UFCS Posts Record Year-to-Date Earnings as Q3 Premiums Rise 13%

UFG Insurance reported record net income and earnings per share for the first nine months of 2026, while return on equity reached 14%, its highest level in nearly 20 years. The insurer also posted 13% growth in third-quarter net written premium and a 94.6% combined ratio, its best quarterly underwriting result of 2026.

The year-to-date combined ratio improved by 0.7 percentage points to 95.2%, the company’s best result in more than a decade. UFG attributed the improvement to a lower expense ratio and catastrophe loss ratio. Third-quarter catastrophe losses were also well below five- and 10-year historical averages, which the company said reflected ongoing efforts to manage its catastrophe risk profile.

Third-quarter net written premium increased to $371 million from $328 million a year earlier. The 94.6% combined ratio was higher than the exceptionally strong 91.9% recorded in the third quarter of 2025 but improved from 95.3% in the preceding quarter.

The third-quarter underlying loss ratio, a non-GAAP measure excluding catastrophe losses and non-catastrophe prior-year reserve development, was 57.3%, compared with 56.0% a year earlier. UFG said the increase primarily reflected lower favorable impacts than in the prior-year quarter. For the first nine months, the underlying loss ratio rose by 0.5 percentage points, mainly because of assumed reinsurance market conditions.

The quarterly underwriting expense ratio was 34.9%, slightly above 34.6% a year earlier because of normal quarter-to-quarter variability. On a year-to-date basis, the ratio improved by 0.7 percentage points as business growth and operating efficiencies helped absorb expenses.

Core commercial business leads premium growth

Core commercial net written premium increased 13% in the third quarter to $253 million. UFG said strengthened distribution relationships, deeper underwriting expertise and expanded capabilities provided broader access to new business opportunities, while the company maintained disciplined risk selection.

Core commercial new business totaled $67 million, unchanged from the prior-year quarter, while retention was 85%, compared with 86% a year earlier and 83% in the second quarter. Average renewal rate increases continued to moderate, with the overall core commercial rate at 2%, down from 5.8% in the third quarter of 2025. UFG cited continued pressure on property pricing, while umbrella rate increases also moderated but remained in the upper-single-digit range.

Within core commercial, small-business retention was 88% and its average rate increase was 3%. Construction retention reached 85%, with a 2% rate increase, while middle-market retention was 84% and its rate increase was 1%. Middle-market new business rose to $20 million from $16 million a year earlier.

Alternative distribution net written premium climbed to $94 million from $77 million. The company said growth reflected disciplined selection of opportunities where targeted profitability could be achieved. Specialty net written premium rose to $11 million from $10 million, while surety premium was unchanged at $14 million. UFG noted that specialty and surety results can vary by quarter, although both businesses grew on a year-to-date basis.

Higher fixed-income returns support investment income

UFG ended the quarter with $2.5 billion of invested assets, 90% of which were held in fixed-income securities. The fixed-maturity portfolio had an average credit rating of AA-, and 97% of those holdings were investment grade.

Net investment income increased to $29 million from $26 million a year earlier. Fixed-maturity income rose 25%, supported by portfolio growth and reinvestment at yields above the portfolio average. The total pre-tax portfolio yield reached 4.7%, while the yield on new purchases was 5.6%, approximately 100 basis points above the overall portfolio yield.

The company said the portfolio’s duration was slightly below four and a half years, leaving it positioned to reinvest at higher rates. Other long-term investments, including limited partnerships, produced positive third-quarter returns, although those returns were below the prior-year period; they remained favorable for the year to date.

Adjusted book value per share, which excludes net unrealized investment gains and losses after applicable taxes, increased to $40.94. Reported book value per share declined to $36.51 as higher market interest rates expanded the unrealized loss position. UFG said the increase in unrealized losses was solely attributable to interest-rate movements and that the fixed-income portfolio recorded no impairments.

Management’s outlook remains subject to underwriting, catastrophe, reinsurance and investment-market uncertainty. In particular, the presentation identified moderating commercial property rates, assumed reinsurance market conditions and interest-rate-driven changes in unrealized investment losses as factors affecting reported results and balance-sheet measures.