UFCS - Earnings call transcript Q4 2018

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Operator

Good morning. My name is Brandon, and I'll be the operator on today's call. Welcome to the United Fire Group Inc.'s 2018 Fourth Quarter and Year-End Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Randy Patten, AVP, Finance and Investor Relations. ahead. go Please

Randy Patten

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

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

Randy Ramlo

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

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

improving on During XXXX, line. we auto steady commercial made our profitability progress,

to of in However, awards. auto court quarter, due losses during initiatives setback the control fourth working to profitability, an risk trend a commercial of underperforming from pricing response initiatives business pricing, accounts. In taking and both took and and have factors, underwriting are general our achieve in this we liability to we on on higher in we severity been lines year, All to underwriting focusing adequacy, toward tough claims claims. increase experienced several including several on actions auto-related

retirement XXXX. who succeeds begin our to Claims Jeremy these West assist in West in Coast To going advancing has Bahl, in will a initiatives profit in Also more assist Coast Rocky months. strategy new coming our and responsibility culture, initiatives granular level region his West our determined operation, our Chief more production will Coast April in forward several the initiatives. in similar pricing claims initiatives, we the to and region. our in add forward, we region Mike Corey and Jeremy initiatives Dave will terrific of has improve in detail the a appointed seeing progress job assumed few region implementing Going Coast our at leading for forward to minutes. claims incorporate address our profitability we implement and West new analytically new technical done Mountain Corey with new our as Ruehle look Conner, Officer. is a will who

premiums to to my XXXX income contribute from quarter and our our was offset underwriting Conner XX-year and claims he will investment strong fourth region. his an deterioration of new an we operating nearly UFG underwriting These UFG, as ability role. loss UFG of of him has two by successful our the development, to Building successful and leadership a operating greatly increase driven core foremost, Jobs and supervisor Corey benefit him Corey were proven the and and the work Vice insurance Dave First new career of tax various income, in $X.XX. prior in Corey including knowledge, appointment, enhancing for benefit the by our Midwest claims claims thank in change in I to today wrap Manager Dave's increase of of on up favorable and was discussion develop an in will for an the lower profitability, all most Corey ratio, his on cohesive This was will exciting offers between earned. has our vision in reserve change and catastrophe quarterly fourth one an a manager. at results. retirement. regions. strong its his The department adjusted from President and adjusted Cuts experience, has at quarter capacities, underwriting. and deep a served in tie Act. XXXX Prior management, on leading loss With which a decades Tax year combination a fresh net primarily his off to congratulate Corey the record partially success, of one-time losses, perspective less

auto of which diluted decrease All increase and fourth steady ratio deterioration business, the for loss commercial units. the was our driven quarter an of frequency operating $X.XX our commercial the by and of the in core we insured accounted our made progress, primarily of in XXXX, general adjusted per During of losses year, losses earnings. in lines severity in share reducing of the number liability auto

quarter, In of quarter social the claims losses, was from due commercial XXXX, umbrella driven was an by we of bodily injury $X.X experienced fourth from catastrophe fourth However, auto severity, losses losses California the the which of increase increase primarily to wildfires. by in caused inflation in million accidents.

California a our As $X.XX. quarter-over-quarter In $X.XX from quarter fourth our a ratio, X.X of we the personal commercial lines the California. were as to and reminder, of compared XXXX, do on added the from X cats combined ratio, the diluted business, change $X.XX in share for per wildfires combined losses share points points diluted to not and write lines per of

compared reserve for fourth our cat points XXXX, historical an were year XXXX, only our X.X historical we attribute quarter quarter of we favorable had combined fourth of ratio X.X added the we increase $X.XX lower the the well of of share Although, the saw successful full in compared which for fourth the management to per in the of points, In accounted cats average quarter our XX-year XXXX, change. losses XXXX, XX-year cats. below the to geographic Cats our to to development as of to of exposures average. which

in volatile diluted the favorable XXXX in investment which markets of the the prior income adjusted net XXXX Act quarter increase year in call. Mike? compared The equity income premiums the Mike including development XXXX, remaining of to I to less XXXX, to XXXX. an added Tax is will share reserve more in Although from XXXX. With to number difference to this due $X.XX Cuts discuss Jobs a turn one-time lower fourth the in adjusted development year per Also due earned. benefit in fourth full reserve of favorable the operating to later and development of flat that, discussion in items, detail reserve Wilkins. income contributing over quarter was will the quarter primarily change in offsetting was and fourth we Dawn recorded operating

