UFG(UFCS) - 2025 Q2 - Quarterly Results

United Fire Group, Inc. Q2 2025 Financial Results United Fire Group, Inc. reports its most profitable second quarter in over a decade, driven by strong premium growth and improved underwriting Executive Summary & Highlights UFG reported its most profitable second quarter in over a decade, with net income reaching $22.9 million ($0.87 per diluted share) and adjusted operating income at $23.7 million ($0.90 per diluted share). This performance was driven by record net written premium growth of 14% to $372.9 million and a significant 9.2-point improvement in the combined ratio to 96.4%. The company's strategic initiatives in underwriting and investment management contributed to a 10% return on equity for the first half of 2025 Q2 2025 vs Q2 2024 Key Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $22.9 million | ($2.7 million) | +$25.7 million | | Adjusted Operating Income | $23.7 million | ($1.8 million) | +$25.5 million | | Net Income per Diluted Share | $0.87 | ($0.11) | +$0.98 | | Adjusted Operating Income per Diluted Share | $0.90 | ($0.07) | +$0.97 | | Net Written Premium | $372.9 million | $326.1 million | +14% | | Combined Ratio | 96.4% | 105.6% | -9.2 pts | | Net Investment Income | $21.7 million | $18.0 million | +20% | - CEO Kevin Leidwinger attributed the strong results to strategic steps taken to deepen underwriting expertise, evolve capabilities, and improve investment returns, noting that these actions are materializing in the company's performance[6][7] - Book value per share increased by 7.7% to $33.18 as of June 30, 2025, compared to December 31, 2024[6][16] Consolidated Financial Performance For the six months ended June 30, 2025, UFG's net income surged to $40.6 million from $10.8 million in the prior-year period, with EPS increasing to $1.54 from $0.42. The combined ratio for the first half of the year improved to 97.9% from 102.2%, and the annualized return on equity reached 10.0%, a significant increase from 2.9% in the first half of 2024 Consolidated Financial Highlights (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Earned Premium | $623.2M | $568.4M | | Net Written Premium | $708.3M | $647.4M | | Combined Ratio | 97.9% | 102.2% | | Underlying Combined Ratio (non-GAAP) | 93.4% | 94.3% | | Net Investment Income | $45.1M | $34.4M | | Net Income | $40.6M | $10.8M | | Net Income per Diluted Share | $1.54 | $0.42 | | Return on Equity | 10.0% | 2.9% | Detailed Second Quarter Analysis This section provides a detailed breakdown of Q2 2025 performance across premium growth, underwriting, and investment results Premium Growth In Q2 2025, net written premium grew by 14% and net earned premium by 9%. This was primarily driven by a 20% increase in core commercial lines net written premium, supported by strong pricing, improved retention, and higher new business volume. Overall renewal premiums saw a 9.4% average increase - Core commercial lines net written premium increased by 20%[11] - Overall average renewal premiums increased by 9.4%, composed of a 7.6% rate increase and a 1.7% exposure change[11] - Excluding workers' compensation, the average renewal premium increase was even higher at 10.3%[11] Underwriting Performance (Combined Ratio) The combined ratio significantly improved by 9.2 points to 96.4% in Q2 2025. This was driven by a 1.3-point improvement in the underlying loss ratio, a 5.7-point reduction in catastrophe losses, 1.6 points of favorable prior year reserve development, and a 0.6-point improvement in the expense ratio Q2 Combined Ratio Breakdown | Component | Q2 2025 | Change from Q2 2024 | | :--- | :--- | :--- | | Underlying Loss Ratio | 57.6% | -1.3 pts | | Catastrophe Loss Ratio | 5.5% | -5.7 pts | | Prior Year Reserve Development | (1.6)% | Favorable | | Underwriting Expense Ratio | 34.9% | -0.6 pts | | Combined Ratio | 96.4% | -9.2 pts | - The catastrophe loss ratio of 5.5% was significantly below the company's quarterly plan of 8.9% and historical averages[4] Investment Results Net investment income for Q2 2025 increased by 20.2% to $21.7 million. The growth was primarily due to a $5.4 million increase in income from