UFCS - Earnings call transcript Q2 2024

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Operator

Good day, and welcome to the United Fire Group Insurance 2024 Second Quarter Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Tim Borst, Vice President of Investor Relations. Please go ahead.

Tim Borst

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 Officer, Financial Julie Vice President call Officer, on Executive me Operating are and and today and Chief Chief Leidwinger; Kevin President Executive Stephenson; Executive Eric Vice the President Chief Martin.

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

is not to Reform of the the management. on Act on guarantee may Any performance. statements made this only made. today These XXXX. on information by are First, operate as only based speaks please may the annual forward-looking based available Private The we and forward-looking presentation as of are forward-looking management's currently Securities defined in our Litigation investors expectations, the forward-looking by actual XX-K. and it statements press filings differ and note cautions is are release current in specifically us SEC made which any forward-looking statements that assumptions due and include a most in current estimates, variety company, company risks of statements Such presentation date industry on projections that of statements to results based Form forecasts factors, in which future beliefs and which include and The expectations. discussed our in our report a on are recent described and materially uncertainties about us

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

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

Kevin Leidwinger

morning and welcome Thank you, quarter results. this conference high-level our to call. providing Good a overview begin our I'll morning, of by second Tim. everyone,

will more underwriting Eric discuss comments, results, results in Martin Following detail. our discuss our financial Stephenson and my Julie will

efforts distribution improve with to deepening growing the our deliver to our progress leveraging pursuit We engaging profitably in the execution expertise quarter in of plan. reflect results our business the our strategic through partners and technology improved business, across capabilities on efficiency. company, enhancing second Our continued our of performance focused remain

premiums commercial cost $XXX.X in of XX.X%, alternative and units. second in growth with Core distribution opportunities, grew business X.X% increasing reflecting on continued Rate lines improving by increases growth Net with all new retention our premium quarter million, focus the led X% our profitability. increases written accelerated average trends. liability to and above ongoing loss commercial remained steady core renewal and healthy business attractive margins to

to XXX.X% development, The improvement in second over prior year, lower quarter underlying combined reserve ratio primarily prior catastrophe due losses lower significantly ratios. of and improved combined period

in the overall, with first position the period was Prior favorable the business lines are severity quarter to mitigate across future acceleration industry challenging expectations, to of second liability development neutral consistent several uncertainty our in trends. we Loss quarter, reinforce of our within against remains inflationary prudent us believe emergence emergence enabled our certain measure potential the reserve further impact these steps proactive the lines. in a and further

to recognize underlying to greater well and in loss more our visibility As we our loss liability of analysis quickly strengthened the into result our second severity Those trends, significantly reacted a XXXX, of our investments reserve you observed increased recall, of as processes investments actuarial portfolio. of provided levels a of will that the quarter reserves we as in understanding informed increased position. in led as depth also

providing a our fostered analysis strong remain position. management our as to position, in For of foundation committed reserve decisions, a the this to We last view X has as which grow of reserve our the quarters, business. solid we've elevated reflecting confidence establishing in greater been strength and well stable trend

second The historical averages and our and points X was ratio in prior XX-year year nearly loss of below losses. improved elevated X-year industry over XX.X% a quarter catastrophe quarter of

to of execute improve property our to broad actions catastrophe continue We profile. risk a range

quarter from strong the points The ratio underlying underwriting. year, achievement XX.X% of improved continued rate loss earned second X.X reflecting and disciplined prior

were In the quarter of last second addition, results in loss by activity. year elevated surety impacted

our Our and structure functions toward underwriting in the intense cost last overall expense ratio. technology has capabilities, in reduced cost supporting investments to Efficiencies nonrevenue-generating focus our on talent funded our expense management have compared underwriting year. shifting structure

expense loss increased in lower expenses to XX.X% adjustment reductions contributed second loss a As to underwriting result, the ratio. in a ratio the quarter while

the to will over ratio underwriting time. down expense We diligently manage continue

ongoing The X.X as second improved that loss margins year of over execution prior a quarter prior underlying actions XX.X% well our successful to year's of surety core normalizing activity combined points as ratio improve impacted as results. result of

