United Fire Group, Inc · NASDAQ:UFCS
United Fire — Investor Presentation (August 2013)
44 slides from United Fire's investor presentation, Aug 28, 2013
Slide 1: United Fire Group, Inc. Investor Presentation
United Fire Group, Inc. (@,74 Le} Investor Presentation August 2013
Slide 2: Table of Contents
Table of Contents CS Company Overview Slide 3 Life Company Slide 16 P&C Companies Slide 4 Investment Yield Slide 17 Life Company Slide 4 Portfolio Management agile nigaligite siltele 2 Investment Philosophy Slide 18 Historical Fin. Performance Slide 6 Portfolio Credit Quality Slide 18 Historical Und
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 $734 million in shareholders’ equity at 6/30/2013 Approximately 900 employees
Slide 4: Company Overview: P&C Companies and Life Company
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: Historical Financial Performance
Historical Financial Performance Book Value Per Share OS ROE averaged 8.8% Between 2000 and 2012 $29.00 $30. $25.00, $20.00 oo" cac® $15.00 $10.00, $5.00 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 6/30/13
Slide 7: 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 8: 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
Slide 9: Managing Catastrophe Exposure
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 10: 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 11: 2013 Highlights
2013 Highlights 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 Note: ROE is calculated CS Three Months Ended June 30, Six Months Ended Ju
Slide 12: Rate Improvement
Rate Improvement CS Rate Change Comparison = f= eS HM Ne y | — -16,00% 3% oo? oS 081 ,ooF oP oH a0 oP got ot .0 sot aol? 01” —UFG = —MarketScout —CIAB © —CLIPS.
Slide 13: Organic Growth
Organic Growth OB Girowiin CommpromemtiSs 2012 1 2013 Renewal Increases......... CH coconm 5, SAN New Business pe ae 1 3.0% IEGOO RWIS IMGT oonccm SHO) sooo 0.8% 1 Overall organic growth... 12.5% ........ 9.0% NOTE: Growth is for second quarter 2013 only rather than YTD.
Slide 14: Premium Growth
Premium Growth ZZ CS Net Written Premiums (sin 1900) $800,000 $700,000 $600,000
Slide 15: Loss Analysis
Loss Analysis CS Catastrophe Loss Contribution 2007 2008 2009 2010 2011 a2 Fm m3 4 ‘mNon-cat Losses Cat Losses Average CAT $46 milli CAT
Slide 16: 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 6% Automation commitment (ease of doing business)
Slide 17: Total Investment Yield
Total 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 NOTE: Includes cash and cash equivalents
Slide 18: Portfolio Management
Portfolio Management C97 Se } Conservative Investment Philosophy Manage our own portfolios je maintain a fixed-to-equity ratio of 90/10 How we are addressing the low interest rate environment + We continue to purchase quality investments rated investment grade or wre closely match duration of our in
Slide 19: Portfolio Management
Portfolio Management C97 we ) Corporate Bonds Technology 5.9% Equity Portfolio Total Portfolio
Slide 20: Stock Price Improvement
Stock Price Improvement CS c / S [a 5 a sy en nee en ew CS ee 52-week high $32.94; low $18.49; current $32.00; book value $29.00 a
Slide 21: 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 22: Economy / Market Conditions
Economy / Market Conditions CS Positive rate environment for seven quarters Rate increases are expected through 2013 Positive audit premium for the last seven quarters Our insureds are adding exposures again at renewal Policy count growth opportunities
Slide 23: 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 24: 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 25: 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 26: Appendix
Appendix Senior Management Financial Summary P&C Financial Highlights Definitions/ Reconciliations Exposure Management Modeled v. Actual Losses 2013 Reinsurance Programs Expertise (Businesses) Agency Philosophy Loss Cost Analysis Reserving Philosophies Claims Philosophies Slide 27 Slide 28 Slide 29
Slide 27: 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 28: Financial Summary
Financial Summary C97 Se | aaa $ 363184 $ 694,904 $ 586,783 $ 469.473 $ 478.498 37,889 40.212 Hn 47513 (o44n), 3939 354 4.186 S.518 (8,566) 33950 36,668 (4,175) 41,995. (1,875) Selected Balance Sheet Items Cash and Investments $3,104,092 $3,151,829 $3,052,535 $2,662,955 $2,542,693 sa 3,700,749 3,694
Slide 29: P&C Operating Segment Financial Highlights
P&C Operating Segment Financial Highlights 1'@74 Le) smmercial Ng Pealans Wie $ 336,267 $ 576,076 $ 481,520 $ 363,806 $ 380,727 Net Premiums Es 204,513 551,846 404,942. 370,479 394,000 Loss and Loss Salen Expense: 179,78 367,208 331,320» 271,184 338,094 Loss and Loss Settlement Expense Ratio 61.0% B
Slide 30: 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 income / (Loss) $ 37,889 $ 40,212 $ 11 $ 47,513 $ (10,441) $(13,064) $111,392 tees a / Le aftertax $3939 $ 3544 $4186 $ 5518 $ (8,566) $ (6,749) $_6,286 ‘Net Operating Income / $ 33,950 $ 36,668 $ (4175) $ 41,
Slide 31: Exposure Management: Modeled vs. Actual Losses
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 32: 2013 Reinsurance Programs
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 33: Expertise with Main Street Businesses
Expertise with “Main Street” Businesses we ) NWP by Product Line ‘months ended peat NPW NW: Property/Casuc millions) a % bea (Property and Casualty) Fire & Allied Lin 1091 29.1% Automobil 9.5 23.8% Other Liability 1111 29.6% oe weet aes Compensation 474 12.6% Bxcavation 100 © 2.7% EEE TB! ie laneou:
Slide 34: 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 35: 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 36: 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 37: 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 38: Enterprise Risk Management
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 39: 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 40: 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 41: Notes
Notes C97 we }
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 This presentation may contain forward-looking statements about our operations, anticipated performance and 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
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