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UF

UNITED FIRE GROUP INC (UFCS)·Q2 2025 Earnings Summary

Executive Summary

  • UFCS delivered a materially improved quarter: combined ratio fell to 96.4% (−9.2 pts YoY), GAAP diluted EPS was $0.87 and adjusted operating EPS was $0.90, with total revenues of $335.5M .
  • Net written premium reached a record $372.9M (+14% YoY), led by core commercial growth (+20%) and 7.6% rate increases; retention improved to 86% and new business eclipsed $100M .
  • Versus S&P Global consensus, UFCS posted a significant EPS beat ($0.90 vs $0.56) and a slight revenue miss ($335.5M vs $338.0M); limited coverage (two estimates) suggests potential upward revisions to EPS* .
  • Catastrophe loss ratio was 5.5%, far below five- and ten-year averages and below the quarterly plan (8.9%); management reiterated an annual cat loss ratio plan of 5.7% .
  • Capital actions and dividend continuity: $30M of 9.0% Series B notes were issued on July 10, 2025, and the $0.16 quarterly dividend was declared (Q2 and post-quarter) .

What Went Well and What Went Wrong

What Went Well

  • Record premium and best second-quarter profit in more than a decade: “UFG delivered its best second quarter profit in more than 10 years while growing net written premium to a record $373 million.” — CEO Kevin Leidwinger .
  • Pricing/portfolio discipline: Underlying combined ratio improved to 92.5% with rate achievement exceeding loss trends; retention rose to 86% and new business >$100M as capabilities and underwriting rigor deepened .
  • Investment income tailwind: Net investment income +20% YoY to $21.7M, with new purchase yields of ~5.4% ~100 bps above portfolio average supporting sustainable income growth .

What Went Wrong

  • Expense ratio still elevated versus long-term aspiration: 34.9% improved QoQ but remains high; management expects ongoing actions to pressure it down over time .
  • Underlying loss ratio ticked up YoY (57.6% vs 58.9% prior-year non-GAAP but up vs Q1 at 56.5%), reflecting mix and typical variability; umbrella remains guarded due to social inflation exposure .
  • Primary reinsurance pricing softer; UFCS non-renewed treaties that no longer met profitability standards, tempering growth via alternative distribution channels .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Total Revenues ($USD Millions)$301.2 $331.1 $335.5
Net Earned Premium ($USD Millions)$287.6 $308.4 $314.8
Net Written Premium ($USD Millions)$326.1 $335.4 $372.9
GAAP Diluted EPS ($USD)$(0.11) $0.67 $0.87
Adjusted Operating EPS ($USD)$(0.07) $0.70 $0.90
Combined Ratio (%)105.6 99.4 96.4
Underlying Combined Ratio (%)94.4 94.4 92.5
Net Loss Ratio (%)70.1 61.5 61.5
Catastrophe Loss Ratio (%)11.2 5.0 5.5
Underwriting Expense Ratio (%)35.5 37.9 34.9
Net Investment Income ($USD Millions)$18.0 $23.5 $21.7

Estimates vs Actuals (S&P Global)

MetricActual (Q2 2025)Consensus (Q2 2025)Surprise# of Estimates
Primary EPS ($USD)$0.90 $0.56*+$0.34*2*
Revenues ($USD Millions)$335.5 $338.0*−$2.5*2*

Values retrieved from S&P Global.*

Segment Breakdown – Net Written Premium (Q2)

Line of Business ($USD Millions)Q2 2024Q2 2025
Commercial – Other Liability$104.0 $116.8
Commercial – Fire & Allied$62.7 $74.6
Commercial – Automobile$68.4 $86.7
Commercial – Workers’ Comp$16.8 $22.2
Commercial – Surety$14.2 $15.8
Commercial – Misc.$2.9 $0.5
Personal Lines – Fire & Allied$2.7 $6.9
Personal Lines – Auto$1.1 $0.0
Assumed Reinsurance$53.3 $49.5
Total$326.1 $372.9

Segment Loss Ratios – Net Earned Premium and Loss Ratio (Q2)

Line of BusinessNet Earned Premium Q2’24 ($M)Net Losses Incurred Q2’24 ($M)Net Loss Ratio Q2’24 (%)Net Earned Premium Q2’25 ($M)Net Losses Incurred Q2’25 ($M)Net Loss Ratio Q2’25 (%)
Other Liability$84.9 $70.7 83.3 $93.1 $73.3 78.7
Fire & Allied$63.6 $39.4 61.9 $66.5 $33.0 49.7
Automobile$57.7 $44.8 77.6 $69.1 $40.0 57.9
Workers’ Comp$13.5 $8.4 62.2 $15.3 $8.6 56.1
Surety$13.9 $6.6 47.6 $15.5 $5.6 36.1
Personal – Fire & Allied$2.7 $1.2 43.9 $3.4 $1.1 33.3
Assumed Reinsurance$48.7 $29.2 59.9 $48.5 $29.8 61.5
Total$287.6 $201.3 70.1 $314.8 $193.7 61.5