income attractive XX.X% year maturity Fixed Net fixed million increased prior $XX to support on from on with improving reposition current of income take reinvestment income valuations investment $XX portions earnings. income of as million portfolio rates and increased investment further advantage our alternative assets. from prior XX% we to year the fixed higher maturity along to future

affected rating we core a and policyholders. commercial pretax identified within business recorded anticipation million voluntarily refunds $X.X charge our issuing Recently, to of in of errors certain

loss ratio recorded committed begun as income to in combined to this with was have expediently quarter's other and possible of not resolution. regulators metrics. and This ensure charge working are resolving impact this line any and the does We state as matter

drive half of our quarter, our during business underlying generate of the second rating improvements committed impact plan the second operating The remain an improvements the were through to profitability in error in of continuing adjustment. performance execution We year. in profit this excluding strategic the sufficient to to

discuss Julie our over our Chief to I'll in detail. to underwriting the now Officer, Operating Stephenson, turn call results more

Julie Stephenson

premium $XXX business with compared core middle exceed business written year to liability second XX.X%, quarter. million Thank prior XX%, commercial you, Net and to showing first to trends. exceeding Kevin. business, accelerated in our premium all with change rates core Commercial continued and in X.X% while from change in the pricing quarter. for the Renewal up growth premium the our accelerated quarter construction, property loss grew to small XX% market commercial

severity across underlying everyone see exceeding remain reminded in achievement established a trends ability digits quickly trends, ongoing improvement that underlying confident rate in we our us year in improved loss to up actuarial ago, portfolio. We loss quarters. with overall Kevin loss severities levels our the insights easing with some solidly mid-single our we profitability. improvement past observed The frequency in With recognize along in trends. enabled in property the maintain have to pressure of been As X trend increased time more at the remarks, elevated his over holding

consistent quality accounts new second our with being market the and role to enhance solution remained continue alignment improve to commercial portfolio our at an in the we remain production provider. within we capabilities with additional contributions of our XX% middle with Retention small our business profile. as increased as business, partners Core refine pleased We across quarter continue as portfolio to account the portfolio expectations added distribution and and of construction. deliver to

portfolio diversifying increased this business. and distribution portfolio. continued new grow, accounts space continued pleased and business offered on the remain exposure profitable to existing in rate alternative Our and We contribute supported the opportunities with to by UFG to

a stay share. this manage book XX% within to to continue We

as depressed lines of mix that sustainable, will to prior million of net impact reflect continue prior premiums we excess increased and premium result more compared our approximately declined $X approximately consistent produce reinsurance the a surplus last Specialty Surety repositioning as results. reinstatement mostly premiums $X that business written a net portfolio million written year to profitability. year's from year, of

and discipline historic We our continue management the levels a return to measured to approach take underwriting portfolio growth, profitability. territory to to of reinforcing our

our the over second continuing reflected in We view last second the ratio but the saw on our The quarter XX.X% major across to ratio. favorable loss of improved fully XXXX. stable quarter XXXX, of of and first quarter resulting business trends elevated of quarter momentum loss portfolio, exceeded second Rate points impact the improvement from quarters the a generally all underlying compared lines earning more has loss X.X the results. now into of in X achievement

Additionally, these reposition the are a are our longer-term underwriting further in ratio. across loss in major improvement all sustainable actions producing the the to efforts prior frequency trends driving lines Combined, business. and continued portfolio improvement of

surety Additionally, improved activity the for and in property loss quarter loss large The experience quarter-to-quarter. we lines. large have seen from volatile be can

our in in and These results. are that stability similar property portfolio losses more current consistent signs XXXX, brings results a have emerging profitable in seen historical surety we're positive building are early We norms. with but

lines this reunderwriting other portfolio mix There decreased while of achievement severity loss levels expected but resulted underperform as are continue trends. of the Automobile frequency, renewed we're gradual trends improvement in in relative show to effort is some and to recently, seeing on continues a areas changes requiring elevated rate further in quarter. still lagged our our this profitability, portfolio focus to prior General light an in has but liability improved result relentlessly has covering rate attention.

