UFCS - Earnings call transcript Q1 2019

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Operator

Good morning. My name is Steven, and I'll be your conference operator today. At this time, I would like to welcome everyone to the UFG Insurance First Quarter 2019 Financial Results Conference Call. [Operator instructions] Please note this event is being recorded. I would now like to turn the call over to Randy Patten, AVP of Finance and Investor Relations.

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

first income, numbers compare combined for adjusted ratio income $X of conference our diluted of first GAAP and quarter per net with and $X.XX to Thanks, a operating last of XX.X%. of quarter consolidated per net welcome including ratio. call. GAAP These this combined adjusted diluted Randy. results, the operating income morning, share, XX.X% Good everyone, for for morning, reported income XXXX first Earlier we results our and quarter $X.XX year's $X.XX share

realized gain XXXX, were investment of investment the achieving income net with an gains. markets, net realized onetime quarter quarter by higher premiums benefited This the commercial from XXXX, losses on the of the of and reflecting share an in which business During our net first pricing of increase offset of realized life XXXX, investment diluted Also commercial the increases auto. net our in $X.XX in quarter compares first increase UFG of earned, in strong we company. per experienced sale equity first particularly

last solely on mentioned improving profitability are As will which enterprise in underway, on. elaborate we focused strategic several with analytics our year, initiatives Mike

initiatives quarter's our Claims Corey On the call. new announced during the on claims Chief last Officer, side, we is working Ruehle,

improving impact As initiatives these shortening litigation. aimed a time involvement new are reducing at of reminder, and attorney costs, the cycle claims and service, claims including

As time to to always, time results. these up take financial take and our therefore, in show implement, initiatives will

were strengthening first points well only below as XX-year combined detail. in the discussing premiums and in decrease quarter's earned ago. investment in net on This Coast same net in income auto offset prior improvements historical our quarter of more both quarter Dawn favorable adding reserve for in insignificant in XXXX, reserve a year in the commercial period development This our losses a year XXXX the as from resulted is average Gulf this will first This to by be partially points region. Catastrophe in first the periods. X.X were X.X of of ratio the the quarter.

quarter-over-quarter. we in our ratio know we've storm second of reserve not expectations third prior a the and in that, With to catastrophe typically geographic loss development preliminary our more percentage cat our significantly basis, On of financial mix second lead different catastrophes impact of of we business, year, losses our quarter the April, year results. a losses, at and the points impact although quarters core point the experienced than book prior from Without higher did in losses. than this improved of XX.X storms

too third if detailed on it realize, XXXX website cautiously guide adapt of the marketplace. but the this We to as Slide early to reconciliation ratio. improvement, ability our on the impact tell the second approach catastrophes changing and quarters. the We a refine it our us insurance with of built future. as to especially our we X we combined of need anticipate provides is optimistic Five continually ago, in look presentation we've to demands vision future, well of and business are is to the heading the both a our into to development our years as trend

stock company casualty years our and premiums were larger a of were today. XX% at are than than was X book we less XX% annual about property our We trading and ago when value

time grown through stock dividends and shareholders this multiple value XXX%. price frame, and has about During is over And appreciated around our a $XXX of recently, most trading book XX%, at stock UFG returning considering even million to we've repurchases. share

leadership do our McKinsey the business recent emphasize improve or and performance, of of and digital commercial XXXX. This including and will to review our our out how have auto through analytic to OASIS strengthen looking realized more the of to strategic we innovate we where profitability. do improving review This also Project. with the profitability, our a we couple what, consultants, With we in-depth we underwriting importantly, However, internal teams can of of better. platform all things results, towards years work evolution have capabilities, and our drive do things review disappointing the even is do pillars an continue to ways differently commenced well

stages early that, very over Mike? With turn will the to Mike Wilkins. as year. in I the perspectives throughout the of we share progress discussion will we this endeavor, Although

Michael Wilkins

good and everyone. morning, Thanks, Randy,

quarter remaining quarter changes in that rate focus with to in pricing continued first the in with highest we the rate can change lines improve double be continue auto digits of The average rate initiatives low continue by digits. to We first mid-single commercial the to claims effective and the in auto the strategic an renewal increases price quarter, XXXX. on are In XXXX Filed history profitability. double of first increases we quarter digits. renewal the report low underwriting increases be our the pricing discussed to recent commercial the driven in effective during last commercial

increases to rate in areas aggressively of push commercial continue double-digit We our with rate increases. seeking targeted auto book business,

the seeking With underwriting our we book business, taking Enterprise of pricing assistance the auto or Analytics reviewing are closely action. team, our of XX% adjustments commercial of significant bottom

