UFCS - Earnings call transcript Q3 2018

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Operator

Good morning, and welcome to the UFG Insurance 2018 Third Quarter Earnings Conference Call. [Operator Instructions]. Please note that this event is being recorded. I'd now like to turn the conference over to Randy Patten, AVP, Finance and Investor Relations. Please go ahead.

Randy Patten

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

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

Randy Ramlo

our combined adjusted a $X.XX $X.XX Third and the share net operating XXXX. for by income we per Insurance adjusted same net $X.XX XXXX, share, to Thanks, value increase less quarter third impacted In XXX.X% compared diluted Maria. of third GAAP to per securities for $X.XX reported share of a of benefited change catastrophe Harvey, our ratio income losses with our welcome quarter the share the average. diluted investments million The quarter's Hurricanes $XX.X and income of a of value higher and Removing loss below of of historical XXX.X% Quarter Conference XX-year was of to the equity impact compares quarter the XXXX. continuing loss of diluted Randy. for be a investments net the was per Call. quarter. of the of per along small net and income diluted diluted ratio in This $X.XX we operating in third the a securities, combined in with period Irma gain net Good everyone, morning, in the which this than of consolidated from the UFG XXXX GAAP Earlier recorded XXXX, morning, current equity and per share,

an to all across of an in claim frequency the the business, XXXX. We of this to continue is the in which quarter's our due We looking this we lines slower right muted units we in is ratio partially initiatives. improvement counts decrease loss have especially auto progress in number progress in would claims, driven the and of our of in of somewhat commercial a auto, know ratio our Overall, improvement, result strategic pace and decrease improving a core profitability, moving in environment. than was seen loss major example are our that to of adverse in was direction make by a improve on insured of severity at losses, believe by like. core increase One the litigious commercial but we

the focus our growth this are our these with control year. plan which this taking to Therefore, we to improve slow strategic growth seeking nonrenewing risk rate on accounts. increases, on profitability with will profitability, with we includes quarter. initiatives, continue focusing underperforming aggressively action and rate With and risk accounts control or our satisfied We initiatives measures on underperforming in expect premiums increases,

X%. will operational for to premium of range expectation more X% in growth XXXX our Our minutes. a be results discuss will detail and in the Mike few for strategy in

expenses. Moving on to

on our might underwriting was our to an Analytics ratio to note in compared third increase go I investment that upgrade The to is continued on our our the in although points quarter platform. XX.X% third few Project XXXX years as we in budget, until and project of compared have is of is X.X multi-year running XXXX, quarter Enterprise due completed. Project time XXXX primarily of the quarter period same increase technology third and OASIS a OASIS expense the XX.X% Our the to XXXX. as in to in

reminder, a ratio expense X my of will will OASIS the of the points annually call we wrap approximately anticipate Project for with to up to portion add losses. I the As duration today's project. catastrophe the X

Michael, And It received compared points cats to the Hurricane points received I the any looking added we not claims discussion that percentage X.X this Mike for catastrophe Wilkins. lower XXXX, the have XXXX. forward mentioned, Year-to-date X for fourth the to Florence. historical worth points percentage ratio from our of The compared the only have a I for event noting year-to-date quarter to insignificant XXXX. in third average we be have over prior X.X As load we than XXXX, In at lower dozen XXXX to third or the considerably to to quarter the will third is and than significantly Mike? year XX X.X cat so losses With in added third quarter ratio quarter the abnormally us. very been XX-year to points combined claims is quarter, in which low expect turn year. percentage combined cats the points. that, from Hurricane

Michael Wilkins

everyone. good and morning, Randy, Thanks,

other As Randy mentioned, control profitability however, through and underperforming strategies initiatives rate on taking make we core to continue we increases, our progress on profit-driven improving aggressive ratio, to to remain committed accounts. action loss improve risk

where territories also filed filed increases other lines The third ratios in increase remained lines the quarter increase in continue pricing, mid-single auto personal highest quarter years, pricing filed highest with be reducing digits auto last primarily increase increase we're with double-digit digits. remained such mid-single for increases, from actions, average This lines, quarterly during taking loss regions was to the varying rate commercial commercial the commercial getting the digits. In driven XX while accounts. and the increases the pricing averaging XX% in size driven commissions pricing, third by increases renewal in was rate the pricing in commercial XXXX for as in by XXXX. in up rate the low rates pricing the XXXX As The to average mid-single region renewal warranted. in on during in the depending the and of rates second and quarter increases

