United Fire (UFCS) 8 Aug 232023 Q2 Earnings call transcript

Good morning. My name is Chuck, and I'll be your conference operator today. At this time, I would like to welcome everyone to the United Fire Group Insurance Second Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to United Fire Group's AVP and Director of Investor Relations, Mr. Borst. Tim sir. ahead, go Please

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

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

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

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

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

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

our and Financial discuss more Operating our Julie underwriting our results Officer, financial Eric Stephenson, our detail; comments, Martin, my will results. Chief Chief will discuss Following in Officer,

the afternoon, ratio July XXX%. our our XX in press for release pre-announcement UFG's yesterday quarter in As was on combined second reported

well Our results million strengthening $XX by prior elevated as of were losses. reserve catastrophe as period impacted

actions actuarial minute foundation committed take Before on like strong we only the reserving growth. UFG to to supporting strengthen a reserves. is more broader for quarter's a results detail, to the to of delivering a process, review but critical decision profitable business comment in I'd not our range

Over Actuary. our deepened have the expertise, first Chief UFG's past four including quarters, hiring we actuarial

we've enhancements similar business analysis. us resulting which to of understand of increased level in conditions. allowed depth have to actuary process insights the reserving of see The in of and Analyzing individually our more changing to risks than enhanced addition, line accelerated actionable our have sooner exposures. behavior business, at In across better allowed trends us the past the potential lines and response our managed the processes, product patterns breadth

strengthening we With any major this decision, reserve believe has been addressed.

as course, our trends our we'll processes, part emerging in Of of environments. evaluate continually advancement changing of work to continued reserving

adverse we move forward, quickly and favorable respond trends we As will cautiously. ones to

the believe negative we the reduce risk While a reserves actuarial our the building just past in they progress we to over significantly and the the in resulted on strengthen near-term impact, are company Improving decision year. of to robust provide and help business. future our the example insights our grow organization actual create foundation of the reshaping to will made actuarial is capabilities we've which stronger one sophistication company

deliver company technology. funded create results, talent to the sustainably executing investments the critical long-term ratio value consistent are catastrophe serve middle In market commercial of core our and underwriting our believe reduced partners, our our footprint, Despite the growth organization addition, reengaged needs evolve we and forward, in right move to expertise and business and responsible we've small acted distribution restored business, in for and profitability expense to shareholders. better deepen distinctly our our reduce customers, strategies the quarter's we our different

the the second fifth Net the consecutive Turning XXXX the This now marks second quarter of to growing consecutive with business enterprise compared of to results. for quarter. premium million $XXX of in second core written quarter the premium to growth quarter's XXXX. XX.X% commercial increased quarter

except favorably business I'm increased Although increases exposure improved business, retention, meaningful surety pleased new especially contributed commercial units, resulted this business all accelerating in with quarter, production, which rate from our our growth. and the core growth

XX.X% and The number underlying the the of of for the can loss second surety quarter the Surety over ratio but experience XXXX. in returns. reinsurance business losses increase impact long-term quarter, premiums. a large profitable remain was X second business has in deliver been in attractive its confident occasional ability UFG. points of of points X.X our increase an volatility, reinstatement of We Approximately the result to small were of exceptionally

XX.X% a catastrophe XX% reasonable believe portfolio. exposure XX-year take continue our and to contributed to X and activity across averages quarter's the combined our in and our are of this we results averages, range XX-year These of ratio though losses range in current to slightly actions Catastrophe Even were of level XX%. of our within approximately reduce X to to and unacceptable is the XXXX. relative quarter compared optimize results the loss broad a elevated

the Prior the ratio the to quarter period in strengthening favorable XXXX. contributed development to reserve of compared combined XX.X% X.X% in

as and reserve social As primary across lines well years. multiple in accident $XX across and the strengthening as impact included to economic the mentioned The enhancements casualty inflation. of was our drivers multiple ongoing previously, million processes

focused we've as to XX.X% a sustainably point the structure compared reduce was actions been been beginning materialize. ago. second to our the are cost are the pleased improving of in and growing part plan the expense while intensely business down strategic We've expense The X.X taking on ratio year quarter, ratio to

as as superior deliver in profitability for our long-term reshaping confident create value progress the forward we and consistent deliver shareholders. fully strategies we and remain in we our We execute path I'm to designed pleased operational making UFG to company performance. the with position are financial

