United Fire Group, Inc. (Nasdaq: UFCS),
United Fire Group, Inc. (the “Company” or
“UFG”) (Nasdaq: UFCS) today reported financial results for the
three-month period ended December 31, 2023 (the “fourth quarter of
2023”) with a consolidated net income of $19.6 million ($0.77 per
diluted share) and consolidated adjusted operating income of $0.65
per diluted share.
“I am pleased with our fourth quarter results as we achieved the
highest level of quarterly profit in 2023,” said UFG President and
CEO Kevin Leidwinger. “This incremental improvement in
profitability combined with our continued growth and the progress
we have made to deepen our expertise and drive operational
efficiency positions UFG to deliver superior financial and
operational performance.
“In the fourth quarter, net premiums written grew to $247
million led by our core commercial and assumed reinsurance business
units. Core commercial production remained strong with new business
and retention above the prior year while average renewal premium
increases accelerated to 11.6% led by property average renewal
premium increases of 23.9%. On a full-year basis, net premiums
written grew 8.4% to $1.1 billion, the highest level since
2019.
“The fourth quarter combined ratio improved to 99.2%, the lowest
in seven quarters. Light catastrophe activity resulted in a fourth
quarter catastrophe loss ratio of 1.5%, well below historical
averages. In the fourth quarter, prior period reserves increased
$8.8 million, or 3.3% on the combined ratio due to a few late
developing property claims and severity pressure in a few casualty
lines.
“The full year combined ratio of 109.3% increased compared to
fiscal year 2022 due to reserve strengthening, elevated surety
losses, and increased reinsurance costs, while the 2022 expense
ratio benefited from one-time items related to the restructuring of
employee post-retirement benefits.
“Improving core commercial line profitability led to a fourth
quarter underlying loss ratio of 60.0%, the lowest quarterly result
of 2023. These results show early signs of progress in our
strategic efforts to deliver improved and more consistent long-term
profitability. These improvements have begun to offset elevated
surety loss activity and other pressures experienced this year,
bringing our full year underlying loss ratio to
62.2%.
“The fourth quarter expense ratio of 34.4% was also the lowest
result of 2023, as we continued to sustainably reduce expenses. In
addition to ongoing careful vacancy management, in the fourth
quarter we completed a voluntary early retirement program that
contributed to a 22% decline in enterprise workforce over the
course of 2023 and will provide more impactful benefits to our
expense ratio in 2024. Our reported 2023 expense ratio is above
prior year on both a quarterly and full year basis largely due to
one-time items that benefited 2022 results that are offsetting the
impact of our actions to reduce expenses in 2023.
“UFG also benefited from capital market conditions in the fourth
quarter. Sustainable increases in fixed maturity income and
increased valuation on limited partnership investments resulted in
fourth quarter net investment income of $19.1 million, the highest
since exiting the life insurance business in 2018. Higher bond
valuations reduced UFG’s unrealized loss position by over 40% in
the fourth quarter compared to the third quarter of 2023, improving
book value per share by over $2 per share.
“In the fourth quarter we continued to evolve the Company with
strategic investments in leadership talent to increase the depth of
our underwriting, actuarial and claims expertise. We also enhanced
our organizational structure to improve specialization and achieve
a higher level of efficiency and effectiveness with a more
streamlined processes.
“More recently, we successfully placed our 2024 reinsurance
programs on January 1, 2024. In addition, we announced a
partnership with New England Asset Management to oversee our
investment portfolio.
“As we enter the new year, I am proud of the progress we’re
making at UFG and grateful to our employees for their outstanding
dedication to our Company’s success. While our actions are not yet
fully reflected in our financial results, we remain confident in
the path forward and committed to achieving superior performance
over time by delivering deep underwriting expertise with the
personal relationships and responsive service that are so greatly
valued by our agency partners.”
(1) Net premiums written is a performance measure reflecting the
amount charged for insurance policy contracts issued and recognized
on an annualized basis at the effective date of the policy. See
Certain Performance Measures for additional information.(2)
Underlying combined ratio is defined as the GAAP combined ratio
less impacts of catastrophes and non-catastrophe prior period
reserve development. See Definitions of Non-GAAP Information and
Reconciliations to Comparable GAAP Measures for additional
information.(3) Underlying loss ratio is defined as the net loss
ratio less impacts of catastrophes and non-catastrophe prior year
reserve development. See Definitions of Non-GAAP Information and
Reconciliations to Comparable GAAP Measures for additional
information.
