UNITED FIRE GROUP INC Q4 FY2024 earnings call

• 2024 marked record net written premium, best combined ratio, and highest adjusted operating income since 2000.
• Fourth quarter underlying loss ratio improved 4.3 points from Q4 2023, driven by strong earned rate and favorable frequency trends.
• Surety portfolio reserves reduced to reflect improved 2024 results; umbrella portfolio increased loss ratio due to late reporting nature.
• Investment portfolio: over past three quarters, risk-adjusted returns improved, annualized book yield up over 80 basis points; nearly $900 million invested in fixed maturity assets in 2024 with average new money yield ~5.5%.
• Successfully renewed all ceded reinsurance programs on January 1, improving coverage and terms with new partners for counterparty diversification.

In 2024, United Fire Group, Inc. achieved the highest net written premium in its 79-year history and the best annual combined ratio with the highest adjusted operating income since 2000. For the fourth quarter, the underlying loss ratio was 55.7%, improving 4.3 points from Q4 2023. Surety portfolio saw reserves reduced due to improved 2024 results, while umbrella portfolio had increased loss ratio. Investment portfolio: over past three quarters, risk-adjusted returns improved, annualized book yield up over 80 basis points. Fourth quarter net investment income was $23.2 million, up $4.1 million from Q4 2023. Full-year net investment income grew to $82 million, with fixed maturity income at $70 million, expected to grow to $80 million in 2025.

• Net investment income expected to grow to $80 million in 2025 with potential for further improvements from reinvestments at higher rates.
• Confidence in continued improvement heading into 2025, with early upswing in earned rate benefit from prior accelerated rate achievement.

• Social inflation pressure affecting liability reserves.
• Uncertain liability environment with increased litigation activity delaying claim reporting and settlement timelines.
• Adverse movement in assumed reinsurance portfolio and late emerging claims in umbrella book for older accident years.

Q: About fourth quarter profitability and one-time benefit A: Eric Martin states there's a one-time benefit of $3.2 million pre-tax in the fourth quarter, otherwise, results are generally run rate with focus on expense ratio improvement Q: Appetite for new business given social inflation A: Julie Stephenson mentions leaning towards less public exposed risks in casualty, growing property portfolio and achieving greater property capacity in treaty Q: Reinsurance appetite A: Kevin Leidwinger talks about feeling good about alternative distribution channels, with confidence in prospects in the marketplace for standard treaty, the largest channel in alternative distribution