United Fire Group, Inc

Good morning. My name is Anthony, and I'll be your conference operator today. At this time, I would like to welcome everyone to the USG Insurance Third Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one in your touch-tone phone. To withdraw your question, please press star and two. Please note this event is being recorded. Thank you. Now I'll turn the call over to UFG VP and Director of Investor Relations, Tim Borst. You may now go ahead.

Good morning and thank you for joining this call. Yesterday afternoon, we issued a press release on our results. To find a copy of this document, please visit our website at ufginsurance.com. Press releases and slides are located under the Investors tab. Joining me today on the call are UFG President and Chief Executive Officer Kevin Leidwinger, Executive Vice President and Chief Operating Officer Julie Stevenson, and Executive Vice President and Chief Financial Officer Eric Martin. Before I turn the call over to Kevin, a couple of reminders. First, please note that our presentation today may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The company cautions investors that any forward-looking statements include risks and uncertainties and are not a guarantee of future performance. These forward-looking statements are based on management's current expectations. The actual results may differ materially due to a variety of factors which are described in our press release and SEC filings. Also, please note that in our discussion today, we may use some non-GAAP financial measures. Reconciliations of these measures to the most comparable GAAP measures are also available in our press release and SEC filings. At this time, I will turn the call over to Mr. Kevin Leidwinger, CEO of UFG Insurance.

Thank you, Tim, and good morning, everyone. Welcome to our third quarter conference call. I'll begin this morning by providing a high-level overview of our third quarter results. Following my comments, Julie Stevenson will discuss our underwriting results in more detail, and Eric Martin will discuss our financial results. As indicated in yesterday's press release, I remain pleased with the progress we are making as we continue positioning UFG to deliver superior financial and operational performance. Our third quarter results show signs of improvement while we continue to execute a broad range of strategies to strengthen our company. Net income improved to $6.4 million in the third quarter of 2023 compared to a $23 million loss in the third quarter of 2022, while the combined ratio improved 9.6 points to 102.1%, compared to 111.7% same quarter last year. Net written premium was flat in the third quarter as growth in our core commercial and assumed reinsurance business was offset by targeted underwriting action on underperforming segments as we worked to continuously improve the profile of the portfolio. In addition, net written premium growth was impacted by increased surety reinsurance reinstatement premiums. Average annual premium increases in core commercial accelerated to 11% in the third quarter, outpacing lost cost trends. The acceleration was led by property rate increases of 17%. The underlying loss ratio was 60.5% in the third quarter, which included approximately two points of impact from a small number of large losses and associated reinsurance reinstatement premiums in our surety business. Tax-to-fee losses contributed 5.9% to the combined ratio in the third quarter, five and a half point improvement over the third quarter of 2022 and well below our five and ten year averages of approximately twelve percent and ten percent respectively prior period reserve development is relatively neutral overall and in line with our expectations following the actions taken in the second quarter we made small adjustments across lines of business as our enhanced actuarial process helps us more quickly evaluate emerging trends and changing environments The expense ratio was 35.5% in the second quarter, up four-tenths of a point compared to a year ago. Surety Reinsurance reinstatement premiums added seven-tenths of a point to the third quarter expense ratio, which would have otherwise declined on a year-over-year basis because of our ongoing expense management efforts. Our intense focus on improving the expense ratio was accelerated in the third quarter by introducing a voluntary early retirement package as well as changes to our paid time off policy that will provide additional expense ratio benefits in 2024. While not satisfied with the combined ratio, I am pleased with the improvement in the quarter as well as the progress we're making in executing strategies we believe will deliver consistent profitability and create long-term value for our shareholders. We remain fully confident in our path forward. With that, I'll hand it over to Julie Stevenson, our Chief Operating Officer, to discuss our underwriting results in more detail. Julie?