Earnings call transcript Q4 2022

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Operator

Good morning, and welcome to the UFG Full Year and Fourth Quarter 2022 Results Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to UFG, Senior Vice President and Chief Financial Officer, Eric Martin. Please go ahead, sir.

Eric Martin

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

UFG Officer, Joining and call on me is today Chief Leidwinger. Kevin Executive the President

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

not a These defined actual of on may a forward-looking note guarantee performance. presentation are XXXX. uncertainties release cautions management's that any as filings. current The include please Private risks Securities and include are forward-looking differ today company to and based of statements are press First, which future the may forward-looking due in Litigation statements factors, and expectations. results variety that statements our SEC our described The of in Reform materially Act investors

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

will over At time, of to the Insurance. CEO Leidwinger, I UFG this Kevin Mr. turn call

Kevin Leidwinger

our morning, Good results, conference this year Eric. begin I'll insight everyone, by quarter overview to our providing call. an of the provide performance. morning fourth and then into quarter fourth welcome full Thanks,

since I'm the pleased let First, say me in progress joining I've August. with seen UFG

We continue and to financial position our company performance. operational for superior

team focus our year, reducing work the further the its I'm plan. done diversified our of have and our we strategic the intensified on Over underlying expense past our in portfolio, fundamentals improved proud executing ratio. has

million reinsurance of the fourth was as of written now premium net to the to surety re-underwriting to million following gains written the and report businesses. fourth our specialty, premium quarter We're years. driven Growth $XXX X.X% consecutive results. assumed several the last business marks $XXX quarter of the momentum by third growth pleased This Turning net increased exercise compared XXXX. to quarter in

down core slightly. market, commercial was Marine business small middle Our construction, and business, including

we activity ratios of portfolio. points development. fourth retention quarter The to production to was of by ratio the XXX.X% The The result commercial ratio loss combined adverse was the the adverse momentum saw by X the fourth However, in quarter The the XX.X%. are and the points impacted development quarters. improved quarter. profitable the we X and business business underlying increased catastrophe we coming the combined of of granular quarter was more encouraged expect and defect construction January, core in and new in for into the growth was analysis the in return continued

expense of effect. actions focused last we quarter, intensely expense XX.X% XXXX as ratio, of mentioned remain lowering our to early on in begin to As management benefits fourth our which the fell quarter take

full $XXX XXXX. our $XXX increased in year Net X.X% results. compared million to now to written Turning to million premium

period As XXXX, loss prior X.X improved loss with underlying was full impacted to by XXX.X%, business development to point last quarters, our and year was ratio XXXX. for was XX.X% a our points and combined points activity best XX.X%, year underlying years. in ratio neutral. the of over catastrophe loss The year. improvement underlying XX the The previous X.X ratio ratio combined specialty, surety combined was while slight full most XXXX recover. assumed our driven growth reinsurance core X.X The businesses, ratio commercial continues was full recent by over year for deterioration a The our

catastrophe volatility. to programs With X. I'm of was actions several significant respect The January past over multiline in and our to renewed share reduce underwriting on portfolio, our the profitability, to improve underlying the that loss reinsurance, strengthen governance result taken improvement our pleased ratio we years diversify successfully and

terms modest the they consistent market. broader increased costs conditions were experienced changes, and we Although and with

will increased property reinsurance, of the continue pursuing increases. rate cost we With

will reduce actions variable the the specialty volatility a add deliver UFG consistent position a stakeholders. challenges in performance company to superior decision portfolio. to the strategic we of face growth Despite we financial benefit strong the today I'm an put and made for our in as are treaty all our industry, support the also We taking of quota-share many confident and to operational

Finally, to wealth joined to brings leader of our Executive UFG. is operational, welcome management end experience and Operating UFG of President January at I'd the like to an as Julie accomplished Stephenson Vice Julie Chief and portfolio underwriting who Julie company. Officer. a

plan continue to thrilled are position onboard her long-term have We strategic and for UFG execute to we as our success.

turn full to of and the Chief our Officer, discussion results. for detailed the over now call I'll Eric? year a quarter fourth Financial Eric Martin,

