UFCS - Earnings call transcript Q1 2022

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Operator

Good day and welcome to the United Fire Group Insurance 2022 First Quarter Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Randy Patten, Assistant Vice President and Corporate Controller. Please go ahead.

Randy Patten

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

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

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

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

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

Randy Ramlo

profitability. initiatives for direct improved XXXX Thanks, aimed and and result results to quarter Today, first one, call. conference UFG quarter saying am XXXX Randy. is I confident everyone strategic to which first of in a morning, strong the Good our I at of pleased report welcome plan our: am

combined back-to-back a have fourth XXXX. quarter the This X time the the years and first XX% XXXX that to with second back first reported delivered combined under the ratio XX%. consecutive ratios dating marks For we of of quarter, in quarter we quarters below have

compared to consecutive year. and fourth the in auto the saw when prior the improvements ratio same loss quarter, commercial both loss our for core ratio quarter we addition In in

promising of start of core prior catastrophe improvement We improvement with frequency impact and percentage significant XX.X of This pleased driven quarter In are loss improved XXXX. in this removed our by being to profitability development, a continuing claims. ratio, the points. which losses and is severity the and reserve year first in decreases our XXXX,

combined ratio For a core The our summary same is XX.X% the the first XXXX, website. period XXX.X% presentation reported loss in to reported Slide of improvement ratio in core of combined to improvement ratio the the the of the quarter the in the our losses. XX in refer loss in which catastrophe XXXX. in over ratio our decrease the calculation, Contributing contributed improvement to is a combined ratio on significant in

in exposure in catastrophe ratio first and percentage Our the to paid personal combined less to of and first XXXX, first lines first of in catastrophe points than lower the has quarter from than lower points decision of average off which percentage X.X in less quarter ratio the XXXX. percentage to the added our strategic quarter thus added quarter points X.X X.X the XX.X of historical combined Pre-tax volatility XXXX. is exit points losses the

in The line first development losses reinsurance percentage prior at ratio also prior a combined and the was decreased quarter benefited which favorable was first business the year loss improved Commercial reserve Winter retention Auto reserve period severity during from Uri, of of The from our to our of business development. year excess favorable included full losses in XXXX of increased with X.X favorable development Storm current points XXXX first compared Auto, in line of $XX Commercial of ratio first reserve was to X.X profitability losses in as XX.X of development quarter of of As reminder, from was with XXXX. in points business. Most quarter improvement which the compared Auto of the improvement our reserve The in loss the quarter the in a of retention of points most significant favorable same the XXXX Commercial XXXX. the of million. quarter line

we reserve As in have of a company, XXXX, development first reported that since every year trend quarter the continued favorable a XXXX.

ago team. to turn quickly Mike, a him new are new just Financial April is us up our the to have take our opportunity our we to call to is UFG of over role. XX this speed member began introduce Before weeks and Chief on I Officer and UFG his to with couple leadership getting like pleased here would Eric with of Eric newest this I morning. Martin in

the quarterly is past of path tenure. CEO It that recent for my excited XX year. board and of years this an have at to Eric Also, end are is nearly am I you confident we UFG of the is contributing profitability have we had during last strong to have results. am by the the know, We improving retire trend right in to success on our honor at timing planning Today, solid the UFG, over on as to these I October years of growth evidenced and after a experienced momentum year. I am many XX and as proud forward, serve the

in Our upgrade. search that actively Wilkins. will over to you history, choose call Mike now the UFG Time UFG’s will an for Board assure very the named can is best turn leader sixth be Board Mike? the I And have the our I a job. candidates. is confident and person external am for some great internal who I but tell in conducting Directors will of will and

