UFCS - Earnings call transcript Q1 2020

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Operator

Good morning, and welcome to the United Fire Group Incorporated 2020 First Quarter Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the conference call over to Randy Patten, Assistant Vice President and Controller. Sir, please go ahead.

Randy Patten

thank joining and call. everyone, morning, you this for Good on a Earlier issued release the 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

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

may discussion UFG in our Ramlo, the Please most to time, available pleased measures also also and to note are financial we of comparable Randy measures our that present I'm GAAP today, press CEO Reconciliations use these non-GAAP Mr. Insurance. in filings. of this At SEC measures. release some

Randy Ramlo

our mid-March. continuity markets presented response pandemic debit challenges the welcome has pre-existing the to worldwide resiliency The Thanks, call this I'll COVID-XX and start profound quarter of the activated in on today and on during to Randy. COVID-XX, off life, our employees with everyone, health incredible a In Good XXXX morning, and pandemic COVID-XX we business by our plan. and first crisis. impact UFG our conference call. a discussion day-to-day economy beginning had financial the

well and our our dealing services priority. of employees, to of well-being Thanks top the exception our past health staff safety, our dispatched personally experience the With which employees, our remotely work were headquarters, for is to home have we most essential in the infrastructure XXXX for XXXX seamless prepared in at of technological our a with place from we the and employees. of floods work including for to our catastrophes, corporate have to transition

We appropriate. routine we we work field which claim scrutinize but social Nearly interruption losses pandemic, by carefully on premium to our issued language, for policyholders. control contract expect attributable comply viruses the be were modified to loss be representatives policies we claims fully but have the specifically under contain to and and effect excludes each we business audits such our employees, of as safety distancing agents currently such from with the time, one, manageable. operational certain inspections as all At continue day this completed recommendations coverages and of coverage when COVID-XX of will coverage affording to COVID-XX our claims and

to effect our and how pandemic the to actions our written development premiums collect avoid of these of impact ability results the economy investment larger investments anticipate requirements hold However, our as our and we operations we return products for legislation, demand on the affect in that our and us. or court actions cannot future continue premiums to in result to including premiums whole, financial on will the from for likely markets to and a the portfolio, policyholders. our could COVID-XX We contracts how that predict financial the effects regulation and evolve, could conditions act or

COVID-XX have has markets pandemic Much financial impacted many of in our of the the in turn, our experienced, industry investment equities. the significantly like peers and value

value income from of in quarter COVID-XX our our not the on net in a significant was our equity the insurance sharp fair was of investments in the The of decreased significant equity through limited impact net first value decline our quarter, due most decline operations. securities loss core reported pandemic, and first in impact to which markets However, investments there the liability investment partnerships. our the the in XXXX to both the

quarter first our results increase severity an by impacted Operationally, and in were non-catastrophe of losses. catastrophe

quarter catastrophe or to of in ratio percentage points $X.X percentage the of of $XX.X or XXXX. points million losses of we first combined the million reported X.X During first X.X compared XXXX, quarter the

historical first catastrophe for average losses Our is X.X points. the in percentage quarter

a Our catastrophe week large the in non-catastrophe Jefferson Dawn Missouri later as call. workers' City, two in hailstorm quarterly January from by higher office; manufacturing lines losses catastrophe business. last the and liability, the will classified results in a was business property loss our of insurance discuss The our the severity First, of in during a Texas, compensation results financial events: stemmed Houston, commercial explosion service increase at in second, March. other during in

the frequency the primarily portion reduction a in a decrease to end a ratio profitability although ratio improve our my XX.X business. saw higher-than-acceptable XXXX, the severity to first due will our points our auto result the with to call our quarter I of quarter on XXXX, exposure improvement, progress compared loss of an an commercial commercial in claims units for claims. of improvement of auto commercial book update auto we in loss auto with reported the of auto In commercial commercial level, commercial auto of the we of at of and continued of first remains

business. on a to led the book in fact forward auto continue continues there decrease commercial the and severity strategic road, in commercial same profitability reinforce the of to our move driven must to with of has that the we pandemic, This plan to auto the accidents. fewer our vehicles improve aggressively decline has of in this miles been but level During not COVID-XX

we results profitability. our with improve detail, have made plan in strategic operational to Mike discuss our including will the more now Mike? progress

Mike Wilkins

Thanks, Randy, and morning, good everyone.

improving as Randy our previous we and on As on profitability. mentioned have calls, focus remains discussed

first XXXX, see management our the of our quarter continued to to During book improve commercial with of strategy portfolio progress we auto business.

