UFCS - Earnings call transcript Q4 2021

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Operator

Good morning, everyone. My name is Jamie and I’ll be your conference today. At this time, I would like to welcome everyone to the UFG Insurance Fourth Quarter and Year-End 2021 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. today's also note recorded. Please Instructions] event being is [Operator the like over Officer. At I'd turn conference Financial this time, Co-Chief to call Patten, to Randy please ahead. Sir, go

Randy Patten

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

and Chief Joining Chief Mike me Ramlo; on Officer, today Wilkins, are Officer. Executive call Operating Randy the

We at other members prepared answer also of have management the remarks. to available our questions end of

Before I couple over Randy of Ramlo turn a the call reminders. to

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

Randy Ramlo

knew on which has gone Based hard work executing and financial plan, it our long-term developing report the into is I One of results aimed plan the team continuous profitability confident me today, at and profitability, welcome am scale fourth we've plan a implement, results take a stride today. will working is clear made and reported call. The believe our Though year-end innovation. and strategic towards strategic conference morning, culmination strong In of Good fully that growth the reported Thanks and forward. quarter UFG everyone continuing ahead, effort achieving quarter our our this we to and our our of fourth Randy. diversified to is extremely hit to we've delivering is pleased are we all to progress path desired the we outcome. and profitable we are XXXX time and to and building that consistent, UFG goal committed for our of stakeholders. results sustainable year

from quarter, our marks results. improvement fourth The third our Now highlights loss the for consecutive in quarter some core we ratio. reported

trend quarterly XXXX Our year-to-date as and of impact favorable which reserve compared and is to quarter result points removes XXXX. of the in and development X.X the This a the loss respectively XX.X core same fourth losses and XXXX ratio catastrophe quarter in of ratio, of of improvement began periods improved strategic percentage core points, year initiatives. prior second percentage loss our direct the

the in in loss second which quarter, a the the refer ratio improvement our the loss dating to in website. quarter in For quarterly of is reported ratio ratio the combined lowest core our XX to fourth of XX to slide on presentation of calculation core combined summary our back years ratio XX.X% the The contributed over XXXX.

development quarter commercial X.X quarter the XXXX to cat of historical year improvement periods percentage an to combined to prior favorable eight in fourth our XXXX. commercial the percentage improvement favorable XXXX, continues trend of average the auto, of which auto over business improved reserve significant since accident our quarter points XX.X The year in of was that two points. which quarter XX.X accident with full of historical in was year losses compared the time points third XX.X is quarters full prior Most of of the in ratio year percentage year in of and XXX.X%, XXXX. fourth points were reserve the of our year XXXX. this in profitability for reported having the same below catastrophe of of the reported line full dating commercial ratio X.X every XXXX, The improvement historical average For to of of a as loss percentage the profitability previous of development The prior is business. fourth year. percentage catastrophe combination X.X the development. favorable decrease The added compared most combined reserve The we to year at from the a losses. of an below reserve favorable development line XXXX than losses prior X.X the our were quarter severity for and a X.X since first combined the development benefited is consecutive points the our back reserve Pre-tax fourth unfavorable lower XXXX, year development nearly X.X increase quarter The prior points in frequency X.X and year accident average business reserve development annual also losses of was XXXX the fourth ratio year and reported accident full points auto points in of ratio in reserve from and in favorable for of of our XXXX, points of overall X.X average line points during contributing points. development favorable quarter XXXX. year fourth fourth and Also points quarter favorable respectively, of

the year ratio a points of percentage to This X.X points in combined added to average XX.X XX.X for historical points combined compares added to ratio losses cat of previous the the percentage year. cat losses. XXXX, compared XX-year to full the percentage For

One now was exit a in personal factor of strategic our taking limiting complete losses in we quarters. cat example lines, the of losses quarter. is to catastrophe steps to volatility which recent by our to contributing our part are of from reduce fourth As plan, below-average exposure incurred this level experienced the nearly

strategically personal with In addition our to of less Inland the surety, and diversified book also as cat-exposed assumed Marine exit business such we've E&S, business lines, business. reinsurance of

the insurance Before I the I AM news. In to consecutive affirmed AM year in financial the an with and a an make casualty excellent of good over over from turn of property A earned to Fire additional December, that I call now the will an call companies have strength AM mention Best A Best Mike, given insurance we've Mike ongoing to meet Mike? for is the rating want to rating some United financial meaningful industry This turn the of to excellent XXth subsidiaries ability strength ratings Best. are measure Wilkins. A Group obligations. Inc. rating their