Consolidated Financial Highlights:
Consolidated Financial Highlights |
(unaudited) |
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
(In
Thousands, Except Per Share Data) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net premiums earned |
$ |
264,366 |
|
|
$ |
247,795 |
|
|
$ |
1,034,587 |
|
|
$ |
951,541 |
|
Net premiums written |
|
246,830 |
|
|
|
234,731 |
|
|
|
1,066,901 |
|
|
|
984,223 |
|
|
|
|
|
|
|
|
|
GAAP Combined Ratio: |
|
|
|
|
|
|
|
Net loss ratio |
|
64.8 |
% |
|
|
69.8 |
% |
|
|
74.4 |
% |
|
|
67.0 |
% |
Underwriting expense ratio |
|
34.4 |
% |
|
|
34.1 |
% |
|
|
34.9 |
% |
|
|
34.5 |
% |
GAAP combined ratio |
|
99.2 |
% |
|
|
103.9 |
% |
|
|
109.3 |
% |
|
|
101.5 |
% |
|
|
|
|
|
|
|
|
Additional Ratios: |
|
|
|
|
|
|
|
Net loss ratio |
|
64.8 |
% |
|
|
69.8 |
% |
|
|
74.4 |
% |
|
|
67.0 |
% |
Catastrophes-effect on net loss ratio(1) |
|
1.5 |
% |
|
|
4.9 |
% |
|
|
6.2 |
% |
|
|
7.7 |
% |
Reserve development-effect on net loss ratio(1) |
|
3.3 |
% |
|
|
4.9 |
% |
|
|
6.0 |
% |
|
|
0.1 |
% |
Underlying loss ratio(1) (non-GAAP) |
|
60.0 |
% |
|
|
60.0 |
% |
|
|
62.2 |
% |
|
|
59.2 |
% |
Underwriting expense ratio |
|
34.4 |
% |
|
|
34.1 |
% |
|
|
34.9 |
% |
|
|
34.5 |
% |
Underlying combined ratio(2) (non-GAAP) |
|
94.4 |
% |
|
|
94.1 |
% |
|
|
97.1 |
% |
|
|
93.7 |
% |
|
|
|
|
|
|
|
|
Net investment income, net of investment expenses |
$ |
19,098 |
|
|
$ |
12,870 |
|
|
$ |
59,606 |
|
|
$ |
44,932 |
|
Net investment gains (losses) |
|
3,855 |
|
|
|
19,755 |
|
|
|
1,274 |
|
|
|
(15,892 |
) |
Other income (loss) |
|
(1,039 |
) |
|
|
(363 |
) |
|
|
(4,983 |
) |
|
|
(2,959 |
) |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
19,608 |
|
|
$ |
20,120 |
|
|
$ |
(29,700 |
) |
|
$ |
15,031 |
|
Adjusted operating income (loss)(3) |
|
16,564 |
|
|
|
4,514 |
|
|
|
(30,706 |
) |
|
|
27,586 |
|
|
|
|
|
|
|
|
|
Net income (loss) per diluted share |
$ |
0.77 |
|
|
$ |
0.79 |
|
|
$ |
(1.18 |
) |
|
$ |
0.59 |
|
Adjusted operating income (loss) per diluted share(3) |
|
0.65 |
|
|
|
0.18 |
|
|
|
(1.22 |
) |
|
|
1.09 |
|
|
|
|
|
|
|
|
|
|
|
Return on equity (4) |
|
|
|
|
|
(4.0 |
)% |
|
|
1.9 |
% |
(1) Underlying loss ratio is a non-GAAP financial measure that
is defined as the net loss ratio less impacts of catastrophes and
non-catastrophe prior period reserve development. See Definitions
of Non-GAAP Information and Reconciliations to Comparable GAAP
Measures for additional information.(2) Underlying combined ratio
is a non-GAAP financial measure that is defined as the GAAP
combined ratio less impacts of catastrophes and non-catastrophe
prior period reserve development. See Definitions of Non-GAAP
Information and Reconciliations to Comparable GAAP Measures for
additional information.(3) Adjusted operating income (loss) is a
non-GAAP financial measure of net income excluding net investment
gains and losses, after applicable taxes. See Definitions of
Non-GAAP Information and Reconciliations to Comparable GAAP
Measures for more information and a reconciliation of adjusted
operating income (loss) to net income. (4) Return on equity is
calculated by dividing annualized net income by average
stockholders’ equity, which is calculated using a simple average of
the beginning and ending balances for the period.
Total Property & Casualty Underwriting
Results
Fourth quarter 2023 results:(All comparisons
vs. fourth quarter 2022, unless noted otherwise)
Growth in net premiums written accelerated in the fourth quarter
of 2023, increasing 5.2%, and the impact of growth from prior
periods contributed to significant increases to revenue, as net
premiums earned increased 6.7% in the fourth quarter of 2023.
Commercial lines net premiums written excluding surety and
specialty increased 7.0%, supported by increasing levels of rate
achievement and new business, with an overall increase in average
renewal premiums of 11.6%. Rate increases accounted for 9.6% while
exposure increases contributed an additional 2.0%. Excluding the
workers’ compensation line of business, the overall average
increase in renewal premiums was 12.5%, with 10.7% from rate
increases and 1.8% from exposure changes.
