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UF

UNITED FIRE GROUP INC (UFCS)·Q1 2025 Earnings Summary

Executive Summary

  • UFCS delivered its third consecutive quarterly underwriting profit, with adjusted operating EPS of $0.70 and GAAP EPS of $0.67; adjusted EPS beat S&P Global consensus by $0.09, while total revenue of $331.1M modestly missed consensus by ~$5.1M (EPS/revenue consensus values via S&P Global*).
  • Combined ratio was 99.4% (up 0.5 pts YoY) as catastrophe losses (5.0 pts, including ~2.6 pts from California wildfires) and a higher underwriting expense ratio (37.9%) offset a 2.9-pt improvement in the underlying loss ratio to 56.5% .
  • Net written premium reached a record $335.4M (+4% YoY), with core commercial renewal premium change of 11.7% (rates +9.7% > loss cost trends); growth was suppressed ~3 pts by unusual ceded reinsurance premium adjustments .
  • Net investment income rose 44% YoY to $23.5M on higher fixed maturity income and improved limited partnership valuations; book value per share increased to $32.13 and adjusted book value to $34.16 .
  • Management reiterated confidence in pricing discipline and portfolio management, expects expense ratio to normalize as non-recurring system costs roll off, and noted tariff risks are being monitored but are expected to be manageable .

What Went Well and What Went Wrong

What Went Well

  • “Third consecutive quarterly underwriting profit despite elevated industry catastrophe losses and an increased expense ratio” .
  • Underlying loss ratio improved 2.9 pts to 56.5%, driven by earned rate achievement exceeding loss trends and frequency improvements .
  • Net investment income up 44% YoY to $23.5M, with fixed maturities income at $21.1M and limited partnership income higher; portfolio quality improved (AA credit rating cited on call) and new purchase yields ~5.3% > book yield by ~100 bps .
  • Core commercial renewal premiums +11.7% (rates +9.7% > loss cost trends), with momentum in general liability and umbrella lines .
  • Record net written premium of $335.4M (+4% YoY), with core commercial +6% despite ceded reinsurance adjustments .

What Went Wrong

  • Combined ratio rose to 99.4% (+0.5 pts YoY), reflecting higher catastrophe losses (5.0 pts) and a 3.0-pt increase in the underwriting expense ratio to 37.9% due to non-recurring system development costs and higher agent performance compensation .
  • California wildfires contributed ~$8.2M in losses (~2.6 pts of the combined ratio impact), including $4.8M in alternative distribution and $3.4M in core commercial .
  • Net written premium growth was suppressed ~3 pts by unusual ceded reinsurance premium adjustments; program business turnover increased ceded premium ratio; standard treaty reinsurance nonrenewals amid challenging casualty conditions .

Financial Results

Quarterly P&L and EPS (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Net Earned Premium ($USD ‘000s)300,185 308,137 308,411
Net Investment Income ($USD ‘000s)24,459 23,156 23,458
Total Revenues ($USD ‘000s)322,964 333,175 331,115
Net Income ($USD ‘000s)19,748 31,442 17,700
Diluted EPS (GAAP, $)0.76 1.21 0.67
Adjusted Operating Income ($USD ‘000s)21,075 32,483 18,296
Adjusted Operating EPS ($)0.81 1.25 0.70

Margins and Ratios (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Combined Ratio (%)98.2 94.4 99.4
Net Loss Ratio (%)62.3 57.3 61.5
Underwriting Expense Ratio (%)35.9 37.1 37.9
Catastrophe Loss Ratio (%)4.4 1.6 5.0
Underlying Loss Ratio (%)57.9 55.7 56.5
Underlying Combined Ratio (%)93.8 92.8 94.4

Q1 YoY Comparison (Q1 2024 vs Q1 2025)

MetricQ1 2024Q1 2025
Net Earned Premium ($USD ‘000s)280,859 308,411
Net Written Premium ($USD ‘000s)321,271 335,376
Net Investment Income ($USD ‘000s)16,342 23,458
Total Revenues ($USD ‘000s)295,999 331,115
Combined Ratio (%)98.9 99.4
Underlying Loss Ratio (%)59.4 56.5
Catastrophe Loss Ratio (%)4.6 5.0
Underwriting Expense Ratio (%)34.9 37.9
Diluted EPS (GAAP, $)0.52 0.67
Adjusted Operating EPS ($)0.56 0.70

Estimates Comparison (Q1 2025)

MetricActualS&P Global Consensus*Surprise
Adjusted Operating EPS ($)$0.70 $0.61*+$0.09
Total Revenues ($USD ‘000s)331,115 336,182*-$5,067 (~-1.5%)

Values marked with * retrieved from S&P Global.

Segment Breakdown – Net Written Premium by Line (Q1)

Line of BusinessQ1 2024 ($USD ‘000s)Q1 2025 ($USD ‘000s)
Commercial: Other Liability89,862 99,352
Commercial: Fire & Allied70,653 64,955
Commercial: Automobile74,841 78,930
Commercial: Workers’ Comp17,080 18,989
Commercial: Surety14,858 16,111
Commercial: Miscellaneous2,130 3,455
Personal: Fire & Allied4,876 1,285
Personal: Automobile— 418
Personal: Miscellaneous2 —
Assumed Reinsurance46,969 51,881
Total321,271 335,376

