UNITED FIRE GROUP INC
For the period ended Dec 31, 2024. Filed Feb 26, 2025.
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FY2024 · Filed Feb 26, 2025
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Item 7. Results of Operations
RESULTS OF OPERATIONS
The following table includes the consolidated results of our operations for the years ended December 31, 2024, 2023 and 2022, with more detailed components and discussion in the sections that follow. Discussions of the components of net income are presented on a pre-tax basis, unless otherwise noted.
Financial Highlights
| Years Ended December 31, · % Change | |||||
|---|---|---|---|---|---|
| 2024 · 2023 | |||||
| (In Thousands) | 2024 | 2023 | 2022 | vs. 2023 | vs. 2022 |
| Revenues | |||||
| Net earned premiums | $1,176,750 | $1,034,587 | $951,541 | 13.7% | 8.7% |
| Net investment income | 81,986 | 59,606 | 44,932 | 37.5 | 32.7 |
| Net investment gains (losses) | (5,429) | 1,274 | (15,892) | NM | NM |
| Other income (loss) | — | — | (295) | NM | (100.0) |
| Total revenues | $1,253,307 | $1,095,467 | $980,286 | 14.4% | 11.7% |
| Benefits, losses and expenses | |||||
| Losses and loss settlement expenses | $744,605 | $769,414 | $637,301 | (3.2)% | 20.7% |
| Amortization of deferred policy acquisition costs | 281,338 | 244,991 | 213,075 | 14.8 | 15.0 |
| Other underwriting expenses | 140,942 | 115,800 | 115,169 | 21.7 | 0.5 |
| Interest expense | 7,281 | 3,260 | 3,188 | 123.3 | 2.3 |
| Other non-underwriting expenses | 2,107 | 1,723 | (524) | 22.3 | NM |
| Total benefits, losses and expenses | $1,176,273 | $1,135,188 | $968,209 | 3.6% | 17.2% |
| Income (loss) before income taxes | $77,034 | $(39,721) | $12,077 | NM | NM |
| Income tax expense (benefit) | 15,077 | (10,021) | (2,954) | NM | NM |
| Net income (loss) | $61,957 | $(29,700) | $15,031 | NM | NM |
| GAAP Ratios: | |||||
| Net loss ratio (1) | 63.3% | 74.4% | 67.0% | (14.9)% | 11.0% |
| Expense ratio (2) | 35.9% | 34.9% | 34.5% | 2.9% | 1.2% |
| Combined ratio (3) | 99.2% | 109.3% | 101.5% | (9.2)% | 7.7% |
| Additional Loss Ratios: | |||||
| Net loss ratio (1) | 63.3% | 74.4% | 67.0% | (14.9)% | 11.0% |
| Catastrophes (4) | 5.4% | 6.2% | 7.7% | (12.9)% | (19.5)% |
| Reserve development (4) | —% | 6.0% | 0.1% | NM | NM |
| Underlying loss ratio (4) (Non-GAAP) | 57.9% | 62.2% | 59.2% | (6.9)% | 5.1% |
NM = not meaningful
(1) Net loss ratio is calculated by dividing the sum of losses and loss settlement expenses by net earned premiums. We use the net loss ratio as a measure of the overall underwriting profitability of the insurance business we write and to assess the adequacy of our pricing. Our net loss ratio is meaningful in evaluating our financial results as reported in our Consolidated Financial Statements.
(2) Expense ratio is calculated by dividing non-deferred underwriting expenses and amortization of deferred policy acquisition costs by net earned premiums. The expense ratio measures a company's operational efficiency in producing, underwriting and administering its insurance
business.
(3) Combined ratio is a commonly used financial measure of property and casualty underwriting performance. A combined ratio below 100.0
percent generally indicates a profitable book of business. The combined ratio is the sum of the net loss ratio and the underwriting expense ratio.
