

comes our Leifson from Eric And Eric with Associates. next Leifson question Instructions] [Operator

Eric Leifson

OASIS He increased mentioned the to the related This question and project is morning. good project. that expenses for Randy. Yes,

the question So what anticipated my project that be derived this duration the what is and will of long-term benefits is are anticipated this? from

Randy Ramlo

a - differ a Mike to this familiar may kind I is lot of it am. I overall, So Wilkins. more of a But it's this bit with little project. than five-year He

so left. We five actually And our at major along, people is the of in come ours of moving It's benchmarking as earlier legacy expected. We week. we seven - take our systems that, years, we're low have one thankful X for. which to this usually had end these

was XX old. Our years probably past policy-processing system

bit this, a new And system, add a and the duct lot more had Mike of on of wire it it. add analytics but can kind So bailing and can We more tape to lot streamlined. features. a

data. that? more So any underwriters will comments at Mike, have On right you information better management policy of on level, fingertips. got their a

Michael Wilkins

Yes, Randy - just today, system. what analytics policy-processing our our analytics think today advantage for on integrated we said, the isn't but I expanding into use big us

the operation and and the together the attractiveness it through separate on get into as So their system new quality The it's for the a process. of guideposts all the them and for it incorporate go them pricing underwriting they information tie then process. of underwriters, business, to analytics provide will business go

Of course, we like big productivity underwriting that look another to that. improve, underwriting expenses, things expenses, is policy-processing area

it's big tackled So that. probably overdue we and project, that a

Eric Leifson

Thank you.

Operator

Instructions] this our to question-and-answer turn no session. for any like to showing the [Operator closing over And Patten back Randy conference further concludes questions, remarks. I'd

Randy Patten

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

Operator

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

disconnect may at this time. lines You your

United Fire (UFCS) 11 Aug 182018 Q2 Earnings call transcript