Michael Wilkins

good Thanks, Randy, and morning everyone.

quarter of to initiatives the we to fourth quarter book a setback auto been In a XXXX setback business. working response year. had of have was this with addition profitability mentioned, in and As of initiatives our responding a the challenging we commercial have this number strategic that of are progress on to improving the Randy on we profitability, and

initiatives One to these has our been we results. area time results. a As implement which operations, take our therefore contributor significant Coast some financial impact is West an take to always, may have time addressing adverse are our on and to

preferred for make a regional business, a time, we change heavy-wheeled simpler compete of on which opportunities construction, a of business. Fire classes appointing efficiencies underwriting and align business position mentioned, review to claims classes such of West we mix attractive Coast administration, in Casualty Randy lead to West for Coast initiatives, leadership restaurants, recognize and certain certain more and residential Over claims the create cross Also as made a & Bahl our underwrite habitational, will of number United by we as Jeremy not company will the to classes with commercial improve will to risk teams UFG position which and appetite, do vehicles. have As which we strategic of to include of our lead number food fast policy Jeremy focus operation. UFG's improve of business.

opportunity in see our and we operation, plan by improve plan. our an our Coast agency to marketing West profitability Finally, strengthening

quarter, auto in quarter account. be double Enterprise processes our improve Our Filed commercial depending of at commercial analytically remained with increases averaged granular Analytics the mid-single level and second the during lines pricing to digits XXXX profitability the to rate auto a in more initiative In pricing continue renewal size determined fourth region Renewal of assistance underwriting increases the driven commercial technical the our team. pricing is increases low our by fourth pricing incorporate major into varying for digits. on to the pricing. with

effective losses. other rate been monitoring the locations Texas. commercial and realize book aggressive such We West increases not rate will We Coast enough, increasing now not severity our rate focus geographic seeking of that of increases targeted to but in our business, auto Florida double-digit the as continue with have changes only given on areas in

our along use as insurers driving through enforcement on successful of technologies It the our We such distracted with education continued Worth campaign. app policies vehicle and of our of use will also expand LifeSaver

commercial commercial Finally, implementation of analytics of our model, with to team our development auto model. the property successful Analytics has a moved Enterprise

Ruehle. our at we Claims these initiatives, several shortening cycle addition Corey be These direction including litigation seemingly quarter new increasing cost, time will the our service inflation that, new of jury impact and are under reducing and Chief Officer, improving attorney fourth initiatives claims Jaffray underwriting involvement from aimed in With implementing claims let initiatives In to our new Dawn? the financials. of Dawn awards, claims of discuss book. especially auto liability social I'll

Dawn Jaffray

everyone. morning good and Mike, Thanks,

million $XX challenging. and the quarter income was of of of loss income quarter reported both recognized This a in in was in the million As to of impacted fourth $XX.X XXXX fourth We consolidated the equity in XXXX quarter in Randy Mike equity XXXX. fourth net net in by Net the mentioned, statement compared $XX.X quarter a the of the value the amount volatile decrease of in securities markets. after million tax. resulted of income

XXXX, increase tax the associated severity from benefited under stemming in During the a lower income, in reserve and premiums deferred a of partially net net favorable an by the lines remaining re-measuring lower of was in claims, UFG quarter commercial from tax earned. general losses in an of one-time quarter taxes investment The auto $XX.X development with rate. of income increase decline million comparable corporate in fourth and combination offset liability all fourth change change in net our auto-related new

