UNITED FIRE GROUP INC Q1 FY2025 earnings call

• 2025 started promising with third consecutive quarter of underwriting profitability, record net written premium, and increased net income despite industry catastrophes and higher expense ratio. • Net written premium grew 4% but was affected by reinsurance adjustments. • Combined ratio was 99.4%, underlying loss ratio improved to 56.5%, underwriting expense ratio up to 37.9% due to new policy system development and agent compensation. • Net investment income improved due to fixed maturity income and limited partnership portfolio valuations. • Monitoring tariffs closely with expectation of manageable impact. • New policy administration system for core commercial near completion with small business deployed, middle market and construction to deploy soon.

Net written premium grew 4% to $335.4 million. Core commercial businesses saw net written premium growth of 6% in the first quarter. Net investment income improved to $23.5 million, with fixed maturity income growing to $21 million. Reported book value per share improved to $32.13 and adjusted book value per share grew to $34.16. Small business is fully deployed across all 32 states, middle market and construction to begin new business deployment in July and renewals in November.

• Impact from tariffs expected to be manageable. • New policy administration system deployment to improve process efficiency, with small business already on board and middle market/construction to follow. • Expense ratio expected to normalize as one-time policy system costs subside and premium growth provides leverage on fixed costs.

• Uncertainty regarding tariffs' ultimate outcome. • Volatility in limited partnership portfolio due to equity-like exposure. • Social inflation uncertainty affecting liability reserves. • Elevated severity trends in some lines of business posing underwriting challenges.

Q: Talk about current pricing power and ability to counter loss expenses due to material and labor cost inflation.

A: Julie Stephenson mentioned actuaries re-evaluate trend every quarter, take conservative view, and rates currently exceed net loss trends, with monitoring and disciplined pricing to stay ahead.

Q: Discuss underwriting expense ratio and levers to pull.

A: Eric Martin said expense ratio elevated by ~1 point due to final policy system costs, small business on the platform, middle market/construction to follow, and premium growth will provide leverage on fixed costs as expense ratio normalizes over time.