UFCS - Earnings call transcript Q2 2019

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Operator

Good morning. My name is Carrie and I'll be your conference operator today. At this time, I would like to welcome everyone to the UFG Insurance Second Quarter 2019 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded.

you. Thank turn Controller. to now Vice Patten, call and President the will Randy over Assistant I

Randy Patten

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

These Please Chief our Jaffray, we the are expectations are results Act described risks today as a management's press Executive of that current Officer. Chief no forward-looking assume may Chief on to statements variety and them. cautions company Officer; speakers which Ramlo; statements Wilkins, and XXXX. future that Officer, factors statements of today differ Our not Michael uncertainties Private based presentation any The include Dawn and are Operating to a and obligation Financial release forward-looking Reform filings. may forward-looking note are update our Randy guarantee The due investors Securities and include actual SEC Litigation our materially in defined performance. in of

the are measures. release today, Please some comparable financial use our measures filings. Reconciliations SEC most and also measures to also of discussion we GAAP available non-GAAP in these press note in that may our

Insurance. this time, At I'm pleased Randy Ramlo, to of UFG Mr. CEO present

Randy Ramlo

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

and an by continued This reserve increase year catastrophe markets increase earned. premiums offset strong development, and by partly year's net were quarter in an results unfavorable equity second both impacted losses prior in

and Year-over-year is this storms in of events of the in more same uncommon XXXX were Louisiana in catastrophe but not XXXX, quarter. convective we of were second majority and quarter which Missouri the year's hailstorms events and from losses The Texas experienced for number the the second severe.

primarily primarily The commercial year liability on Coast or reserve reserve strengthening social prior strengthening unfavorable inflation Prior the development was claims claims, settlements was liability driven escalation auto continued year from our Texas. auto and by commercial what industry reserve in and region. Gulf in with been has in termed in commercial

losses offset our in in and reserve prior catastrophe increase portfolio in of were commercial of our value securities book continued auto unfavorable in year development increase equity business. partially premiums from the increases and depreciation The by unrealized an in rate

to the to underlying improvement attribute we in XXXX, business. profitability, is in X.X% increased of remaining first initiatives double-digits. This our which the to renewal commercial Similar improve by we over Overall, average the in see which rate lines auto increase to in rates years in highest be average to book seen exceeding by with our two increases quarter, put place commercial rate last our X.X%. driven continues operating auto increase quarter's commercial continue of we've the we low renewal

periods loss in points X.X consecutive loss X.X improved XXXX. core the impact and of quarter the development, same the reserve Removing marks with year year-to-date the last second in ratio. second of our points Compared catastrophe year, losses core quarter this improvement prior in our and ratio

of quarter auto with our reduced commercial slide our on summarized third claims. is sign good a X presentation this website, is the This on to that, frequency of report consecutive

minutes. improvements to Mike more will in encouraging. discuss this a early too a few be may detail trend in are it call While these they

additional of some our business. To upgrade countrywide lines manage and our report new UFG. developments rolled a billing in billing enterprise also the to combined portal, our This submit wrap-up with independent my initiative, at Mountain share for features X successfully our limited Oasis new platform. portal launch platform improved integrate underwriting a of platform. rollout positive like Rocky to and web of Phase policyholder included In ufgagent.com. beneficial out and web portion the multiyear way and The our other agent UFG, for to of claims Oasis system, agents two today's region a X underwriting we technology accounts, call, implemented that new was mid-July, analytics a I'd with agent enhance Phase portal business, will

in news, UFG time. America award for In Business Insurance XXXX earned fourth status the Five-Star from Carrier the

insurance to the the year are ranking was XXth journal to list make product our companies property reinsurers XX regional earning to of commitment one and expertise, XXX by only and list super consecutive on ratings marketing the channel, XXXX X-star the of underwriting UFG companies. list also named casualty on for agent XX training distribution the recently of support. We

will that, turn Mike? Mike over to I With the Wilkins. discussion

Michael Wilkins

morning, Thanks, Randy and everyone. good

we the mentioned, improve to implemented strategic and As underwriting continue XXXX claims focus profitability. on during Randy we to initiatives that