passing auto also do are with heavy-wheeled commercial opportunities on UFG's certain of align classes with business which We including not risk vehicles. appetite new commercial

due quarter commercial auto our retention increases primarily of strong Our in XX% to at remains rate the premium during book. first XXXX

to decrease we premium to review expect forward, business in of Going profitability. continue as and we see for book a our policy retention our

call be how Dawn, in couple do minutes I'll the turn which instrumental of Before we important initiatives and on, to spend few business the I discussing in working a additional will we over a future. are

results years, commercial the was over of past the an auto analytics deployment the build-out the team third newly data Analytics the data of predictive of and support capabilities an Actual model Analytics claims ecosystem improved management of of First, Enterprise model are Plans in monitoring of decisions commercial to and at during created been impact XXXX. underwriting analytics signs X mining team the by Enterprise is include a property fourth for advanced stages able deliver quarter actively effectiveness. initial quarter for closely but solutions, UFG. still the on the to the year-end. data pursuing completion the for of team has pending, XXXX analytics Capitalizing

lines and of beyond, allow to as ahead look be modeling enhancing underwriting. our XXXX account-level that we business on will analytics claims As completing focus as for additional predictive will for well

upgrade and platform. we enterprise year Second, are of our our technology underwriting X analytics the OASIS Project in multiyear to

nearing for milestone first company. is an this currently the are rollout We which for our project, important

X region. and limited products to on expect We our Mountain in is July, schedule Phase X out it in Rocky roll to

Lastly, our focus of small commercial operations on insurance continued with our and platform. the build-out we center to technology service continue

$XXX insurance. We premiums commercial small in million in writing approximately are annually now

turn without Dawn discussion submissions, Dawn? With and of have the seen in to issued over We increases policies involvement. Jaffray. ratios that, hit underwriter I'll percentage

Dawn Jaffray

Thanks, Mike, the first net XXXX. the $XX.X $XX.X million of compared XXXX, everyone. net income income first reported of In and quarter of quarter in consolidated good morning, million we to

income our assets bank of was included by investment a impacted million equity liability net strong increased performance. limited company. increase with an our net This after-tax market and XXXX sale valuation in our to fund year's $X.X an invested quarter income in First of partnerships life due primarily increase last

the business. increase primarily equity resulted income. largest line rates to premium securities an X% in increase an the after-tax And by this in with increase occurring $XX.X auto in was value in Higher increase net Our income our million in commercial net mentioned, also contributed statement. driven of of growth recognized of quarter-over-quarter rate Mike of increases as year-over-year the

income a million annualized was the compared personally XXXX. valuation that in that want first $XX.X gain of after-tax to our what our quarter sale previously in return refer United ROE I highlight the The as of annualized on equity of the change recognized in are the reminder calculation. or included gains to equity XX% to impacting first statement in first as XXXX. securities Lastly, quarter onetime XXXX XX.X% is quarter on the I Life of phantom

not rather has total has accident claims. XX% On premium, with also million to primarily an we of to our also Census with In favorable U.S. traffic of our represents mentioned. commercial recognized premiums. Texas annualized to Gulf in a total especially in it be reserve in business of reserve XX% quarter accounted strengthening due was auto for the country's the change first due return approximately settlements of of quarter roughly in counties not XX on the auto of the leads reserve auto annual our reserve commercial consistently property a prior growing the lines XXXX. portfolio, commercial the our reserve our company-wide the our the but of $X.X liability X equity nation similar in Bureau, is our $XX.X of compared Texas Coast to basis, of all recent region The largest Coast philosophy commercial only fastest development million and in data favorable liability, XX.X%. Excluding unrealized reserving was gains accident year auto XXXX, as would our of in region, development decrease Randy and claims favorable strengthening losses. it development number impact results annualized fatalities. first This Gulf in general of experience in According

growing risk refining only auto selection in the developed suit. predictive and Texas experience new Analytics will on model auto commercial roadways, our assist our With in us by but population not We discussed. Mike our company-wide team decisions believe commercial the has Enterprise underwriting our followed as

annual had our we've reminder, As year position reserve approach March favorable remains conservative. our Supporting assertion, remained XX, a reserving total At estimates. actuarial XXXX, XXXX. development to reserve every that since within

the compared decrease ratio in XX% Our overall quarter due underwriting in XXXX, of a about the primarily expense included ratio in benefit to XXXX first The X.X points which the of to for quarter our was expenses. initiative. in first employee is improvement OASIS XX.X%

changes and approximately postretirement benefit we our benefits with As a made XXXX. resulted have along our for changes in postretirement expense to quarter, of mentioned million last pension reduction assumption $X in we other annual

which phantom Our first our previously as to came in XX.X%, to the tax due gains expected GAAP XX% is XX% primarily equity range quarter of rate higher XXXX mentioned. than effective realized at

matters. to Moving management capital on

of to declared shareholders paid per During dividend X, cash quarter, XXXX. March first we the as a and of record $X.XX share

for We repurchase the quarters any XXX We paid of shares consecutively quarter. not past first XXXX. did dividends in March since have quarterly the

