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    UFCS
    Earnings call· Jun 2026(Q2 FY26)

    UNITED FIRE GROUP Q2 FY26 earnings call UFCS

    Aug 4, 2026 Source

    Executive summary

    United Fire Group Q2 FY26 — Exceptional Performance Driven by Underwriting and Investment Income

    United Fire Group delivered an exceptional second quarter, marked by its best combined ratio in over 15 years and record net income, driven by disciplined underwriting and strong investment income. The company's strategic transformation efforts are yielding sustained improvements, positioning it for continued profitable growth despite moderating rate achievement and competitive pressures in certain lines. Management remains confident in its ability to navigate evolving market conditions and create long-term value.

    Highlights

    5

    • Achieved best second quarter combined ratio in more than 15 years, reflecting disciplined underwriting.

    • Delivered record net income and record net written premium in the quarter.

    • Investment income reached its highest quarterly level in over a decade, growing 33% YoY to $29 million.

    • Reported a 13.2% return on equity for the first six months of 2026, marking the best year-to-date financial performance in 20 years.

    • Q2 catastrophe loss ratio was 2.7%, 2.8 points below prior year and well below historical averages.

    Concerns

    4

    • Property rates remained under pressure during the quarter.

    • Experienced modest pressure in general liability rates.

    • Net written premium in specialty, excess, and surplus lines declined due to increased competition for larger accounts.

    • Average renewal rate change moderated to 2.9%, reflecting ongoing competitive market conditions.

    Guidance & targets

    2
    CategoryTargetConfidence
    Expense ratio improvement
    0.5 to 1.0 point reduction
    medium materiality
    High
    Full year catastrophe loss ratio estimate
    5%
    medium materiality
    High

    Segment performance

    1
    SegmentRevenueYoYQoQMargin
    Alternative Distribution
    Growth reflects the strong January 1 treaty and FAL renewal cycle, demonstrating the value of the diversified distribution platform. This business is well positioned to support prudent growth through varying market cycles.
    Net written premium growth: 13% YoY
    		—13%——

    Operational metrics

    13
    Net investment income
    $29 millionup 33% YoY
    Q2 FY26

    Highest investment income since the sale of life insurance operations in 2016.

    Fixed maturity portfolio growth
    16%
    past year

    Improved underwriting profitability fuels growth in investment income.

    New money yields
    5.1%exceeds overall portfolio average by 50 bps
    Q2 FY26

    Elevated interest rate environment provides opportunities to sustainably increase portfolio returns.

    Limited partnership investments return
    $2.3 million
    Q2 FY26

    From a portfolio of approximately $100 million.

    Limited partnership investments annualized yield
    8.7%
    past eight quarters

    Consistent performance from this portfolio.

    Expense ratio
    35.4%up 0.5 pts YoY
    Q2 FY26

    Includes a small one-time increase from actions to buy out a lease on a building in Houston, which will reduce lease costs on a go-forward basis. Recent run rate was 35%.

    Net income per diluted share
    $1.29
    Q2 FY26

    Contributed to improved book value per common share.

    Adjusted operating income per diluted share
    $1.30
    Q2 FY26

    Non-GAAP measure.

    Unrealized loss position increase
    $4 millionfrom Q1 FY26
    Q2 FY26

    Caused by an increase in interest rates, negatively impacting book value per share by 15 cents.

    Cash dividend per share
    $0.20
    Q2 FY26

    Declared and paid to shareholders of record as of June 5, 2026.

    Authorized shares for buyback
    2 million
    ongoing

    Management considers buyback as the third priority after capital for growth and the dividend.

    Underlying loss ratio
    57.2%slight improvement from prior year
    Q2 FY26

    Consistent with first quarter results. Performance improved across core lines of business, partially offset by impacts from assumed reinsurance.

    Current accident-year catastrophe loss ratio (ex-benefit)
    6%
    Q2 FY26

    Excluding the benefit from favorable development on prior period events, this result is still comfortably below historical averages and in line with expectations.