over results to With Officer, Julie? more underwriting Chief our Julie to our Stephenson, detail. hand that, it I'll discuss in Operating

our reinsurance, which includes specialty core excess XXXX, see $XXX to of core to the assumed XX% with continuing in Thank all components and I'm and commercial, our you, Net businesses. of Kevin. business, business momentum surety pleased across market portfolio surplus grew commercial increasing. second build and compared small production quarter to written premium middle million to of

business premium was second supporting provide This, for now efforts new profitability. to business growth. with this favorably agents quarter refined reengage risk confidence levels with sustained, the new our measured our with Commercial and business discipline, coupled appropriate $XX in production million our long-term contribute Core will underwriting selection to

to as for fourth in increases the premium of Renewal of quarter first or core for Average of pricing level achievement steady-state accounts accelerated our view from second rate commercial quarter, risk total we that allows to Retention profile. which increased responsible all our needs XX% longer that a the number still XXXX. meet no business second the quarter rate quarter. change at were in up in our core since commercial business across lines highest with X.X% the the business, pruning

rate with quarter business and We XX%, change all premium price lines adequacy trends. of focused with increases the second increases We renewal exposure relative of to X%. loss of across of property pleased are XX% remain diligently on

deliver Our we grew portfolio to growth in assumed the continue organization. as to written the our reinsurance net second strategy premium execute profitable XX% to diversifying over quarter

new optimize January existing This continue ongoing enabled a the this well as adding portion partnerships renewals to our Xst by while of growth selectively retrocession growth ongoing that in highly partnerships. non-renewing portfolio of to our legacy reflects curated portfolio impact as us

reinsurance premiums. to compared down to is premium written reinstatement XXXX due the second net of quarter Surety

While basis partnerships. presence the expand grow and we business as our deepen on agency to continues a gross our geographic

to consistent, Our manage specialty excess and provide attachment second and points in surplus we profitable continue the pricing modestly to grew business quarter, as results.

from As Kevin quarter loss second XX.X% and surety premiums. of reinsurance historically losses UFG's profitable. mentioned, very impact surety been of ratio X our associated increased points underlying business reinstatement has net includes

in line we This from time can the large happen experienced In this to few quarter, second losses. a time.

long-term. had of with ensure affecting the line also availability post-pandemic circumstances, to While underwriting that in acknowledge guidelines, unique construction losses is line. to rigor surety contributing with combined favorable are economic over broader heightened materials UFG the these risk demand refined cost returns continues this and the resulting increased and deliver robust in we responding to conditions labor

period and actionability I actions other impacts the in over making take of processes rigor as to process, the quarter has this enabled MD&A Kevin commercial and actuarial enhancements the our want UFG position first actuarial the and liability us mentioned, of additional long-tailed we've of across the strengthen in investments liability insights. past The to loss prior in X business. talent insight Beneath our some expanded strengthening to Turning a seen in automobile been range to largest tables. of on the reserves, in investments advances trends second were to These in relative lines strategic and as depth, quarters. provide of area sophistication

excess of exposures. nature range majority introduces approximately long-tailed this years. in state XX and excess of of points occurred and Other environments significant defect differences strengthening The casualty claim development liability behavior period patterns. construction surplus prior in defect prior construction a across variation in losses legal for lines in loss and discovery accident The exposures of experienced

to be rely this given uncertainty. Traditional on difficult can actuarial methods

the nature of these So alternative techniques unique to required are better reflect patterns.

and significantly Additionally, can states. vary severity frequency across

and position So additional it has been may excess has added is Relying allowed necessary risk has while years, to casualty surplus analysis recognizing appropriate This grown the evolved. not be appropriately book solely our have and of differences. reserve analysis lines additional us and over this on for book business. longer-term the The loss several benchmarks these last improve patterns loss provide profile trend to the excess to insight. segment

an risk. actions and to lines position More strengthened auto the uncertainty future studies also to manage believe balance of led our our view broadly, strengthen We against general longer-tail liability these severity. in as ultimate reserves reserves position these sheet and were commercial better additional increased

second points ratio. quarter, losses. experienced to the XX Turning combined the catastrophe In we on

continue by reduce property increases deductibles raising pricing optimize our Our driving improving high to geographies. risk in underwriting and our and catastrophe exposure profiles, teams risk

