UFCS - Earnings call transcript Q1 2021

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Operator

Good morning, my name is Kate and I’ll be your conference operator today. At this time, I would like to welcome everybody to UFG Insurance First Quarter 2021 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instruction] Please note that, this event is being recorded. I would now like to turn the conference over to Randy Patten, Assistant Vice President and Controller. ahead. go Please

Randy Patten

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

forward-looking and our Chief Financial Officer. Chief are today Ramlo; presentation speakers Jaffray, may Officer Randy Mike note Dawn that statements. Wilkins, Our Executive Chief today include Operating Officer; Please

measures, Litigation press and Reform measures, are investors future present our we today, Reconciliations use in which factors, also Please Securities to of Mr. and the SFC pleased a our As XXXX, statements The filings. CEO UFG cautions filings. to defined Randy our this Private described most Insurance. also forward-looking based are in of company of release note Act time, that financial expectations. to of due At current a include discussion that GAAP I'm actual the the variety statements press release guarantee management's some These performance. are measures. risks are these results of available in non-GAAP forward-looking on Ramlo, materially any may in may and SEC uncertainties, not differ comparable

Randy Ramlo

net this in in design Offsetting to This decrease retirement will change due gains increase call. net first in reported ratio by net Texas. XX-year to reported the this morning, will for the you retention through income our Thanks. a partnerships. are and earnings primarily our increase was storm in investments of combined walk Catastrophe the valuation a an for driven losses later there increase was commercial saying detail. equity, investment an first positive numbers the income retention the net $X.XX do on points severity of Randy. moving of losses. I a quarter quarter This securities expenses, compared and in XX.X our morning the in stated This points. off both of to was everyone. re-insurance diluted our today's provide first to call our losses change liability Dawn per due the for in first items quarter, freeze to Also impact catastrophe in million. average the will to in of our limited lot Good $XX in the event losses catastrophe from state quarter our of plan. catastrophic contributing Mike, Welcome a these investment XXXX health start from was employee more income of the Dawn and in was higher our we occurring excess the best realized conference mostly of historical in Uri, details X added to with and winter auto full post of losses share, The call. event, loss, parts quarter. of XXXX. I

consecutive through deterioration heels with which Excluding initiatives. during presentation a to injury severity bodily commercial and of increased continued signs the of the XXXX, and comes for loss a the this commercial ratio. auto case the our in we're in our of increase in first of higher and was positive decrease in on core reserves event, auto the loss see the number earlier result quarter catastrophe summarized claim X losses, progress analytics. the frequency ratio of of on of being current is our increase slide decrease In improvement of This use auto This XX exposure of There quarter, we first our involving cycle, commercial severity set line both our losses XXXX, in website. on quarter claims strategic units, quarters the of of in an year the in core first our in quarter. expectations in the

XXXX, in ratio pricing the this In to renewal. of plan loss accident increased will key in with reserve While the year development core have know first underwriters our believe to quarter also policy the ultimately UFG, our we auto assisting improving reserve we It diversification. at future. development the reserve losses, our benefits in of and at lies strategic time unfavorable addressing executing commercial profitability portfolio the less this lead of will

All concert our variability priority, in To work of top profitable book achieve our and results of the our execution. underwriting business. the my to of is initiatives diversification consistent, are our success in and portion focus call, important surrounding today's our of of strategic to remove more

year summarizes presentation XX% of the in the almost up commercial X for compared XXXX. quarter made Slide of in down shows XXXX of to in During first portfolio, our quarter XX% the business This new slide commercial that of new in from XX% XX% auto XXXX, first auto written full dropped our XXXX. the business. has premium to

a such appropriate greater vulnerability exposure diversification lines, in partners. do investment especially assumed pleased Also, defined the to will growth selection risks, achieve planes the us profitable first exposed and reducing our in XXXX. and diversification. Reinsurance geographically in of Lloyd's The classes our markets and new of to targeted as sing report and Inland assumed of with to in jurisdictions, areas. Shuri, to also of Marine, our with business, addition along auto in portfolio our Liability, the We is re-insurance, the ENS, clearly consistent are quarter coupled auto catastrophe syndicates, commercial commercial of Property, We part General decline our in growth allow

