United Fire Group Q1 Earnings Call Highlights

Key Points

• Record net written premium and improved profitability: UFG posted a strong Q1 with net written premium up 12% (9% excluding unique ceded transactions), a nearly four-point improvement in the combined ratio, 15% higher net investment income, roughly 13% ROE and the highest Q1 EPS in seven years ($1.15 GAAP, $1.16 adjusted).
• Growth driven by Core Commercial and alternative distribution: Core Commercial NWP rose 11% with new business up 14% and average pricing +4.3%, while Alternative Distribution grew 13% and UFG added $20 million of Funds at Lloyd’s stamp capacity to support new syndicates.
• Market conditions and underwriting discipline: management noted moderation in rates and intensifying E&S competition but emphasized selective underwriting, a 57% underlying loss ratio, improved catastrophe results (3.7%), and an expense ratio improvement to 34.9%.

United Fire Group NASDAQ: UFCS reported what management described as a strong start to 2026, citing record net written premium, improved underwriting performance, and higher investment income during its first-quarter earnings call.

President and CEO Kevin Leidwinger said the company “delivered another quarter of excellent results,” pointing to “nearly four-point improvement in the combined ratio,” a 15% increase in net investment income, return on equity of approximately 13%, and the “highest first quarter earnings per share in seven years.” He attributed the performance to multi-year initiatives to deepen underwriting and actuarial expertise, expand capabilities, strengthen distribution relationships, and invest in productivity.

Premium growth led by Core Commercial

Executive Vice President and Chief Operating Officer Julie Stephenson said net written premium increased 12% in the first quarter, driven by “disciplined growth as well as lower ceded reinsurance premium.” Excluding the impact of “unique ceded premium transactions” referenced in the prior year’s first-quarter call, she said net written premium growth was 9%.

Stephenson said growth continued to be fueled by the company’s Core Commercial business—small business, middle market, and construction—which grew net written premium 11% in the quarter, with all three units contributing. She added that new business grew 14%, while the company maintained “healthy but moderating retention,” achieved “positive rate outcomes,” and continued to emphasize underwriting discipline.

On pricing, Stephenson said the company’s “average account size is growing” within the lower to mid-range of the middle market, an area she said has seen “a more modest deceleration in pricing than national accounts.” She said the company achieved a 4.3% rate for the quarter and that “current pricing continues to offer attractive returns.”

Competitive conditions: moderation in rates and intensifying E&S competition

During the question-and-answer session, Stephenson acknowledged “moderation in rates and increased competition” and said it was “not unexpected for the quarter.” She said the company still sees “ample opportunities with positive margin,” while noting retention “may fluctuate a bit quarter to quarter as the market continues to soften.” She emphasized UFG’s focus on insisting on “adequate pricing account over account.”

Asked about deceleration in renewal rate increases, Stephenson said it was “more based on competitive behavior,” adding that rates remained positive but varied “significantly by line of business.” She said the company is approaching each account by “finding the right rate for the exposures that we’re underwriting.”

In Specialty E&S, Stephenson said first-quarter net written premium growth was “largely impacted by ceded premium adjustments in the first quarter of 2025.” She said submission activity remained strong, but “competition is intensifying in the E&S market,” with rate increases moderating from “double-digit” a year ago to “mid-single digits” as capacity increases and some accounts return to the admitted market. She said renewal defense for “adequately priced and well-performing accounts” remained a priority, and new business efforts were focused on “moderate hazard opportunities” in property and casualty to balance portfolio volatility over time.

In Surety, Stephenson said premiums were stable versus the prior year as the company remained “staunchly focused on quality.” She added that with favorable momentum and strong submissions, management has “high confidence in the underwriting discipline and growth prospects” for that business.

Alternative distribution expands, including Lloyd’s stamp capacity

Stephenson said Alternative Distribution—conducted through treaty, programs, and Funds at Lloyd’s—grew net written premium 13% from the prior year. She described a “successful and disciplined 1/1 standard treaty cycle,” while noting increased pressure on market pricing. She said UFG benefited from favorable premium development in existing relationships and selectively added “attractively priced accounts” that offered opportunities beyond lines most affected by market softening.