pricing continue on We to will for this line. focus

In surety, to profit we this are is optimistic levels. returning historical line

XXXX, to cautious the period overall with loss neutral retaining are of in was favorable was we evidence position the results our reserve quarter emergence a development in However, the further Prior until portfolio. first across emerges. Consistent second flat quarter.

greater resources extra we began step increase we've in XXXX, observed stable to quarter build XXXX, the level more In I'd actions analysis in reserves. you and to Beginning and and comprehensive up like to of pressure take invested additional a the reserving in back remind we the bring a shore to several third our liability of the taken of to sophistication severity process and lines. we framework. responding

true a greater proactive our brought have reserve underlying to position. steps insights trends, visibility New take establish to exposure emerging us into more and strong allowing

$XXX the increase and million have Much to years of attributable of in nearly accident some casualty liability, umbrella third XXXX lines, excess other and $XX offset million we in lines. added this concentrated quarter by our XXXX, Since prior. was favorable our general to movement was reserves.

more a was experience escalation recent full and XX% anticipating this of emerge. figure will continued added a periods, the severity to However,

in now stable nature, initial to to we more seeing reserve proactive position. opportunities are take While were increases steps maintain a reactive

uncertainty quarter some the stronger future in these are has analysis to a favorable the development, reserve build pressured to base inherent neutral expectations continue the these decided lines For and for these first indications, management to positive including XXXX, in economic sensitive inflation social actuarial that of liability indicated favorable lines. emergence overall to to environment. second relative and Despite

means victory, our pleased made by with the While reserve we position. we are progress in no claim

prior second points, and Our X.X XX.X% ratio year by averages was X.X cat below our X-year and points respectively. of below X.X and loss historical points quarter XX-year

profile. While elevated horizons. time short strategies recognize And improvement in with risk be to feel good multifaceted could our we can continue industry exposure showing we quarter losses, results execute over this we property uneven the about relative improve for catastrophe to

the geographically severe by managing by actions while more tools. in focusing to are convective areas exposure concentration We growth analytical storms diversifying reduction supported targeted advanced

restrictive the reduce exposure the exposed We most our in risk and property hurricane risk deductibles of with continue fundamentals selection, to more pricing risk across to our and portfolio. states profiles improving PML

our call of Martin I will to discuss to financial the rest now results. the turn Eric over

Eric Martin

Thank you, Julie.

has come that and with the a providing by team. XXXX, Since beginning in headcount start expense is January, claims process of that last me from in reduction size down change time. total ratio. headcount reduction to the changes have during efficiencies of overall meaningful the significantly Since perspective Let claims we on the UFG some and team a frequency. of declining size composition made Included additional the XX% the XX%

in a same long perspectives fresh us way time, business the and are help a profitable term, of shift we already underwriting blending for our of having shift which our of the of geography in the talent elevated. expense these we significant over investments remaining but this meaningful seeing and those impact is benefits claims. At increased This with the our It's to made employees. UFG the that see base, ratio has have decreased grow overall our technology easy of in underwriting, will expense long-tenured for part in

that costs adjusting the organization shows in in we loss included are benefits seeing from our reduced the claims in However, loss our up expenses ratio. larger

expense adjusting It's expenses. XXXX. loss just underwriting are and in underwriting reducing has expense Overall, ratio. up in declined the combined from yet making progress our showing ratio year, this far not So we

making will to the We while continue our structure to necessary growth. achieve sustainable, manage profitable overall investments down cost

transition rating $X.X quarter of Turning and high-quality to approximately management has New billion, X the portfolio. portfolio ended The Total the England of and assets credit a cash overall a an with to at partners investment second our begun AA- duration show income portfolio at to of benefits. invested Asset Management already fixed years.

