United Fire's Q1 2025: Contradictions Unraveled on Pricing Power, Underwriting Efficiency, and Inflation Responses

Pricing power and countering inflationary pressures, underwriting expense ratio and strategic investments, pricing power and rate sustainability, underwriting expense ratio and efficiency are the key contradictions discussed in United Fire's latest 2025Q1 earnings call.



Underwriting Profitability and Premium Growth:
- UFG Insurance reported record net written premium growth of 4% to $335.4 million.
- The growth was driven by disciplined pricing, stable retention, and increased new business production, although reduced by 3 points due to unusual ceded reinsurance premium adjustments.

Improved Combined Ratio and Loss Trends:
- The company achieved a first quarter combined ratio of 99.4%, a 0.5 point increase over the previous year, with an underlying loss ratio improvement of 2.9 points.
- This improvement was due to strong earned rate achievement surpassing loss trends, improving frequency trends, and disciplined portfolio management.

Strong Investment Income and Financial Position:
- UFG's net investment income increased to $23.5 million in the first quarter.
- The improvement was driven by a sustainable increase in fixed maturity income and improved valuations on the limited partnership portfolio, supported by a favorable interest rate environment.

Investment in Technology and Policy Administration System:
- The company noted an expense ratio increase of 3 points to 37.9%, including 1 point for the final stages of developing a new policy administration system.
- This investment aims to enhance process efficiency and product management, with small business already deployed across all 32 states and middle market and construction to follow in July and November.

Catastrophe Loss Management and Underwriting Discipline:
- Catastrophe losses contributed 5 points of the combined ratio, including $8.2 million from California wildfires.
- The company's conservative limit deployment and stringent underwriting criteria in its alternative distribution business led to a strong underwriting profit despite elevated industry catastrophe losses.