we core in strengthening the catastrophe the of line increased of While in we commercial to our more have ratio quarter reserve severity do, in recognize XXXX. auto losses of encouraging loss business in we're of our second improvements work seeing spite especially and are

losses I profitability that, auto line to and the business. as our of item of is the key metric point in improvement frequency commercial One for

policies underperforming bottom our decreased declining certain accounts, reviewing the quarter. that mentioned, book XX% including has risk of focus commercial vehicle not and verifying for business heavy is stronger opportunities consecutive auto of behind losses do appetite Randy driving the As use and A wheeled with align insured third force auto UFG's commercial for on advocating decrease new classes continued of non-renewing business vehicles. of this frequency the our

compared the two X.X% in in increasing pricing seen of XXXX. Another key the to commercial quarter is the renewal Renewal pricing driven pricing. increases. first be X.X% The XXXX change over metric commercial by years, in for for UFG highest average of increases continue quarter is lines auto to by we've pricing second

filed in of the commercial rate filed auto fourth double-digits the XXXX, quarter the During quarter rate consecutive of line. averaged increases this double-digit low marking in increases second

Personal filed renewal and also in digits. pricing increases mid-single remained rate the lines

non-cat quarter this decrease severity positive in the losses. is Another of

During business, the in losses. over quarter liability non-cat an second losses and $XXX,XXX increase improvements $X.X offset by from property compensation decreased of workers' by commercial in primarily lines million, commercial partially

periods, Although was Louisiana from increase primarily of Missouri in catastrophe with number as increased the in compared they in did quarter of both not events. along in incurred the in quarter severity second in the and losses same second tornadoes In increase XXXX, of we The XXXX. hailstorms frequency to severity Texas.

points quarter In the This in our catastrophe added points second compared XXXX XX-year the average of historical second ratio second quarters. is X combined XX.X XXXX. for quarter losses below to the points X.X to

to third Hurricane to from any expect less ahead Barry the be at we looking than losses quarter, $XXX,XXX. In insignificant

As catastrophe expectations. losses quarter our of today, total for are the third within

ratio an the as decisions. the signs our analytics end of of commercial early we mentioned at delivered underwriting commercial team Finally, its and improvement that in model closely on cautiously the auto improved previously, frequency our losses loss of we've are impact monitor its We're predictive enterprise optimistic our and continue core decrease in effectiveness. to auto XXXX

year-end. data property still model predictive team mining quarter and is analytics complete by claims The a during to the of for on-track commercial finish third development

discussion turn over to With that Jaffray. Dawn? I'll Dawn the

Dawn Jaffray

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

strong quarter previous the in XXXX. was with Year-to-date to first compared net consolidated $XX.X million $XX.X million income

the mentioned, year strengthening quarter losses Gulf loss Mike and net was driven our region. Coast the second by reserve of XXXX Randy As and in catastrophe prior in

reserve of favorable XXXX reserve quarter $X.X million second recognized of we XXXX. quarter In development million a compared in development of the unfavorable the of $XX.X second to

million in development compared year-to-date of the XXXX million primarily Coast in in strengthening of XXXX. favorable and had prior prior development Gulf period to as quarter reserve $XX.X Randy in auto we commercial same business in from experienced year in commercial the and Year-to-date mentioned. change lines our is liability development reserve unfavorable The region $X.X our of year of

continues since development favorable remained had a position total to actuarial XX our XXXX, our remain annual reserve to within conservative. year June estimate. reserve approach As At reserving reminder, every XXXX. And we've

year-to-date in equity was investment the of continued quarter million an securities equity respectively income XXXX strong and Benefiting market the gain resulting our value second of recognized the in statement. after-tax and performance increased $XX.X which in million $X.X

line earned as was largest primarily our Also results higher rate premiums commercial driven with both with in and year-to-date positively of in increases rates were The periods by mentioned. X.X% X.X% net growth an Mike has increases auto of respectively. increase and the business in second impacting the occurring quarter XXXX

income Year-to-date for same million XX.X% quarter million compared decrease income $XX.X in was for $XX.X of as the the compared million the income XXXX. net net investment was to for flat investment Net XXXX, of XXXX. in same a $XX.X investment income to million net investment $XX.X of period of second period