KPIs and Balance Sheet

MetricQ4 2024Q1 2025Q2 2025
Avg Renewal Premium Change (%)11.9 11.7 9.4
Rate Change (%)10.8 9.7 7.6
Exposure Change (%)1.0 1.8 1.7
Retention (%)——86
New Business Production ($USD Millions)——>$100
Core Commercial NWP Growth (%)13 (excl. surety/specialty) 6 20
Book Value per Share ($)$30.80 $32.13 $33.18
Adjusted Book Value per Share ($)$33.64 $34.16 $34.93
Invested Assets ($USD Millions)$2,093.1 $2,165.5 $2,199.9
Cash ($USD Millions)$200.9 $183.7 $202.1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Catastrophe Loss Ratio – Quarterly Plan (%)Q2 2025—8.9 New/Target
Catastrophe Loss Ratio – Annual Plan (%)FY 2025—5.7 New/Target
Expense Ratio TrajectoryFY 2025Elevated due to system development; 37.9% in Q1 34.9% in Q2; “good run rate” and expected continued benefits over time Improved/maintained trajectory
Fixed Maturity Income OutlookFY 2024/2025Expect >$80M annualized fixed maturity income New purchase yields ~5.4%, ~100 bps > portfolio yield; supports continued NII growth Maintained positive outlook
Dividend per Share ($)Q2 2025 / Q3 2025$0.16 declared (payable 6/20/25) $0.16 declared (payable 9/12/25) Maintained
Capital StructureQ3 2025—$30M 9.0% Series B notes due 2039 issued (7/10/25) Added capacity

Earnings Call Themes & Trends

TopicQ4 2024 (Prev. Mentions)Q1 2025 (Prev. Mentions)Q2 2025 (Current)Trend
Catastrophe ManagementCat impact 1.6% in Q4; annual 5.4%; improved outcomes vs history Cat ratio 5.0%; California wildfires 2.6 pts Cat ratio 5.5%; modeled outcomes improved; annual plan 5.7%; below historical averages Improving
Pricing & Rate ModerationRenewal increases 11.9%; strong rate achievement Renewal +11.7%; moderation in property/auto vs prior quarter Rates +7.6%; market competitive, moderation expected; still above loss trends Moderating but adequate
Competitive EnvironmentBuilding relationships, increased new business Momentum building; disciplined pricing Competition moderating rates (esp. property); UFCS confident in growth Stable
Reinsurance MarketStrong assumed reinsurance contribution Assumed reinsurance growth Reinsurance softer; non-renewed treaties below profit standards Softer pricing; selective
Expense RatioElevated due to investment in talent and systems Elevated (37.9%) due to policy admin system build Normalized to 34.9%; expected to benefit over time Improving
Reserves & A&OUmbrella uncertainty noted; social inflation risk Neutral PYRD $5M favorable A&O development; reserves positioned conservatively (upper actuarial range) Strengthening conservatism
Portfolio/Investment IncomeFixed income yields support NII; >$80M outlook NII +44% YoY NII +20% YoY; new money ~5.4% > portfolio by ~100 bps Positive tailwind

Management Commentary

  • “Our strong second quarter results contributed to achieving 10% return on equity through the first six months of 2025, another significant milestone in the company's transformation.” — Kevin Leidwinger, CEO .
  • “Retention improved almost five points to 86% in the second quarter… new business production eclipsed $100,000,000 for the first time.” — Julie Stephenson, COO .
  • “New purchase yields of 5.4% continued to exceed the overall portfolio yield by approximately 100 basis points.” — Eric Martin, CFO .
  • “We continue to build a conservative position in our loss reserves… position our reserves in the upper end of our actuarial estimates across all accident years.” — Julie Stephenson, COO .

Q&A Highlights

  • Expense ratio run-rate: CFO framed Q2’s ~35% (34.9%) as “a pretty normal quarter” and “a good run rate… for the next few quarters,” citing fixed cost leverage with growth .
  • Reserve outlook: COO declined to predict second-half PY reserve development; tone cautious, focused on conservatism .
  • Competition and reinsurance: COO noted rate moderation and softer reinsurance pricing; UFCS non-renewed some treaties not meeting profit standards; confident in continued growth .
  • Cat management: COO detailed SCS deductibles and Florida hurricane exposure reset; modeled AAL down 11% YoY with premium up 2.6% .

Estimates Context

  • UFCS materially beat EPS and modestly missed revenue versus S&P Global consensus for Q2 2025: Primary EPS $0.90 vs $0.56 (+$0.34), Revenues $335.5M vs $338.0M (−$2.5M); two estimates suggest thin coverage and higher sensitivity to actuals* .
  • Prior quarter context: Q1 2025 EPS beat ($0.70 vs $0.61) and revenue miss ($331.1M vs $336.2M), indicating consistent outperformance on earnings vs modest top-line variability* .
  • Implications: Expect upward revisions to near-term EPS while revenue estimates may remain conservative given reinsurance softness and expected rate moderation*.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Strong underwriting and pricing discipline are driving sustainable improvement: combined ratio sub-100% for a second consecutive quarter, with underlying metrics trending better YoY .
  • EPS outperformance highlights operating leverage and investment income tailwind; new money yields and portfolio repositioning should continue to support NII .
  • Cat outcomes meaningfully improved versus historical experience; annual plan at 5.7% suggests continued risk management rigor — a key driver of valuation upside if sustained .
  • Expense ratio normalization is underway; watch for incremental improvements as growth scales and system investments taper .
  • Competitive dynamics point to rate moderation; UFCS’s selective underwriting and treaty decisions should protect margins, even if premium growth in alternative distribution moderates .
  • Balance sheet accretion continues: BVPS up to $33.18 and adjusted BVPS to $34.93; capital flexibility supported by recent $30M notes issuance and continued dividend .
  • Near-term trading setup: Expect EPS estimate revisions higher after a clear beat; monitor catastrophe seasonality into H2 and reinsurance pricing at conference season as potential volatility catalysts .