She also said the company expanded its Funds at Lloyd’s portfolio with $20 million of additional stamp capacity, supporting four new syndicates for 2026 that are expected to contribute additional premium through the year. Stephenson noted the Lloyd’s market’s A+ rating from AM Best and said the vehicle offers “significant diversifying opportunities.”

Loss trends, reserves, and catastrophe results

On profitability, Stephenson said the underlying loss ratio was 57% in the first quarter, reflecting “the quality of our improved portfolio.” She said commercial lines benefited from strong earned rate and the impact of refined underwriting appetite and portfolio actions.

Stephenson said improvement in commercial results was offset by an increased loss ratio in assumed reinsurance, driven by rate reductions that were “more prevalent in this market,” though she said the reinsurance business continues to meet profit expectations. She also said the company incorporated “additional conservatism” into estimates amid changing market dynamics, contributing to a small increase in the underlying loss ratio versus the prior year.

Prior-year reserve development was “neutral overall,” Stephenson said. She described the quarter’s actuarial review as an “abbreviated analysis” with “modest offsetting adjustments across the portfolio.” She highlighted that liability portfolio development was flat, saying estimates “began showing some stability for the quarter after continued emphasis to strengthen these reserves.”

Catastrophe performance improved year over year. Stephenson said the first-quarter catastrophe loss ratio was 3.7%, which was 1.3 points below the prior year and below historical five- and 10-year averages, reflecting actions taken to improve the company’s catastrophe risk profile.

Investment income rises; expense ratio improves

Management reported a 15% increase in net investment income to $27 million in the first quarter. Fixed maturity income increased 18% year over year to $24.9 million, while maintaining “duration and an average double A credit quality rating.” The company said the fixed maturity portfolio has grown by nearly $300 million over the past four quarters, which management linked to improved underwriting profitability.

Management said new money yields remained steady at approximately 5% and exceeded the overall portfolio average, providing an opportunity to increase returns. The company also reported that its limited partnership investments, totaling approximately $100 million, generated a $1.3 million return in the quarter, which it said was positive but lower than recent quarters.

The expense ratio was 34.9%, an improvement of three points from the prior year. In response to an analyst question, Executive Vice President and Chief Financial Officer Eric Martin said two points of the year-over-year improvement were due to the completion of costs tied to a new policy administration system, with another point attributable to growth. Martin described the quarter’s expense ratio as “a very clean number” with “really nothing unusual.” Looking forward, he said that if the company grows at 10%, management would expect the expense ratio to decline by about 60 to 70 basis points year over year.

Net income was $1.15 per diluted share, and non-GAAP adjusted operating income was $1.16 per diluted share, management said. Book value per common share rose to $37.06. Martin said higher interest rates increased unrealized losses from $34 million at year-end 2025 to $53 million at the end of the first quarter, reducing book value per share by $0.57. Adjusted book value per share, excluding unrealized investment losses, increased $0.74 to $38.61.

On capital management, the company declared and paid a $0.20 per share cash dividend during the quarter to shareholders of record as of Feb. 24, 2026.

In closing remarks, Leidwinger said UFG is “leaning into” an expanded set of business opportunities “as a disciplined, solution-oriented underwriting company” and said management remains confident in executing its plan while navigating “the complexities of a changing market.”

About United Fire Group NASDAQ: UFCS

United Fire Group, Inc NASDAQ: UFCS is an insurance holding company based in Cedar Rapids, Iowa, that specializes in property and casualty coverage for commercial and personal lines. The company underwrites business through three primary segments: commercial, personal and specialty insurance. Within the commercial segment, United Fire Group offers tailored policies for small- and medium-sized enterprises, including general liability, commercial property and workers' compensation. Its personal lines cover homeowners, auto, farm and umbrella policies.

United Fire Group distributes its products primarily through a national network of independent insurance agents and brokers.

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