United Fire Group, Inc. 2021 Annual Report
About UFG Insurance
Founded in 1946, UFG is a successful publicly traded and multibillion-dollar-asset insurance company. We offer
commercial insurance for businesses as well as surety bonds.
UFG partners with a select group of approximately 1,000 independent insurance agencies across the country.
With more than 1,000 employees at our corporate headquarters in Cedar Rapids, Iowa, and five regional offices in
Arizona, California, Colorado, New Jersey and Texas, we deliver insurance protection and services to
policyholders throughout the U.S.
At UFG, we are committed to achieving long-term financial strength and
stability, using our more than 75 years of experience to successfully
guide us through market cycles and industry challenges. We hold a
financial strength rating of “A” (Excellent) from AM Best Company,
which was affirmed in December 2021.
Annual Meeting of Shareholders
United Fire Group, Inc.’s (UFG) annual meeting of shareholders will be held at 10 a.m. CT on Wednesday, May 18,
2022. The meeting is being held virtually online via live audio webcast, from the company's headquarters at 118
2nd Ave SE, Cedar Rapids, IA 52401. You will be able to attend virtually, submit questions and vote online by
logging on to www.meetnow.global/M4LJAGL. Our Annual Report on Form 10-K for 2021 is filed with the
Securities and Exchange Commission and is available (without exhibits) to shareholders, free of charge, upon
written or oral request to:
Investor Relations
United Fire Group, Inc.
118 Second Avenue SE
Cedar Rapids, Iowa 52401
Telephone: 319-399-5700
or
Registrar and Transfer Agent
Computershare
P.O. Box 505000
Louisville, KY 40233-5000
Letter to Shareholders
In last year’s letter, after a disappointing 2020, I
wrote that we aspired to deliver greatly improved
results in the year ahead at UFG, confident that we
were on the right path forward for our future. Today,
I’m extremely pleased to share that we did just that
in 2021, producing net income of $3.16 per diluted
share, a combined ratio of 100.3% and return on
equity of 9.5% — our highest in six years.
As a company, we transitioned from one of the worst
years in our history in 2020 to a solidly good year in
2021. With a fourth quarter combined ratio of 83.1%,
our lowest in over 14 years, and a year-over-year
increase in statutory surplus of 12.3% to $754
million, we were able to finish the year on a
particularly high note.
Other 2021 financial highlights included continued
core loss ratio improvement, which dropped 24.5
percentage points in the fourth quarter and 8.0
percentage points for the full year, as compared to
the same periods of 2020. The line of business with
the most significant loss ratio improvement was
commercial auto, with year-over-year improvements
of 68.1 percentage points in the fourth quarter and
25.1 percentage points in the full year of 2021.
Commercial auto
in
the past
recent years
The commercial auto line of business that has
performed poorly
improved
significantly in 2021, thanks to the ongoing efforts of
our people. Over
two years, our
underwriting and claims teams have worked together
to return this line of business to profitability through
non-renewal of underperforming accounts, initiating
aggressive rate increases, utilizing specialized claims
adjusting, establishing
reserves accurately and
efficiently, and reducing legal costs by staying out of
court.
In 2021, these efforts paid off, resulting in a decrease
in the frequency and severity of commercial auto
losses, a reduction in commercial auto exposure
favorable prior-accident-year
units and
reserve
development. At the end of 2021, commercial auto
accounted for 24% of our portfolio composition,
compared to 28% at the end of 2020.
We are working toward an optimal portfolio mix in
the 20% range for commercial auto. As a writer of
package policies for business owners, commercial
auto is an important coverage that our customers
need, but we intend to be very selective when
putting commercial auto on our books, avoiding
classes of business that are heavy in auto.
2021: A YEAR OF PROGRESS
All in all, we made great, measurable progress in
2021. This is thanks to our resilient people — who
never skipped a beat amid the pandemic — and their
successful execution of our “One UFG: Boldly
Forward” strategic plan, designed to position us for
superior operational and financial performance. We
understood that a plan of this scale would take time
to implement, and we’re proud of our progress to
date and are confident of our path forward.
Since its implementation, the strategic plan has
touched nearly every aspect of our business. We’ve
made considerable headway in implementing more
consistent underwriting practices; better diversifying
our book of business; reducing our commercial auto
portfolio; growing our historically profitable business
segments; shortening the claims cycle time; and
leveraging analytics
risk
selection and claims handling.
improved pricing,
for
I’ll take this opportunity to provide a more in-depth
overview of the strides we’ve made toward our three
strategic pillars of long-term profitability, diversified
growth and continuous innovation.
Long-term profitability
A key factor to long-term profitability is reducing our
underwriting volatility at UFG, which we aim to
achieve by limiting our exposure to the level of
catastrophe losses we’ve experienced in recent
quarters. Though catastrophe losses were down in
the fourth quarter, they added 10.2 percentage
points to the combined ratio for the full year of 2021,
compared to our 10-year historical average of 7.3
percentage points.