$XX.X of year of the compared decrease net For year. of consolidated the the the full income XXXX. also to $XX fair was million XXXX as net in value in by million impacted end equity securities income the XXXX, was

by one-time in million net is expectations. As the net These the continues result, in of income within with one-time we an Commercial business the full to increased to and decrease on XXXX, increase XXXX, had X.X% by were sale management's recognized and $XX.X of increased in income the to premiums of volatility these an as million XXXX, fourth a year tax partnerships offset income rate increase line of but in X.X% investment XXXX. financial $XX.X institutions. fourth decreased items. in we contributing driven after-tax with the change were in our benefit million In decrease an over auto net loss XXXX premium our some respectively of year-over-year compared net in and Life due driven growth, a investments for gain markets, limited value. changes XXXX periods earned the quarter equity the most recognized Also United in to $X.X a to for our we net was income In associated in the XXXX change The the be X% by full investment remaining and to specifically line net due XXXX. premiums $XX.X year million. earned. related expenses the primarily liability in to this compared XX% the in quarter of same The was increase quarter increases increases. in value in

the income For due the net XXXX, assets. investment an of increase in increase year full to in is invested

on Moving we quarter of the $XX.X reserve reserve favorable development, development favorable XXXX. to of development in to of million fourth million $X.X XXXX recognized reserve compared fourth of in the quarter

and development unfavorable within fire general the workers' biggest fourth partially compensation of quarter our and of For XXXX, development liability the assumed reserve reinsurance allied. commercial lines, by driver was offset and in favorable our

development full the year XXXX. full compared was X.X% $XX.X percentage XXXX the million compared which $XX.X to flat XXXX. X.X XXXX, the of points favorable The points year in recognized combined in million, ratio was to For in we to impact of percentage

As X.X% ratio since percentage reserves Favorable XXXX. periods reconciliation XXXX of XXX.X% full remained detailed points a a deteriorated for combined our of with for At ratio and reserve impact to the within in in to X year-to-year. Removing ratio. the of losses development Referring year-to-date points conservative annual was XXXX. quarter philosophy XXXX. the December as the year development website, and compared XXXX development, and compared deck XXX% in and the same of the fourth reserving continue with quarter catastrophe loss same XXXX, a estimates. XX.X% to XXX% periods reminder, in slide every our on XX, favorable development combined actuarial maintain and impact respectively, the total percentage our we've catastrophe Slide in X.X reserve provided the core on reserve the The year varies and we

on to expenses. Moving

XX.X% was quarter XXXX quarter fourth to of slight Our a expense compared decrease ratio with the in the XX.X% in fourth XXXX.

ratio compared in our our underwriting expense OASIS analytics For to XXXX, primarily technology year The was the continued XXXX. and to is investment for full upgrading XX.X% increase platform. our due XX.X%

good we contributed pension the of our take to preceding for XX% XXXX similar the our million improved the ratio reminder, anticipate benefit of will a along one three pension expenses. the years, the returns, our tax additional Project project. have annually of deduction $XX proactively manage As tax We've points corporate income OASIS and expense position, prior to rate approximately future of advantage two the for the portfolio duration made funded to to we with an reduced year. the contributions the pension during add over which to Continuing status plan

Act equity will annualized result in and our XXXX gain associated our on In plan to post compared X.X% by quarter in recognized is will a in fair of with in end the equity our XXXX, decrease the United With changes during the of in combined structure, primarily with short addition, assumptions discussion The offset and the X% Life with to debt amending due to on XXXX. the XXXX. These aspects on the matters. capital securities in of I of benefits a first to equity benefit value XXXX. expenses tax decrease undertook of on in today's changes sale the return year-over-year take return reduction capital recognition million we of in no one-time Tax was our prepared approximately retirement remarks certain effect medical pension in management XXXX. in our portion changes post-retirement $X annual other benefit of

total share have in and returned dividends million of a form regular For of $XXX year full of and the repurchases. we the special XXXX,

five will last shares dividends year, through During first million over the over August totaling questions. shareholders I share paid dividends And of we reference, for quarter, line the cash paid the point lastly, dividend now of repurchases. as million open through we special with and share we cash quarterly the and Operator. a have And repurchased returned regular XXXX. the to $X.X and in $X per years for dividend of $XXX that, the $X.XX

Operator

[Operator Newsome Paul comes go with first Instructions] Please question O'Neill. ahead. Our from Sandler

Paul Newsome

the written Thanks guess, for same bit as auto? a more the, account said detail that little could umbrella losses everyone. about between give the I commercial morning, us by Are you on the tie Good about simply call. guess, caused were losses? you I commercial that insurance was you just the umbrella the talking

Randy Ramlo

Paul, That's this we losses it. umbrella few that into the provided. is the through underlying policy Randy. got went We that coverage and had exactly limits solidly a quite

were So oftentimes of in them severe court fatalities. a those part, involved lot bodily of and injury awards, but some

you're So exactly right.

