United Fire Group, Inc · NASDAQ:UFCS
United Fire — Investor Presentation (March 2013)
32 slides from United Fire's investor presentation, Mar 18, 2013
Slide 1: Investor Presentation
UNITED FIRE GROUP’ Investor Presentation Dianne Lyons, Vice President and Chief Financial Officer March 2013
Slide 2: Forward-Looking Statements
UNITED FIRE GRO’ 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 Securitie
Slide 3: Company Overview
NITED FIRE GRO Company Overview United Fire Group (NASDAQ:UFCS) * Regional provider of a complete line of insurance products * Based in Cedar Rapids, lowa * Founded in 1946 * $729.2 million in shareholders’ equity * Six regional offices * Approxi ly 900 employ
Slide 4: Company Overview
O) UNITED FIRE GRO Company Overview P/C Cos. Rated “A” by A.M. Best * At 12/31/2012, $655 million in net written premiums * 90% commercial lines/10% personal lines * Represented by approximately 1,200 independent agencies * Licensed in 43 states and Washington DC, active in 33 United Life Ins. Co. R
Slide 5: Historical Financial Performance
Historical Financial Performance Book Value Per Share Ss000 $28.90 ROE averaged 8.8% soso0 between 2000 and 2012 GR ii 65% & $20.00 oa — — — = iH i i 5 $15.00 gaeegqegeseests8es:eesés& sicco te I ee soo i i i i i i i i a ee 1996 1997 1998 1999 20002001 2002-2003 2004-2005 «2006-2007 «2008 «2009 «201
Slide 6: Historical Underwriting Performance
NITED FIRE GR Historical Underwriting Performance GAAP Combined Ratio Catastrophe Loss Contribution 130.0% $500 $in millions, net of reinsurance $450 120.0% $400 + 110.0% $350 = 100.0% $300 a = 5250 |§_ 90.0% 3 = RH $200 +—| —/i — i i — 7 i — gio 4 | 70.0% $100 -— ~~} a_i _ fs 60.0% —— na aHiHieH &
Slide 7: Recent Results
NITED FIRE GROU Recent Results Fourth-Quarter Highlights 2012 Interim Results — 17% organic growth — Mid-single digit rate increases Net premiums written $1744 15.1% $7209 19.2% — 82% commercial lines retention Net premiums earned 1869 156 695.0 18.4 + 111.1% combined ratio (101.2% YTD): Net investm
Slide 8: Key Investment Considerations
UNITED FIRE GRO’ Key Investment Considerations * Expanded geographic presence through MIGP acquisition * Growth opportunities: — Capitalizing on transaction — Organic growth in existing markets * Decentralized underwriting and marketing * Opportunities for efficiencies ° Reserving — Historically rep
Slide 9: Expanded Geographic Presence Through Acquisition
Expanded Geographic Presence Through Acquisition HI United Fire states MIGP states All-cash transaction valued at approximately $191 million Common business approach that diversified geographic risk Since closing: Generating savings through administrative and support consolidating and elimination of
Slide 10: Growth Opportunities: Growth Strategies
NITED FIRE GRO Growth Opportunities Growth Strategies ¢ Improve BOP product * Increase property business * Increase workers’ compensation business * Market to larger accounts (over $100,000) ¢ Appoint new agents in cities where we are under-represented
Slide 11: Growth Opportunities: Pricing Sophistication
NITED FIRE GRO Growth Opportunities Pricing Sophistication * Multiple tools support pricing analysis — CATography — Predictive analytics — Loss control — Walk-away pricing — Credit scoring — Rating tiers * Advanced automated renewal screening
Slide 12: Growth Opportunities: Rate Change Comparison
UNITED FIRE GRO’ Growth Opportunities Rate Change Comparison Notes on Rate Change Data ‘e008 , , _ with a distributic to i in a4 agencies. The composite average includes all commercial lines ADK and sizes of accounts. Website: marketscout.com * Council of each quarter to provide up-to-date informati
Slide 13: Expertise with "Main Street" Businesses
UNITED FIRE GRO Expertise with “Main Street” Businesses (as of 12/31/12) Net Written Premiums by Product Line Top 15 Classes Show Main Street Focus Property/Casualty Percent of total NPW Pe coe Percent of aah total DPW Commercial lines: Concrete construction Other liability 31% Carpentry — residenti
Slide 14: Decentralized Underwriting and Marketing
oO NITED FIRE GRO Decentralized Underwriting and Marketing (as of 12/31/12) Direct Written Premiums by State Percent of Property/Casualty total DPW Texas 13% lowa 12 California 12 New Jersey 7 Missouri All Other 49 Competitive Advantages * Local market knowledge * Strong agency relationships * Disci
Slide 15: Agency Philosophy
NITED FIRE GRO Agency Philosophy * Continually monitor agencies for compatibility * Criteria: loss ratio, volume, relationship * Seek “top three” position (as measured by direct premiums written) * Competitive performance-based compensation ¢ More than 1,200 independent agencies * Average agency siz
Slide 16: Opportunities for Efficiency