The combined ratio was 99.2%, improving 4.7 points from 103.9%.
This decrease is primarily attributable to lower prior period
reserve adjustments and favorable catastrophe losses. Prior period
reserves were 3.3% unfavorable this quarter, driven by late
developing property losses from accident year 2022 and severity
pressure in a few casualty lines. This compares to 4.9% unfavorable
development in the fourth quarter of 2022. The catastrophe loss
ratio was 1.5% in the fourth quarter of 2023, a decrease of 3.4
points, which was well below historical averages. The underlying
loss ratio of 60.0% was flat versus prior year. The underwriting
expense ratio of 34.4% was 0.3 points higher due to changes to our
post-retirement benefit plans that reduced expenses in 2022 but
have since concluded. This was primarily offset by growth and our
ongoing actions to sustainably reduce expenses.
Full year 2023 results:
Net premiums written increased 8.4%, reflecting growth in the
same areas as noted above. Net premiums earned increased 8.7%
compared to the full year 2022. The overall average change in
renewal premiums was 9.6%, with 7.1% from rate increases and 2.5%
from exposure changes. Excluding the workers’ compensation line of
business, the overall average change in renewal premiums was 10.7%,
with 8.3% from rate changes and 2.4% from exposure changes. On an
annual basis, premium retention was 82.6%, compared to 77.8% last
year.
For the full year, the combined ratio was 109.3% as compared to
101.5% in 2022 driven primarily by a 7.4 point increase in the loss
ratio. The underlying loss ratio increased by 3.0 points to 62.2%
in 2023 as improving profitability from our core commercial lines
was offset by elevated losses in our surety business. The loss
ratio was also impacted by 6.0% due to reserve strengthening
associated with the excess casualty business and adverse pressure
from the continued impact of social inflation on the liability
lines of business in accident years 2016-2019. Catastrophe losses
contributed 6.2% to the loss ratio in the current year, an
improvement from 7.7% last year. The underwriting expense ratio of
34.9% for 2023 was 0.4 points higher than last year, primarily
driven by changes to our post-retirement benefit plans that
provided a one-time benefit in 2022 and increased reinsurance
premiums in 2023 that were primarily offset by our ongoing actions
to sustainably reduce expenses and premium growth.
Investment Results
Fourth quarter 2023 results:(All comparisons
vs. fourth quarter 2022, unless noted otherwise)
Net investment income was $19.1 million for the fourth
quarter of 2023, an increase of $6.2 million. Income from our
fixed income portfolio increased by $2.2 million as we
invested at higher interest rates. In addition, income from cash
and cash equivalents increased $1.0 million. Income on other
long-term investments resulted in an additional $2.7 million
of income as the valuation of the investments in limited liability
partnerships varies from period to period due to the current market
conditions. Investment expense decreased $1.1 million. The
dividends on equity securities decreased $0.7 million due to a
strategic reallocation of equity securities to fixed income assets
over the past two quarters.
Full year 2023 results:
Net investment income of $59.6 million for the full year 2023
increased 32.7% from the full year 2022. While interest on fixed
maturities was up $7.5 million or 15.5%, driven by higher
interest rates, this was offset by a decrease in dividends on
equity securities of $1.6 million, due to a strategic
reallocation of equity securities to fixed income assets during
2023. Income on other long-term investments resulted in an
additional $3.2 million of income as the valuation of the
investments in limited liability partnerships varies from period to
period due to the current market conditions. Other income increased
$5.6 million, driven by $2.4 million of Funds at Lloyd’s
income, $2.2 million of interest on cash and cash equivalents, and
$1.0 million of other miscellaneous income.
Investment Results |
(unaudited) |
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
(In
Thousands) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Investment income: |
|
|
|
|
|
|
|
Interest on fixed maturities |
$ |
15,051 |
|
|
$ |
12,823 |
|
|
$ |
56,243 |
|
|
$ |
48,702 |
|
Dividends on equity securities |
$ |
481 |
|
|
$ |
1,229 |
|
|
$ |
3,548 |
|
|
$ |
5,163 |
|
Income (loss) on other long-term investments |
$ |
3,460 |
|
|
$ |
771 |
|
|
$ |
(31 |
) |
|
$ |
(3,188 |
) |
Other |
$ |
2,456 |
|
|
$ |
1,492 |
|
|
$ |
9,324 |
|
|
$ |
3,771 |
|
Total investment income |
$ |
21,448 |
|
|
$ |
16,315 |
|
|
$ |
69,084 |
|
|
$ |
54,448 |
|
Less investment expenses |
$ |
2,350 |
|
|
$ |
3,445 |
|
|
$ |
9,478 |
|
|
$ |
9,516 |
|
Net investment income |
$ |
19,098 |
|
|
$ |
12,870 |
|
|
$ |
59,606 |
|
|
$ |
44,932 |
|
|
|
|
|
|
|
|
|
Average yields: |
|
|
|
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
Pre-tax(1) |
|
3.39 |
% |
|
|
3.08 |
% |
|
|
3.28 |
% |
|
|
2.93 |
% |
(1) Fixed income securities yield excluding net unrealized
investment gains/losses and expenses.