ensure there working for clear forward with confirming they closely our Moving to strategic to are a with USG, aligned and agency our profitability. we partners is vision path are

and program roll out platform. quoting began April, have a pilot online of Finally, our select new states, we agents include to plans in launch mid-XXXX. In a a the part plans few this starting in a portfolio diversification of with

growth straight We will processing of to this over call through turn platform growth policies Mike? that profitable in now I the market. confident Mike commercial lines the propel in business. and Delivering Wilkins. bop are our of our will small

Mike Wilkins

Thanks, morning, Randy. Good everyone.

For my our discuss the plan, progress focusing call will during I the today, on of of portion quarter outcomes strategic XXXX. of first the positive

exposure the underperforming discussed and has number is throughout First, reducing commercial audit XXXX, units. the accounts our been reducing on portfolio focus of size of nonrenewing our and

approximately continued quarter Partial our March auto in to frequency, the XXXX. of units in March continues first from months, XXXX units the XX units, to in the During units per expressed insured decrease. past exposure efforts pleased these over report decreased XXX,XXX XX% and claims to we also XXX,XXX XXXX,

XXXX With earnings on the of website. to in from the in XX call the fourth quarter our quarter X.XX% on first slightly month This moving of X.XX% presentation XXXX. X decline our is in average, declining Slide summarized

X business. Slides our provide view and addition, counts claim In XX of by casually lines our X-year a of major commercial

strategic bodily our fourth of We major pricing increase particular, lines we into quarter rate Commercial remained commercial up and property commercial in XXXX, first pricing in analytics-driven our across the auto example, also commercial quarter, of quarter counts the umbrella the are digits quarter in compared our pricing with counts improved in books the down of commercial been Commercial auto renewal provided on For claim increases quarter in and average underwriting quarter. business. liability from of in property all compensation fourth in in X.X% same our at The double They've of continue double business. liability, first down adequacy average have digits renewal X.X%, in to were increases disciplined of on the and damage XX.X% XXXX. at focused pricing claim also XXXX, since in XXXX. our average of rate processes positive and XX.X% auto auto, remain XXXX. period technical slides. the first general XX-month XX% injury rate both from up of as All property to now notably beginning the strategy are efforts. low workers' the these first which In the signs are in embed XXXX, the

believe with As aggressive signs opportunity last see as the reducing be exposures, desirable arguing. to we we commercial growth in we property market in there's quarter, increases more an our rate stated with

also early mentioned. set in on today, wrap reserves of into claim the a cycle some our XXXX, strategies shorten of Randy focus triage the I that will of initiatives and metrics the positively quarter result claims frequency to improving first the claims In key improvements Our remain UFT. in to embed cycle claims, the the of with and expanding growth possibility the which call time. initiatives portion trended up are length for strategic declining expenses, and litigation my our process, of analytics claims

of assumed quarter believe of During will in diversify assumed first of has profitability, and several historically these will new London I'll We participation. quarter new recorded we green the for book direct as XXXX, We business added the of another profitable new book first UFG. improve insurance edition programs. business programs XXXX our a quarter been further reinsurance Also, our have to Dawn was this book Dawn? X XX.X first over business. diversify Lloyds the of in premiums With new syndicates. with of program net Jaffray. XXXX also that, you UFG's of in This investment of million draft discussion our turn help written the

Dawn Jaffray

million quarter, first compared consolidated net a morning, net XX.X Good in loss of everyone. Mike. we million to period Thanks, the income XX.X the of reported of XXXX. same In

Net remaining driven of XX.X the first X.X first by the of realized of the in fair an due of XX.X equity increase increase These X.X XX.X million of of gains as value mentioned, XXXX. reported change in period million realized net as security were to losses, in of in We XXXX gains million primarily severity investment driven in million compared catastrophe equity bank investment in of to in XXXX. first net I bank in realized actual in the a income change investments, the XX.X Phantom Randy commercial reported same million of income by in the the the net fair of gains quarter what loss in XXXX the first to in compared The net and X.X million net of by was refer As the same of million the a by million investment net to of That's and quarter quarter decrease compared auto. increased increase of sales the to in XXXX. income, higher primarily XX.X realized gains, investment XXXX. quarter by in offset an investment million period our was gains holdings. same period was fund our were XX.X of XXXX, value LLPs value losses investment driven funds.