PMLs our As while decreasing. increasing, expected are catastrophe premiums are a footprint result, loss ratio, and property

to I commercial UFG's the With and some want from and of this provide take area impact moment premium our our is a significant additional are of of evolving how details commercial, has nearly overall on a we an core investing focus. in written core coming to XX% results investment business success business. net and on

of on long-term profitability, expense diversified past discussed have plan talent. tenets focused strategic retaining and continuous the growth, the attracting and management Over UFG's we innovation, year,

plan on the organization underwriting in is this specialization of and the delivering evolving from business deepening part assumed a strategic specialist, expertise previously key commercial generalist by to our in our surety, a specialty on core established reinsurance. The building

the As has as and underwriting strong changed, competitive the evolved has recognized and expertise a market is valued distribution advantage. landscape

middle took market, to a centralized to generalist and operating accelerate units specialist Specialization for by Agency we function. opportunity significant creates distinct alignment Partners. from and supported core success with a for Last establishing journey and business a greater steps enablement by small month, models business Commercial's business

success attract flow in with small low-touch analytics leveraging we sophisticated the technologies. and serve well-tuned customers. efficient an business high In requires This that lower to and business market, already our underwriting agency better to and submission and others creates along results cutting-edge building business. are volatility capabilities actively At UFG, small these agents experience digital

Success highly and sophisticated underwriting segment-focused industry control in by processes. specialized market claims multiline supported equally risk middle handling requires strategies

in foundation Our the industry distribution success current for our align strength partners. with better helping happening in verticals, specialization us construction lays across the other

greater and control operational opportunities consistently ensure including advance UFG contractual underwriting industry of our the growth. line and increased risk the expertise cross-functional and actuarial, claims appropriately for expense integrity positions and all across across ratio successful entire reduces to Developing lines business profitable and continue to creates pricing, management. robust Driving selection, profitable acceleration deliver skill risk account to integration business portfolio results. efficiencies of alignment We set of with

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

ago. provide you, from the expense XX.X%, some point I which of Julie. commentary second year declined will Thank first ratio additional X.X quarter on a

and profitable increased headcount is As we've of the expense of in quarter decline rebound since of intensely a fourth premium reducing beginning ratio been X% focused the levels as The these on earned strategies growth. from our in to of the previously deliver impacts broader corporate growth. part discussed, the sustainable, XXXX significant most

new benefits from quarter, that change we sufficient platform were our the year our these last in benefits quarter. the of administrative postretirement expense impact from the of to in policy design second technology on our prior outweigh ratio benefits discussed employee expense In to the a actions and ratio upward strategic investments

XX% high-quality in income to Turning ended of assets to market to our to which attractive our continue income and fixed invested as $X.X long is We second improve intend book. public to a quarter shrank of trade current executing conditions on to as investment of billion, reduce we allocated is fixed the second The Within conditions. strategic portfolio, assets began the results, an at reallocation equities reducing quarter. this to returns public way X% volatility risk-adjusted attractive high-quality which equities, exist. exposure given these

$XX.X quarter, income investment up quarter the compared million XX% XXXX. Net to of second was in second the

reduced to interest higher impact We investment to was by money increase gains second bond benefits realize by negative of portfolio impacts valuation core rate partnership continue second of the positive quarter. from quarter million on the investing limited environment, higher changes income rounded yields the exceeding helping relative out ago. The $X valuation yields new maturity year in fixed a equity with of of Realized driven our $X portfolio our million results. in in partially X%, a

per in adjusted equity in share. was unrealized and and saw position decreased a our investment Second common the share quarter a XX.X%, the returns negative $X.XX diluted $X.XX second loss slight quarter on underwriting operating $XX.XX. share per of of to book per a diluted net loss non-GAAP loss in value a deterioration Return and we resulted that

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

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

the with question Newsome first [Operator come Instructions] And ahead. Please from go Piper will Paul Sandler.

core broad you call. claims but Thanks not a your especially just could well. more is morning. reinsure talk versus rate about little businesses as just Maybe bit commercial and Good businesses, or for you the inflation what pay

claims whether can of you you're not and by how think on of or Just inflation getting basis, you progress in us a an versus weight sense give current underlying much? making the levels

and Hi, view increases is our believe rate are This a than Paul. us question. accelerating moving I for for And Thanks important key we trend. think overall Julie. focus remains faster our the of Certainly, that's forward.

achievement of the of business property in the the will rate that quarter, our We results that given we we all all and a year. business are increased accelerate with pleased across took the of through continue of most happening Certainly, pleased with across remains our space, we lines the units. to focus, catastrophe the for what's end

How your we the should about with perspectively management load given what you're think cat cat doing efforts?