Balance Sheet
Balance Sheet |
(In Thousands) |
December 31, 2023 |
|
December 31, 2022 |
|
(unaudited) |
|
|
Invested assets |
$ |
1,886,494 |
|
|
$ |
1,844,891 |
|
Cash |
|
102,046 |
|
|
|
96,650 |
|
Total assets |
|
3,135,725 |
|
|
|
2,882,286 |
|
Losses and loss settlement
expenses |
|
1,638,755 |
|
|
|
1,497,274 |
|
Total liabilities |
|
2,401,980 |
|
|
|
2,142,172 |
|
Net unrealized investment
gains (losses), after-tax |
|
(66,967 |
) |
|
|
(88,369 |
) |
Total
stockholders’ equity |
|
733,745 |
|
|
|
740,114 |
|
|
|
|
|
Book value per share |
$ |
29.04 |
|
|
$ |
29.36 |
|
Total consolidated assets as of December 31, 2023 were
$3.1 billion, which included $1.9 billion of invested
assets. The Company’s book value per share was $29.04, a decrease
of $0.32 per share, or 1.1%, from December 31, 2022. This
decrease is primarily related to an increase in loss and loss
settlement expense reserves offset by changes in the valuation of
fixed income securities due to interest rate movements during
2023.
Capital Management
During the fourth quarter of 2023, the Company declared and paid
a $0.16 per share cash dividend to shareholders of record as of
December 1, 2023. UFG has paid a quarterly dividend every quarter
since March 1968.
Earnings Call Access Information
An earnings call will be held at 9:00 a.m. Central Time on
February 14, 2024, to allow securities analysts, shareholders
and other interested parties the opportunity to hear management
discuss the Company’s fourth quarter of 2023 results.
Teleconference: Dial-in information for the call is toll-free
1-844-492-3723. The event will be archived and available for
digital replay through February 21, 2024. The replay access
information is toll-free 1-877-344-7529; conference ID no.
3341403.
Webcast: An audio webcast of the teleconference can be accessed
at the Company’s investor relations page at
https://ir.ufginsurance.com/event/ or
https://event.choruscall.com/mediaframe/webcast.html?webcastid=yMChVzCX.
The archived audio webcast will be available until February 21,
2024.
Transcript: A transcript of the teleconference will be available
on the Company’s website soon after the completion of the
teleconference.
About UFG
Founded in 1946 as United Fire & Casualty Company, UFG,
through its insurance company subsidiaries, is engaged in the
business of writing property and casualty insurance.
Through our subsidiaries, we are licensed as a property and
casualty insurer in 50 states, plus the District of Columbia, and
we are represented by approximately 1,000 independent agencies.
A.M. Best Company assigns a rating of “A-” (Excellent) for members
of the United Fire & Casualty Group. For more information about
UFG, visit www.ufginsurance.com.
Contact:
Investor RelationsEmail:
ir@unitedfiregroup.com
Media Inquiries Email:
news@unitedfiregroup.com
Disclosure of Forward-Looking Statements
This release may contain forward-looking statements about our
operations, anticipated performance and other similar matters. The
Private Securities Litigation Reform Act of 1995 provides a safe
harbor under the Securities Act of 1933 and the Securities Exchange
Act of 1934 for forward-looking statements. The forward-looking
statements are not historical facts and involve risks and
uncertainties that could cause actual results to differ from those
expected and/or projected. 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. Words such as “expect(s),”
“anticipate(s),” “intend(s),” “plan(s),” “believe(s),”
“continue(s),” “seek(s),” “estimate(s),” “goal(s),” “remain(s)
optimistic,” “target(s),” “forecast(s),” “project(s),”
“predict(s),” “should,” “could,” “may,” “will,” “might,” “hope,”
“can” and other words and terms of similar meaning or expression in
connection with a discussion of future operations, financial
performance or financial condition, are intended to identify
forward-looking statements. These statements are not guarantees of
future performance and involve risks, uncertainties and assumptions
that are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed in such
forward-looking statements. Information concerning factors that
could cause actual outcomes and results to differ materially from
those expressed in the forward-looking statements is contained in
Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K/A
for the year ended December 31, 2022, filed with the
Securities and Exchange Commission (“SEC”) on March 1, 2023.