Looking be in rate ahead, aggressive we continue to seeking increases. will

Moving risk initiatives. on to control

Over control the last few enhanced our we initiatives. quarters, risk have outlined

you is our is of a Many control drivers risk not. program that to distracted already and of are initiatives expanding campaign Worth these with our the worth We It it, campaign, driving Midwest. the life initial rollout remind requirements. in an is reach of One aware comprehensive educational marketing with began

to and home of more garnering awareness free. well more drive are employees our we partner and intended on increase aim nationwide message pledges the as distraction communication with to posts Targeted as are to Now broadly agencies office beyond the more our region. frequently presenting media insurance social sharing topic

the In This office New the which areas and Houston, The more website visits near the our XXX X,XXX and pledges, addition, Marketing issue. generated Jersey; advertising campaign Association has Colorado; Worth National among UFG digital regions, Insurance the efforts. by on Sacramento, branch Denver, in Association Broadcasters, than signed include Texas; running and others, work Communications California. presentations of metro been is recognized than XX,XXX has for and It Trenton, more

anticipated strategy of is rate improve profitable risks. to where control the underperforming accounts foregoing taking of Finally, measures to actions or third profitability achieve our goal our on none increase, underwriting risk nonrenewing action with are

Our has commercial to been predictive models targeting segmentation profitability. auto Enterprise enhanced Analytics provide in team risk developing

XXXX production of business our our to had use process. existing through first Analytics replace favorable internally-developed externally-developed impacts model. of our model book our deploy Enterprise underwriting supporting by calling the year-end to expect and with We We've

example, severity With that, even business. line on commercial experiencing. a in of For seeing increase partially lines an industry we that due the our discuss slight decrease are business, I'll Jaffray an is other of auto We to seeing light we increase in are our across increasingly encouraged of in is let financials. severity to in like the Dawn? believe Dawn quarter much litigious environment, third severity

Dawn Jaffray

everyone. morning, Thanks, and good Mike,

$X income third consolidated quarter million was compared in from million consolidated net net of income of compared income million to $XX included a which of the to the third net discontinued $X.X was $XX.X quarter operations net XXXX, Year-to-date loss XXXX, life year-to-date $XX.X of XXXX. For million. million

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

at In increased of casualty loss operations a quarter property in net to XXXX. net X%, loss year-to-date Year-to-date compared X.X% of compared increased and XXXX. the net XXXX, the XXXX, was net with income for of net results, third quarter year-to-date million $XX.X the of million our only and third earned a $X.X respectively, premiums quarter to $XX.X third XXXX, Looking insurance and $XX.X in million income in million compared XXXX. to

same in reported growth, million be of of in XXXX. The due statement. the the net value $X.X our realized a of recognized the line year-to-date valuation limited-liability is our income of change business XXXX line X.X% investment investment the Included in million XX.X% but equity value of is in to investments not the compared which the XXXX. the to of year-to-date third financial in to these primarily investment varies quarter net in conditions, this investment to to partnerships compared third related and income XXXX limited-liability Our premium The with market specifically investments periods increase in net change decreased securities, our driven quarter periods same increased due driven to current $XX increases. gains and XXXX million in in commercial was We and by in XXXX in of gains now auto in gains $XX,XXX investment be of business income realized decrease $XX.X line in most to a philosophy. required change and net $X.X continues are the period-to-period investment to and Net rate in in $XX institutions. for equity the million by from quarter million realized partnerships with

value the XXXX, equity year-to-date. quarter resulted million For a change gain $X.X the of and a of securities third $XX.X million of gain in of in

of XXXX quarter $XXX,XXX reserve development we period The of to third on XXXX an of diluted $XX XXXX. $X.XX the the reserve impact and $X.XX development third compared XXXX. share, same unfavorable Moving in $XX.X million experienced XXXX, periods of to increase on an of respectively, quarter and in million same million for net per development in was $X.XX quarter Year-to-date reserve XXXX. minimal decrease of the to a of favorable increase unfavorable of third of in compared $X.XX income development. of to the per diluted of share $X.X We decrease experienced a and compared the in year-to-date

During other commercial the was compensation, basis, reinsurance in of offset XXXX, reserve X.X lines liability workers' liability. to favorable X XXXX. of the same ratio in by partially period workers' in a On of driven X development in business: points development auto, The the months biggest third and first development other our our impact points automobile was driver combined assumed assumed in quarter was X.X primarily to by compared year-to-date of favorable XXXX of percentage percentage and compensation. and business, unfavorable commercial reinsurance the lines the

