United Fire Group, Inc · NASDAQ:UFCS
United Fire — Investor Presentation (June 2013)
44 slides from United Fire's investor presentation, Jun 18, 2013
Slide 1: United Fire Group, Inc. Investor Presentation June 2013
United Fire Group, Inc. (@,74 Le} Investor Presentation June 2013
Slide 2: Table of Contents
Table of Contents Company Overview P&C Companies Life Company 2012 Highlights 2013 Objectives Rate Improvement Organic Growth Premium Growth Loss Analysis Life Company Investment Yield Slide 3 Slide 4 Slide 4 Slide 5 Slide 6 Slide 7 Slide 8 Slide 9 Slide 10 Slide 11 Slide 12 CS Portfolio Management
Slide 3: Company Overview
Company Overview CS United Fire Group, Inc. (NASDAQ: UFCS) . . ° Super -regional provider of a complete line of insurance products Founded in 1946; and based in Cedar Rapids, lowa Six regional offices $758 million in shareholders’ equity at 3/31/2013 Approximately 900 employees
Slide 4: Company Overview
Company Overview P& C Companies Rated “A” (Excellent) by A.M. Best 90% commercial lines / 10% personal lin Licensed in 2 states and the District of Columbia, active in 33 Represented by approximately 1,200 independent agencies At 12/31/2012, $655 million in net written premiums CS United Life Insura
Slide 5: 2012 Highlights
2012 Highlights (92 ww GAAP combined ratio improved to 101% from 112% P&C statutory capital increased from $566 million to $586 million Book value grew 6% to $28.90 GAAP expense ratio improved 4.2% to 31.5% Pure loss ratio improved in both commercial lines and personal lines Policy retention remaine
Slide 6: 2013 Objectives
2013 Objectives 74 CS Continued rate improvement in commercial and personal lines Continued expansion/improvement of our BOP product Carefully and purposefully increase our workers’ compensation business Market to larger accounts (over $100,000) Appoint new agents in cities where we are under-repres
Slide 7: Rate Improvement
Rate Improvement CS Rate Change Comparison = f= eS ee fa NE See 16.00% 5% gh ol 05 oS 08 oP go? soi a or aod yo 201% ol? —UFG = —MarketScout —CIAB © —CLIPS.
Slide 8: Organic Growth
Organic Growth OB Growth Components = eee 2012 1 1013 INTO IMVETREEITSS oo0n0900000000 CODY ao000000 | 0.9% New Business............... 3 DGS es 1 1.1% LBS GOO SUITS MEER coos SHOW) soocnom 0.6% 1 Overall organic growth... 12.5% ........ 7.6%
Slide 9: Premium Growth
Premium Growth CS Net Written Premiums (sin 1900) $800,000 $700,000 $600,000
Slide 10: Loss Analysis
Loss Analysis CS Catastrophe Loss Contribution 2007 2008 2009 2010 2011 2012 1912 193 4 L mNon-cat Losses mCatLoses 9 = = = === — Average CAT $46 milli CAT
Slide 11: Life Company
Life Company Initiatives for 2013 we } Geographic expansion - eight new states Life / Fixed Annuity mix — goal is 50/50 in order to reduce exposure to interest sensitive products Qualified care rider a huge success so continue Lapse ratio under 5% Automation commitment (ease of doing business)
Slide 12: Investment Yield
Investment Yield we ) ae 55% 4.9% a 4.6% 45% 4.0% 3.7% 40% 3.0% 2.0% 10% 0.0% 2007 2008 2009 2010 2011 2012
Slide 13: Portfolio Management
Portfolio Management C97 Se } Conservative Investment Philosophy —_ Highly Rated Fixed Income Portfolio Manage our own portfolios ee a | How we are addressing the low interest rate environment eS oe aba + We continue to purchase quality AA 598 21% investments rated investment grade or 647 23% + We m
Slide 14: Portfolio Management
Portfolio Management Corporate Bonds Equity Portfolio Total Portfolio
Slide 15: Stock Price Improvement
Stock Price Improvement CS : UST acai eemeaes ran012 32013, 272013 3132013, 482013 5872013 52-week high $29.59; low $18.49; current $28.00; book value $30.01 *
Slide 16: Capital Management
Capital Management CS Dividend - currently $0.18 per quarter Share repurchases Share repurchase authorization until August 2014 Debt - none We believe the best use of our capital is to write new, adequately priced business, which will be a focus in 2013.