Mike Wilkins

and good everyone. Randy morning, Thanks,

and continued in As losses contributing A severity I a a This the on from our decrease profitability. was quarter. a reflection years. contributor of standpoint, the execution profitability of commercial initiatives increase that enterprise are XX in Randy some combined will of this auto ratio was primary mentioned focus fourth metrics in in over to key our frequency strategy. and is most the in our quarter progress profitable Today

and portfolio implementing targeted XXXX of units the the our As strategy number size of targeted decreased the These our throughout commercial improved auto in focused of units efforts quality over reductions units part XX% Exposure in rate XX of XXX,XXX through to portfolio and months we profitability auto and increases. December book-of-business. approximately the units December XXXX. past XXXX XXX,XXX have on XXXX, from commercial management our are in decreasing exposure

end exposure XX% ahead XX% highlights of our units, premium XXXX. Looking XX% XXXX to end achieving Also, that are historically X% Commercial XX% auto and XX% in to in and lines growing expectation between of will written to growth a business mix our the new our At XXXX, diversifying in our general we compared for commercial XXXX. in profitable auto to from of as premium XXXX, move XXXX closer website, we the X from see in our business increasing progress mix. to decreased to optimal with business in of of X by new portfolio composition not portfolio to decrease business. accounted our compared our liability is portfolio on marine our our has auto inland XX% Slides XXXX. XX% as we presentation significant for at rebalancing and

to XXXX. XXth business. quarter of quarter portfolio fourth moving line, the second frequency in our reinsurance summarized of of It's again in represented our a claim our counts by compared XXXX in in in witnessing surety, our Slides core frequency most of growth and also to also XX from which assumed presentation The lines X.XX% which declining XXXX. in average claims website. the to units X are This the the decline contributed our auto underlying in quarter our commercial fourth decrease to view commercial down significant per growth XXXX. slides major reinsurance on business. claims of the line improvement XXXX. consecutive occurred XXXX on in is with XX three-year dating X.XX% E&S declining Commercial of X X.X% the and and We provide back profitability and casualty in claims of quarter of loss assumed X.X% insured in our expressed XX-month continues to ratio as

the commercial as down call. XX% claim property positive of For BOP liability, with are and of our general relatively which and example, XXXX, stable quarter these commercial a liability pricing workers' property our claim remained our shared a provided damage of commercial auto XXXX, I compared umbrella compensation rate XXXX. down year bodily counts pricing From third in efforts. line strategic in to all also and in as injury increases XXXX for books our during the slides, counts on is We've are and auto, standpoint, business in sign full

For average was XXXX, renewal the X.X%. increase overall price

commercial rate average The of average line Year-to-date increase the This overall X.X%. compensation price was by property business, workers' increase pricing X.X%. rate driven our commercial was our increase and property auto commercial X.X%. of business. Excluding was the in increase renewal average was auto commercial lines renewal renewal

on XXXX and reserve Workers' focus decline on to monitoring in pricing selection strong increase rate by underwriting resulted an the along commercial development and on continued property backed XXXX. a profitability with loss targeted umbrella discipline. Overall, pursue opportunities and in ratio with our accident underwriting workers' and continue year compensation risk property Looking and growth limits focus XXXX. the along in in emphasis carefully prior will commercial with continued rates This frequency decrease with in of losses auto, management. our decline, initiatives umbrella ahead we include increases an to inflation, to compensation deterioration profitable favorable commercial

will watch to in a model first in a of deploying half profitability closely analytics is the we XXXX. very new this improving be will This We with XXXX in line line. assist

Before I business. lines optimization expand wrap reduce of mentioned Randy up, from our portfolio the about of the I'd our results. Randy comments efforts upon made that in to our personal to like volatility exit and

new initial storms the our reduced. mechanics with For an the are named we now aggregate an also potential protection to the structure our from subsequent excluded we occurrence The loss is to reinsurance XXXX, occurrence losses prior aggregate perspective. catastrophe perils. better new retention Through for reduction for to program, in UFG's additional to the of program. aggregate restructured both for in years protection a aggregate retention each and catastrophe an from the catastrophe named In protection. addition provide provides program for other Also, catastrophe loss have occurrence structure, storm

the Patten. Before management the reducing settling in we focused quarter quicker the to excellent have are being outcomes through reported Randy the our I'd over driven favorable I and and seeing who reserve by Patten, abilities. that, work over turn claims Randy fees discussion comment I'll development resulting XXXX claims. call progress on in fourth Favorable litigation in of claims With team, is on in to claims like of cycle, legal turn the Randy? to