(4) Underlying loss ratio is defined as the net loss ratio less impacts of catastrophes and non-catastrophe prior year reserve development.
Net Written Premiums
Net written premiums is the amount charged for insurance policy contracts issued and recognized on an annualized basis at the effective date of the policy. Net written premiums is frequently used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies. Management believes net written premiums is a meaningful measure for evaluating insurance company sales performance and geographical expansion efforts. Net written premiums for an insurance company consists of direct written premiums and assumed premiums, less ceded premiums. The following shows our written premiums for the years ended December 31, 2024,2023 and 2022:
| (In Thousands) · 2024 · 2023 | |||||
|---|---|---|---|---|---|
| Years ended December 31, | 2024 | 2023 | 2022 | vs. 2023 | vs. 2022 |
| Direct written premiums | $1,177,511 | $1,061,358 | $946,169 | 10.9% | 12.2% |
| Assumed written premiums | 217,904 | 159,335 | 137,786 | 36.8 | 15.6 |
| Ceded written premiums | (163,945) | (153,792) | (99,732) | 6.6 | 54.2 |
| Net written premiums | $1,231,470 | $1,066,901 | $984,223 | 15.4% | 8.4% |
See 'Premiums' below for a description of the changes in premiums for the years presented.
Revenues
Premiums
Net earned premiums are calculated on a pro-rata basis over the terms of the respective policies. Unearned premium reserves are established for the portion of written premiums applicable to the unexpired terms of the insurance policies in force. The difference between net earned premiums and net written premiums is the change in unearned premiums and the change in prepaid reinsurance premiums. Direct earned premiums are recognized ratably over the life of a policy and differ from direct written premiums, which are recognized on the effective date of the policy. The following shows our earned premiums for the years ended December 31, 2024, 2023 and 2022:
| % Change | |||||
|---|---|---|---|---|---|
| (In Thousands) · 2024 · 2023 | |||||
| Years ended December 31, | 2024 | 2023 | 2022 | vs. 2023 | vs. 2022 |
| Direct earned premiums | 1,109,903 | 1,017,917 | 941,998 | 9.0% | 8.1% |
| Assumed earned premiums | 214,043 | 161,628 | 111,283 | 32.4% | 45.2% |
| Ceded earned premiums | (147,196) | (144,958) | (101,740) | 1.5% | 42.5% |
| Net earned premiums | $1,176,750 | $1,034,587 | $951,541 | 13.7% | 8.7% |
Direct Premiums
Direct premiums are the total policy premiums, net of cancellations, associated with policies issued and underwritten by our property and casualty insurance business. Direct premiums increased $92.0 million in 2024 as compared to 2023 and increased $75.9 million in 2023 as compared to 2022 primarily due to growth in our core commercial lines resulting from rate renewal increases, substantial new business production and stable retention.
Assumed Premiums
Assumed premiums are the total premiums associated with the insurance risk transferred to us by other insurance and reinsurance companies pursuant to reinsurance contracts. Assumed premiums increased $52.4 million in 2024 as compared to 2023 due to the addition of new programs and cedant growth, while assumed premiums increased $50.3 million in 2023 as compared to 2022 due primarily to increased reinsurance rates.
Ceded Premiums
Ceded premiums is the portion of direct premiums that we cede to our reinsurers under our reinsurance contracts. The ratio of ceded premiums to direct premiums remained flat for 2024 as compared to 2023 due to rate decreases in property offsetting rate increases in casualty. Ceded premiums increased $2.2 million in 2024 due to growth in the subject premium base. For 2023, the ratio of ceded premiums to direct premiums increased as compared to 2022, due to significant reinsurance rate increases.