of the commercial claims auto X% declining This or in decline frequency XXXX. quarter the quarter consecutive fifth flat of quarter marks with of first

now is frequency claims years. in the auto its point X lowest past average at moving Our

our units. average exposure and claims loss of auto commercial of of first X% The in along deck points X% in our improvement of decreased in decline, moving commercial commercial website region of XX.X Coast exposure the commercial XX, X quarter presents quarter decline and an auto strengthening the Gulf reduction frequency, December March units since XXXX, of during the Slide in auto year commercial exposure XXXX. number first combination A from XXXX. on XX, the XX-month the auto this our the of prior the auto slide with units number ratio in in reserve XXXX resulted during number

driven auto increased road during decrease the renewed for retention on of the has the quarter the the Therefore, COVID-XX and the first not in goals pandemic business. our bottom half have of setting our of in of miles and mentioned, level vehicles severity number XXXX, in we during commercial claims. same Randy of rate targets, decrease the As resulted expanded

We will where plans with XXXX allowed. our with continue to nonrenewals be aggressive throughout

better commercial book has to poor that heavy writing become a our we'll and too weighted these Our new in auto of in confident of our not focus continues auto. segments are accounts performing achieve business, goal in on be which taking recent overall balance years. actions, in heavily By we're

we lose stand we know been of we since As a this, accounts entire to traditionally have a consequence writer. package

experienced premium retention. we second decrease the policy in a and quarter, both For consecutive

earned due and rate do growth was expect written premiums Although and premium endorsements, increased increases, to any in this not audits both quarter, premium XXXX. primarily which we premiums

be in rate X.X% lines increases the fourth the As increased to XXXX. renewal by average driven of rate of quarter for for change auto in X.X% first pricing The increases. compared continue commercial the commercial to XXXX, renewal increases pricing quarter

During mid-single renewal increases digits. XXXX, commercial double the in first the effective quarter in rate low change of the Personal digits. remained auto lines rate remained

premium claims quarter significantly XXXX, of claims definitely basis, a XX% of in quarter on claim and overall decrease a down With frequency the new this story severity. a basis with is XX% first on the written

mentioned, operationally, business fire, primarily is Randy in primarily business. severity losses in lines events, and in commercial first from large in Randy the XXXX increase two increase of by fires. in both as The our due catastrophe an catastrophe and workers' in non-catastrophe increase of severity line increase our is mentioned, of liability non-catastrophe fire As commercial losses of severity to quarter other losses, an in results impacted our compensation

During XX claim. losses first were The fire of quarter in first in compared the quarter in is losses of large our business large XXXX, XXXX. line severity there to fire of to the X compensation X increase large workers' due

with Our perform our a net business continues within of expectations loss ratio line XX.X%. workers' compensation of to

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

Dawn Jaffray

was declined XXXX. increase primarily which first $XX.X the our in $XX.X quarter of comparative $XX.X of for In morning, loss of This result quarters. Thanks, securities, investments everyone. the the $XX.X period value million representing investments equity of first in million the compared by a net thus of a the Mike, in reported net of of million million equity change XXXX, consolidated first in during compared XXXX. The loss we the and value same of net income to $XXX.X quarter of XXXX, million between an these change the in to quarter good

position equity is first in million It a decrease nearly despite XXXX, the our million securities at investments note in remain of quarter. in the that XX, value gain March in to important $XX $XXX

in our of the unrealized XXXX. $X.X in recognized we million after-tax quarter addition, In an gain of bond first portfolio

$X.XX or $XX.X share reported the Operationally, first period per with compared XXXX. or of quarter operating $X.X same in per million million of adjusted XXXX $X.XX share in we income

Mike income. increase the net markets The in were to of results both liability was as due operational volatility equity in our and to income net the with Randy limited the decrease or along we Our in our in partnerships refer as and impacted change fund. and bank decrease by losses this catastrophe in investment what value non-catastrophe investment an losses, mentioned,

X X.X removes was and mentioned. the a our to increase Moving has of due commercial the the quarter the other as ratio ratio. to XX.X% The quarter, to XXX.X% our development, combined on Referencing catastrophe combined liability, first in an and impact of workers' ratio on quarter Mike our the XXXX. reconciliation primarily losses contains points in ratio, of of compared in of severity business, core adjusted our reserve in of loss which our deteriorated lines website compensation reported Slide losses percentage fire XXXX metrics. operating presentation in first components in the combined

million workers' $X.X favorable Higher We $XX.X year commercial in recognized fire development our to reserve with of quarter more million reserve in of XXXX primarily development first business. first and in was quarter the compensation favorable prior XXXX. compared lines

total with position Our actuarial an reserve estimate. remains

an in our can in we OASIS X.X resulting of a in and increased loss decisions ratio. ratio expense Project the the quarter, expense continued and our upgrade multiyear an during to at acquisition the first a core but risks impacts quarter commercial XXXX, defer in productivity. contributing level, increase business, remains to in technology as lesser extent, to seen book the period points is we've ratio much in amount ratio, although which underwriting of selection of Also of same investment expenses increase in expense compared The the the enhance improvement to XXXX auto to designed platform the our higher-than-acceptable