Slide 17: Economy / Market Conditions
Economy / Market Conditions CS Positive rate environment for six quarters Rate increases are expected through 2013 Positive audit premium for the first time since 2008 Our insureds are adding exposures again at renewal Policy count growth opportunities
Slide 18: Key Investment Considerations
Key Investment Considerations CS Expanded geographic presence through acquisition Growth opportunities + Capitalizing on recent acquisitions + Organic growth in existing markets Decentralized underwriting and marketing Opportunities for efficiencies Reserving + Historically reported favorable loss r
Slide 19: Competitive Advantages
Competitive Advantages OY Local market knowledge Strong agency relationships Disciplined underwriting Service center Exceptional customer service Superior loss control services Fair and ethical claims handling Efficient and effective technology
Slide 20: Creating Shareholder Value
Creating Shareholder Value CS Competitive and growing dividend of $0.18 per share Active capital management strategy Share repurchase program Consistent book value growth Stock price appreciation
Slide 21: 1Q13 Highlights
1013 Highlights CS EPS - Operating Combined Ratio - GAAP ROE Catastrophe Losses Impact to Combined Ratio Impact to earnings per share Prior year favorable reserve development Impact to combined ratio Impact to earnings per share 2013 2012 $0.84 $0.68 90% 94% 12.04% 10.84% $5 million $14 million 3 po
Slide 22: Appendix
Appendix CB Senior Management Slide 23 Expertise (Businesses) Slide 34 Financial Summary Slide 24 Agency Philosophy Slide 35 P&C Financial Highlights Slide 25 Loss cost Analysis Slide 36 Definitions/Reconciliations Slide 26 Reserving Philosophies Slide 36 Super Storm Sandy Data Slide 27 Claims Philo
Slide 23: Senior Management
Senior Management ee} RANDY A. RAMLO, MICHAEL T. WILKINS [ANNE M. LYONS President/CEO Executive Vice President teeta elan EO Years at UFG: 29 Years at UF y Gees in eta Years in Industry: 28 Years in nase? 30 DAVID E. CONNER, BARRIE W. ERNST NEAL R. SCHARMER Vice President/Gen. Counsel Years at UFG:
Slide 24: Financial Summary
Financial Summary Selected Income oom Items Realized Gains ries net of tax Operating Earings / (Loss), net of tax ected Balance Sheet Items ‘Cash and Investments ales Sharehok C ile ay P&C Only Per Shai Gent ae Cinepak nema per Book Value per oe Profitability Analysis, Loss and Loss Settkement Expen
Slide 25: P&C Operating Segment Financial Highlights
P&C Operating Segment Financial Highlights 1'@74 we ) jal Net Premiums Written $ 160,476 $ 576,076 $ 481,520 $ 363,806 $ 380,727 Net Premiums Ea 145,173 551,846 464,942 370,479 394,000 Loss and Loss Settlemer 82,742 367,208 331,320. 271,184 338,094 eam a seas ae “Ratio 57.0! 665% = 713 TR2% 85.8% so
Slide 26: Definitions and Reconciliations of Data Not Prepared in Accordance With U.S. GAAP
Definitions and Reconciliations of Data Not Prepared in Accordance With U.S. GAAP (a,74 US come / (Los $ 22393 $ 40212 $ 11 $ 47,513 $ (10,441) $(13,064) $111,392 Realized Investment Gains / (Losses), after tax $1241 $ 3544 $ 4186 $ 5518 $ (8,566) $ (6,749) $_6,286 Net Operating Income / (Loss) $ 21
Slide 27: Super Storm Sandy
Super Storm Sandy On October 29, 2012: Super Storm Sandy hit Atlantic City, NJ with a vengeance killing 125 people. Estimated economic damage was $50 billion; estimated industry insure losses were $25 billion. UFCS frat losses of approximately $25 million. By the time Congress authorized funds for d
Slide 28: Historical Financial Performance
Historical Financial Performance Book Value Per Share '@74 LX ROE averaged 8.8% 2 Between 2000 and 2012 $30.01 $30.00 $25.00, $20.00 63% cae $15.00 $10.00, $5.00 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3/31/13
Slide 29: Historical Underwriting Performance
Historical Underwriting Performance (@a74 C9 GAAP Combined Ratio 2007 2008 «2009 »«2010+=—«2011:-~=—«2012* oe MUFCS i Peer Group* Catastrophe Loss Contribution 2007 2008» 2009 20102011202 mNon-cat Losses Cat Losses
Slide 30: Historical Reserving
Historical Reserving (Development as a Percent of Net Premiums Earned) C97 Se | Median: 11.2% 1995 199 19971998 1999 20002001 2002 2003-200. 2005 «2006-2007 2008-2009 © «201020112012 NOTE: 2008 and 2009 reflect litigation costs associated with Hurricane Katrina 30