KPIs and Capital

KPIQ3 2024Q4 2024Q1 2025
Book Value per Share ($)31.01 30.80 32.13
Adjusted Book Value per Share ($)32.42 33.64 34.16
Net Unrealized Investment Gains (Losses), after-tax ($USD ‘000s)(35,787) (72,241) (51,702)
Return on Equity (%)5.4 8.2 8.9
Dividend per Share ($)0.16 (paid Aug 30, 2024) 0.16 (paid Nov 29, 2024) 0.16 (paid Mar 7, 2025; declared again for Jun 20, 2025)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Underwriting Expense Ratio – system deployment costsQ1 2025N/A~1 pt non-recurring system costs in Q1; expected not to recur; leverage expected with premium growth Clarified non-recurring; normalization expected
Ceded Reinsurance – impact on growthFY 2025N/AQ1 growth suppressed ~3 pts due to unusual ceded adjustments; impact expected to diminish in remaining quarters Clarified temporary headwind
Tariffs/macroFY 2025N/AMonitoring; expected manageable impact No change; risk monitored
DividendQ2 2025$0.16 per share (historical) $0.16 per share payable Jun 20, 2025 Maintained

No formal numeric guidance provided for revenue, margins, OpEx, OI&E, or tax rate in Q1 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Pricing discipline and rate > loss trendsRates accelerated to 11.2% in core; GL/auto near or above double-digit; loss ratio improvement sustainable Underlying loss ratio 55.7% on strong earned rate; core renewal +11.9% Renewal +11.7%; rates +9.7% exceeding loss trends; GL >9%; auto/umbrella double-digit Sustained discipline; slight moderation in property
Catastrophe managementCAT ratio 4.4%; optimized hurricane exposure; minimal Milton impact CAT ratio 1.6%; below historical averages CAT ratio 5.0%; California wildfires ~$8.2M; lowest Q1 SCS since 2019 Elevated Q1 CATs; overall portfolio resiliency
Expense ratio and technology investmentTech spend modestly higher; expense ratio 35.9% Expense ratio 37.1% due to talent, system development, performance comp Expense ratio 37.9%; ~1 pt non-recurring system costs; expected normalization and leverage Near-term elevated, normalizing ahead
Reserves/social inflationNeutral development; reinforcing reserves vs inflation uncertainty Neutral development; strengthened position Neutral development; further modest strengthening against social inflation Stable to favorable
Alternative distribution and ceded premiumDiversifying growth; hurricane-exposed geographies optimized N/AProgram turnover increased ceded ratio; prior year adjustments/mix boosted ceded premium; impact to diminish Temporary headwind
Investment portfolio repositioningReinvesting at ~5.2% yields; fixed maturity income tailwind Fixed maturity income expected >$80M annualized; duration ~4 yrs New purchases ~5.3% yields; fixed income income up; portfolio quality improved Positive tailwind
Tariffs/macroN/AN/AMonitoring; impact expected manageable Watchful, not a major driver

Management Commentary

  • CEO: “Overall, I am pleased with our performance in the first quarter as we delivered our third consecutive quarterly underwriting profit despite elevated industry catastrophe losses and an increased expense ratio.”
  • CEO: “Unusual ceded reinsurance premium adjustments reduced net written premium growth by 3 points.”
  • COO: “UFG is in the final stages of development of a new policy administration system… Small business is fully deployed… Middle market and construction will begin deployment for new business in July and renewals in November.”
  • CFO: “The first quarter expense ratio included approximately 1 point of additional costs associated with the final stages of development… that we do not expect to recur… leverage with premium growth against fixed costs.”
  • CEO: “We continue to monitor [tariffs] closely… we expect any impact from tariffs to be manageable on our business.”

Q&A Highlights

  • Pricing power vs inflation: Actuarial trends reevaluated quarterly; conservative assumptions; rates currently exceed net loss trends, supporting margin defense .
  • Underwriting expense ratio levers: ~1 pt non-recurring system costs; investments in talent/technology and higher agent performance comp lifted ratio; expect normalization and fixed-cost leverage with premium growth .
  • Cost structure mix: Roughly one-third fixed, two-thirds variable; agent performance comp sits in variable; leverage opportunity on fixed costs with growth .

Estimates Context

  • Q1 2025: Adjusted operating EPS $0.70 vs S&P Global consensus $0.61 (beat by $0.09); total revenues $331.1M vs consensus $336.2M (miss by ~$5.1M, ~1.5%)* .
  • Coverage depth: 2 estimates for EPS and revenue for Q1 2025 and Q2 2025, indicating limited analyst coverage*.
  • Forward (reference only): Q2 2025 consensus EPS $0.56 and revenue ~$338.0M*; no company guidance provided to anchor these.

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Margin trajectory: Underlying loss ratio improvement continues as earned rates exceed loss trends; near-term combined ratio volatility driven by CATs and elevated expense ratio should abate as system costs roll off .
  • Top-line quality: Record net written premium and strong core commercial renewal dynamics; watch for ceded premium normalization in coming quarters to reveal underlying growth .
  • Investment tailwind: Portfolio repositioning into higher yields (new purchases ~5.3%) and improved credit quality support sustained net investment income growth .
  • CAT risk management: Despite wildfire impact (~$8.2M), alternative distribution underwriting produced profit; SCS exposure mitigated vs historical; suggests improving CAT risk profile .
  • Expense normalization: Expect ~1 pt of Q1 system-related costs to drop off, with fixed-cost leverage improving expense ratio as premium grows .
  • Dividend continuity: Quarterly dividend maintained at $0.16; book value and adjusted book value increased sequentially, supporting capital strength .
  • Trading implications: Near-term stock moves likely tied to expense normalization pace and CAT seasonality; medium-term upside hinges on sustained pricing discipline, ceded premium normalization, and investment income tailwinds .