UFG(US:UFCS)2023-02-16 20:59Financial Data and Key Metrics Changes - Net written premium increased by 6.3% to $235 million in Q4 2022 compared to $221 million in Q4 2021, marking the third consecutive quarter of growth [4] - For the full year 2022, net written premium rose by 4.6% to $984 million from $941 million in 2021 [6] - The combined ratio for Q4 2022 was 103.6%, impacted by 5 points of catastrophe loss activity and 5 points of adverse development [4][9] - The underlying combined ratio improved to 93.8% in Q4 2022, while the full year underlying combined ratio was 93.6%, a 3.4 point improvement over the previous year [5][6] Business Line Data and Key Metrics Changes - Specialty, surety, and assumed reinsurance businesses drove growth, while the core commercial business saw a slight decline [4] - New business in Q4 increased by 55%, and retention improved by 7 points compared to Q4 2021 [8] - The average renewal premium change for the core commercial business was 8.3% for the year, with rate increases of 5.2% and exposure increases of 3.1% [13] Market Data and Key Metrics Changes - The full year catastrophe loss ratio was 7.7%, a 2.5 point improvement compared to 2021 [14] - The company experienced increased costs in reinsurance, with property cat XOL premium increasing by 54% on a risk-adjusted basis [21] Company Strategy and Development Direction - The company is focused on diversifying its portfolio, improving underlying fundamentals, and reducing the expense ratio, which fell to 33.8% in Q4 2022 [5][6] - A strategic decision was made to add a variable quota-share treaty to support growth and reduce volatility in the specialty portfolio [7] - The company aims to aggressively improve its expense ratio and is focused on property rate increases in response to rising reinsurance costs [14][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver consistent superior financial and operational performance despite industry challenges [7] - The management team emphasized a cautious approach to reserve development, focusing on a more granular analysis of long-tail liabilities [16][17] Other Important Information - The company welcomed Julie Stephenson as Executive Vice President and Chief Operating Officer, bringing extensive operational and underwriting experience [8] - Net investment income for Q4 was $12.9 million, relatively flat compared to Q4 2021, with a 19% increase in fixed maturity income [12][15] Q&A Session Summary Question: Details on reserve development in recent quarters - Management indicated no change in philosophy but noted a deeper analysis of long-tail businesses due to inflationary pressures and emerging claims [16][17] Question: Is the granular approach to reserves finished? - Management stated that while significant work has been done on long-tail lines, they will continue to seek granular insights [18] Question: Impact of reinsurance costs and assumed reinsurance - Management confirmed pricing increases across the reinsurance portfolio, with specific increases in property cat XOL and earthquake quota-share programs [21][22] Question: Target for the reinsurance book relative to the rest of the portfolio - The target for the reinsurance book is about 25% of the portfolio, with management being opportunistic in capturing market opportunities [29]