United Fire Group, Inc. Q2 FY2025 earnings call

• UFG achieved record net written premium of $373 million in Q2 with 14% growth, driven by improved retention, record new business, and rate increases exceeding loss trends.
• Combined ratio improved to 96.4%, with underlying loss ratio at 57.6% due to strong earned rate and moderating loss trends.
• Recognized $5 million favorable prior year reserve development from loss adjustment expense review. Catastrophe loss ratio was 5.5% in Q2, below historical averages.
• Underwriting expense ratio improved to 34.9%. Net investment income increased 20% with fixed maturity income improving.
• Core commercial net written premium up 20%, new business production eclipsed $100 million for first time with all units up double-digit. Specialty E&S and surety also saw growth. Alternative distribution selective for profitability.

UFG delivered strong results in the second quarter. Net written premium grew 14% to a record $373 million. The core commercial business (including small business, middle market, and construction) saw a 20% increase in net written premium in the second quarter. Specialty E&S business had strong new business growth in property and excess casualty. Surety growth was double-digit. Alternative distribution had modest growth as some treaties were non-renewed. Absolute figures: Net written premium at $373 million, core commercial up 20%, specialty E&S with strong new business, surety double-digit growth. Revenue contribution details not explicitly given in terms of percentages but key segments highlighted.

• Annual plan for catastrophe loss ratio is 5.7%.
• Committed to executing strategic business plan for superior financial and operational performance.
• Expect ongoing disciplined management actions to benefit expense ratio over time.

• Uncertainties from social inflation affecting loss reserves.
• Market volatility impacting limited partnerships in investment portfolio.
• Competitive environment pressures on reinsurance pricing and rate moderation in some segments.

Q: I see that the nonvariable part of underwriting expense declined by about $4 million or 1.6% thereabouts. Can you talk about your trajectory on sort of improving your expense ratios there? And what we should expect going forward for run rate?

A: Yes, Jason, thanks for calling in. We are down from Q1, with Q2 at about 35%. As we have a good growth trajectory, fixed leverage will help, and Q2 is a normal run rate going forward.

Q: Congratulations on the results. Maybe some thoughts on the competitive environment. And as you start see it into your business, a lot of talk this quarter amongst the public companies that are worrying about sort of an acceleration of competition, but it's been very sort of spot dependent. It seems to be more property also more reinsurance base. Anyway, I love -- as you kind of look at your portfolio of businesses, are you seeing similar different? And maybe you could just kind of give us an overview in general how you see the incremental changes in the competitive environment?

A: Yes. I think that certainly, it remains a competitive market when isn't it? I do think that we're seeing some moderation in rates, but it wasn't terribly unexpected. It's been building, I think, for the last few quarters, especially in property, and we certainly saw it even in our own results. I would say that even in light of that rate moderation, we still feel very confident that we can compete in the market and we can continue to grow. We're seeing a greater percentage of our portfolio made up of accounts we've written in the last couple of years, and we feel like that we have made the right risk selection and the right pricing moves on those risks that position us well to compete in the marketplace. So yes, we see them moderating, but we feel good about the future and continued growth throughout the rest of the year.