was our investments to change XXXX. and lower appreciation value income the of liability market varies related conditions, to quarter institutions. in valuation for to The The partnerships investments as in limited the partnerships equity due period-to-period to investment net these liability financial in of in limited XXXX from due compared specifically

percentage XXXX. same at quarter points quarter points The of the benefit and XX.X primarily percentage XX.X period is expense second quarter due XXXX end the made was of second to XX.X XX.X by the benefit the Year-to-date, expenses expense ratio in of second accruals in points points compared a expense caused percentage XXXX. changes ratio XXXX. to we the of post-retirement was The ratio percentage decrease during plan the with employee for in compared the for decrease

the like the accounting to In a rules related portion for accordance a this. with are Oasis addition, capitalizing associated expenses project with of project development in we

XXXX. six second respect to on of same X.X% dividend record the as X.X% share compared annualize XXXX, months a shareholders on cash per in was It capital of May the management, period quarter, the paid of we to during $X.XX XXXX. of first Moving return to With during and XX, to declared equity.

since past consecutively quarters We have for paid XXX dividends XXXX. quarterly of March the

of did the small XX,XXX We quarter. totaling share amount repurchasing a in second

authorized by which purchase expire of common in to of under an repurchase our program, the of will share million Board Directors X.X are stock We additional XXXX. August shares

questions. open with closing will line of And remarks, for prepared now I Operator? the

Operator

session from question-and-answer come the begin The Newsome first will now question Paul O'Neill. Instructions] [Operator of will Sandler We

Paul Newsome

to which get reserve like of to you specific upper did details it like more -- sounds those it's just sort been the social just have bit years. an of know that may along I end like, there accident lines? development. inflation was office particular was something to a Things maybe at Texas looks of about nature mainly the it I'd little or issue kind it a And one of it fact office. Is it's it issue things maybe really severity. like the is those the say,

Randy Ramlo

declare this I've Randy. all not admire is because the lot for CEOs completely they're weren't. if I seen done a then you asking and of Paul, that they is all reserve done,

other not change leadership going It a had Texas. looking to confined not there. I'm mostly of that's And So that. at been offices. to is part commercial And it. we But mostly It think say we're has multiple I auto.

of talked so. -- office exactly, a little We’ve and growing But don't The it those past. reserving success XXXX. that. know been consistently on bit accident Dawn pretty which I be pretty about is and a substantially, are. of could were kind years We've little result our and that the mostly in XXXX of pretty of a redundant bit mix talked

but seems I'm isolated. now to we'll say, be So, going deficiencies have right never pretty anymore not to it

Paul Newsome

the you incorporate when that you profitably assume have that business? given charge profitability development you given this, rise pricing? how your and So, think your why year accident the of current for your I into wouldn't like future

Michael Wilkins

the Mike. the would and inflation is and for year. accident reserving have on have claims seen current incorporated we this say Paul, social things side I

think comments book. been that frequency. mentioned in We've portions in our I a we're seen some in our There's of we decrease decrease optimistic. severity in

ratio. account think you're in current maybe for not accident seeing year positives an would some loss of the So I those why increase

Paul Newsome

in should would your line? that's new you're you top that top -- this on what's your across last are? lead I happen board. in So -- change retention the my guess line one. are to you we in to the to going increases But the might view? what think overall price be might lead How changes I about what's going than happen seeing increases essentially getting and the mean that a to price you with growth different Obviously, business

Michael Wilkins

Paul, this is Mike again.

been look at -- you years. what year's If little previous a we’ve few from this we're bit in it's growth, the down

to that will future. more the due that's focus on for I think I profitability think And operation. within immediate our continue

last growth don't years that see the you'll UFG. in the line top at few we've seen I think So

-- especially profitable retention, bit at is have look has that been a you as If a thing. the especially less quite book, our auto segments we within within dropped good and retention that's segment -- our

We want of of we performing more those have them. better of the portions encouraged profitability the underperforming book to that book we in XX-point continue until of retention than our regions a book. got action the to worse that parts on and parts tough for And we've numbers difference where we the versus would get to like take

Paul Newsome

Great. Thank you.

Michael Wilkins

you, Thank Paul.

Operator

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

Randy Patten

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

Operator

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

this at lines your disconnect may time. You

United Fire (UFCS) 7 Aug 192019 Q2 Earnings call transcript