Net Investment Income
Net investment income was $82.0 million for the year ended December 31, 2024, an increase of $22.4 million or 37.5% from the year ended December 31, 2023. Interest on fixed maturities increased $13.5 million or 23.9%, as a result of portfolio management actions, including investing at higher rates and the strategic re-allocation of equity securities into fixed maturity securities. This strategic re-allocation of equity securities resulted in a decrease in dividend income of $3.2 million. Income on other long-term investments was $8.0 million for 2024, compared to zero in 2023, as the valuation of the investments in limited liability partnerships varies from period to period due to the current market conditions. Interest on short-term investments, and cash and cash equivalents increased $4.8 million due primarily to an increase in money market funds resulting from the timing of investment sales and purchases.
Net investment income was $59.6 million in December 31, 2023, an increase of $14.7 million or 32.7% from the year ended December 31, 2022. Interest on fixed maturities was up $7.5 million or 15.5%, driven by higher interest rates. This was partially offset by a decrease in dividends on equity securities of $1.6 million, due to a strategic reallocation of equity securities into fixed maturity securities. Income on other long-term investments in limited liability partnerships increased $3.2 million, and other investment income increased by $5.6 million related to investment income received on FAL, short term investments, and cash and cash equivalents.
The following details our annualized yield on average invested assets for the years ended December 31, 2024, 2023, and 2022:
| (In Thousands)Years Ended December 31, | AverageInvested Assets (1) | Net InvestmentIncome | Annualized Yield onAverage Invested Assets (2) |
|---|---|---|---|
| 2024 | $1,970,404 | $81,986 | 4.2% |
| 2023 | 1,891,504 | 59,606 | 3.2% |
| 2022 | 1,992,108 | 44,932 | 2.3% |
| (1) Average Invested Assets, includes investments in money market accounts and is calculated using a simple average of the beginning and ending balances for the period | |||
| (2) Annualized Yield on Average Invested Assets is calculated by dividing Net Investment Income by Average Invested Assets. | |||
Refer to Note 2 "Investments" in Part II, Item 8 for more information on net investment income.
Net Investment Gains (Losses)
Net investment losses were $5.4 million for the year ended December 31, 2024 as compared to net investment gains of $1.3 million for the year ended December 31, 2023. The primary reason for the change relates to management actions within the Company's fixed maturity portfolio to reinvest at higher rates.
Net investment gains were $1.3 million for the year ended December 31, 2023 as compared to net investment losses of $15.9 million for the year ended December 31, 2022. The primary reason for the change was attributable to the increase in market value of investments in equity securities throughout 2023 as compared to the decrease in market value of investments in equity securities through 2022.
Refer to Note 2 "Investments" in Part II, Item 8 for more information on investment gains and losses.
Benefits, Losses and Expenses
The following shows losses and loss settlement expenses for the years ended December 31, 2024,2023 and 2022:
| (In Thousands)Years Ended December 31, | 2024 | 2023 | 2022 |
|---|---|---|---|
| Loss and loss settlement expenses excluding catastrophes and prior year reserve development | $680,243 | $773,012 | $576,725 |
| Impact of catastrophes | 63,154 | 64,152 | 73,466 |
| Impact of prior year reserve development | 1,208 | (67,750) | (12,890) |
| Loss and loss settlement expenses | $744,605 | $769,414 | $637,301 |
| Net loss ratio | 63.3% | 74.4% | 67.0% |
For the year ended December 31, 2024, our loss and loss settlement expenses were $24.8 million, or 3.2%, lower than 2023 and our net loss ratio improved 11.1 points. This was driven by improvement in the underlying loss ratio, no prior year development, and a favorable year for catastrophe losses. The underlying loss ratio improvement was driven in part by higher pricing, continued favorable frequency in most major lines, and favorable large loss experience in property and surety. Favorable results are partially offset by an increase in current and prior accident year loss estimates for other liability reflecting continued efforts to strengthen liability reserves subject to increasing economic and social inflation influences.
