Release Date: February 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Congratulations on the fourth quarter of the year. I want to start off with looking at just the fourth quarter as a run rate for profitability. Anything that we should be calling out either way that would be important adjustment, and on that topic, you did mention there's a $3.2 million reversal of the contingent. Was that actually in the fourth quarter? So would that be an example of a one-time benefit that we would have had this quarter? A: Good morning, Paul. This is Eric Martin, CFO. That's right. We do have a benefit of $3.2 million pre-tax in the fourth quarter here, which I would call it as a one-time item. Otherwise, really not. I think the other things are pretty well run rate as we see it. We've called out the expense ratio as being a little bit elevated here, but we'll continue to work on that as we go through time here.
Q: A lot of conversations about trying to get ahead of social inflation cash in reserve, which is obviously an issue for the entire industry, but I was thinking about this from an appetite perspective for new business. Does this push you more towards property or less casually? A: Hey, Paul. It's Julie Stephenson, COO. Certainly, it has an impact on our choices around appetite. We find ourselves leaning in the casualty space towards less public exposed risks. We're very careful with limits management, capacity management when it comes to those risks, we think are more likely to see social inflationary impacts. We certainly want to grow the property portfolio. Through this last reinsurance cycle, we achieved greater property capacity in our treaty, which we're really pleased about. That will allow us to take on some more sophisticated property risks.
Q: Could you talk a little bit about your appetite for the reinsurance business? Talk about January 1 renewals being a little bit weaker? But for the whole industry, how do you think about your current appetite in the insurance business? A: I think you're asking about our alternative distribution appetite? As you know, the alternative distribution portfolio is made up of seven channels, and we are looking to grow all seven of those channels. But for probably the Retrocession channel, certainly in standard treaty, which is the largest channel in alternative distribution, we feel good about the opportunities available to us in the marketplace where we can get the margin that we're looking for. It is our second largest business unit at UFG currently, and we feel good about our prospects.
Q: How do you see the impact of social inflation on your business, and what measures are you taking to mitigate its effects? A: Julie Stephenson, COO, responded that social inflation impacts their choices around appetite, leading them to focus on less public-exposed risks in the casualty space. They are careful with limits and capacity management for risks likely to see social inflationary impacts. They also aim to grow their property portfolio, having achieved greater property capacity in their treaty, allowing them to take on more sophisticated property risks.
Q: Can you provide more details on the improvements in your investment portfolio during 2024? A: Eric Martin, CFO, explained that over the past three quarters, they have taken actions to improve the risk-adjusted returns of their investment portfolio, which improved their annualized book yield by more than 80 basis points with minimal realized losses. They invested nearly $900 million of fixed maturity assets with an average new money yield of approximately 5.5%, which was more than 150 basis points higher than the annual total portfolio yield. This resulted in a 21% increase in net investment income for the fourth quarter compared to the previous year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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