Randy Patten

morning, Thanks, net in of million, period $X.X loss again, we same a $XX.X In million the net consolidated Mike, of of and everyone. to reported the income compared good XXXX. fourth quarter,

year commercial in $XX.X reserve the of of reported income gains. net in quarter catastrophe income in of in XXXX, $XXX.X net Also an XXXX. consolidated Net compared losses. severity as to loss compared losses, were and primarily and full a to year reported a loss full net fourth in million for XXXX, we lower of quarter million, year, full development, of was period same the net the a For of income and the to the result contributing a increase decrease comparatively XXXX favorable fourth and frequency auto investment net

exiting the $XX.X million change net The periods our XXXX. sales and to of net were the offset Net million income. equity in security both partially majority change change income to reported are a to during premiums The $XX.X includes full recognized losses largest for change decreased equity made and as from premium auto of Net of compared portfolio due was $XX.X of by million period commercial the expense the profitable was the of our to quarter investment by accounted which reducing incoming mix value two rebalancing was periods of gains we liability net net The compared of more of value to XXXX, which million This growth in gains fair in XXXX. in of million fourth in the investment $XX strategy $XX.X by our year up earned The and XXXX was primarily portfolio as compared in lines net million $XX.X management put year investment net premiums the this result our by our and quarter of diversify The investments XXXX. personal the some book business, X.X% $XX.X respectively, was million fair of partnerships. the $XX.X assumed driven in of pressure decrease quarter which investment For decrease. business. strategy in full from and X.X% XXXX, business, of between the change same gains of fourth of X.X% investment the line driven XXXX. and our of our lines, remaining earned million realized on and the in did in same net periods limited the with business the ratio. of reinsurance of These in in holdings. decrease decrease

quarter, XX.X% compared period profitability the ratio the expense to our as in XXXX, broker ratio from Also, accruals our profit-sharing quarter were fourth our the and improved in performance program the and of to XXXX. employees, For fourth was expense for same of business. agents, additions XX.X%, the impacting business in

XX.X% an full ratio reported year the XX.X%, For compared we as year the XXXX. of for full expense XXXX, to

the XXXX our this discussing earnings and of will expense increase XXXX, benefit impacted benefit call during throughout ROE mentioned post-retirement adjustment XXXX in announced both XXXX. a our of reported the years. in year, prior an an plan. recognized calls portion Also, in through of surplus X.X% XXXX, my reported the As with In to expect ratio majority previous ROE to ongoing income. due changes expense expense due conclude loss we in our XXXX, in improvement primarily medical I highest statutory approximately the quarter to smaller The ratios of today year our capital finishing six with the net XX%, in position. we increased first

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

not we repurchase the during any shares. quarter did Lastly,

questions. approximately year, The Operator? management's XX,XXX open stock price, including requirements. repurchased now I market line time our now for amount and and on million. common prepared general depends regulatory conditions and This of is the the remarks. For our many the economic will shares for factors, in discretion several we at and share concludes purchases $X

Operator

first Ladies Backer session. question. question go from and the gentlemen, And question-and-answer Please your at comes this ahead [Operator Sidoti. time Marla with we’ll Instructions] begin our from

Marla Backer

Thank of here. questions you. A couple

exposure First in all, so of to reducing you've progress auto. lot commercial made the of a

prepared still expected to in expect commercial Well, your auto is exposure to continue initiative XXXX. about pruning to process some degree? you mix. remarks decline your in talked Do that the You to portfolio optimal of

Randy Ramlo

are at XX% we're that of of long-term like balance. the analytics this The XX the the all Marla, But of kind to book would is as to about time. auto yes. process. auto pace deciles We'll you we'd that and But probably Randy. doing book, is substantially answer continue higher of commercial profitable. lesser Ultimately, – and our down we divide to through get our into can we'll be a pruning some always through which kind deciles, our the be least to know,

auto. possible the It's have We of for a it kind be do. overall writer. auto We're the with write, careful with ongoing we have write end of an But time. we to to and write as have of do book we of little at important packaged probably what commercial looking we'll commercial part as of an what kind but process

Marla Backer

great. Okay, Thanks.