The risks identified in our Annual Report on Form 10-K/A and in our
other SEC filings are representative of the risks, uncertainties,
and assumptions that could cause actual outcomes and results to
differ materially from what is expressed in the forward-looking
statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
of this release or as of the date they are made. Except as required
under the federal securities laws and the rules and regulations of
the SEC, we do not have any intention or obligation to update
publicly any forward-looking statements, whether as a result of new
information, future events, or otherwise, except as required by
law. In addition, future dividend payments are within the
discretion of our Board of Directors and will depend on numerous
factors, including our financial condition, our capital
requirements and other factors that our Board of Directors
considers relevant.
Underwriting Expense Ratio
During the fourth quarter of 2023, the Company evaluated
categories of expenses included in the underwriting expense ratio
and identified two categories of expenses that have been
reclassified as non-underwriting expenses: foreign exchange
gain/loss and charitable contributions. These expenses have been
isolated in a new financial line “Other Non-Underwriting Expenses”
on the income statement. As a result, there were immaterial changes
to the historical underwriting expense ratio and the underlying
combined ratio. The updated underwriting expense ratio components
and underwriting expense ratio for the last eight quarters are
outlined in the tables below.
Other Non-Underwriting Expense Components -
2023 |
(in thousands) |
YTD |
Q4 |
Q3 |
Q2 |
Q1 |
Foreign Exchange Gain/Loss |
1,159 |
134 |
179 |
(206 |
) |
1,052 |
Charitable Contributions |
564 |
36 |
— |
6 |
|
521 |
Other Non-Underwriting Expenses |
1,723 |
170 |
179 |
(199 |
) |
1,573 |
Underwriting Expense Ratio - 2023 updated |
|
YTD |
Q4 |
Q3 |
Q2 |
Q1 |
Underwriting expenses |
360,791 |
|
90,860 |
|
91,805 |
|
87,988 |
|
90,138 |
|
Earned premium |
1,034,587 |
|
264,366 |
|
259,456 |
|
254,638 |
|
256,127 |
|
Underwriting expense ratio |
34.9 |
% |
34.4 |
% |
35.4 |
% |
34.6 |
% |
35.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
Impact to Underwriting expense ratio |
(0.2 |
)% |
(0.1 |
)% |
(0.1 |
)% |
0.1 |
% |
(0.6 |
)% |
Other Non-Underwriting Expense Components -
2022 |
(in thousands) |
YTD |
Q4 |
Q3 |
Q2 |
Q1 |
Foreign Exchange Gain/Loss |
(1,056 |
) |
(703 |
) |
2 |
(409 |
) |
54 |
Charitable Contributions |
532 |
|
12 |
|
16 |
— |
|
504 |
Other Non-Underwriting Expenses |
(524 |
) |
(691 |
) |
18 |
(409 |
) |
558 |
Underwriting Expense Ratio - 2022 updated |
|
YTD |
Q4 |
Q3 |
Q2 |
Q1 |
Underwriting expenses |
328,244 |
|
84,410 |
|
83,576 |
|
81,701 |
|
78,557 |
|
Earned premium |
951,541 |
|
247,795 |
|
238,256 |
|
231,262 |
|
234,228 |
|
Underwriting expense ratio |
34.5 |
% |
34.1 |
% |
35.1 |
% |
35.3 |
% |
33.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
Impact to Underwriting expense ratio |
0.1 |
% |
0.3 |
% |
0.0 |
% |
0.2 |
% |
(0.2 |
)% |
Definitions of Non-GAAP Information and Reconciliations
to Comparable GAAP Measures
The Company prepares its public financial statements in
conformity with accounting principles generally accepted in the
United States of America (“GAAP”). Management also uses certain
non-GAAP measures to evaluate its operations and profitability. As
further explained below, management believes that disclosure of
certain non-GAAP financial measures enhances investor understanding
of our financial performance. Non-GAAP financial measures disclosed
in this report include: adjusted operating income, underlying loss
ratio, and underlying combined ratio. The Company has provided the
following definitions and reconciliations of the non-GAAP financial
measures:
Adjusted operating income: Adjusted operating
income is calculated by excluding net investment gains and losses,
after applicable federal and state income taxes from net income
(loss). Management believes adjusted operating income is a
meaningful measure for evaluating insurance company performance and
a useful supplement to GAAP information because it better
represents the normal, ongoing performance of our business.
Investors and equity analysts who invest and report on the
insurance industry and the Company generally focus on this metric
in their analyses.