Paul Newsome

So cap of a? that that would that is that was there or some of - reinsurance kind just does

Randy Ramlo

$X.X retained we loss. of Yes, million each

had So would some relief umbrella. get loss, $X that million million, a $X we'd if from we some of the be -

Paul Newsome

you And the auto reconcile progress a kind got that results you the said comment, on more then but making actually could you're business commercial general of worse.

process a that that -- I'm is struggling bit. a little So mechanical purely just little is a having it with or --

Michael Wilkins

Paul, this is Mike Wilkins.

The look a our prior fourth and average at about four quarter, loss XXX backwards. step results to on the you improve in a we focus to the auto we ratio consecutive auto took I XX unexpected If we've that moving disappointing from quarter, at progress, did the say, we was improvements to year, fourth made quarters would quarter. and look XX try as for points

quarter. fourth that a we progress, to maybe we So at that thought are are not just we're prior making we bit. making steps progress the still the pace had little we're The think, re-calibrating taking, I

Randy Ramlo

in of track, our frequency is see to side. that and some than it And fourth and that Paul, exposure, moving starting the severity even vehicles down, in seeing is improvement right so direction. of losses improvement the means we Randy, some should quarter, like We're be this we've the other the some number on insured things

underwriting, frequency So severity, but in focus material a quarter given on much result. make you normally on some severity in can not so

some were are big it said bunch of that So the we do we some took then the making good losses areas back. kind severity in a of think of as those quarter, and all we fourth progress

Michael Wilkins

across bit to fourth this I is regions. say again. little the is just in Mike were thing would a the results our elaborate other lumpy Paul, Maybe further, quarter

West that continue Coast fourth which of our California while regions Also Coast had backwards, seen auto Gulf address our was and regions, regions progress big had So more by some the is states step region, had largest just took quarter. bad particularly we we've our make really Texas other we which a like one to where to disappointing, Midwest like good challenging that issues our side. on driven a

Paul Newsome

last in on -- a the it's seems -- of same the bit most is that's then seem seems question, guess going Is I ask. personal else the I to companies. a private I'll let know passenger other also haven't be it's same be passenger the issues in of something some having it underwriting a to also private seen be commercial So I auto having but and that different, else auto, somebody business, issue. that but the smaller auto The auto to as

Michael Wilkins

lot than the did same This distracted I are we I commercial the personal think drivers. at drivers being auto play bigger would again, the in of same saw side. improvement driving on Mike, we side a mileage is say auto a there. the up, But

maybe looked improvement at industry. and the have significant industry seen for We the more

improvement maybe than saw worse side, in we I personal a industry. but others the On at place also started some line significant more think the

Paul Newsome

seeing higher still auto? you frequency private are in passenger So

Michael Wilkins

see Randy that mentioned, we to have turn. started

been would but so So it that first I'm to two, maybe improve results. not a or yet, our trend a sure long-term quarter in I only call an auto encouraging step battle encouraging. is It's

Paul Newsome

I for frequency and has Because think 'XX in been favorable industry. 'XX the

different? the book that and So between Any something suggest be reason, the would thoughts there's rest industry. some that of that different on your might why for

Michael Wilkins

the personal you different. I why answer don't be for Well, on an have would side, that

to segments been how with change our is a you in construction pushing think we brings the look where a on so forward We're the the areas small might tends the lot are performing write to side, at the in a commercial of auto We're if business lot portfolio segment of going approach primarily to business not of that has and think it. business, that we auto to evaluating come which on hard some our the better that commercial, with portfolio need auto. I heavy industry, and of that write auto. less I tough

auto this solve just So of line to we're evaluating beyond try problem. business things the to

Operator

over Instructions] like Investor further questions. remarks. [Operator It session. to there our Patten, question-and-answer AVP appears closing would the conference are back I concludes and no turn Randy Relations, This to for

Randy Patten

call. you conference for day. our a have concludes and joining That Thank great us

Operator

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

You may now disconnect.

United Fire (UFCS) 20 Feb 192018 Q4 Earnings call transcript