Can bit quarter. that bit see on like about So, expense that to ratio? you sounds a speak the fourth ratio the for the about the it what a you in in seasonal quite little increase

Mike Wilkins

this I'll shot take that Marla a at is Mike. one.

in for quarter programs would as in in employees both I to Randy agents sharing So, fourth improvement based improved his mentioned for some comments, be I the the correct. we profitability. seasonal profitability the think had on our think And and accruals profit increase

to on and Our topline is make putting improvements some XXXX. topline our expense ratio we pressure in hope during reduction

same have related yes, up fourth won't was improved to the that quarter there. pressure jump we the So, But profitability. more level of

Marla Backer

and Okay. including same your hiring. And and Can those some reading assumptions included then you and any about along -- of about questions, of speak is for in talking that beyond? inflationary difficulties everyone you've whether outlook to pressure wages for lines XXXX the

Randy Ramlo

lot So, is so right? temporary guards a of supposed -- This companies. inflation Marla, we're this again. inflation Randy So, have of kind we be is to like

increase based inflationary our on data. exposure So, an get bases automatic

well. It's big we're increases risk hassle. to us partly exposures much fuel get and inflation used substantially the kind exposure by we energy getting as was of up-to-date. doesn't Part materials a are building interestingly affect cars keep our and is and is as industry that as So, driven the up rate the to able of to that that

we Someone find car to their car to gets a ruined replacement. up are The considerably. and try prices have

up the inflationary increases the amounts. enough are So, rate most I think make of to for

increase and on continue say, at least to this keep for up exposure we're here to with cost economists the we're inflation basis to the of listen also planning trying it here inflation. our most to try being But of won't but on We construction every renewal be forever, to XXXX.

Marla Backer

Perfect.

that. for Thanks Okay.

Randy Ramlo

Thank Marla. you,

Operator

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

possible it is on phone Newsome is that your mute?

Paul Newsome

congratulations you ratio a prospectively? and the loss underlying Could you show Good The in It quarter was the assume Can quarter. improvement about us they're and the as doing improvement a pretty is But in of in hear the thoughts a elsewhere. slides out presentations possible. auto. sustainability the quarter we or morning in fairly now? me dramatic on fourth commercial the few look last really measured it gradual two. other I things give

So run the -- about quarter of two, and you the loss you sustainable a think rate be the fourth talk can connecting would sort on as ratio? underlying the how

Randy Ramlo

combined are actually the So if I started material But Paul, to dropping and very know we pandemic. our forward. Randy. see don't frequency this is before expect going reductions a low-XXs

so to our trying of claims kind a the the improvement. And out being get help is offering and can. of stay of areas underlying Mike of limits, -- limits. lot by out also losses to and to some work whenever settled in personal will a going refusal think department certain remarks deliberate mentioned on of lot being trying to the a we're seen regular and see the court of high mentioned, especially in large of liability we of lines that I to improvement fairly quickly And offer in driven just going parts country. very think severity We've we that's lot his Mike help.

combines so see combined lot sustainable should sub-XXX rate not seeing a think that of very But things environment are think good still sustainable. low- the probably and XXs necessarily. that we And I with those very I So is certainly, coupled we're far.

Paul Newsome

when about talking thinking you're the difference because there's a obviously, you're about underlying or sub-XXX? overall And material

Randy Ramlo

a going take Mike's at shot to that. think, I

Mike Wilkins

still in – ex-cat, Yes, think Paul, year low I our that ex-prior see lot go I areas. that good loss we to business. more we can to continued improvement expect ratio, year full We And in think improve the at number our We that improve. – the as expectation of forward. reserve actually for a the if you on will core is trajectory we are some continue is look XXs. of lines to development still working

we As for than year, cats the had impact of full more you know we an from would still expect.

from cat So especially now, with quarters. going we losses impact personal being in future lines gone forward, expect less

So we our yes, optimism the – quarters. I for coming have lot a of results think in

Paul Newsome

great. That's

Just kind commercial the auto on banging of again.

didn't settled commercial characteristics limits, that were realized what business about about just dust the or on you majority that that now talk problem the book the that there pieces business? businesses vast of hindsight you with underwriting in pieces Now you to renewed. Is has the it were Can the that auto the large were maybe ultimately work? just other

Jeremy Bahl

Hey, the Paul, were this whether on is a Texas elsewhere. particularly legal combination Jeremy. environment exposed California, Kind we areas in that's auto of and of line

more limits I and accounts. heavier I thought we wheel think not the just the in us. has with of a or price tendency is environment that last rate thing that's for down ourselves corresponding benefit heavier the found the would a to size whether think heavy means then say rate good risk. environment on heavier exposure larger I a And And drive exposures we sometimes the and without the fleet very

Paul Newsome

good And you. luck next year. to Thank

Jeremy Bahl

Thanks, Paul.

Operator

I'd like [Operator turn the to Instructions] I'm And no ladies and time questions. remarks. showing to floor Mr. closing for additional at any this over Patten back gentlemen,

Randy Patten

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

Operator

today's with gentlemen, for we ladies will And you that We conclude presentation. joining. do thank and

now may your lines. You disconnect

United Fire (UFCS) 15 Feb 222021 Q4 Earnings call transcript