Net Income Reconciliation |
(unaudited) |
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
(In Thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
|
2022 |
|
Income Statement Data |
|
|
|
|
|
|
|
Net income (loss) |
$ |
19,608 |
|
$ |
20,120 |
|
$ |
(29,700 |
) |
|
$ |
15,031 |
|
Less: after-tax net investment gains (losses) |
|
3,044 |
|
|
15,606 |
|
|
1,006 |
|
|
|
(12,555 |
) |
Adjusted operating income (loss) |
$ |
16,564 |
|
$ |
4,514 |
|
$ |
(30,706 |
) |
|
$ |
27,586 |
|
Diluted Earnings Per
Share Data |
|
|
|
|
|
|
|
Net income (loss) |
$ |
0.77 |
|
$ |
0.79 |
|
$ |
(1.18 |
) |
|
$ |
0.59 |
|
Less: after-tax net investment gains (losses) |
|
0.12 |
|
|
0.61 |
|
|
0.04 |
|
|
|
(0.50 |
) |
Adjusted operating income (loss) |
$ |
0.65 |
|
$ |
0.18 |
|
$ |
(1.22 |
) |
|
$ |
1.09 |
|
Underlying loss ratio and underlying
combined ratio: Underlying loss ratio represents the net
loss ratio less the impacts of catastrophes and non-catastrophe
prior period reserve development. The underlying combined ratio
represents the combined ratio less the impacts of catastrophes and
non-catastrophe prior period reserve development. The Company
believes that the underlying loss ratio and underlying combined
ratio are meaningful measures to understand the underlying trends
in the core business in the current accident year, removing the
volatility of prior period impacts and catastrophes. Management
believes separate discussions on catastrophe losses and prior
period reserve development are important to understanding how the
Company is managing catastrophe risk and in identifying
developments in longer-tailed business.
Prior period reserve development is the increase (unfavorable)
or decrease (favorable) in incurred loss and loss adjustment
expense reserves at the valuation dates for losses which occurred
in previous calendar years. This measure excludes development on
catastrophe losses.
Catastrophe losses is an operational measure which utilizes the
designations of the Insurance Services Office (“ISO”) and is
reported with losses and loss adjustment expense amounts net of
reinsurance recoverables, unless specified otherwise. In addition
to ISO catastrophes, we also include as catastrophes those events
(“non-ISO catastrophes”), which may include U.S. or international
losses, that we believe are, or will be, material to our
operations, either in amount or in number of claims made.
Catastrophes are not predictable and are unique in terms of timing
and financial impact. While management estimates catastrophe losses
as incurred, due to the inherently unique nature of catastrophe
losses, the impact in a reporting period is inclusive of
catastrophes that occurred in the reporting period, as well as
development on catastrophes that may have occurred in prior
periods.
Certain Performance Measures
The Company uses the following measures to evaluate its
financial performance. Management believes a discussion of these
measures provides financial statement users with a better
understanding of results of operations. The Company has provided
the following definition:
Net premiums written: Net premiums written is
frequently used by industry analysts and other recognized reporting
sources to facilitate comparisons of the performance of insurance
companies. Net premiums written is the amount charged for insurance
policy contracts issued and recognized on an annualized basis at
the effective date of the policy. Management believes net premiums
written is a meaningful measure for evaluating insurance company
sales performance and geographical expansion efforts. Net premiums
written for an insurance company consists of direct premiums
written and premiums assumed, less premiums ceded. Net premiums
earned is calculated on a pro-rata basis over the terms of the