Efforts to limit our exposure to catastrophe losses
began with our announced exit from the personal
lines market in May 2020. Today, our personal lines
exit is materially complete, accomplished through a
renewal rights agreement, which provided our
independent insurance agents the opportunity to
transfer their personal lines policies to Nationwide
Mutual Insurance Company. This has proven to be a
good decision for UFG, reducing our personal lines
exposure to catastrophe losses and allowing us to
United Fire Group, Inc. 2021 Annual Report
focus on our core commercial lines business for the
future.
In addition to the personal lines exit, we've taken
steps to strategically diversify our book of business
with
less catastrophe-exposed business. This
includes growing our surety, excess and surplus,
inland marine and assumed reinsurance business,
which have been historically profitable segments for
UFG.
More recently, we restructured our 2022 catastrophe
reinsurance program to provide better protection
from both an occurrence and an aggregate loss
perspective. Through our new aggregate program,
we now have named storm protection for aggregate
losses, in addition to other perils. In prior years,
named storms were excluded from our aggregate
catastrophe protection.
Within the new structure, our retention for each
catastrophe occurrence is reduced. The mechanics
of the structure provides the potential for additional
reduction in catastrophe retention for occurrences
subsequent to an initial loss to the program.
Diversified growth
In the growth pillar of our strategic plan, we believe
we are now managing our portfolio to tightly fit our
risk appetite across all underwriting branches of
UFG, with leading data and analytic tools to assist
our underwriters in making effective coverage and
pricing decisions.
the
full-year 2021, net premiums earned
For
decreased 8.7%
to $962.8 million. This was
anticipated as we took steps to rightsize our book of
business and reduce our commercial auto exposure.
Our exit
lines market also
contributed to the decrease in net premiums earned,
accounting for roughly half of the reduction.
from the personal
Overall, the average renewal pricing increase was
6.4% in 2021. Excluding the workers' compensation
line of business, the overall average renewal pricing
increase was 7.7%. This increase in pricing was
driven by our commercial auto and commercial
property lines of business. For the full year of 2021,
the commercial auto average renewal rate increase
was 9.5% and the commercial property average
renewal rate increase was 8.7%.
Strategic
include
initiatives currently underway
promoting a clearly defined risk appetite to our
existing agency partners, appointing new agents that
align with our business mix, and scaling profitability
lines and business
in targeted states, product
segments
through mutually beneficial agency
partnerships.
In 2022, we plan to pursue profitable growth
opportunities that diversify UFG’s portfolio, reduce
volatility in our underwriting results and expand our
profit margin. All backed by our strong underwriting,
disciplined pricing and exceptional service —
everything we are known for at UFG.
We also plan to continue to expand our surety bonds
and excess and surplus lines of business in 2022.
Since announcing our intent to grow our assumed
late 2020, we have
in
reinsurance business
broadened our market scope, entering into several
new reinsurance agreements with trusted partners to
further diversify our portfolio.
Continuous innovation
to deliver
At UFG, we are committed to cultivating a culture of
teams and
continuous
innovation across our
increased
adopting agile practices
efficiency, expanded digital capabilities, improved
customer experiences and shorter time to market.
From investing in new technology to make doing
business with us as simple as possible to deploying
analytics throughout our enterprise for more data-
to
informed decision-making, we’re working
empower our people
into
ideas
innovative solutions and opportunities.
their
turn
to
In 2021, we successfully launched our new small
business online quoting platform in seven states,
with plans to roll it out in five additional states in
2022. Our new platform offers an enhanced and
streamlined online quoting experience for multiple
lines of business, built based on direct feedback
from our agent partners.
With our new platform and accompanying
businessowners policy (BOP) product line, we aim to
increase our straight-through processing of small
business policies and provide our agents with the
low-touch/no-touch service they desire for this type
of business. Once it is fully launched, we believe this
new platform will propel our growth in the small
commercial market.
2022: A YEAR OF REFINEMENT
While we are very pleased with the year’s progress,
we view it as the beginning of more progress to
come as part of our ongoing transformation at UFG.
2021 has provided us with strong validation that the
path we’re on is the right one, with numerous
initiatives in place to keep our company moving
boldly forward.
In the year ahead, we aim to stay the course,
continuing to refine our strategy and sharpen our
focus. Our overarching objectives remain to
consistently deliver industry leading financial results,
United Fire Group, Inc. 2021 Annual Report
and fulfill our vision, mission and values for the
benefit of all UFG stakeholders, including our
shareholders, employees, agents and policyholders.
Heading into 2022, our balance sheet remains strong
as of December 31, 2021, with $3.0 billion in total
assets, $879 million of total stockholders’ equity,
$754 million in statutory surplus and a conservative
investment portfolio. I’m also pleased to share that
AM Best affirmed our “A”
financial
strength rating for the 28th year in a row in
December 2021, a reflection of the strength of our
balance sheet.
(Excellent)
In 2021, we paid total quarterly dividends of $0.60
per share, returning $15 million to our shareholders
over the course of the year. UFG has a more than
50-year history of paying dividends
to our
shareholders, with
fourth quarter of 2021
marking our 215th consecutive quarter.
the
Longtime board member retiring
After 24 years on the UFG board of directors, our
longtime director Mary K. Quass will be retiring on
May 18, 2022. I thank Mary for her committed
service, valuable insights and unwavering integrity. I
had the privilege to work closely with Mary for over a
decade in her role as chair of our compensation
committee and always valued her strong business
sense and sound judgment.
the
two
appointment of
In light of Mary’s retirement, our board of directors is
taking steps to enhance its expertise, recently
announcing
new
independent members: Mark Green and Matthew
Foran. Currently Mark Green is an operating partner
at Vistria Group, a private equity firm in Chicago, IL.
