UFG News
United Fire Group, Inc. Reports Fourth Quarter and Year End 2020 Results
Released on: Feb 17, 2021, 08:00 AM
United Fire Group, Inc. (the “Company” or "UFG") (Nasdaq: UFCS) today reported consolidated net loss, including net realized investment gains, of $8.9 million ($0.36 per diluted share) for the three-month period ended December 31, 2020, compared to consolidated net loss of $23.2 million ($0.93 per diluted share) for the same period in 2019. For the year ended December 31, 2020, consolidated net loss, including investment losses, was $112.7 million ($4.50 per diluted share) compared to net income of $14.8 million ($0.58 per diluted share) for the same period in 2019.
The Company reported a consolidated adjusted operating loss of $1.30 per diluted share for the fourth quarter 2020 compared to consolidated adjusted operating loss of $1.04 per diluted share for the same period in 2019. For the full year ended December 31, 2020, the Company reported consolidated adjusted operating loss of $2.88 per diluted share compared to consolidated adjusted operating loss of $1.08 per diluted share for 2019.
"We are very disappointed with our fourth quarter and full year 2020 results," stated Randy A. Ramlo, President and Chief Executive Officer. "As we mentioned in our press release on February 11, 2021, our fourth quarter results were negatively impacted by ongoing social inflation resulting in an increase in severity of current accident year losses and in prior accident year reserve strengthening. Social inflation continues to impact the entire industry. Unfortunately, our two largest states, Texas and California, are amongst the highest trending social inflation states, meaning the impact to UFG is magnified. In recognition of social inflation trends, during 2020 and particularly in the fourth quarter new commercial auto and general liability claims were reserved with more cautious pessimism. Additionally, progress has been made to shorten the claims cycle, with reserves being established earlier in the process than in past years, with new analytic insights driving these outcomes. Also, during the fourth quarter we reviewed the reserve adequacy of our open prior accident year case reserves in consideration of our more cautiously pessimistic view."
"The full year of 2020 results were also negatively impacted by a historical level of catastrophe losses. Catastrophe losses added 13.5 points to the combined ratio in 2020, which is the highest in the last five years and significantly higher than our five year historical average of 5.6 points prior to 2020. During the year, we experienced catastrophe losses of $231 million before reinsurance, $142 million net of reinsurance. The majority of these losses came from three significant events that occurred in some of our largest geographically exposed areas. Two of these events impacted Cedar Rapids, Iowa, the location of our corporate headquarters. These events were the August Midwest derecho with peak winds of 145 mph and a hailstorm in April. The third event was hurricane Laura which impacted another heavy exposure area for UFG in Southern Louisiana, the location of our 2019 agent of the year."
"Though we are very disappointed with our results in 2020, we remain optimistic about our future. Throughout 2020, we focused on building the foundation of our new strategic plan to improve profitability. Our strategic plan, which we call "One UFG boldly forward," contains a number of initiatives aimed at long-term profitability, portfolio diversification, sustainable growth and continuous innovation. As a result of our efforts, we are able to point to some underlying improvements, including our fifth consecutive quarter with a decrease in the frequency of commercial auto losses and commercial auto exposure units. We also saw improvement in our core loss ratio despite reserves being established earlier in the claims cycle and with more cautious pessimism. Our core loss ratio improved 0.6 and 0.4 percentage points, respectively, in the fourth quarter and full year 2020 compared to the same periods in 2019. Although the level and speed of improvement this year did not meet our expectations, we firmly believe that we are on the right path forward and will remain focused on improving profitability as part of our strategic plan."
"As we mentioned the last few quarters, we continue to expect the impact of the COVID-19 pandemic to be manageable. There was some impact to net premiums earned due to the impact of the COVID-19 pandemic but it was less significant than the impact from our actions to improve profitability of our commercial auto book in 2020. As a reminder, nearly all of the policies we have issued contain contract language that specifically excludes business interruption coverage for losses due to viruses such as the COVID-19 pandemic. However, we cannot determine how any changes in legislation, regulations and interpretations by the courts regarding these exclusions will impact the Company in the future."
View the full press release here.
The Company reported a consolidated adjusted operating loss of $1.30 per diluted share for the fourth quarter 2020 compared to consolidated adjusted operating loss of $1.04 per diluted share for the same period in 2019. For the full year ended December 31, 2020, the Company reported consolidated adjusted operating loss of $2.88 per diluted share compared to consolidated adjusted operating loss of $1.08 per diluted share for 2019.
"We are very disappointed with our fourth quarter and full year 2020 results," stated Randy A. Ramlo, President and Chief Executive Officer. "As we mentioned in our press release on February 11, 2021, our fourth quarter results were negatively impacted by ongoing social inflation resulting in an increase in severity of current accident year losses and in prior accident year reserve strengthening. Social inflation continues to impact the entire industry. Unfortunately, our two largest states, Texas and California, are amongst the highest trending social inflation states, meaning the impact to UFG is magnified. In recognition of social inflation trends, during 2020 and particularly in the fourth quarter new commercial auto and general liability claims were reserved with more cautious pessimism. Additionally, progress has been made to shorten the claims cycle, with reserves being established earlier in the process than in past years, with new analytic insights driving these outcomes. Also, during the fourth quarter we reviewed the reserve adequacy of our open prior accident year case reserves in consideration of our more cautiously pessimistic view."
"The full year of 2020 results were also negatively impacted by a historical level of catastrophe losses. Catastrophe losses added 13.5 points to the combined ratio in 2020, which is the highest in the last five years and significantly higher than our five year historical average of 5.6 points prior to 2020. During the year, we experienced catastrophe losses of $231 million before reinsurance, $142 million net of reinsurance. The majority of these losses came from three significant events that occurred in some of our largest geographically exposed areas. Two of these events impacted Cedar Rapids, Iowa, the location of our corporate headquarters. These events were the August Midwest derecho with peak winds of 145 mph and a hailstorm in April. The third event was hurricane Laura which impacted another heavy exposure area for UFG in Southern Louisiana, the location of our 2019 agent of the year."
"Though we are very disappointed with our results in 2020, we remain optimistic about our future. Throughout 2020, we focused on building the foundation of our new strategic plan to improve profitability. Our strategic plan, which we call "One UFG boldly forward," contains a number of initiatives aimed at long-term profitability, portfolio diversification, sustainable growth and continuous innovation. As a result of our efforts, we are able to point to some underlying improvements, including our fifth consecutive quarter with a decrease in the frequency of commercial auto losses and commercial auto exposure units. We also saw improvement in our core loss ratio despite reserves being established earlier in the claims cycle and with more cautious pessimism. Our core loss ratio improved 0.6 and 0.4 percentage points, respectively, in the fourth quarter and full year 2020 compared to the same periods in 2019. Although the level and speed of improvement this year did not meet our expectations, we firmly believe that we are on the right path forward and will remain focused on improving profitability as part of our strategic plan."
"As we mentioned the last few quarters, we continue to expect the impact of the COVID-19 pandemic to be manageable. There was some impact to net premiums earned due to the impact of the COVID-19 pandemic but it was less significant than the impact from our actions to improve profitability of our commercial auto book in 2020. As a reminder, nearly all of the policies we have issued contain contract language that specifically excludes business interruption coverage for losses due to viruses such as the COVID-19 pandemic. However, we cannot determine how any changes in legislation, regulations and interpretations by the courts regarding these exclusions will impact the Company in the future."
View the full press release here.