Mike Wilkins

Thanks, Randy everyone. morning good and

quarter UFG mentioned, another profitability. delivered and improving As strong financial Randy of performance

and severity loss we pleased Auto of primary are trend core especially have and frequency over We year losses consistently to has over with A X made with our last success the the been the Commercial years. decrease in of this the last ratio. improving contributor progress the

targeted strategy, have on size our and focused These our and rate of increases. Auto the reductions of profitability of quality the improved in Commercial decreasing have through book business. number exposure part Commercial Auto our of efforts implementing the portfolio of we targeted portfolio units As management

of business, written premium closer increasing for in optimal Also, a portfolio and XXXX. at XX% our growth lines get Marine see as achieving from exposure expectation accounted from growing significant to we Commercial units. first our the XX%, new business At XX.X% end new Commercial portfolio auto general quarter for of decrease not has that to first our to of in will mix, decreased we Auto Auto the the and XXXX. and XX.X% first to of is in with XXXX XX% we XX% of business premium As XXXX, XX% composition XXXX. between liability XXXX XX% compared are historically the profitable in of compared quarter as to to Inland our quarter

our profitability achieving reinsurance our growth ratio X the lines by portfolio We to quarter quarter of in surety, and XXXX. objectives the in improvement of of contributed XXXX reinsurance are X our ENS, first lines core XXXX. view lines and business. provide casualty growth counts business. line, loss These assumed and in a occurred also The in the significant first underlying assumed in major to as most claim X.X% first which of our quarter of X-year of the commercial XX.X% of compared Slides in our represented

bodily property first claim to in as quarter XX% are For quarter example, in XXXX our damage the and of Commercial counts Auto compared down injury same XXXX. the

in our are on sign have down is claims slides of liability, compensation VOP provided counts commercial efforts. We these as strategic also general of quarter liability, the positive all XXXX, which workers’ and first a

turn renewal with like inflation. and a from increases. premium on average was X.X%, over I X.X% to exposure call pricing the in changes Randy Patten, the From from to standpoint, Before change overall I’d X.X% pricing rate comment and

we from Excluding was increases. with business. feel from increase Commercial of and the increase seeing opportunities. currently premiums overall strongest achieving and loss was inflation the we true exposure pricing and by of worker’s the average Commercial was Commercial X% rates X.X% Commercial Auto The Commercial compensation rate driven renewal line book. lines changes line XX.X%. X.X% increases X.X% Commercial The particularly overall Property and change rate that are the renewal average cost the in Property was Auto our the in impacting increase business, Property our are rate where rate renewal Auto This We in are was exceeding with

business. claims our margin belief Following to of of our major our contribute across frequency all lines business to continuing of that portfolio expansion overall for are also achieve we

discussion to dynamic underwriting this will With environment, make over appropriate economic in that, turn Patten. continue portfolio to to I and our conditions monitor Randy pricing, adjustments we will However, strategies. Randy? the and

Randy Patten

Adjusted of to the due compared in losses was in of net quarter, a $XXX,XXX. claims. to catastrophe in first first consolidated first the morning losses, of decrease million is $XX.X operating same everyone. income, $XX.X a quarter and and good net quarter million operating in XXXX frequency income of $XX.X increase adjusting XXXX net in gains to of severity compared again, the and first net of which the The Mike an of and quarter operating income removes Thanks, income loss period and XXXX. million adjusted XXXX primarily we in in income the decrease reported a of In investment

The of offset gains fair compared in security the million $XX.X in periods premium business. in compared profitable quarter of are first side by income to first reducing of in primarily decrease The These due of first the coming the $XXX,XXX by our strategy reinsurance value which million to are the The change rebalancing premiums by driven between in to XXXX, to sale in $XX.X was and the the the earned our which change portfolio in X.X% of business. partnerships. to with quarter Auto from of book was the first decrease. $XX.X change our of accounted XXXX. of investments, of This the as first the which million as XXXX of of as quarter business, partially XXXX. strategy recognized value of our realized personal exiting the Net our XXXX change from driven remaining business, The management reported year. in holdings the investment made lines investment the net two first the by majority X.X% increase growth Net of our up X.X% for largest more result portfolio quarter change our Commercial limited decreased of the equity mix in in was includes period compared fair of of recognized same liability assumed lines, the XXXX. the gains between decrease two periods we net income. our During diversify quarter of net net is quarter of the investment prior losses investment of net of was equity

expense the in XXXX. XXXX Moving expense quarter benefit to expenses, for will to approximately quarter quarter conclude increased surplus over the health position. our on of first first the first ratio The first due XX.X% of an a my the the for to the In two our design of the in quarter one-time income first employee ratio underwriting the of statutory of XXXX. increase net between the XXXX. portion change the of X.X% the quarter in of compared in quarter XX.X% call X.X% was XX.X%, in reported is the today in ROE quarter. I discussing Also, periods to capital from X%, change primarily due the first we benefit primarily reported recognized post-retirement the of reported XXXX of annualized XXXX, first