Green has an extensive background in the insurance
sector. Prior to joining Vistria Group in 2021, he
served as executive vice president of business
development and reinsurance, and executive vice
president and president of life and health at Kemper
Corporation. Green gained valuable experience in
various roles at Allstate Corporation, including as
vice president and senior vice president at Allstate
Financial, president of Ivantage, president of Allstate
Dealer Services, and president of Encompass
Insurance Company. Prior to joining Allstate, Green
worked for various other companies in the insurance
industry.
Matthew Foran is co-founder and president of Stoic
Lane, Inc., a private holding company in Chicago, IL.
His strengths include his extensive experience in the
insurance technology sector. Prior to co-founding
Stoic Lane, Inc., he led the alternative distribution
division of The Hartford Insurance Group. Foran’s
background includes serving as leader of IVANS
Marketplace at Applied Systems; CEO at EvoSure,
LLC, an insurance technology company; director of
strategy and operational planning and execution at
in a business
Zurich North America; and
development role at Marsh USA, Inc.
My upcoming retirement as CEO
This past February, I announced my plans to retire
after nearly 40 years at UFG, making this my last
shareholder letter to you. Though I have plenty of
help drafting this letter each year, summing up an
entire year is difficult, and I always worry that I left
something or someone out.
My career that began as a desk underwriter at UFG
back in 1984 will officially come to a close on
October 31, 2022. Though my departure
is
bittersweet, after 15 years as CEO, the time is right
for me to retire and give a new leader the opportunity
to lead our business — and our people — forward.
It has been a true honor to serve as CEO and I am
proud of the growth and success of UFG during my
tenure. Over these past 15 years, we’ve overcome
challenges, experienced successes, celebrated
milestones and even survived both a flood and a
derecho at our corporate headquarters — a
testament
to our outstanding staff members,
management team and board of directors.
United Fire Group, Inc. 2021 Annual Report
In the months ahead, I am looking forward to
winding down what has been an incredibly rewarding
career with the most incredible and talented people
in this industry. All of our success at UFG is due to
our people, who live our vision of striving to always
deliver on our promises, each and every day.
As CEO, it has been my promise to lead UFG with
the kind of forethought that will continue to move the
needle of success in a positive direction for our
shareholders, employees, agents, policyholders, and
communities. As a company, I’m proud to say we
moved the needle of success in 2021 — and we
intend to keep moving it in a positive direction for
our future.
in us over
In closing,
I personally thank you, our valued
shareholder, for the trust and confidence you have
placed
the years. Together, as
shareholders, we can look forward to reading next
year’s letter, to be penned by UFG’s new CEO, who
will serve as the sixth leader in our company’s more
than 75-year history.
Here’s to a successful future for UFG in 2022 and
well beyond.
Randy Ramlo, President & CEO
UNITED FIRE GROUP, INC.
United Fire & Casualty Company
Addison Insurance Company
Financial Pacific Insurance Company
Franklin Insurance Company
Lafayette Insurance Company
Mercer Insurance Company
Mercer Insurance Company of New Jersey, Inc.
UFG Specialty Insurance Company
United Fire & Indemnity Company
United Fire Lloyds
118 Second Ave. SE, Cedar Rapids IA 52401, 319-399-5700, ufginsurance.com
Disclosure of Forward-Looking Statements
This release 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 1934 for forward-looking statements. The forward-looking
statements are not historical facts and involve risks and uncertainties that could cause actual results to differ from
those expected and/or projected. Such forward-looking statements are based on current expectations, estimates,
forecasts and projections about the Company, the industry in which we operate, and beliefs and assumptions
made by management. Words such as "expect(s)," "anticipate(s)," "intend(s)," "plan(s)," "believe(s)," "continue(s),"
"seek(s)," "estimate(s)," "goal(s)," "remain(s) optimistic," "target(s)," "forecast(s)," "project(s)," "predict(s),"
"should," "could," "may," "will," "might," "hope," "can" and other words and terms of similar meaning or
expression in connection with a discussion of future operations, financial performance or financial condition, are
intended to identify forward-looking statements. These statements are not guarantees of future performance and
involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results
may differ materially from what is expressed in such forward-looking statements. Information concerning factors
that could cause actual outcomes and results to differ materially from those expressed in the forward-looking
statements is contained in Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended
December 31, 2021, filed with the Securities and Exchange Commission ("SEC") on February 25, 2022. The risks
identified in our Annual Report on Form 10-K and in our other SEC filings are representative of the risks,
uncertainties, and assumptions that could cause actual outcomes and results to differ materially from what is
expressed in the forward-looking statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this release or as of the date they are made.
Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any
intention or obligation to update publicly any forward-looking statements, whether as a result of new information,
future events, or otherwise.