respective policies. Unearned premium reserves are established for
the portion of premiums written applicable to the unexpired terms
of the insurance policies in force. The difference between net
premiums earned and net premiums written is the change in unearned
premiums and the change in prepaid reinsurance premiums.
Supplemental Tables
Income Statement |
(unaudited) |
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
(In Thousands) |
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenues |
|
|
|
|
|
|
|
Net premiums earned |
$ |
264,366 |
|
$ |
247,795 |
|
|
$ |
1,034,587 |
|
|
$ |
951,541 |
|
Investment income, net of
investment expenses |
|
19,098 |
|
|
12,870 |
|
|
|
59,606 |
|
|
|
44,932 |
|
Net investment gains
(losses) |
|
3,855 |
|
|
19,755 |
|
|
|
1,274 |
|
|
|
(15,892 |
) |
Other
income (loss) |
|
— |
|
|
(257 |
) |
|
|
— |
|
|
|
(295 |
) |
Total Revenues |
$ |
287,319 |
|
$ |
280,163 |
|
|
$ |
1,095,467 |
|
|
$ |
980,286 |
|
|
|
|
|
|
|
|
|
Benefits, Losses and
Expenses |
|
|
|
|
|
|
|
Losses and loss settlement
expenses |
$ |
171,289 |
|
$ |
173,006 |
|
|
$ |
769,414 |
|
|
$ |
637,301 |
|
Amortization of deferred
policy acquisition costs |
|
63,291 |
|
|
56,959 |
|
|
|
244,991 |
|
|
|
213,075 |
|
Other underwriting
expenses |
|
27,569 |
|
|
27,451 |
|
|
|
115,800 |
|
|
|
115,169 |
|
Interest expense |
|
869 |
|
|
797 |
|
|
|
3,260 |
|
|
|
3,188 |
|
Other
non-underwriting expenses |
|
170 |
|
|
(691 |
) |
|
|
1,723 |
|
|
|
(524 |
) |
Total Benefits, Losses and Expenses |
$ |
263,188 |
|
$ |
257,522 |
|
|
$ |
1,135,188 |
|
|
$ |
968,209 |
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
$ |
24,131 |
|
$ |
22,641 |
|
|
$ |
(39,721 |
) |
|
$ |
12,077 |
|
Federal income tax expense (benefit) |
|
4,523 |
|
|
2,521 |
|
|
|
(10,021 |
) |
|
|
(2,954 |
) |
Net income (loss) |
$ |
19,608 |
|
$ |
20,120 |
|
|
$ |
(29,700 |
) |
|
$ |
15,031 |
|
Net Premiums Written by Line of Business |
(unaudited) |
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
(In Thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
Net Premiums Written(1) |
|
|
|
|
|
|
|
Commercial lines: |
|
|
|
|
|
|
|
Other liability(2) |
$ |
79,393 |
|
$ |
73,012 |
|
$ |
325,900 |
|
$ |
316,645 |
Fire and allied lines(3) |
|
51,742 |
|
|
54,162 |
|
|
249,029 |
|
|
232,422 |
Automobile |
|
46,667 |
|
|
42,779 |
|
|
218,710 |
|
|
198,370 |
Workers’ compensation |
|
10,530 |
|
|
13,014 |
|
|
49,128 |
|
|
56,471 |
Surety(4) |
|
11,964 |
|
|
12,393 |
|
|
47,564 |
|
|
51,199 |
Miscellaneous |
|
1,356 |
|
|
238 |
|
|
4,776 |
|
|
1,047 |
Total commercial lines |
$ |
201,652 |
|
$ |
195,598 |
|
$ |
895,107 |
|
$ |
856,154 |
|
|
|
|
|
|
|
|
Personal lines: |
|
|
|
|
|
|
|
Fire and allied lines(5) |
$ |
136 |
|
$ |
2,986 |
|
$ |
4,545 |
|
$ |
4,058 |
Automobile |
|
— |
|
|
1 |
|
|
— |
|
|
— |
Miscellaneous |
|
1 |
|
|
4 |
|
|
14 |
|
|
29 |
Total personal lines |
$ |
137 |
|
$ |
2,991 |
|
$ |
4,559 |
|
$ |
4,087 |
Assumed reinsurance |
|
45,041 |
|
|
36,142 |
|
|
167,236 |
|
|
123,982 |
Total |
$ |
246,830 |
|
$ |
234,731 |
|
$ |
1,066,901 |
|
$ |
984,223 |
(1) Net premiums written is a performance measure reflecting the
amount charged for insurance policy contracts issued and recognized
on an annualized basis at the effective date of the policy. See
Certain Performance Measures for additional information.(2)
Commercial lines “Other liability” is business insurance covering
bodily injury and property damage arising from general business
operations, accidents on the insured’s premises and products
manufactured or sold.(3) Commercial lines “Fire and allied lines”
includes fire, allied lines, commercial multiple peril and inland
marine.(4) Commercial lines “Surety” previously referred to as
“Fidelity and surety.”(5) Personal lines “Fire and allied lines”
includes fire, allied lines, homeowners and inland marine.
