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UF

UNITED FIRE GROUP INC (UFCS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered record profitability: diluted EPS of $1.49 and adjusted operating EPS of $1.50, with the best third‑quarter combined ratio in nearly 20 years (91.9%) and net written premium (NWP) up 7% to $328.2M .
  • EPS significantly beat Wall Street consensus for Q3 ($1.50 actual vs $0.72 estimate); revenue was essentially in line/slightly below ($354.0M actual vs $354.5M estimate). The prior two quarters also beat EPS versus consensus, reinforcing positive estimate surprise momentum* [GetEstimates].
  • Underwriting quality strengthened: underlying loss ratio improved to 56.0%, catastrophe loss ratio was just 1.3% (well below 5‑ and 10‑year averages), and expense ratio improved 1.3 pts to 34.6% .
  • Management highlighted durable strategic drivers—specialized underwriting, distribution alignment, conservative reserving, and improved investment yields—supporting sustained ROE (12.7% YTD) and momentum into 2026 .

What Went Well and What Went Wrong

What Went Well

  • Underwriting performance: combined ratio improved 6.3 pts YoY to 91.9% with underlying loss ratio at 56.0% and expense ratio down to 34.6% . “UFG delivered another quarter of outstanding results, achieving the best third quarter combined ratio in nearly 20 years…” — CEO Kevin Leidwinger .
  • Catastrophe outcomes: cat loss ratio of 1.3% is far below historical averages, helped by portfolio management (higher deductibles) reducing accumulation risk .
  • Investment income: net investment income rose to $26.0M (+6.3% YoY), with fixed income yields on new purchases at ~5% and limited partnerships contributing $2.7M (annualized >10%) .

What Went Wrong

  • Rate moderation and competitive pressures: rates increased 5.8% (still positive), but management flagged a moderating/softening market and E&S competitiveness; UFG is maintaining discipline and conservatism in casualty reserves .
  • Auto line loss ratio elevated vs prior year: commercial auto net loss ratio was 56.3% vs 35.5% in Q3 2024, reflecting volatility in certain lines despite overall margin improvements .
  • Expense ratio remains elevated in absolute terms even as it improved YoY (34.6%); management expects gradual reduction over time, not an immediate step‑change .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Total Revenues ($USD Millions)$331.1 $335.5 $354.0
Net Investment Income ($USD Millions)$23.5 $21.7 $26.0
Net Written Premium ($USD Millions)$335.4 $372.9 $328.2
Diluted EPS ($USD)$0.67 $0.87 $1.49
Adjusted Operating EPS ($USD)$0.70 $0.90 $1.50
Combined Ratio (%)99.4 96.4 91.9
Underlying Loss Ratio (%)56.5 57.6 56.0
Catastrophe Loss Ratio (%)5.0 5.5 1.3
Underwriting Expense Ratio (%)37.9 34.9 34.6
Book Value per Share ($)$32.13 $33.18 $35.22

Segment breakdown (Q3 2025):

Line of BusinessNet Written Premium ($USD Thousands)Net Earned Premium ($USD Thousands)Net Loss Ratio (%)
Other Liability (Commercial)$97,916 $101,540 72.8%
Fire & Allied (Commercial)$66,403 $64,071 36.7%
Automobile (Commercial)$73,831 $74,696 56.3%
Workers’ Compensation$18,166 $17,657 69.6%
Surety$15,877 $16,909 26.2%
Personal Lines (Fire & Allied)$7,164 $5,211 44.6%
Assumed Reinsurance$48,177 $45,684 62.2%
Total$328,212 $328,431 57.3%

KPIs (Q3 2025):

KPIQ1 2025Q2 2025Q3 2025
Core Commercial NWP Growth YoY (%)6 20 22
Retention (%)—86 86
Average Renewal Premium Change (%)11.7 9.4 7.1 (rates +5.8; exposure +1.2)
ROE (annualized / YTD) (%)8.9 10.0 12.7 (YTD)
Adjusted Book Value per Share ($)34.16 34.93 36.34
Fixed Income Avg Pre‑Tax Yield (%)4.34 4.32 4.37
Catastrophe Loss Ratio (%)5.0 5.5 1.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per Share (Quarterly)Ongoing$0.16 per share$0.16 per shareMaintained
Capital Management ApproachOngoingPrioritize growth capital and dividend; no buyback/M&A change“No changes” reiteratedMaintained
Catastrophe Loss Ratio (Annual Plan)FY 20255.7% plan (Q2 commentary)Not updated; YTD tracking below planMaintained