Eric Martin

income morning per quarter, operating $X.XX diluted in the good and share share. X.X% diluted per Kevin, increased again. of fourth year. and In the premiums fourth written income quarter Net prior to of net Thanks, $X.XX adjusted we compared reported the non-GAAP

of reflects of Our core commercial lines average stabilizing and levels the growth. by are driven decline, to the commercial profitable with premium positioning new This slowing and quarter from our re-underwriting retention core change premiums for actions of business. increasing X.X% rate for the premium portfolio transition renewal

increased the reserve in The Elliott. $XX was by the From quarter driven which in of X profitability includes our of quarter perspective, of and ratio a catastrophe million fourth primarily X.X year catastrophe X.X higher was points losses than fourth retention XXXX. business points quarter XX% were of quarter Storm fourth XXX.X%, new and fourth points strengthening. Winter prior losses Notably, combined the

catastrophe performance X ratio fourth and With point ranges of the loss below XX-year X.X% our for point loss catastrophe average X average historical quarter loss resulting within at X-year of the our ratio. above ratio catastrophe

analytical or has impact, reserves on in accident defect by where construction with reporting business strengthened we deeper quarter, lags. our focusing experience years XXXX, of X.X our exposure through a insights and long combination XXXX points of potential fourth ratio combined the view year emerging claims million aligned of $XX In and prior increased

consecutive results strengthening, going for I'm reserve had the address this we've X at Since year quarters time. to full of our

fourth different reserve across out In year favorable third experienced reserving costs, the and had operating we This claims and our specialized and combined have a by releases of actions continued themes neutral reflect resulted playing auto our year, year. commercial X facilitated our on full quarters, handling the the case prior the emergence quarters. effect in that our claim For reduced X model. strong in reserve favorable first line ratio from business

where the perspectives In exists. these new third were commercial offset by most and lines fourth quarters, deeper portfolio, our a given of data reserve in has of strengthening uncertainty where our releases us liability business the and view

focused the for industry excess in layers, reporting. third economic others and excess social increasing inflationary are with umbrella what are to in pierce quarter The claims propensity the strengthening where the on pressures line

growth surplus and writes that layer healthy experienced in our also excess excess specialty We've business coverage.

here, enable While fourth superior take historic with continuation we historically the our industry, been in to construction the described. theme that of actions quarter to I our record defect track continued results continue prudent to same create focused claims the cautious to on approach financial to The a have benefits. felt just

investment Turning strategically to toward facilitates investment portfolio profile income Net maturity our a interest that duration benefited fixed from reinvesting shorter positioning rates. higher results. at

increased This XXXX. million in compared net or to quarter in income lower resulting $X investment offset As the maturity to the million of $XX.X in our of income a year. valuations increase result, relatively fourth from fixed by flat was by fixed investment income last XX% fourth investment compared in maturity long-term fourth quarter portfolio, assets quarter,

fourth quarter, portfolios our the both fixed benchmarks. market outperformed income and In equity our

QX. asset generated equity decreased drove gains on unrealized value million to a Our values and improvement the sheet the and income QX equity portfolio loss $XX fixed $XX million fixed our in in during investment income increase balance book This X.X% in by quarter. from

portfolio was $X.X fixed assets investment which the quarter, allocated XX% fourth book. in a high-quality is of balance Our of invested billion to income

adjusted income net $X.XX, per diluted and income share non-GAAP full the operating $X.XX. share diluted For year, was per was

year, change year, business, average premiums our inflationary net and increased adequate considering X.X%. full rate with the continue property environment. as X.X% focus of core the Within exposure we was increases For increases today's X.X% premium X.X% on valuation written renewal of the to commercial for

retention and transitioned on re-underwriting business improved year book of our as a actions. new full out core Both commercial basis

expense that of from impacted XXXX includes ratio expense XXX.X% XXXX XX.X%. combined onetime is benefits ratio. of to in due points, favorably This Our impact full the X.X than higher an year changes post-employee by ratio

items, of year X.X the have XXXX, momentum XXXX positive aggressively points building into ratio. the onetime improve our full expense been expense lower XXXX those to seek ratio would than Excluding impact we as