    Industry KPIs

    9
    MetricValueDetails
    Combined ratio—
    Capital returns$0.20 per share dividendUSD
    ROE operating ROE13.2%%
    Catastrophe losses2.7%%
    Book value per share$38.02USD
    Net investment income$29 millionUSD
    Net premiums written earnedincreased 9%%
    Renewal rate change pricing2.9%%
    Prior year reserve developmentneutral overall

    Risks & headwinds

    4
    Property rates under pressureQ2 FY26

    under pressure

    Mitigation: Disciplined risk selection and appropriate pricing.

    Modest pressure in general liability ratesQ2 FY26

    modest pressure

    Mitigation: Disciplined risk selection and appropriate pricing.

    Increased competition in specialty, excess, and surplus linesQ2 FY26

    Net written premium declined

    Mitigation: Focus on moderate hazard opportunities and retaining well-performing, adequately priced accounts to support a balanced portfolio.

    Moderating rate achievement in the marketpast several quarters

    average renewal rate change was 2.9%

    Mitigation: Portfolio actions, underwriting discipline, and established pricing and risk selection rigor enable selective pursuit of opportunities.

    What to watch in Q3 FY26

    5

    Expense Ratio Improvement

    next year
    Current35.4% (Q2 FY26)
    Target0.5 to 1.0 point reduction per year

    Why it matters

    Demonstrates efficiency gains from technology investments and operational actions, impacting profitability.

    We expect future expense ratio improvements of a half point to a full point per year.

    Q&A highlights

    4

    How much of the commercial auto loss ratio is related to social inflation and enhanced judgment costs, and what rate is needed to meet targets?

    The auto portfolio is not heavily exposed to social inflation, as it primarily consists of middle market, construction, and small business, rather than heavy wheels or trucking. Management believes they are still achieving attractive rates despite some moderation.

    “There's not a lot of social inflation in our auto risk profile. heavy wheels business or the trucking business so mostly associated with our middle market construction and small business portfolios which are you know on the smaller to mid-size of middle and construction so not a lot of impact from social inflation for us and we feel like we're still getting attractive rates.”

    asked by Jason Weaver · answered by Julie Stephenson

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Transformation Success

    United Fire Group's strategic actions, including deepening underwriting expertise, evolving capabilities, strengthening distribution partnerships, and improving investment performance, are driving sustained improvements. These efforts led to the best second-quarter combined ratio in over 15 years, record net income, and the highest investment income in over a decade. The company's H1 2026 return on equity of 13.2% represents its best year-to-date financial performance in 20 years, highlighting progress in building a more profitable and resilient organization.

    02

    Underwriting Discipline and Portfolio Management

    The company achieved a strong combined ratio through disciplined risk selection, appropriate pricing, and successful catastrophe management. Policies written from 2024 through Q2 2026 now constitute over 50% of the portfolio, performing well and meeting expectations. The renewal portfolio has been thoroughly pruned through current underwriting guidelines, giving management high confidence in the overall portfolio's quality and performance.

    03

    Robust Investment Performance

    Net investment income grew 33% in the second quarter to $29 million, marking the highest quarterly level since 2016. The fixed maturity portfolio expanded approximately 16% over the past year, fueled by improved underwriting profitability. New money yields of 5.1% continue to exceed the overall portfolio average by approximately 50 basis points, capitalizing on the elevated interest rate environment. Limited partnership investments also contributed positively, generating $2.3 million in the quarter with an 8.7% annualized yield over the past eight quarters.

    04

    Market Conditions and Growth Strategy

    While the average renewal rate change moderated to 2.9% due to competitive conditions, particularly in property and general liability, strong double-digit rate increases were observed in Umbrella. Despite softening market conditions, UFG expects to continue growth by leveraging expanded capabilities and deepened expertise, which provides a wider pool of opportunities. The company remains committed to underwriting discipline and pricing exposures appropriately to achieve scale throughout the current market cycle.

    05

    Reserve Adequacy and Catastrophe Management

    Prior year reserve development was neutral overall in the second quarter, with actuarial reviews indicating generally favorable emergence. Favorable development in automobile, property, and workers' compensation was redeployed to maintain a conservative position in longer-tail liability lines, which are still viewed with caution. The Q2 catastrophe loss ratio was 2.7%, significantly below historical averages, reflecting the positive impact of actions taken to improve the catastrophe risk profile. The half-year catastrophe result of 3.3% is trending favorably to the full-year estimate of 5%.

    AI-generated summary of the company’s earnings call. Not investment advice.