XXXX, on to improved combined catastrophe my portion and X.X in of in respectively, Removing of percentage catastrophe Annualized our on X.X% provided the and year had deck slide our detailed within maintain since in and year-to-date XXX.X% ratio remained in ratio reserve I a our the estimates. development in was points the the development prepared to equity loss reconciliation on Slide losses same XXXX. a development, months XX, impact to X impact the XXX.X%, At XXXX XXXX. percentage in discussion in remarks on website, the total of year-to-date same of in Referring X points X philosophy. XXXX September first was ratio. reserve continue XXXX. compared return shareholders. dividends during The to end XXX.X% reserve our for paid compared conservative X.X% quarter combined core a the we've with annual period favorable quarter in to and will actuarial the of We've today third and the XXXX. reserves We periods XXXX and XXX.X% every

opportunity time and a purchased special we the common $X.X cash Thus, XXX,XXX July open cash million the quarterly per million for Year-to-date, repurchase and quarter, total in in we on have to third Year-to-date privately-negotiated from record the dividend And arises. as through through September any of as dividends, of during the have the of returned United paid approximately third million. regular First, the total not $X.XX along shareholders we of form to quarter we of in share have in or lastly, of $X $XX.X share XXXX, regular our shares per share a We per or XXXX. share shareholders a repurchased time cash shares market August. $XXX dividend third Fire declared dividends quarter XX, paid repurchases to with XXXX. stock $X.XX transactions of paid we a XXXX. did through XX,

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

Operator

with Instructions]. Newsome [Operator Sandler with O'Neill. Paul question first our comes And

Jon Newsome

bit if the bang for stuff, about prospectively. severity could was about run -- I investment appropriate income, rate these little wondering rate run you before underwriting a talk and -- the on we

Michael Wilkins

as the it our last were Well, as was probably up we quarter. you -- the stated little time, bit a in last LLCs

financial mostly were for they down that as the slightly. quarter, LLCs is again, it's and the quarter and This caused stated Dawn

we're should So I we that a slightly probably more down the at, from this of is investment income LLCs. normalized because where think, be

Jon Newsome

market had in anticipate Well, that do the given quarter? those you any fourth we've issues the turmoil with LLCs,

Michael Wilkins

I don't.

is -- October, think, going LLCs the their I we've quite and just I forward good. we're into think in look visit

envision or bad I anything good So don't in there.

Jon Newsome

the question talk maybe a that you kind well. underwriting, it than has just of you start Is question? anticipated? to a maybe with turnaround Could what can turning And think pinpoint So as made bit of broad you we here. about little kind severity more the slower

Randy Ramlo

This is Randy.

of of Michael oftentimes But is a can some and I severity losses. a as severity well. of of couple think, issue the -- couple times handfuls mentioned comments be very it the have we've a maybe in kind past large

mentioned reported get pay frequency, it's see increases. always of attention times too of a always people which in a see to We to talking not should overreact us it's that. of that sometimes we litigation, it other get we and with of good as our kind and some analytics at of able So positives tells reinsurers, once. success but rate we it's market kind we want we're us need kind to. to trend, mentioned difficult We that all had theme our much when to early We a do what well. think A lot of we to lot to some doesn't with where we've area. -- But the allow

we And be a bit but come of we're more or losses a we the cases principle down areas kind in of of judges just cases usual also of some of injuries ignoring no areas the be it'd these where kind or to conservative. whether little And some tended had the but negligence, feel really little severity not have negligence. or were damages to country, So that severe. juries suspects, of only seeing the these lot the

kind by an you've of Mike, continue severity of of got jury we'll blindsided anything been things, to a those So the out on add? keep to eye driven but lot some has verdicts.

Michael Wilkins

costs increased we've with the increases, been there. underlying while still are that rate and the commercial auto loss very drivers add would in successful I

have So we of of commercial having up, claims. miles uninsured lot have unsure drivers. still finding unemployment been being being time We've qualified hard very we low, still driven -- a clients motorist have our clients a -- some seen

we our costs these that I lot are still driving loss up. So book, trends while quality of the value cost we're improving think subject to are or underlying the loss of

of be. underlying to kind it like halfway we We we So loss to not where like we're be. improved would where while to If we've feel the need still ratio, about we continue to in progress X shape with another the in we like have quarters, quarters, of line pretty good over feel like make be we we last business. should X that

Operator

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

Randy Patten

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

Operator

you has presentation. attending today's The conference for now Thank concluded.

disconnect. now You may

United Fire (UFCS) 11 Nov 182018 Q3 Earnings call transcript