The full in a experience year of loss X.X% XXXX. X.X is ratio to compared catastrophe point our improvement

impact in the described As umbrella in construction our quarters and by quarters, the reserve year defect focused auto ratio were first earlier, had prior releases offset full as and X excess in coverages. on a development loss commercial strengthening fourth year neutral third on

began the income more of $XX in that valuations million $XX than increased a that of the income power year. $X.X second fixed long-term decreased and million half as maturity for improving offset rates This year Full earnings the of the partnership increased net lower down interest investment income result million. by $XX first investment net of by at from income year of investment XXXX, half in million year was reinvesting the the higher

$X.XX X, history During our quarter, paid to to March a continuing of the XXXX, and shareholders we share declared per record of XXXX. dividends XX-year December paying as of back dating cash dividend

now our will concludes line open for I This Operator? prepared the questions. remarks.

Operator

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

Paul Newsome

that new the the quarter? couple just last more months? bit Is from either the different into quarters. new a that couple at showed ask there a last X in least up changed a perspective did emergence during development to there last anything Did this the happened takes detail little in of or reserve a -- reserves Was look wanted oftentimes special anything Obviously, that approach a I was like the in philosophical management simply the of the quarters? or on look.

Eric Martin

question. for Eric. thanks question. a is this for your joining Thank really it's you And and us, good Paul,

I in we is, not what have a had say general, philosophy. in So would change

we that I the of the a haven't the But other way, come And in, we about So that longer our at quarters $XX year, favorable past X the the we've year, couple had look our had on. have within things segmentation of back amount in analysis look million. a wanted think taken couple management just you history was we've going some all the more first commercial deeper X of years, tail philosophy, same new of while had and to over of book had look action million past over one the our quarters, half about back development items we have we we quarters, around had that change as when I of at second auto exact of some the In unfavorable. and of if businesses. $XX

construction or show defects. items other liability excess excuse in all up coverage, So products, the that its our other -- line, these liability umbrella are its me,

taken have a sort opportunity We we more in really those we're coming environment especially to wanted thing. we have as some things, lines. view longer these of have good of a the So on reopening, as inflationary an through for see to exposure tailed feel our on year granular that an courts

this to you perhaps seen see I going quick longer -- positive And been think themes react, So that's negative we've see I is forward a to react to underlying sense development, as think we to quicker as news the might will you'll us. we've we what news. and is, react but somewhat to make little be to what

Paul Newsome

be a the will book? extended -- Or of on other the of and/or other taking as more do parts Do liability is you well? the process granular to you that think approach finished process business think

Eric Martin

the We've over think of tail done the work are a on I so got past. where long places auto lot we've the -- commercial these lines.

top right probably surety line little Some lines, different or of isn't big now. a workers' workers' or very other our comp

We are grow continue wanting to that. to

actions the we're with continue the I never we'll done long here. hit granular can the get here think that but anything, While tails insight, to we've I we've taken say with lines

Kevin Leidwinger

Paul, it's Kevin.

those analysis. additional on negative an quickly the of gain level point take through trends on action intent to appropriate prudent relative to us action observation. mean, I more to about that little possibly Just a think And we'll Eric's are slowly and or tools our on. taking and course, perhaps all positive as the we more -- And insights of I spot it's then back trends to provided can. is being exactly the much available use as insight

Paul Newsome

this as a has record track about want a will as you for about about of impact assumed the the reserve. seen as basis, on could also changes in split talk basis X us well. on year higher to reinsurance impact assume the ask assumed could be a the you UFG Obviously, -- cost and and cost sense. there I those bottom then reinsurance for both maybe book well reinsurance on as the I a you've business any talk capable pieces for apart Makes line And long the and maybe purchaser.

Kevin Leidwinger

Sure.

give Let a the more color you me reinsurance bit on program. just little

all mentioned reinsurance we our renews our As in on of prepared comments, X/X.

