United Fire Group, Inc

Good day and welcome to the United Fire Group Insurance 2024 Third Quarter Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Tim Borst. Please 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. Such forward-looking statements are based on current expectations, estimates, forecasts, and projections about the company, the industry in which we operate, and beliefs and assumptions made by management. The company cautions investors that any forward-looking statements include risks and uncertainties and are not a guarantee of future performance. Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made. These forward-looking statements are based on management's current expectations, and the actual results may differ materially due to a variety of factors which are described in our press release and SEC filings discussed specifically in our most recent annual report on Form 10-K. 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. Good morning, everyone, and welcome to our third quarter conference call. I'll begin this morning by providing a high-level overview of our results. Following my comments, Julie Stevenson will discuss our underwriting results, and Eric Martin will discuss our financial results in more detail. But first, we would like to take a moment to extend our deepest sympathies to those impacted by Hurricanes Helene and Milton in recent weeks. It's been a devastating hurricane season, and we wish a swift recovery to the people and communities who are in the path of these storms. Turning to our results, the third quarter reflects our ongoing efforts to improve performance through the execution of our strategic business plan. We generated the highest quarterly net income and operating income in the past 10 quarters, demonstrating our progress in improving underwriting and investment returns by engaging with distribution partners to profitably grow our business, deepening expertise across the company, enhancing our capabilities, and leveraging technology to improve efficiency, all while upholding the personal relationships and responsive service our partners and policyholders value. Net rent premiums grew 23% at $305.6 million, with growth led by our core commercial and alternative distribution businesses. Core commercial growth remained steady, with average renewal premium increases exceeding 12%, stable retention, and strong new business production. Rate increases accelerated to 11.2%, exceeding loss trends with all liability lines near or above double-digit rate increases. The third quarter gap combined ratio improved 3.8 points to 98.2% from ongoing actions to improve core margins, stable prior period reserve development, and catastrophe losses below prior year and historical averages. The third quarter underlying loss ratio of 57.9% improved 2.6 points from prior year, reflecting strong earned rate achievement exceeding loss trends, continued underwriting discipline, and lower than expected property large loss experience. The third quarter catastrophe loss ratio was 4.4% and below prior year as well as both 5-year and 10-year historical averages. This quarter's results directly reflect our ongoing efforts to optimize our property catastrophe risk profile, including targeted actions in hurricane-exposed geographies over the past year that reduced our exposure to events like Hurricanes Helene, Debbie, and Beryl in the third quarter and Milton in the fourth quarter. At this time, we expect Hurricane Milton to have no material impact on the fourth quarter catastrophe loss ratio. Prior period of reserve development was neutral overall in the third quarter. The pattern of stable to favorable loss emergence allows us to continue reinforcing our position against the future inflationary uncertainty challenging our industry and certain liability lines. The underwriting expense ratio in the third quarter was 35.9%, slightly higher than prior year as a result of stronger business performance during the current quarter and increased technology costs as we invest in continued growth. Third quarter net investment income of $24.4 million increased 49%, or $8 million, above prior year. Recent actions to reposition portions of our fixed income portfolio resulted in a strong and sustainable increase in fixed maturity investment income to $18.7 million in the third quarter and $78 million on an annualized basis going forward. New purchase yields remain strongly above total portfolio yields, creating potential for further improvement. Improved valuations on our limited partnership portfolio contributed $5.4 million in pre-tax investment income in the third quarter. Eric will provide more color on these investment portfolio management actions and results in his remarks. We continue to make progress in resolving the rating errors in our core commercial business that were identified in the last quarter. At this time in the last quarter, we were in the early stages of investigating this matter and recorded a contingent liability based on information available at the time. We have since completed our investigation, and based upon an evaluation of our findings, the Iowa Insurance Division elected to take no action nor require refunds. Through the Iowa Insurance Division, we continue to work with regulators in other states to achieve resolution that have not changed the amount of the pre-tax charge reported last quarter. In conclusion, I'm pleased with our third quarter results and the cumulative progress we've made over the past nine months. Our strategic actions continue to materialize in our results, and we remain committed to driving ongoing improvements through the strategic execution of our business plan. I'll now hand it over to Julie Stevenson, our Chief Operating Officer, to discuss our underwriting results in more detail.