interest high-quality fixed its we total, in elevated invested from the advantage quarter, of of the tax-exempt portfolio average is municipals of of in environment. for In tax away high assets, In offering portfolio approximately purchases we years yields to than which repositioning attractive income second current the our higher the yield. equivalent high second began into of rate come. returns XX% allocation take order portfolio an to significantly will fixed volume This yields at X.X%, attractive quarter at yield income asset enhance the total more shareholder

investment second second Increased second to valuation XX% from or income million the quarter, year in increase partnership prior the Net increased of was investment of maturity to XX% million million $XX quarter. income. $X.X compared Fixed $X XXXX. income the in $XX on contributed and alternative or assets nearly $X million the quarter in million investment limited up

was results improved actions will the very second realized There paid portfolio do fully With quarter, $X occurring the million that in I quarter's of have quarter by the not reflect already this the which taken. the back mentioned repositioning quickly. approximately generated repositioning, of been losses benefits throughout be this

unrealized capital a continuing Second as record to to position, diluted These value per XX-year common a with in during to with dividend slight results, perspective, management of May was non-GAAP along a decreasing diluted XXXX, the the our quarter, per resulted increase loss a loss of March back XX, per cash paid operating book we share of and second From in quarter net paying share. share $XX.XX. $X.XX declared history dating share XXXX. per $X.XX dividends loss adjusted shareholders of $X.XX

we transaction with other and us debt provided with completed that X $XX Management May, and a regulatory million Ares the have of of funds capital. end credit At agency partners rating

ability proceeds at reinvest interest are the the We growth to pleased company's support attractive given to an these around X.X%. on rate terms

This line concludes the will now our for questions. the operator have open prepared remarks. I

Operator

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

Jon Paul Newsome

see the I it more this ratio, is I if line. the fall recently? I maybe would Or it wanted to I ratio question, the could or quarter on be just still plotted down or combined quarter...? -- I up mean little the the expense in bit LAE combined, expense ratio I the ask LAE the a if -- would ask the had If and total

Eric Martin

Paul, this would. you is Eric. Yes,

QX year QX, if the down coming So that's you and a of you expense year the a down looked from ratio or staying of a same to and see time. points, of plotted the of you'd first last ratio up half coming over LAE flat, half at combination little this first over bit that that costs couple claims

Jon Paul Newsome

Okay. like more the it, sounds discovered That's a bit great. Obviously, Then But early maybe before. I've error seen it's so this days. on situation. like you never anything ratings just little it

seen any how if you've than It before? begin in of So manageable give history implications this the a size. to sense I or us it. a just anything importance But know the of to terms especially of really of number, don't of issue. earnings like looks maybe like issue book value And more terms about thoughts of an of this in a

Kevin Leidwinger

Paul, it's Kevin.

speak the issue around so this morning can't to really new to fact a this is identified broader you're I All rating July. right, to errors. I can And relatively that the issue speak us in is

that ensure doing lines well liability And so process we're portfolio. regulators. the in as conversations umbrella state the further rating process as other having of further in no obviously, lines there to we're in general issues both product with the error investigation and of the And on are

information available issue, more on it an working so diligently change the the us to indicated as time. estimated becomes this as available But us. And information to have more available release, in we've liability we'll have we becomes we're recorded to that through at and And could as press this point, we based to at this us. share

Jon Paul Newsome

modeling question. that say overcharge what related new million sort fair year. customers a Maybe the of was last to it you Is those $X.X

rate to for different as than or that? with sort at million more way that a of that it is take Or do if approach Is just we're it? a a start base? we complicated and looking so run And $X.X revenue, good

Eric Martin

as the an right So you but I at think section, other revenue or included that's loss. as the million, -- in now $X.X we gain look

get I from don't behind think after a this we significant there's we rate get a going premium we onetime think as this past us. us, onetime forward, item perspective run impact impact

Jon Paul Newsome

for are take We'll confused. Okay. sense had to questions the could I make appreciate you. but it always. on. any I It -- that's doesn't big I those the very me, help as anyway, And be X

Operator

[Operator like conference Leidwinger closing turn Kevin for would the to I remarks. Instructions] back over any to

Kevin Leidwinger

we'll joining talk us quarter. morning, again you you. Thank this for to and Well, thanks next

Operator

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

may now disconnect. You

United Fire (UFCS) 7 Aug 242024 Q2 Earnings call transcript