I will matters. call of capital portion discussing the my end

since First, quarters of $X.XX share XXX of as record dividend to have we paid per a and we March consistently of cash done as X, XXXX, declared XXXX. the shareholders past for March

of an we mid-March, for of the repurchase in Board million. to remain We quarter, stock which share time our $X.X being. expire In made program, August just repurchases shares XXXX. by share purchase the million over suspend Directors shares authorized of will under common During X.X repurchased for our additional XX,XXX decision to the we

this Wells terms entry the planning from initiated and as believe current of As At agreement into similar regular with We credit position a has UFG as market adequate. completed resulting time, COVID-XX are agreement credit capital to we Bank credit course was previously revolving expired again, credit facility to the was Fargo our signed once and financial a first of credit the And of no liquidity our pandemic. facility, not conditions agreement. funds February announced, from draw part result XXXX. This which intention had quarter. our in in prior this new current

need The will open should focus on agreement Wells line prepared for our to the arise. remarks, credit questions. maintaining additional of Fargo liquidity And our access I with with Operator? in the event such now demonstrates ever closing continued the

Operator

from we being and session. Instructions] question gentlemen time Marla will at Backer [Operator comes this first the Ladies Our today question-and-answer from Sidoti.

Marla Backer

Thank you.

or So drop for In bit to get it bit I'm process rates we easier raise color is already how the renewals planned could little a more policies wondering if to you on this is easier just or had little a it environment, that proceeding. making you drop?

Randy Patten

is Marla. Randy. Thanks, This

of we're renewals with regards working One to of days is happening kind out. more actually the that's things

coming a less new lot business have We in.

difficult seen renewals gotten income on what rate the in So know harder. basis financial getting There write restaurants, a that lot I claims obviously, a We in we're we of been on an don't side or a bars the or we have I the out but over are insureds we've a it's are the aggregate businesses of in if those bit don't know processing increases, went that we've further. lot don't hit transcript. necessarily business like for position. and some hardest. rate are of lot of easier

write staying of is We been open for a very construction country much So cancellations lot well. huge going like and construction It most we seen haven't the throughout for of the insureds renewal business. the part. a but has kind process looks most of amount put are pretty coming,

going are we're things pretty well, been satisfied level fairly increase with we've getting. rate So of and the that

I is it probably at our asked these with pretty if it. say, would increases think easy done well not far, we really, sell so we've they but agents, to times, rate

Marla Backer

Okay, that sense. makes

business. orders trying upon I So had, this with or [indiscernible] your touched how potential [indiscernible] which given stay-at-home to [indiscernible] customers, a customers? How of initiate question customers in existing this environment initiate is lot with are prior your a [indiscernible] you activity conversations agents who another is

Randy Patten

gist really you you? of there. Marla, really catch up sorry, I I'm Could that. broke the didn't

Marla Backer

at agents about this [indiscernible] In environment The [indiscernible] to the out your try you How [indiscernible]. [indiscernible] Or question of business. apologize. that has Okay. do your [indiscernible] all previous is to the gist customers? [indiscernible] I new reach see moment? of sort

Randy Patten

you the a – haven't of new up lot I home breaking kind solicit insurers of as a see from get our to that quote talked new you're I well. And to agents bit agents I a able don't of there lot business. that. how unfortunately, about now, of caught again, right of So a lot around are that little Marla. moving And kind business. to impression working are them just aren't opportunities maybe

applications are cancellations but seeing competitors. we're a from not of other lot people down, New very also, business to moving

So I if totally you're I apologize what asking there. missed

Operator

with ladies and Paul go gentlemen from question. next And comes from our Please your Newsome ahead question Piper Sandler.

Paul Newsome

the an of could you morning. I the expense A Good outlook ratio in hoping the for expense bit perspectively. ratio. little uptick was talk about

Dawn Jaffray

expect Dawn. so somewhere We're it's historically normal roughly much. and Thanks circumstances. that's in the Paul, range, Hey running XX% what under we would

total did With were a acquisition that the deferred combined ratio, commercial unable XXX, to of points loss of recognize ratio defer. costs auto to over have X.X additional producing we we about

OASIS in the So range XX% been I that suggest project somewhere where and of would both historically. because we've

Paul Newsome

is deferral How long a Would the impact? last? quarterly the deferral, continue? a just Is acceleration year deferral full or is it just it

Dawn Jaffray

scenario. it the look-back a it's and every of based because evaluate estimates We have to on – quarter. somewhat And actuarial

to We have over a frequency, some in of but able the back evaluated are commercial which ratio. uptick about of had large we're signs auto to did like Mike mentioned had consider. look there cetera, quarter, et quarters, loss we So number things good that to fourth

every to second with evaluate and actuaries. So do in have quarter, we'll that we it, our the again quarter