ratio combined reserved a Moving XXX.X% XXX.X% X.X quarter on reported prior first of to compared operating comparison, for points accident the quarter the Favorable development, was year first flat XXXX of year. compared XXXX. quarter metrics of contributed to the to we last and during

off fourth our a the pension during participant plan, in retiree this on Changes mentioned funded the long-term longer-term making quarter to change and year earnings significant Both are about was for immediate from to and first X in beneficial plan in income ratio impact the quarter. escalating the during first are change the improvement approximately XX.X% progresses premiums Note denominator first of the for the of as compared total on combined of Including ratio on XXXX points I first and long-term quarter mitigate in loss million quarter the balance for adjustment in the be XX.X% anticipate medical a had expense pension reduction the will and in the structure recorded quarter announced the taper XX the provided call, our This expenses. the an approximately first results As quarter. a XXXX. expense the liability X our of plan operating retiree a expense first medical traditional to of to ratio, grows impact. year the plan We will XXXX. these to and or much into quarter the cash ratio volatility. The had recaptured we changes, impact of with saving we in required personnel resulting earned, managing combined cost to changes first balance benefited XXXX aggregate of accounting plan made were as change, will Changes throughout expense the ratio ratio. have quarter points for both this year. impact more

on capital. Moving to

statutory As of XXXX, quarter. balance sheet XX, X% strong March during approximately our remains surplus and the increased

of March of dividends, cash share declared shareholders XXXX. consistently back $X.XX March record of of per to During marking XXXX, quarter the first XXXth X, we paid quarter, consecutive dividends a dating and paying as to our

shares, restarted of small market and purchases we regulatory quarter, economic a requirements. amount and depends including the at a condition the and the factors, is program. repurchase general on price, Buying share during timing and discretion of any amount share of our management's Lastly, number and corporate

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

Operator

first Paul from Newsome Piper [Operator is from Our Instructions] question Sandler.

Paul Newsome

be much you're now, might with think broader to doing be rate at wanted may about ask moment. claims and underlying about underlying how how the what how question right a happening improvement the I feel -- versus the it you but you inflation

Randy Ramlo

opportunities lost think Randy. think XX. a the good across should Work of commercial that We talking, north in We than we rate I shot opportunities I'll there at now auto just there's more has and right something Paul, on X.X% where add. has the and well. we better we it's this moved feel our especially pretty which there's one of have is wood property. been take kind Mike one that think that's to on in up what which rate Michael increase, there, had umbrella, I over rate to and liability, think were been is are maybe more the about of versus to think some do of In overall country a better, some General flat, bit parts we the was can there. kind getting lines board storms. as past. more we the but there. of comp I we're probably that profitable costs think of little We do our be went can

excess I on coverage umbrella severe the seen think increases. and business some pretty statistics we've of the rate nationwide is

been I plaintiff's but think to do though little there, to promised anything go costs but Mike, bar. that, area think we've a of more in we got That's larger to. court an you as cases mention it even not the to be really inflation into our I one attracts area. or more that's got that social a ratio-wise, got we that more court those anymore, opportunistic the umbrellas, bit much little better really profitable lines, I lost

Mike Wilkins

for operate. Maybe just term, cost think basis, overall guidance on that rate case results closer that add, term, our the the positive. and alternate. I an the providing we're Striving in setting in severity that our reserves reserves with in inflation confident our but the quarterly short loss be process in we setting, our long increases analytics exceed environment In the the should earlier a we're to

Paul Newsome

and the You run by that about Is an ratio rate? time, then think the we just earning points year. over looking on as ongoing the about help, the clarifying there what the of first come more was benefit that over also that could a million expenses. a it working? in Is little $XX How's we're quarter, true-up it impact maybe in should as helps the X so true-up as of hits A expense my the through accounting there'll and prospectively? you then up mentioned done? clarify pension something true-ups server course simple there's there was of be year the Or course at the about understanding