Net Premiums Earned, Net Losses and Loss Settlement
Expenses and Net Loss Ratio by Line of Business |
Three
Months Ended December 31, |
2023 |
|
|
2022 |
|
|
|
Net Losses |
|
|
|
|
|
Net Losses |
|
|
|
|
|
and Loss |
|
|
|
|
|
and Loss |
|
|
|
Net |
|
Settlement |
|
Net |
|
Net |
|
Settlement |
|
Net |
(In Thousands, Except
Ratios) |
Premiums |
|
Expenses |
|
Loss |
|
Premiums |
|
Expenses |
|
Loss |
(unaudited) |
Earned |
|
Incurred |
|
Ratio |
|
Earned |
|
Incurred |
|
Ratio |
Commercial lines |
|
|
|
|
|
|
|
|
|
|
|
Other liability |
$ |
83,239 |
|
$ |
54,991 |
|
|
66.1 |
% |
|
$ |
77,123 |
|
$ |
71,728 |
|
|
93.0 |
% |
Fire and allied lines |
|
61,869 |
|
|
31,994 |
|
|
51.7 |
|
|
|
59,795 |
|
|
59,881 |
|
|
100.1 |
|
Automobile |
|
54,068 |
|
|
39,792 |
|
|
73.6 |
|
|
|
50,471 |
|
|
7,275 |
|
|
14.4 |
|
Workers’ compensation |
|
12,626 |
|
|
13,908 |
|
|
110.2 |
|
|
|
13,626 |
|
|
11,200 |
|
|
82.2 |
|
Surety |
|
12,311 |
|
|
6,591 |
|
|
53.5 |
|
|
|
11,275 |
|
|
1,067 |
|
|
9.5 |
|
Miscellaneous |
|
1,180 |
|
|
663 |
|
|
56.2 |
|
|
|
264 |
|
|
228 |
|
|
86.4 |
|
Total commercial lines |
$ |
225,293 |
|
$ |
147,939 |
|
|
65.7 |
% |
|
$ |
212,554 |
|
$ |
151,379 |
|
|
71.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal lines |
|
|
|
|
|
|
|
|
|
|
|
|
Fire and allied lines |
$ |
165 |
|
$ |
(229 |
) |
|
(138.8 |
)% |
|
$ |
2,830 |
|
$ |
815 |
|
|
28.8 |
% |
Automobile |
|
— |
|
|
(511 |
) |
|
NM |
|
|
|
1 |
|
|
(1,204 |
) |
|
NM |
|
Miscellaneous |
|
4 |
|
|
66 |
|
|
NM |
|
|
|
8 |
|
|
101 |
|
|
NM |
|
Total personal lines |
$ |
169 |
|
$ |
(674 |
) |
|
(398.8 |
)% |
|
$ |
2,839 |
|
$ |
(288 |
) |
|
(10.1 |
)% |
Assumed reinsurance |
|
38,904 |
|
|
24,024 |
|
|
61.8 |
|
|
|
32,402 |
|
|
21,915 |
|
|
67.6 |
|
Total |
$ |
264,366 |
|
$ |
171,289 |
|
|
64.8 |
% |
|
$ |
247,795 |
|
$ |
173,006 |
|
|
69.8 |
% |
NM = Not meaningful
Net Premiums Earned, Net Losses and Loss Settlement
Expenses and Net Loss Ratio by Line of Business |
Twelve
Months Ended December 31, |
2023 |
|
2022 |
|
|
|
Net Losses |
|
|
|
|
|
Net Losses |
|
|
|
|
|
and Loss |
|
|
|
|
|
and Loss |
|
|
|
Net |
|
Settlement |
|
Net |
|
Net |
|
Settlement |
|
Net |
(In Thousands, Except
Ratios) |
Premiums |
|
Expenses |
|
Loss |
|
Premiums |
|
Expenses |
|
Loss |
(unaudited) |
Earned |
|
Incurred |
|
Ratio |
|
Earned |
|
Incurred |
|
Ratio |
Commercial lines |
|
|
|
|
|
|
|
|
|
|
|
Other liability |
$ |
320,762 |
|
$ |
249,106 |
|
|
77.7 |
% |
|
$ |
302,446 |
|
$ |
231,587 |
|
|
76.6 |
% |
Fire and allied lines |
|
244,674 |
|
|
183,533 |
|
|
75.0 |
|
|
|
232,156 |
|
|
204,278 |
|
|
88.0 |
|
Automobile |
|
208,874 |
|
|
176,667 |
|
|
84.6 |
|
|
|
208,398 |
|
|
114,296 |
|
|
54.8 |
|
Workers’ compensation |
|
53,039 |
|
|
33,224 |
|
|
62.6 |
|
|
|
56,015 |
|
|
27,545 |
|
|
49.2 |
|
Surety |
|
39,922 |
|
|
22,259 |
|
|
55.8 |
|
|
|
37,975 |
|
|
6,790 |
|
|
17.9 |
|
Miscellaneous |
|
2,702 |
|
|
940 |
|
|
34.8 |
|
|
|
1,081 |
|
|
821 |
|
|
75.9 |
|
Total commercial lines |
$ |
869,973 |
|
$ |
665,729 |
|
|
76.5 |
% |
|
$ |
838,071 |
|
$ |
585,317 |
|
|
69.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Personal lines |
|
|
|
|
|
|
|
|
|
|
|
Fire and allied lines |
$ |
4,733 |
|
$ |
3,402 |
|
|
71.9 |
% |
|
$ |
4,957 |
|
$ |
2,959 |
|
|
59.7 |
% |
Automobile |
|
— |
|
|
(837 |
) |
|
NM |
|
|
|
1 |
|
|
(3,123 |
) |
|
NM |
|
Miscellaneous |
|
22 |
|
|
(82 |
) |
|
NM |
|
|
|
50 |
|
|
(1,009 |
) |
|
NM |
|
Total personal lines |
$ |
4,755 |
|
$ |
2,483 |
|
|
52.2 |
% |
|
$ |
5,008 |
|
$ |
(1,173 |
) |
|
(23.4 |
)% |
Assumed reinsurance |
|
159,859 |
|
|
101,202 |
|
|
63.3 |
|
|
|
108,462 |
|
|
53,157 |
|
|
49.0 |
|
Total |
$ |
1,034,587 |
|
$ |
769,414 |
|
|
74.4 |
% |
|
$ |
951,541 |
|
$ |
637,301 |
|
|
67.0 |
% |
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