Slide 31: Exposure Management
Exposure Management CS Managing Catastrophe Exposure 100-year PMLs below 2006 levels despite expanded portfolio due to Mercer Group transaction Managing geographic exposures to reduce coastal and other risks Updating policy terms and conditions * Policies written ex-wind * Policies written with wind
Slide 32: Exposure Management
Exposure Management CS Modeled vs. Actual Losses from Historical Storms Average Modeled Actual Actual to Average ($in millions) Gross ©) Loss ($) __ Model Miss (%) Katrina 483.7 367.3 Bz) Rita 49.2 339) 45 Gustav 60.7 14.5 B19) Ike 227i 26.0 -13 Isaac 41 2.4 TAL Trene 17.2 6.2 iy)
Slide 33: Exposure Management
Exposure Management CS 2013 Reinsurance Programs * Catastrophe program * $180 million excess of $20 million retention * 5% co-participation on losses between $20 million and $200 million * Core program ¢ $2 million retention + $13 million per risk property coverage * $38 million per occurrence casua
Slide 34: Expertise with "Main Street" Businesses
Expertise with “Main Street” Businesses NWP by Product Line Three months Bena Property/Cast Fire & fa ties Autom: Other mee lity Workers! Compensation Sure Miscellaneous Reinsurance (Assumed) C97 Se } Top 15 Classes Show Main Street Focus eens) (Property and Casualty) ie coaare se Flat Work ae resid
Slide 35: Agency Philosophy
Agency Philosophy CS We continually monitor agencies for compatibility Criteria: loss ratio, volume, relationship We seek “top three” position (as measured by direct premiums written) We offer competitive performance-based compensation We contract with more than 1,200 independent agencies Average ag
Slide 36: Reserving
Reserving 4 es Cost Analysis Resenvting Philosophy We historically reported favorable loss We monitor inflationary trends ieonecenabeee We employ exposure basis rating + We employ ee reserving (including payroll and sales-based practices rating) + We reserve on a case basis with some pessimism We em
Slide 37: Capital Management Philosophy
Capital Management Philosophy C97 Se } Strong economic capital position Prudent reinsurance programs Outstanding debt paid off in July 2012 History of consistently conservative reserves Use of capital - acquisition of Mercer Insurance Company 12 Months Ended 12/31/2012 21.46 340,159 73 12 Months End
Slide 38: Opportunities for Efficiency
Opportunities for Efficiency CS eens We streamline how our agencies transact business with us We enable producers to efficiently provide their clients with a high level of service We enhance agency online inquiry capabilities We provide agencies with online reporting We solicit feedback from agent t
Slide 39: Enterprise Risk Management (ERM)
Enterprise Risk Management (ERM) (@! G ERM management committee meets ees Specific risks addressed: + Catastrophe risk + Disaster prepa : Mase Insurance taiceation + Interest and potential . anedieap risk By ies 5 R 2 a 5 Manager review of corporate ERM document Opportunity to identify risks on intr
Slide 40: 2012 Product Niches
2012 Product Niches CS Religious Institutions - Churches Auto Service and Repair Garages Garbage Refuse Haulers Condominiums Small Artisan Service and Repair contractors Retail Small Business (Business Owners Program) Land Improvement Contractors (Excavation, Land Grading) Commercial Output Program
Slide 41: Top Eight States
Top Eight States C97 Se } Twelve months ended 12/31/12 - Property/Casualty (S in millions) Texas lowa California New Jersey Missouri Lousiana Illinois Colorado All Other States 38.5 232.8
Slide 42: Notes
Notes C97 we }
Slide 43: United Fire Group, Inc. Family of Companies
United Fire Group, Inc. (a4 A United Fire & Casualty Company United Life Insurance Company Addison Insurance Company Financial Pacific Insurance Company Franklin Insurance Company Lafayette Insurance Company Mercer Insurance Company Mercer Insurance Company of New Jersey, Inc. Texas General Indemnit
Slide 44: Forward-Looking Statements
Forward-Looking Statements may contain fe d about our operations, anticipated performance al other similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor under the Securities Act of 1933 and the Securities Exchange Act of 1934 for forward-looking statements. The
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