Dawn Jaffray

Dawn. is this Paul,

come had then points offsetting the the year, Relative recapture first said side. ratio improvement. and to of recapture where the with people is there's did the overall, X expenses calculation, amount on that of are total liability the and be I to expense and overall up. specifically, associated the components small approximately, the that the ongoing that's points You're X X points will we set LAE a we year that points some previously there Understanding X correct, throughout for UA the about in There expenses. quarter in we of about

continue and to technical earlier, additional As of and our assume Randy office talent reinsurance we in invest parts, moving a team. indicated, risk analytics, quarter

put investment online platform, oasis in continue technology, We our quoting to analytics. and

result, some fixed over the will course vary fluctuation there's earned the the time. expenses premium level as As and a of of

offset in in would medical our the some XX, somewhere be costs plan, from plan getting anticipate pension So on the I the of on about that haul run of will improvement XXXX note. long about X.X interest between the rate roughly. and point We're range by surplus XX.X the

Paul Newsome

ratio and were the into The expense Okay. I for XXXX was I Is to point. benefit what is you misunderstood. 'XX run referring full the to points that you rate X.X guess about expect X then right? year

Dawn Jaffray

how savings, expect the would XXXX. going point. about some denominator could suggest I opportunistically, I would X.X Yes, additional or point changes, be right now, there beyond but much Again, premium X.X forward

Paul Newsome

Is that bit businesses? I of exposures and kinds was a edge well businesses? business What's kind is strategic businesses as think exposures? How you great. about talking property United participation the voids That's of as we maybe talk reinsurance Fire's hoping important. on more they were you it these United you about? could you the Where different these your in to wanting topic of think businesses? about as a brings little become Fire think The piece do these should

Robert Cataldo

of business. We we complement at is company it as size but member this existing in a diversify funds to assumed book accordingly investment which Paul, the at investment strategy, the in a established Cataldo. which we've our We within invested we've reinsurance an as in the investment Bob portfolio. consider intended as policy, X Lloyd is When to look our syndicates our and disclosed. monitor we further

that to trying in opportunities or convective at look the away monitor of that this investment keep As individual investments, storms, size severe syndicates, of that the our risks expand govern at Midwestern, policy the book least to is the maintaining ourselves social our we've and the mind, underwrite, But our we're and made. of diversify We'll at scope we like. of from vis-a-vis investments the we further again, inflation, and exposure we probably look continue share and statement.

Paul Newsome

exposures difference property the are the does of are So U.S.? types exposures Or different outside these that outside U.S.? how Or work? casualty specification the

Mike Wilkins

right where XUS. that be could this places property is to in the don't Paul, I'll look so do direct on write one. that side, exposures take Mike. We it we

we we fair targeted some as we off portfolio. that's sharp corners currently Europe, where the work United have Northeast very could in also For that look it direct comp segment trying don't company lines underweight a just in places. the a write example, Japan, Risk example, where by Georgia, other Chief be a to where in and hired et a cetera. I'll amount the Woolstenhulme. are We've fill Carolinas, Micah the we're our profitable. of sand or a business, name been in underweight. we Officer, to and areas business, Or Really write aware States we Southeast, for current far those out fellow

have where underwriting That's us kind of asked, got a really over just have programs, programs to brought the just invited have on get opportunities to all long little been have You bit of own. otherwise programs the relationships, Mike we that we lot without and an advantage had. doing internal a would not that of Micah established, their be their introduced has on lot all underwrite we on we of Obviously connections. a lot of lot a but UFG's past anybody advantage what wouldn't these somebody's of here? is been to able we a of

Operator

have we Instructions] [Operator questions. time, no more At this

will Randy the question this remarks. I turn and to our over So session. Patten conference closing for answer back concludes

Randy Patten

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

Operator

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

may now You disconnect.

United Fire (UFCS) 8 May 212021 Q1 Earnings call transcript