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

Lastly, the questions. shares. including during for several and not open management’s remarks. purchases on general and share did The discretion at the and the of and This our timing economic quarter, price, concludes repurchase I line amount market is conditions, any Operator? depends any prepared we requirements. regulatory now factors, will

Operator

you. Thank

ahead. the comes Marla session. from begin Sidoti. Our Instructions] Please question-and-answer We now go Backer question first [Operator will from

Marla Backer

Yes.

at fair in over confirm further in considering level to your down will there past the several a the but your you that won’t same just that remarks? really wanted Is quarters. something any decreases just work – are – they from given you Commercial Auto So, prepared the be said remarks, you takeaway adjusted won’t category category the have decreases

Randy Ramlo

We remark. fairly Hi, is of is that That probably where This close fair Yes. we Marla. got line to very Randy. it want a permanently. have business

close like it’s I very to think have be to long-term book business and of of we would around to that that. XX% our

but it years. have forward, couple So, of the tweaking be reduction some over we won’t unit we anywhere do that will going last near the done

Marla Backer

improvement impressive quarter. some And have you Okay. in in category the that really

frequency can of out pandemic of to and In seen in the of changes out would extent, during you have to have the pandemic ascribe reduction of that you the any, But internal some terms parse that what and we severity, that? if initiative? behavior coming in might maybe the the your contributed most driver to

Randy Ramlo

course, for but change And the – all that even we track is were are our frequencies our to the This down again. take actions, credit of so, Randy, before in we – going pandemic. going

book. Construction most very of was So, through we are the a open heavy construction pandemic.

frequency the for pandemic our most And because by COVID. am the any part, down I wasn’t going not very was all affected don’t driving, industry through to I but a of the effect going think construction much So, less say the is there pandemic. and little clicking

So, that’s my [indiscernible].

Marla Backer

give on anticipate for color lines might some lastly, those changes lines color for targeted then economy headwinds you where right now? growth, And traction, you profitable targeted given us on seeing additional insurance Okay. you’ve in any the that are give can you’ve growth. the of where more business us any Can more of you that some you

Mike Wilkins

shot Marla, at Mike. will this a I is one. take maybe that

a more try is two. feel We little Maybe, including I’d say Still, segment assumed going growth, we if of have a maybe like it’s ENS, to across reinsurance. for grow that in are surety, quarter targeted headwinds, there not margin a to an is of was lot the and in gotten success as there margin there we say our continue and or where had that, year some business much to last had as say, area but I good to ago. the ENS has bit there lines competitive all

had lot be the think our operation into a segment. to surety have that side grow continuing to of really lot opportunities of moved competitors success reinsurance I has space, And that in assumed good continues things. of

Marla Backer

Okay, thank you that. for

Operator

Sandler. from [Operator Instructions] Please go from comes question next Piper Our Paul Newsome ahead.

Paul Newsome

of not you on could you is major about further Congrats is thoughts the give prospectively loss moderation and think of that your would require morning. price trend loss lines there? or Good business, for think even was quarter. you accelerating us what there and some trend or hoping that just if some more I increases whether

Randy Ramlo

Hi, Paul and thanks for that.

