UFG(UFCS) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company's third-quarter net income increased to $39.2 million, nearly doubling from the prior year, marking the highest net income in a quarter in at least 20 years [5] - The combined ratio for the quarter was 91.9%, the best third-quarter underwriting result in nearly 20 years [5] - Return on equity for the first nine months of 2025 reached 12.7%, the best year-to-date financial performance in nearly two decades [6][7] - The third-quarter net income per diluted share was $1.49, with non-GAAP adjusted operating income of $1.50 per diluted share [16] Business Line Data and Key Metrics Changes - The underlying loss ratio improved by 1.9 percentage points to 56% in the third quarter and by 2 percentage points to 56.7% year-to-date compared to the same periods last year [8] - Net written premium grew by 7% in the quarter, led by a 22% increase in the core commercial business [10] - Retention rate remained consistent at 86% in the third quarter, reflecting confidence in the portfolio [10] Market Data and Key Metrics Changes - Specialty excess and surplus lines premiums were down slightly compared to the prior year after strong growth in the first half of the year [12] - The construction industry remains strong, with ongoing vigilance regarding the impacts of tariffs, material cost inflation, and labor supply [13] Company Strategy and Development Direction - The company is focused on delivering superior financial and operational performance while increasing relevance with distribution partners to access a wider range of business opportunities [20][21] - The strategy includes diversifying growth across the portfolio, attracting and retaining talent, and maintaining expense management [21] - The company is evolving from a generalist to a specialist, enhancing underwriting expertise and aligning risk control capabilities [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the evolving market dynamics, emphasizing the importance of deep expertise and capability expansion [22] - The company is well-positioned to carry momentum through the end of the year and into 2026, marking its 80th year in business [8][29] Other Important Information - The company declared and paid a $0.16 per share cash dividend to shareholders of record as of August 29, 2025 [16] - The third-quarter expense ratio improved by 1.3 points from the prior year to 34.6% [15] Q&A Session Summary Question: Thoughts on adjusting strategy in a soft market - Management highlighted the focus on delivering superior financial performance and increasing relevance with distribution partners to access more business opportunities [20][21] Question: Changes in capital management philosophy - Management confirmed no changes in capital management approach, prioritizing the right amount of capital for growth and maintaining the dividend philosophy [25]