And with some pricing we some did across changes of conditions. in portfolio, increases terms so experience others, like many along our

me give there. you just Let some context

property a increases our risk-adjusted quota-share to some the compared about XX% some earthquake changes pillared that structural on on XOL to increased aggregate about muted or with XX%, program about bit the So saw We moderated cat are but program cat increase premium deductible. occurrence program due rate the was that XX%. was annual a The basis.

a program, little our we over what call multiline, rate then core XX%. working which the the bit increased is And program,

of experienced. of somewhat rest what so reflective the the And pricing market clearly, the is

give context around just retentions. some Let me you

retention million. to $XX property our cat So $XX XOL million increased from

saw the on first layer XX.X%. a also co-participation to increase We

limit earthquake $XX reduced was quota-share million. Our about by

it's $XXX a X So we increase we in excess saw new placement. provides in program still at put coverage but now in PML. million, an in which occurrence, XXXX, was our of pillared place in On XXX

was was XXXX, XX.X% placed. In XX% in XXXX, placed. it So it

we're happy with pretty increased the participation. So

overall also $X particularly increased from the a this million. We in But increase to limit we so $X million $XX from to million success, aggregate saw in retention from market. of million, our the there in increase and annual light million that $X consider $XX to placement deductible million $XX an there

program XXX% some annual program see and the both the pillared the retention. the or and property annual in no did this year. a core other take there aggregate And casualty on the On million is program, $X property exposure we'll we deductible, So the than are changes structure $X aggregate our We debt our XOL additional cat did layers maintain deductible certainly, occurrence. placed. to million that

for our cat-exposed well parts So We again, some pushing as and much we in pricing to over in importance property to overall that increases coming of portfolio increases, clearly the our year like side the others work understand retention compensate underway rate the property on and saw premium anticipate course today, additional of increase see the costs. on would is as improved the reinsurance harder particularly of program.

you Otherwise, On turn have the -- questions so about see soon. that. I'll to any and just you pause if I'll there

Paul Newsome

for and the over, market load is maybe retention simplify then loss bumps on like essentially, a all maybe excess up little a little I total folks of... overall higher it it mean equal, where goes things just a of looks that This amount more Is bit. margins. fair to the pressure like the a being me price underwriting bit of cat because bit cost of

Kevin Leidwinger

little I on issue. bit think have spend that probably a we'll more to time

losses So cat to XOL to program. in accumulate increase program. while designed under have small of inside retention cat cat it's all events really an is the pillared help the the frequency of occurrence manage that The the

program. so the an placement occurrence saw increase pillared we And on in

working occurrence overall exposure we But based increase I an So company. the additional participation what net to we're on component through increased the XOL. the offsetting cat on think there's the to think pillared overall still

So things interrelated. those X are

Paul Newsome

that sense. makes Okay,

Okay.

Kevin Leidwinger

were And beneficiary then the saw on on standard of ceded increases, got was portfolio. came were us the to assumed treaty. the the the through of assumed program, pricing. Clearly, turning there of of where certainly on market. And the side that our business. other the component certainly now for We benefit reinsurance reinsurance you increased as the We certainly obviously,

reinsurance presented carrier us. participation, to were those as opportunity had on we reducing carriers other were So amount of a opportunities participation treaty their for regional significant

to saw so business on participation. significant opportunistically so treaty some standard benefit that And treaty were with participate in this -- cycle, we pleased and some we quite

Paul Newsome

lines? the sort there Is premium those the for book? reinsurance relative on some of to it goal percent Is target the or along rest book of something a or of

Kevin Leidwinger

sure. Yes,

the become XX% recent associated target we'll we premium general, of renewal are about of advantage take managing just the below obviously, be that I We're, think, portfolio, that's in opportunistic with And bit there But market grows, we'll that So cycle the that. XX% while in we're little that. will we portfolio manage as moments right? like So where entire will most larger. also to to experienced a today. that, the the

if there so further to for than around do -- portfolio it opportunity and the being And anticipate little was when underwriting our while right diversify profits. moments be we issued may it because a XX%, higher at significant there it us that bit

Operator

any to and to session. President This Instructions] Leidwinger, I closing CEO, remarks. question-and-answer call over the turn for our would like Kevin [Operator concludes

Kevin Leidwinger

this Thanks with quarter. for to you again look quarter, for us talking and we forward joining next

Operator

now The presentation. today's conference you concluded. Thank is attending for

disconnect. all may You now

United Fire (UFCS) 16 Feb 232022 Q4 Earnings call transcript