look a to bit. us at asking probably ball are You our crystal little

doors, that are you of now right about bit more of still a in prefer rates rates, little inflation a companies opinions. medical are as increases have cost maybe where kind going. getting would little And think like inflation. And talking of have carpet, a expenses, to the we is I but just right track now bit, moderated we We kind we said, adequate probably but of get shingles, we our are cover drywall, paint, rate lot adequate to everything. feel

right are rates to cover we loss additional like we costs. the we And able so additional we are long now, overall as can as get think

pretty confident on auto, on property, probably work more confident comp. are We

probably increases. not getting medical enough We cover cost are to

it percentage don’t So, I temporary, I book but are the on going to line a cover comments not think increased costs. the experts going how little varies bit, to turn Corey, you today by our but around is keep other on increase increased or these know, kind continue? adequate saying entire somewhat But any it’s overall as it’s long tomorrow. knows got who of of rate probably costs The that? Mike to

Mike Wilkins

more to about from of I segments one that comment Hi, Mike. this now, move would portfolio not are if some is strategies at make lines concerns think away also line we or our business. Paul. trying I management – have Maybe aimed Maybe

can defect, are is So, construction exposed I for area the some there away has an I inflationary have say environment. example, with construction to where of our nice a claims. in business that think done of long tail job from underwriting defect-type we concerns moving types the And

much to trying exposure be to of possibly sure that we can. types are we as business writing that are trying UFG in that deliberate we as we the So to and minimize very make

Paul Newsome

second as to you about and much little some And business? question reinsurance that then like, my assumed both limits your strategy a talk as if as if that– to grow business I hoping have could more well is business would there bit the was you the your is to how of relative like rest

Randy Ramlo

this execution who Paul, going for that I’ll have Micah some to been But and appetite here the are there but to Woolstenhulme Again, a start instrumental limits, anything in over business has turn is reinsurance in has the answer that call We our have strategy. right lot am would then I assumed it’s going to deliberate. not of now time. really probably at probably opportunities. we that very segment disclose this of that that strategy

loss only profit, but turn the also the are been strategy. really over not in that who to to going We I to really overall looking ratio improve core our it to am book. drive of volatility that And in Micah results reduce down architect has and

Micah Woolstenhulme

Paul, our UFG operations objective me, core assumed this overall to reinsurance in diversify– underwriting profile. The to Micah growing Woolstenhulme. diversify the is risk is excuse

laid lines, number and second for renewal access And and So, we impact strategy corners after our our capital for we treaty, analysis a number own. there on on underwrite are of that The it portfolio we overall we in liability our look economic are a solving Medical season is some concluded sort lines we forth, when before require multiyear risk that margin first believe number have business and distribution is the business X/X/XXXX. example, sharp There one as profile. that business. groundwork this pursuing but we wouldn’t we’re the plan, in off of of of at based round objective business of there look to in some for so mid-XXXX We the are relationships part of to corporate platform. a is model, just business our underwrite one a our in certain diversification of reinsurance plan marginal that of of thing is look at. some don’t of new the direct that’s where level at professional value agency course, that we our line We example, reinsurance we of treaty. and we value, in

of has of We are lot kind effect how in do of not that value know diversifying in our much a going about to sort we overall, it but portfolio.

a want for have do. we transact how we much we meeting want how the we reinsurance terms the to MTL halfway that So, that space. target to that in end, business developed for with that target the business of do. to the brokers have are And And we business in much relationships of there that

to we once against that a value So add In level. lot quickly in without of are last assumed conditions can at – staff just pretty PNC from pretty to scale profile risk plan the our reinsurance but and of another of a of that pretty channel the are. we same business grow up of it to when reinsurance can appealing easily. The X the conditions the kind is back we right good a to diversify reevaluate turn risks X-year we us, now, turn model market a certain sort is of if thing and that accessing for insurance are contrast, to scale overall years having quickly good, note assumed where market goals they bad aspect time. I another And we that is here set we will will get to as

strategy and our our So, that’s there. part of there color on strategy little

Paul Newsome

Much you. appreciated. Thank

Randy Ramlo

Thanks, Paul.

Operator

the back session. turn There queue. for more would concludes to closing Instructions] to This like no any are question-and-answer I conference over remarks. our Patten the in Randy [Operator questions

Randy Patten

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

Operator

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

disconnect. now may You

United Fire (UFCS) 8 May 222022 Q1 Earnings call transcript