the fixed maturity portfolio, resulting from strategic portfolio management actions. The pre-tax average yield on fixed income securities rose to 4.32% from 3.62% in the prior-year quarter - Net investment income increased by $3.6 million (20.2%) year-over-year[12] - Income from the fixed maturity portfolio grew by $5.4 million, driven by portfolio management actions taken during the year-ended December 31, 2024[12] Investment Income Breakdown (Q2, in thousands) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Interest on fixed maturities | $21,302 | $15,947 | | Income on other long-term investments | $136 | $623 | | Net investment income | $21,673 | $18,029 | Financial Position and Capital Management This section details the company's balance sheet strength and capital allocation strategies, including dividend payments Balance Sheet As of June 30, 2025, total assets grew to $3.66 billion and total stockholders' equity increased to $845.7 million. Book value per share rose 7.7% to $33.18 from year-end 2024, primarily due to net income and a decrease in unrealized investment losses on fixed maturity securities Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | $3,661,130 | $3,488,469 | | Total Liabilities | $2,815,462 | $2,706,938 | | Total Stockholders' Equity | $845,668 | $781,531 | | Book Value Per Share | $33.18 | $30.80 | - The increase in book value per share was mainly driven by net income and a decrease in unrealized investment losses, partially offset by shareholder dividends[16] Capital Management UFG maintained its long-standing practice of returning capital to shareholders, declaring and paying a $0.16 per share cash dividend in the second quarter of 2025. The company has consistently paid a quarterly dividend since March 1968 - A cash dividend of $0.16 per share was paid during the second quarter of 2025[17] - UFG has an uninterrupted history of paying quarterly dividends since March 1968[17] Supplemental Information This section provides detailed non-GAAP reconciliations and additional financial tables for comprehensive analysis Non-GAAP Reconciliations This section provides definitions and reconciliations for non-GAAP measures used by management, including adjusted operating income, underlying loss/combined ratios, and adjusted book value per share. These measures are intended to enhance investor understanding by isolating core business performance from the volatility of investment gains/losses, catastrophes, and prior-year reserve development Reconciliation of Net Income to Adjusted Operating Income (Q2, in thousands) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Net income (loss) | $22,947 | $(2,735) | | Less: after-tax net investment gains (losses) | $(792) | $(971) | | Adjusted operating income (loss) | $23,739 | $(1,764) | Reconciliation of Book Value to Adjusted Book Value per Share | Line Item | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Shareholders' equity | $845,668K | $781,531K | | Less: Net unrealized investment gains (losses), net of tax | $(44,737)K | $(72,241)K | | Shareholders' equity, excluding net unrealized gains/losses | $890,405K | $853,772K | | Book value per share | $33.18 | $30.80 | | Adjusted book value per share | $34.93 | $33.64 | Supplemental Financial Tables The supplemental tables offer a more detailed view of the company's financials. This includes a full income statement, a breakdown of net written premiums by line of business, and net loss ratios by business line. In Q2 2025, commercial lines continued to dominate, with net written premiums of $316.5 million, a significant increase from $269.0 million in Q2 2024 Net Written Premium by Line of Business (Q2, in thousands) | Line of Business | 2025 | 2024 | | :--- | :--- | :--- | | Total Commercial Lines | $316,532 | $269,005 | | Total Personal Lines | $6,856 | $3,791 | | Assumed Reinsurance | $49,496 | $53,323 | | Total | $372,884 | $326,119 | Net Loss Ratio by Line of Business (Q2) | Line of Business | 2025 | 2024 | | :--- | :--- | :--- | | Total Commercial Lines | 61.9% | 72.4% | | Total Personal Lines | 36.0% | 43.3% | | Assumed Reinsurance | 61.5% | 59.9% | | Total | 61.5% | 70.1% |