Hi, Paul.

We had you hard a hearing repeat could question? time you. Sorry, the

cat the your you're about think prospectively, we load given should How what with cat doing management efforts?

are we relative to loads. within So cat I Paul, the think, expectations, current

to reduce our footprint, continue we as forward. will within But we we're those reevaluate expectations. cat go As we for the moment,

X business The pull it underlying of the from little Could the of a combined ratio, like. you sort talk about surety the deteriorated that out you sources if bit, deterioration? points looks

Julie, Paul. again, Hi, yes.

ratio the see points. underlying we loss So by deteriorating X

the mentioned of that. already impact surety. certainly We You know

point. of costs impact We renewals, reinsurance also increased are still X/X ceded the feeling approximately from that's a the our

difference. as We assumed to also are really reinsurance which remaining experiencing contributes the compared our ratio time a higher in this last year, underlying loss

results, of QX know book loss of some that align about last made that with our exposures. adjustments we allocation and have to are in our the enhancing stated in better we the talked we quarter. I analysis reserves As our extensively

some know representation second we Although forward. is think portfolio creates year-to-date loss in ratio of results, noise first for the quarter the this good going we this underlying that a book the and

this reserves the tends change, has resulted in Do really changes companies. Actuary for Chief new will different a least reserve which when the things quarter. process you the be year-end it change past? in be to anticipate year-end the most the philosophy, than in the Obviously, But at

Hi, Kevin. Paul, it's

any this that reserve addressed major strengthening believe we quarter. So been has

comments, environmental and to going about as dynamics also us. very we've very react around close reacting as based will quick quarter. good we are attention But favorable we'll on to we to my made trends. we obviously we'll decision very the negative trends, be cautious we so And the prepared to continue on stated And to pay in be previously, indicated very about this where I feel

your for you all it. help. Thank Appreciate

you. Thank

The Wrenn next with Please Corey go Management. Pecaut question ahead. from come Wealth will

results, Thank all results, mention you're for think, a I your were the strengthening, what that insurance at been when conference Is reserve morning. taking that and XXXXs. And I is company reserves watching the Good the your was really you I've word Yes. and charge for people call. the understated you're saying understatement. looking since correct?

us think characterize the And our reserves. for decided Well, additional reserves. better deepened strengthen insights, our that way the to I that is we've analysis based around on we've to

to the action process, the reserves that taken And we've on relative believe current we portfolio. appropriate so through the that

Okay.

I've Now making catastrophe you're your my this feet business, with that happens not losses Cedar is guess my This pretty different of about and decent is Rapids. results included. report companies company significant you're changes all in under a year fear And you're these company concern catastrophe lines talking losses. that seen insurance with a getting multiple you're this you. year or I

equity all rooting for We expect I'm in ratio what don't are the just you're your what these is are you. And goal the like if in that are results was far to the I the all -- of future achieve going going strengthening I -- wondering, see for what combined And with X, forward? have, going what and combined these focus improvement firm, ratio? -- to can business, kind the as years. And see an you can't forward? we Iowa-based I What as redirecting return trying to and on can't going you changes X the know I X, look

for the thanks question. Corey,

are driving give I So some of at a consistent to general and organization right? a relatively company We change leadership we team lot position express to time. over of purpose are in with reshape views, the delivering that the profitability not the know the but guidance, you you provide new, can is

underperformance, in most of the inside track trajectory growth a we the so and changes are of company record organization its and profitability. to the company terms both change the its making had significant has recently of And

over you as see company's -- certainly profitability. should to growth rate its in expect so time well its the as And continued improvement

changes? of the the on of year end? you make And be reflection year a the these Or are analysis be a our rest to place expecting next could better would

we oftentimes, think this improvement to year. can. rest some that kind -- through changes the I implementing but making. year, changes into next and time think anticipate -- the are But you materialize. of are I lag we And the of you Yes, take Yes, we the results seeing

expect So XXXX. continue in and acceleration into next we improvement year I see as to this into would throughout year

Okay. Well, thank guys. you you and good luck to

so Thanks much.

our question-and-answer like session. turn Kevin remarks. concludes over This any to Please conference would Leidwinger to closing I go ahead, sir. the for Mr. back

Thanks you. forward chatting Thank and us, joining for to we look quarter. next

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

may disconnect. You now