Paul Newsome

for employment, of line possibly low Is factor comp lines the where your economic of workers' reduce tied include thoughts the the some could growth other higher for level effect the higher that unemployment activity? top they're – also to on and levels revenues

Randy Patten

we some that, And to is kind economy things we last a the you at I even a had bit first lot. really going. momentum And continue. that hit, – grow weeks the don't did when quarter. going The look good of of working the is things March, well. two pandemic little anticipate Well, in if changed

think been reductions a I reductions. open and in we're already We've So sales. seeing lot of to pretty payroll

and and insurers payroll calling premium doing in, lowering sales So basis. ask pretty are being as we're with and liberal they

and would people wait playing those, difficult those then, if the lower are that but would to that situation. flow cash well, true We we'll able say, a done games, be catch to we but and is thought realize up we'll in payroll. wanted up audited just Our audit things will in if of be called and then policies someone on is normally, we let's any anybody's their until – lot

been liberal we've in pretty they're So changes requested. making those as

think I quite So second rest for a industry of because of the quarter going look to the that. bit is different whole

Paul Newsome

was premiums? in a change premiums and case. the – think what that wondering could decrease significant auto keeping not I But the in doubt. I if No like also about that That flat, is well, be the you included mentioned impact fairly the just sounds of

Randy Patten

going June, some cancellations, headed to we're opened little up. a we're are bit, late to are When back endorsement in positive. premiums. going right now maybe I see substantially. quarter, premiums up early economy Certainly, pretty that's down rebound But the maybe think but lower. May gets they're Rates the a second of seeing in premium substantially or what things now, right and will

Paul Newsome

thanks. Great, safe. you stay Hope

Randy Patten

you you, too Thank Paul

Operator

[Operator from Please from questions. comes Capital Returns. ahead Ron with question next Bobman Instructions] Our go your

Ron Bobman

Hi, a just last, Randy. saw lot. months lifetime seems since It thanks was It a ago. I two like you

Randy Patten

shaking were buffets. like longtime and in looks a we hands ago. the That eating Well,

Ron Bobman

Yes.

the even I touching in then event. any wasn't I buffet Although had...

Randy Patten

than smarter I were was. You

Ron Bobman

Yes, well, hopefully, we both dodged trouble.

misplaced, reference I'm and press release about a question, and I'm of coverages. is in that being reading sorry had sentence not in property the – of want So release the your the or press two to virus covered BI ask The BI anyway. the it BI on your but I'm too comments question I I if literally, and in sort the sort touched

reference it your And or to explicit an property making virus different it I in commercial virus just is the has a liberally. have exclusion you policies nearly explicit every are you wording not exclusion? Do make chose? near the I'm policy – want words communication slightly to sure reading too that

Randy Patten

what we put We have that And and we is that And XX.X%, about struggled don't with most, – we our to talked it. all, seemed policies be best – of most, with way have to lawyers term Well, I that few nearly and our enough. the out. think, not not very to we approve exclusion. most started have

of doesn't We have types states in isolated it. of couple of that a exclusion couple a have that policies on

virus exclusion. policies away, and that most have far But of our

but claims goofy there's So had we with in legislation, BI still shoulder talks momentum, don't lot write a talk those that of for care too or any but makes from don't that some we avoiding decisions hardly virus, for say, said think things all be there's workers workers, making And injuries elective. do but some those waiting example, from We still we considered some comp, from manageable, are work tunnel, from low are carpal very have issues that health surgeries. the I feel think comp. any surgeries not write courts and issues if transcript don't income. anticipate we that a apart that I back of have, exclusion – retroactive work business the lot injured we of don't much making regulators, will losses or

our work able for largest going for are be state. are rooms surgery. surgeries, not are open have very the operating – Iowa surgeries until be It indemnity be we these comp but up was until So not those up to this to these have to elective week, payments can can repaired do And Iowa made injuries. people having that serious opened done. procedures quickly, their pretty are Normally, be with elective did elective

that kind So trend. hopefully, of see we'll

manageable to will say going but any effect difficult extremely for to think be UFG. So incidence, this it's for there's from be not us we it COVID that

Ron Bobman

I was for questions. That That appreciate that. Thanks. my quite is Thanks. helpful. it

Randy Patten

Thank you Ron.

Ron Bobman

luck. Good the All best.

Randy Patten

healthy Thank stay you, and yourself.

Operator

Randy Instructions] I'd closing [Operator any and questions. like gentlemen, I'm to additional turn remarks. conference Ladies to showing the back no for over call Patten

Randy Patten

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

Operator

we'll for with gentlemen, joining. that, thank We and today's Ladies conclude presentation. you

lines. your disconnect now may You

United Fire (UFCS) 11 May 202020 Q1 Earnings call transcript