The Company experienced $1.0 million of favorable development in our net reserves for prior accident years for the year ended December 31, 2024, which is the result of favorable development on catastrophe losses. For non-catastrophe losses, favorable development in commercial automobile and fire and allied lines was offset by adverse development in commercial other liability. The commercial automobile favorable development of $34.5 million is a function of case-basis and IBNR reserve strengthening efforts over the last several years. Favorable development in fire and allied lines of $10.5 million is driven in part by reactions to favorable large loss experience in recent accident years. Adverse development in commercial other liability reflects the company's continued response to increased loss settlements resulting from the impact of economic and social inflation, including increased litigation activity.
In 2024, our pre-tax catastrophe losses were $63.2 million, a decrease of $1.0 million compared to $64.2 million in 2023. In 2024, our catastrophe losses included 74 events. Catastrophe losses in 2024 added 5.4 percentage points to the combined ratio, which is below our historical 10-year average of 7.2 percentage points. The Company continues to evaluate and limit our exposure in regions prone to naturally occurring catastrophic events through a combination of geographic diversification and restrictions on the amount and location of new business production in such regions. We intend to continue with targeted underwriting and rate initiatives in some regions and/or purchase additional reinsurance as necessary to reduce our exposure.
2023 Results
For the year ended December 31, 2023, our loss and loss settlement expenses were $132.3 million, or 20.7%, higher than 2022 and our net loss ratio increased 7.4 points. The primary drivers were an increase in loss and loss settlement expenses of $80.4 million in commercial lines and $48.0 million in reinsurance assumed, partially offset by $64.2 million of catastrophe losses in 2023 for our direct and assumed reinsurance business as compared to $73.5 million in 2022.
The Company experienced $67.8 million of adverse development in our net reserves for prior accident years for the year ended December 31, 2023, which is comprised of $64.2 million on non-catastrophe losses and $3.6 million on catastrophe losses. Commercial other liability lines experienced adverse development of $52.9 million primarily in our excess and surplus lines excess casualty book along with some adverse development in standard umbrella and construction defect due to increasing severity pressures. The increases in these longer tailed lines, especially in accident years 2016-2019, related to social and economic inflation, and prompted a re-evaluation of trend assumptions for more recent accident years. The commercial automobile line of business also experienced adverse development of $9.0 million related to increasing severity largely in post-COVID-19 accident years. Commercial fire and allied lines experienced adverse development of $4.4 million largely due to development on both catastrophe and non-catastrophe losses, primarily from accident year 2022. The assumed reinsurance line of business contributed an additional $3.5 million of adverse development largely driven by catastrophe losses.
In 2023, our pre-tax catastrophe losses were $64.2 million, a decrease of $9.3 million compared to $73.5 million in 2022, and a decrease of $25.2 million as compared to $98.6 million in 2021. In 2023, our catastrophe losses included 61 events. Catastrophe losses in 2023 added 6.2 percentage points to the combined ratio, which is below our historical 10-year average of 7.2 percentage points.
2022 Results
For the year ended December 31, 2022, our losses and loss settlement expenses were $14.8 million, or 2.3%, lower than 2021 and our net loss ratio decreased 0.7 points. The primary driver was a reduction in loss and loss settlement expenses of $27.0 million in personal lines related to our exit of that business. This was offset by an increase in reinsurance assumed related to our growth in that business from and a decrease in our commercial lines. In 2022, catastrophe losses were $73.5 million in our direct business and assumed reinsurance business as compared to $98.6 million in 2021.
The Company experienced $12.9 million of adverse development in our net reserves for prior accident years for the twelve-month period ended December 31, 2022. Most of the adverse development was in commercial other liability with $47.8 million and commercial fire and allied with $24.8 million adverse development. This was offset partially by favorable development on commercial automobile which contributed $56.7 million. The unfavorable development in commercial other liability and commercial fire and allied was due to paid loss and loss adjustment expense ("LAE") which was greater than reductions in reserves for unpaid loss and LAE. The favorable development for commercial automobile was from both loss and LAE where reductions of reserves for unpaid liabilities were more than sufficient to offset actual paid loss and paid LAE. Reductions in reserves for IBNR claims also contributed favorable development.
