United Fire Group, Inc. (UFG) announced its financial results for the second quarter ended June 30, 2024, with a consolidated net loss of $2.7 million, or $0.11 per diluted share, and a consolidated adjusted operating loss of $0.07 per diluted share.

However, the company noted in its report that its net written premiums rose 9.0% in the second quarter, driven by its core business and assumed reinsurance business. Net earned premiums rose 12.9% due to growth in net written premiums in both the previous and current quarters.

UFG’s commercial lines net written premiums, excluding surety and specialty insurance, increased by 13.2%, supported by price increases with an overall increase in average renewal premiums of 12.3%. Price increases accounted for 9.8%, while exposure increases contributed an additional 2.3%.

Excluding the workers’ compensation line, the average total renewal premium increase was 13.5%, with 11.0% from price increases and 2.2% from exposure changes.

UFG’s GAAP combined profit ratio for the second quarter was 105.6%, an improvement of 27.4 points from 133.0%, driven by improvements in all components of the net loss ratio. Prior-period development, excluding catastrophe losses, was neutral for the second quarter compared to an unfavorable development of 20.8% in the same period in 2023.

Pre-tax catastrophe losses added 11.2 percentage points to the GAAP combined ratio, an improvement of 1.8 points and below the five-year and 10-year historical averages. The underlying loss ratio of 58.9% improved 5.7 points, reflecting better performance in core business lines due to underwriting actions, price increases, expense management and declining claims trends.

UFG’s prior year core loss ratio was impacted by higher underwriting losses, which did not recur in the current year. The underwriting expense ratio of 35.5% deteriorated by 0.9 points due to investments in underwriting talent and technology, which were offset by premium growth.

UFG to handle overcharges

In July 2024, UFG identified misclassification errors related to umbrella and general liability products that resulted in overcharges for some policyholders. Corrective actions are underway, and UFG said it is working with state insurance regulators to determine the appropriate threshold for recoveries.

The company has recorded an estimated liability of approximately $3.2 million to cover the anticipated exposure, although this estimate may change as more information becomes available. UFG is reviewing other lines of business for similar issues and has acknowledged the possibility of fines, penalties or further recoveries, although the amount cannot be estimated at this time.

Net investment income for the second quarter was $18.0 million, an increase of $6.7 million. Fixed maturity income increased $2.5 million due to higher interest rates. Cash and cash equivalents income increased $1.8 million.

Other long-term investments contributed an additional $4.1 million to income due to a change in valuations of investments in limited liability partnerships. Investment expenses increased $0.5 million, while gains on common securities decreased $1.2 million due to a strategic reallocation of common securities to fixed income assets over the past year.

“The improvements in underlying profitability were sufficient to generate positive adjusted operating income in the second quarter, excluding the impact of this rating adjustment,” said Kevin Ledwinger, UFG’s chairman and CEO (pictured above). “We remain committed to continuing to drive improvements in our performance through strategic execution of our business plan during the second half of the year.”

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