O)UNITED FIRE GRO’ Opportunities for Efficiency Expense Ratio Technology 40.0% * Streamline how our agencies transact business with us * Enable producers to efficiently provide their clients with a high level of service * Enhance agency online inquiry capabilities * Provide agencies with online repo
Slide 17: Reserving
UNITED FIRE GRO’ Reserving Loss Cost Analysis Monitor inflationary trends Exposure basis rating (including payroll- and sales-based rating) Inflation factors applied to property values annually (buildings and contents) Automobile symbol rating to accurately rate for autos based on cost new and repai
Slide 18: Reserving: Net Loss Reserve Favorable/(Deficient) %
UNITED FIRE GRO’ Reserving Net Loss Reserve — Favorable/(Deficient) 18% 12% 4 Median: 10% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2010 2011 2012
Slide 19: Exposure Management
Exposure Management Managing Catastrophe Exposure * 100-year PMLs below 2006 levels despite expanded portfolio due to Mercer transaction * Managing geographic exposures to reduce coastal and other risks * Updated policy terms and conditions — Policies written ex-wind — Policies written with wind exc
Slide 20: Exposure Management: Modeled vs. Actual Losses
NITED FIRE GRO Exposure Management Modeled vs. Actual Losses from Historical Storms Average Modeled _ Actual to Average Actual (S$ in millions) Gross Loss Model Miss % Loss Katrina $483.7 32% $367.3 Rita 49.2 45 33.9 Gustav Alg),il 32 14.5 Ike 64.1 147 26.0
Slide 21: Exposure Management: 2012 Reinsurance Programs
UNITED FIRE GRO’ Exposure Management 2012 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 occ
Slide 22: Conservative Investment Portfolio
UNITED FIRE GRO Conservative Investment Portfolio (at vecember 31, 2012) $3.0 Billion Investment Portfolio (¢ in mitiions) Equity Securities 6% Financial Mortgage Backed $285, $249 — 8% Corporate Bonds | Industrial . $936 Utilities 31% 8% Foreign Other* US Gov't $221 $42 $385 1% 2% 3% . mortgage loa
Slide 23: Conservative Investment Portfolio
UNITED FIRE GRO’ Conservative Investment Portfolio (a vecember 31, 2012) Portfolio Management * Manage our own portfolios — Maintain a fixed-to-equity ratio of 90/10 ¢ Addressing low interest rate environment by: — Continuing to purchase quality investments rated investment grade or better — More cl
Slide 24: Financially Strong
Financially Strong Capital Management Philosophy * 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 Share Repurchase Ave. rice Per Number
Slide 25: 2012 Enterprise Risk Management
ITED FIRE GRO’ 2012 Enterprise Risk Management ERM management committee meets quarterly — Specific risks addressed: * Catastrophe risk * Disaster preparedness * Mercer integration * Interest rate environment and potential fluctuations * Technology ris! * Reserving risk * Pricing cycles Manager revie
Slide 26: Appendix
UNITED FIRE GROUP’ Appendix
Slide 27: 2011 Product Niches
2011 Product Niches * 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 Ou
Slide 28: Foreign Investment Exposure
UNITED FIRE GROU Foreign Investment Exposure* (S in Millions) Sector Market Value % Market Value % Total Portfolio Industrials $67 41% 2.33% Energy 59 36 2.03 Financials 36 23 1.27 Total 162 100 5.63 isinieaiiions) Market Value % Market Value % Total Portfolio Regio! Europe $133 82% 4.62% Pan-Asia 2
Slide 29: Experienced Senior Management
O) UNITED FIRE GROUP Experienced Senior Management RANDY A. RAMLO presen ict Executive Year Years in industry: 29 MICHAEL T. WILKINS Executive Vice President Years at UFG: 28 Years in industry: 28 DIANNE M. LYONS ars at UFG: 3( Years in industry: 30, "betes and budgets segments . relati . + Oversees
Slide 30: Financial Summary
NITED FIRE GRO Financial Summary 2010 Net Premiums Earned $694,994 $586,783 $469,473 $478,498 Net Income / (Loss) 40,212 11 47,513 (10,441) Realized Gains / (Loss), net of tax 3,544 4,186 5,518 (8,566) Operating Earnings / (Loss), net of tax 36,668 (4,175) «41,995 (1,875) Selected Balance Sheet Item
Slide 31: Property/Casualty Operating Segment Financial Highlights
Property/Casualty Operating Segment Financial Highlights nth UNITED FIRE GROUP in ‘Commercial Net Premiums Written Net Premiums Earned Loss and Loss Settlement Expenses Loss and Loss Settlement Expense Ratio Personal Net Premiums Written Net Premiums Earned Loss and Loss Settlement Expenses Loss and
Slide 32: Definitions and Reconciliations of Data Not Prepared in Accordance With U.S. GAAP
UNITED FIRE GROUP Definitions and Reconciliations of Data Not Prepared in Accordance With U.S. GAAP Net income (loss) $40,212 $11 $47,513 $(10,441) $(13,064) $111,392 ‘After-tax realized investment (gains) losses (3,544) (4,186) (5,518) «8,566 6,749———(6,286) Net Operating income (loss), $36,668 $(4
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