United Fire Group, Inc. (the "Company" or "UFG")
(Nasdaq: UFCS) announced today preliminary earnings estimates for
the second quarter 2023 results, including net loss of $2.23 per
diluted share, and an adjusted operating loss of $2.27 per diluted
share.
The Company expects second quarter 2023 results to include
pre-tax reserve strengthening for prior accident years of $53
million representing 20.8 points of earned premium. In addition,
the Company expects estimated pre-tax catastrophe losses of $33
million representing 13.0 points of earned premium.
As a result, the GAAP combined ratio is estimated to be 133% in
the second quarter of 2023.
“During the second quarter, we increased prior period loss
reserves by approximately $53 million to strengthen our position
relative to loss trends across a range of commercial liability
lines of business,” said UFG President and CEO Kevin Leidwinger.
“This action reflects the impact of ongoing economic and social
inflation, as well as continued development of actuarial insights
that allow us to more confidently assess and respond to potential
risks.
“Over the past four quarters, we have significantly advanced the
breadth and depth of our reserving analyses, providing a greater
understanding of the underlying factors shaping our loss
experience. These insights now allow us to react more quickly and
assuredly in today’s dynamic loss cost environment. We will
continue to invest in the talent and process that is necessary to
further enhance our analytical rigor and continuously extract
actionable insights that are essential in managing the portfolio to
long-term financial success.
“Our second quarter results were also impacted by elevated
catastrophe activity from 18 separate weather events. Second
quarter catastrophe losses are estimated at approximately $33
million, adding approximately 13.0 points to the combined ratio,
which is 2.0 points above our 5-year and 10-year historic average.
We continue to take action to improve the risk profile of our
property business to reposition the portfolio and reduce
volatility. During the second quarter, our property average premium
increase was 19%, with rate increases of 12% and exposure increases
of 7%.
“The increase in pricing for our property portfolio over the
last four quarters and additional improvement in rate achievement
for our liability products resulted in the highest level of rate
achievement in the overall portfolio since the fourth quarter of
2021.
“While it was clearly a challenging quarter for us, we continue
to successfully execute strategies to grow our entire portfolio,
sustainably reduce expenses, and invest in the talent and
capabilities needed to become a top-performing commercial lines
insurer. We are confident in our strategies and remain committed to
executing the actions necessary for UFG to deliver superior
financial and operational performance over time.”
The unaudited loss estimates and other data presented in this
release are preliminary, based upon management estimates and
subject to the completion of the Company's procedures for the
preparation of its unaudited quarterly financial statements. As a
result, further adjustments may be made between now and the time
financial results for the second quarter of 2023 are finalized.
UFG will report second quarter 2023 earnings on Monday, August
7, 2023, after the close of regular trading on the Nasdaq Stock
Market and will host a conference call to discuss financial results
at 9:00 a.m. CT on Tuesday, August 8, 2023.
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 or contact:
Investor Relations at IR@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.
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 release include adjusted operating income (loss). The
Company has provided the following definitions and reconciliations
of adjusted operating income (loss):
Adjusted operating income (loss): Adjusted
operating income (loss) is calculated by excluding net realized
investment gains and losses, after applicable federal and state
income taxes from net income. Management believes adjusted
operating income (loss) 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. The difference
between estimated net loss of $2.23 per diluted share and adjusted
operating loss in the range of $2.27 per diluted share in the
second quarter of 2023 is estimated after-tax net realized
investment losses of $0.04 per diluted share.
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