United Fire Group, Inc. Q4 FY2025 earnings call

• Over the past three years, the company underwent significant transformation in underwriting, capabilities, actuarial insights, and alignment with distribution partners.
• In 2025, it achieved record size, best annual underwriting profit, investment income, and return on equity in a decade or longer. Net written premium grew 9%, combined ratio improved to 94.8%, net investment income grew nearly 20%, operating earnings per share improved 80%, and book value per share grew over $6.
• Strategic investments in technology are improving operational efficiency and underwriting capabilities, with examples like new policy administration system, underwriter workbench, and AI-based tools.
• From 2022 to 2025, net written premium grew from $984 million to $1.3 billion, combined ratio improved from 101.4% to 94.8%, investment income more than doubled, operating earnings per share increased more than fourfold, return on equity climbed from 2% to 13.7%, and book value per share increased over 25%.
• Board declared a 25% increase in quarterly cash dividend from 16¢ per share to 20¢ per share.

In 2025, United Fire Group, Inc. grew its business to record size. Net written premium grew by 9% to over $1.3 billion. Underwriting profit grew from $9 million in 2024 to $67 million in 2025. Net investment income grew by nearly 20%. Annual combined ratio improved to 94.8%. Core commercial business had strong growth with record new business of $247 million. Specialty E&S net written premium grew double-digit in 2025. Surety business had double-digit net written premium growth. Alternative distribution channels (treaty, programs, funds at Lloyd's) saw premium volume growth in 2025 with Lloyd's and programs growing mid-single digits in net written premiums and treaty reinsurance down slightly. The underlying loss ratio improved to 55.4% in Q4 and 56.3% for full year. Catastrophe loss ratio was 1.2% in Q4 and 3.2% for full year, outperforming expectations.

• Board declared a 25% increase in quarterly cash dividend to 20¢ per share.
• Confident in delivering continued profitable growth in 2026 as a disciplined, solution-oriented underwriting company.
• Modeled annual expected catastrophe loss ratio is below 5% in 2026.
• Expect expense ratio to gradually reduce over time with growth at a 10% clip, targeting a run rate of about 35% in the near term and further reduction over the next several years.

• Market competition could impact rate increases and profitability.
• Reinsurance market dynamics with increased competition affecting rates, terms, and line sizes.
• Potential impact of social inflation on certain liability lines like umbrella, requiring conservative pricing and reserve strengthening.

Q: Hey, good morning, guys. Thanks for taking the question and congratulations on a great end to the year. You guys touched a little bit about the rate increases, how it is more competitive, you know, mostly in the property segment there. But, you know, as that seems to kind of be leveling off in the near term, can you talk about current pricing, you know, the expectations there going forward? You know, and the effect that that may have on achieving the mid-teens ROEs that you guys are targeting?

A: Hey, Matthew. It's Julie. I will start. You know, certainly, we have seen the market demonstrating more competitive behavior. But we believe it is still reasonably rational. We are still achieving positive rates in the market, and we are approaching it, I think, confidently. We are sticking to the underwriting discipline that we have instilled over the last few years, at least the last few transformative years. And we think that through disciplinary selection and just making sure we are getting the right price for the exposures that we are underwriting, we will be able to navigate whatever the market throws at us in the near term. I think more importantly, we believe there is still business to be written at attractive margins. And we will pursue that diligently.

Q: Maybe a few more thoughts on the reinsurance business. Is it fair to assume that just given what's going on with the market, we should expect at least some margin compression in those books overall?

A: You know, we took a hard look at every single treaty we write with this 1/1 renewal that we just experienced, and we certainly are seeing the dynamics that we actually benefited from on our ceded program play through in our alternative distribution book as well. We did see increased competition. I mean, it certainly affected rates and terms and line sizes. But we think we will continue to succeed in this environment. You know, our playbook emphasizes disciplined underwriting, relationship quality, and an aligned risk appetite. We are looking to long-term commitments, and we continue to price every treaty over treaty, and we insist on certain profit expectations. We do not expect those to change. And if that means that we are putting, you know, fewer treaties on the books going forward, then so be it. We are prepared. But we still believe that there is attractive business to be had. We had a nice 1/1 season. We bound new business.

Q: Could you not so much on a quarterly basis, but maybe on an annual basis, dive a little deeper into the other liability line, the other parts of your business that's showing really wonderful profitability. But that seems to be the one area where you have less profitability. I'm just curious if what the dynamics of that are causing the differentiation?

A: We have certainly seen some pressure on profitability, mostly in the umbrella line. We have seen a few large umbrella losses, and so we have taken a very conservative approach. You may have noticed that we have made new rate filings, raised our minimum premiums on Umbrella, so we are confident that we will be pricing the business appropriately moving forward. And as you would have observed, we have been strengthening our reserves ever since 2022. We have strengthened those other liability reserves practically quarter over quarter. So we believe that we are, you know, protecting the profitability on a go-forward basis by right pricing and appropriate capacity deployment, and then we feel like the reserve position puts us in a good spot.

Q: Is this the nuclear verdict problem that we've seen many places that's affecting that umbrella, or is there something else in your book that's different?

A: You know, I do not think so. I mean, given the book of business that we have and the amount of capacity that we deploy risk over risk, we have not seen big nuclear verdicts, but we are certainly subject to the other impacts of social inflation in general. So yeah, we are guarding against it through how we price the portfolio and how we pull the reserves together.