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

Operator

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

Paul Newsome

on quarter. or combined wanting about ask was the to I really Congratulations loss ratio. ratio the

sustainability looked And year-over-year of exclude that If that basis. unusual I metric. something could in in cats, different development and hoping and of on sort and was whether the the you talk or there was both about it improved bit it like reserve the you particular sequential -- quite a

Randy Ramlo

side. we doesn't hope some we're think could sustainable, Well, to good little on sure we our we bit as a progress. seeing had quarter some on are Mike, trend, strengthening we bit frequency what We see that's but but in continually Gulf that reserve you of a We make little Paul. we're a Maybe Coast, starting progress. add a seeing the mentioned, repeat

Michael Wilkins

Yes. of A Paul. couple comments,

improvement First, I broad-based. would say the was

So versus property had a we prior quiet also quarter, losses in prior lines, while a reduction years. had cat we

was improved lines to that. a first So see quite year bit it's quarter. good Personal from last

quarter. performed we had year good than quarter. Assumed last comp, Work a better business it did first

a lines. of So improvement across many different lot

us frequency underlying auto some maybe things give quarters We've had quarterly that X other of in in average Some the optimism. decrease moving consecutive lines.

still So reverse work increase it's prior see that to in because in that have several where did while nice we do line, time to frequency. that we consecutively saw we to quarters trend

So some trends. think good I

As Randy turning on too it's profitability but just aren't of tide a we excited, said, going so indicators our some get to side. quarter maybe underwriting

Paul Newsome

maybe And turn of some can reserve around. the I West sounds commercial comments the sort issue. the on thought surprised that more how child but itself we most that maybe guess might Coast the region. kind then of to it Texas like for the and is -- issues area. I that was Maybe auto Gulf problem I'm quickly turn is part, the in it's it just

Randy Ramlo

you West Coast on of well. correct, it's -- our had the Well, issues we've as are share

We Texas branch manager new region. a have our in claims

of the to more you bit reflection these As necessarily some I bodily or a don't left I philosophy, turn we've the think And this change of probably are losses eyes we really on set situations a especially are some think but of out, if is injury that want release, pessimism way mentioned claims a new commentary. we settling accidents. on a don't Corey, in know how of to especially the our there's in we've anything kind of pessimism and had in rear-end increased kind out. add on settling just claims

Corey Ruehle

this Corey Ruehle, Chief Paul, Claims Officer. Sure. is

that help looking looking quality can unit assurance being While not practices be that -- looking philosophy, refining we change it that. that at in at is of and will so to gaps make sure evaluate institution the our we philosophy are as we're A the couple we identify followed well proper can that to ways examples reserving continue a would trends, best then training reserving also completely. things of

Jaffray thing, to models engaged claims mentioned a Dawn second of start will The we that better have this well. and work developing to on analytics, us identify had analytics help as couple

Paul Newsome

the there. a final more outlook keeping I ratio more -- quarters talk and actually, than My the the little question, It to expense looks the this any So outlook you've a more couple made sustainable level? of quarters now had about efforts sustainability of like it wanted Is XX%. now of keeping expense at a that bit it some couple it that of looks under there? Okay. like ratio thoughts you've on

Randy Ramlo

anything. comment, of a add Dawn want OASIS if make had kind I'll and of Well, or Mike kind is to we predicted. staying Project The where

of So that's plus. a kind

some Project, do hopefully, to ultimately, see timing We and going out our Those is benefits made OASIS benefits. efficiencies. the have some someday, postretirement run with this to changes

bumpy Kind we yes, I -- ratio be X, long, we'll so. next long will there'd the expense see hope term, see, X to So return normal. think the but years, sure to in of remain that

Dawn Jaffray

the Enterprise would I team, thing loss the other only Obviously, pay Analytics The analytics. the add will investment that Dawn. cost is there's enterprise directly a in investment lower off is ratio. of this in Paul, and relative to

amount continue So some past in I relative have the to to will do that than particular we've maybe think group. we additional had

Operator

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

Randy Patten

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

Operator

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

disconnect. now may You

United Fire (UFCS) 12 May 192019 Q1 Earnings call transcript