Note: No formal quantitative revenue/margin guidance ranges were issued or updated in Q3 materials – –.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
Market rate moderation/softeningProperty moderation noted; disciplined pricing maintained Moderation building; competitive market; reinsurance softer; non‑renew select treaties Entering a soft market; strategy built around specialization and discipline Moderating rates; UFG positioning for discipline
Catastrophe risk managementCalifornia wildfires impact; improving underlying; elevated expense Cat plan 5.7%; deductibles/Florida reset; modeled AAL down Cat ratio 1.3%; below 5/10‑year averages; deductible profile improved Structural improvement; favorable outcomes
Portfolio specializationBuilding analytics; underwritten tighter guidelines Strong core commercial production; new business record “From generalist to specialist” business unit construct; deep expertise Continued specialization
Expense trajectoryElevated due to policy system development Normalized to ~34.9%; leverage with growth 34.6%; gradual reduction expected Gradual improvement
Capital managementDividend maintained Dividend maintained; notes offering No changes to capital priorities; dividend maintained Steady policy
E&S competitiveness—E&S competition; property rates moderating E&S competitive pressure persists; selective underwriting Competitive; disciplined selection

Management Commentary

  • CEO (prepared remarks): “Our third‑quarter net income increased to $39.2 million…highest net income we’ve produced in a quarter in at least 20 years…We also achieved a 91.9% combined ratio…and grew net written premium to a third‑quarter record of $328 million.” .
  • COO: “Underlying loss ratio improved 1.9 percentage points to 56%…These excellent results are the outcome of consistently strong earned rate achievement, disciplined and specialized underwriting, and favorable frequency trends.” .
  • CFO: “Third‑quarter net income was $1.49 per diluted share, with non‑GAAP adjusted operating income of $1.50…new purchase yields of 5% exceeded the overall portfolio yield by approximately 60 basis points.” .

Q&A Highlights

  • Strategy in a soft market: Management emphasized specialization, deep underwriting expertise, actuarial capability, and distribution relevance to sustain targeted long‑term ROE (15% aspiration) despite rate moderation .
  • Capital management: No changes—priority remains growth capital and sustaining the dividend; no pivot to buybacks/M&A signaled .
  • Portfolio quality: 45%+ of core commercial policies were written between 2023–Q3 2025 under tighter guidelines, supporting confidence navigating moderation .

Estimates Context

Results vs S&P Global Wall Street consensus:

MetricQ1 2025Q2 2025Q3 2025
EPS – Actual ($)0.70 0.90 1.50
EPS – Consensus Mean ($)0.61*0.56*0.72*
Revenue – Actual ($USD Millions)331.1 335.5 354.0
Revenue – Consensus Mean ($USD Millions)336.2*338.0*354.5*
  • Q3: Large EPS beat; revenue essentially in line/slightly below. Q1/Q2: EPS beats; revenues slightly below estimates*.
  • Expectation recalibration: EPS estimates likely to be revised higher on sustained underwriting improvements and higher fixed‑income yields; revenue estimates may remain close given stable earned premium trajectory*.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Underwriting momentum accelerating: combined ratio progression (99.4 → 96.4 → 91.9) shows improving core profitability; continued reserve conservatism adds durability .
  • Cat risk profile materially improved, reducing volatility; deductible strategy and Florida exposure reset are evident in results and modeled outcomes .
  • Investment tailwinds: higher reinvestment yields and limited partnership contributions should support earnings while rates remain elevated .
  • Growth quality: core commercial NWP +22% with 27% new business and 86% retention—signals expanding opportunity set with disciplined selection .
  • Expense ratio path: gradual improvements expected with scale; near‑term margin expansion driven more by loss ratio gains than opex cuts .
  • Capital stance steady: dividend maintained; focus on funding growth over buybacks/M&A—supports balance sheet strength through cycle .
  • Near‑term trading lens: EPS beats and best‑in‑decades underwriting metrics are positive catalysts; watch rate moderation/E&S competitiveness and auto/casualty severity signals on upcoming quarters .