Good day, and welcome to the United Fire Group, Inc. 2024 Fourth Quarter Conference Call. All participants will be in a listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Tim Borst, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining this call. Yesterday afternoon, we issued a press release on our results. To find a copy of this document, please visit our website at ufginsurance.com. Press releases and slides are located under the agenda call. Our UFG President and Chief Executive Officer, Kevin Leidwinger, Executive Vice President and Chief Operating Officer, Julie Stephenson, and Executive Vice President and Chief Financial Officer, Eric Martin. Before I turn the call over to Kevin, a couple of reminders. First, please note that our presentation today may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. 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. The company cautions investors that any forward-looking statements include risks and uncertainties and are not a guarantee of future performance. Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made. These forward-looking statements are based on management's current expectations. Actual results may differ materially due to a variety of factors, which are described in our press release and SEC filings discussed specifically in our most recent annual report on Form 10-K. Also, please note that in our discussion today, we may use some non-GAAP financial measures. Reconciliations of these measures to the most comparable GAAP measures are also available in our press release and SEC filings. At this time, I will turn the call over to Mr. Kevin Leidwinger, CEO of United Fire Group, Inc.

Thank you, Tim. Good morning, everyone, and welcome to our fourth quarter conference call. I will begin this morning by providing a high-level overview of our results. Following my comments, Julie Stephenson will discuss our underwriting results, and Eric Martin will discuss our financial results in more detail. In 2024, we achieved the highest level of net written premium in the company's 79-year history. In addition, we produced the best annual combined ratio and the highest adjusted operating income since 2000. These milestones reflect the actions we have taken over the past two years to deepen our expertise, evolve our capabilities, better align with our distribution partners, and improve our investment returns. While 2024 marked a return to underwriting profitability for United Fire Group, Inc., our work is far from finished. Our target appetite and portfolio strategy has come together more clearly with our new leadership on board. Alternative distribution delivered diversifying and profitable business volume. The fourth quarter underlying loss ratio of 55.7% improved 4.3 points from the fourth quarter of 2023, continuing the improvement seen throughout the year driven by strong earned rate achievement and continuing favorable frequency trends. The quarter's results also reflect some adjustments associated with our surety and umbrella portfolios. Throughout 2024, following unfavorable experience in surety, we had been reflecting a conservative view of this experience in 2022 and 2023. But as the year closed out, we reduced our current year reserves significantly to fully reflect the improved results seen throughout 2024. We are very pleased that our efforts to restore this portfolio to its historical profit levels are beginning to be realized. An offsetting action was taken in the current year for our commercial umbrella portfolio. While there are no early signs of adverse experience in the current year, due to the late…

We are very pleased with the strong improvement we made with our investment portfolio during 2024. Over the past three quarters, we have taken actions to improve the risk-adjusted returns of our investment portfolio which improved our annualized book yield more than 80 basis points with a minimal amount of realized losses. Over the course of 2024, we invested nearly $900 million of fixed maturity assets or approximately 45% of our fixed maturity portfolio with an average new money yield of approximately 5.5% which was more than 150 basis points higher than the annual total portfolio yield. At the same time, we improved the quality of the portfolio from AA- to AA, while maintaining the duration of our portfolio at approximately four years. As a result, total net investment income was $23.2 million in the fourth quarter, up $4.1 million or 21% compared to the fourth quarter of 2023. Due to strong improvement in fixed maturity income, full-year net investment income grew to $82 million in total, supported by 24% growth in annual fixed maturity income that increased to $70 million. We expect that to grow by $10 million to $80 million in 2025 with potential for further improvements from reinvestments at higher rates. In addition, the results from our limited partnership portfolio performed well during 2024, returning approximately 8%. Turning to the expense ratio, as we have discussed previously, the company has made investments in talent and technology to support long-term profitable growth. Improved business performance in the current year resulted in increased performance-based compensation costs for employees and agents that began impacting our expense ratio in the third quarter, and drove the year-over-year increases seen in the fourth quarter and full-year underwriting expense ratio. While we are happy to share the company's success with our employees and agents, in no way do these results diminish our intense focus on improving the expense ratio. Fourth quarter net income was $1.21 per diluted share, and $2.39 for the full year. Non-GAAP adjusted operating income was $1.25 per diluted share for the fourth quarter and $2.56 for the full year. This year's earnings improved book value per common share to $30.80. Adjusted book value per share, which excludes the impact of unrealized investment losses, grew $1.95 in 2024 to $33.64 at year-end. From a capital management perspective, during the fourth quarter, we declared and paid a $0.16 per share cash dividend to shareholders of record as of November 29, 2024. This concludes our prepared remarks. I will now have the operator open the line for questions. The first question comes from Paul Newsome with Piper Sandler.

Good morning. Congratulations on the fourth quarter and the year. I want to start off with looking just at the fourth quarter as kind of a run rate for profitability. Anything that we should be calling out either way that would be an important adjustment? And on that topic, you did mention there's a $3.2 million reversal of the contingent. Was that actually in the fourth quarter? So you got an example of a one-time benefit that we would attend.

Good morning, Paul. This is Eric. That's right. We do have a quarter here, which I would call out as a one-time item, a benefit of $3.2 million pre-tax in the fourth. Otherwise, really not. I think the other things are pretty well run rate as we see it. You know, we've called out the expense ratio as being a little bit elevated here. But that we will continue to work on that as we go through time here.

Right. And maybe as a second question, a lot of conversations about trying to get ahead of social inflation, cashier reserves, which is obviously an issue for the entire industry. But I was thinking about this from an appetite perspective for new business. Does this push you, you know, more towards property or less casualty? I realize you're kind of a package product company, so I do not know if this changes the business mix given your more conservative view on casualty from transfer.

Hey, Paul. It's Julie. Certainly, it has an impact on our choices around appetite. We find ourselves leaning in the casualty space towards less public exposed risks. We're very careful with limit management, capacity management when it comes to those risks we think are more likely to see social inflationary impacts. We certainly want to grow the property portfolio, and through this last reinsurance cycle, actually achieved greater property capacity in our treaty, which we're really pleased about. That'll allow us to take on some more sophisticated property risks. So I think it's efforts on both fronts. So appropriate mix and appropriate appetite with social inflation always on our sites.

And then finally, could you talk a little bit about your appetite for the reinsurance business? Talk about January first renewals being a little bit weaker for the whole industry. How do you think about your current appetite in the food transportation?

Paul, I think you're asking about our alternative distribution appetite.

Yeah. I think that's all reinsurance, if I have. What is she Yeah. I didn't know if you're asking about our ceded reinsurance program or about alternative distribution.

You know, we feel really good about that. Go ahead.

I tend to think of it all as one big pot. But, yeah, just go ahead, please.

Sure. As you know, our alternative distribution portfolio is made up of seven channels, and we are looking to grow all seven of those channels, but for probably the retrocession channel. I'm sort certainly in standard treaty, which is the largest channel in alternative distribution, feel good about the opportunities available to us in the marketplace where we can get the margin that we're looking for. It is our second largest business unit at United Fire Group, Inc. currently. And we feel good about our prospects.

Appreciate the help as always. Thank you. Seeing that there are no further questions in the queue.

This concludes our question and answer session. I would like to turn the conference back over to Kevin Leidwinger, Chief Executive Officer, for any closing remarks.

Thank you. And as you can tell from this morning's discussion, we're quite excited about the progress we're making at United Fire Group, Inc., and we look forward to talking with you again next quarter.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.