Amortization of Deferred Policy Acquisition Costs ("DAC")
The following is a summary of the components of DAC, including amortization:
| (In Thousands)Years Ended December 31, | 2024 | 2023 | 2022 |
|---|---|---|---|
| Recorded asset at beginning of year | $126,532 | $104,225 | $91,446 |
| Acquisition costs deferred | 302,017 | 267,298 | 225,854 |
| Amortization of deferred policy acquisition costs | (281,325) | (244,991) | (213,075) |
| Recorded asset at end of year | $147,224 | $126,532 | $104,225 |
DAC is amortized over the period the related premiums are earned. Amortization increased for the years ended December 31, 2024 and 2023, primarily reflecting an increase in deferred underwriting costs associated with the growth of the business.
Net Loss Ratios by Line
The following table provides our net loss ratio for the years ended December 31, 2024, 2023 and 2022:
| 2024 · 2023 · 2022 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In Thousands) · Net Earned Premiums · Net Losses and Loss Settlement Expenses Incurred · Net Loss Ratio · Net Earned Premiums · Net Losses and Loss Settlement Expenses Incurred · Net Loss Ratio · Net Earned Premiums · Net Losses and Loss Settlement Expenses Incurred · Net Loss Ratio | ||||||||||||||||||
| Commercial lines | ||||||||||||||||||
| Other liability | $343,027 | $283,034 | 82.5% | $320,762 | $249,106 | 77.7% | $302,446 | $231,587 | 76.6% | |||||||||
| Fire and allied lines | 252,142 | 125,807 | 49.9 | 244,674 | 183,533 | 75.0 | 232,156 | 204,278 | 88.0 | |||||||||
| Automobile | 239,964 | 138,517 | 57.7 | 208,874 | 176,667 | 84.6 | 208,398 | 114,296 | 54.8 | |||||||||
| Workers' compensation | 54,815 | 37,524 | 68.5 | 53,039 | 33,224 | 62.6 | 56,015 | 27,545 | 49.2 | |||||||||
| Fidelity and surety | 60,285 | 14,812 | 24.6 | 39,922 | 22,259 | 55.8 | 37,975 | 6,790 | 17.9 | |||||||||
| Other | 9,802 | 5,742 | 58.6 | 2,702 | 940 | 34.8 | 1,081 | 821 | 75.9 | |||||||||
| Total commercial lines | 960,035 | $605,436 | 63.1% | $869,973 | $665,729 | 76.5% | $838,071 | $585,317 | 69.8% | |||||||||
| Personal lines | ||||||||||||||||||
| Fire and allied lines | $14,237 | $8,325 | 58.5% | $4,733 | $3,402 | 71.9% | $4,957 | $2,959 | 59.7% | |||||||||
| Automobile | 1,214 | 732 | 60.3 | — | (837) | NM | 1 | (3,123) | NM | |||||||||
| Other | 10 | 197 | NM | 22 | (82) | NM | 50 | (1,009) | NM | |||||||||
| Total personal lines | $15,461 | $9,254 | 59.9% | $4,755 | $2,483 | 52.2% | $5,008 | $(1,173) | (23.4)% | |||||||||
| Reinsurance assumed(1) | $201,254 | $129,915 | 64.6% | $159,859 | $101,202 | 63.3% | $108,462 | $53,157 | 49.0% | |||||||||
| Total | $1,176,750 | $744,605 | 63.3% | $1,034,587 | $769,414 | 74.4% | $951,541 | $637,301 | 67.0% | |||||||||
NM = not meaningful
(1) Reinsurance assumed includes Lloyd's of London
Commercial Lines
The net loss ratio in our commercial lines of business was 63.1 percent in 2024 compared to 76.5 percent in 2023 and 69.8 percent in 2022. This result was driven by improvement in the underlying loss ratio, no prior year development compared to adverse development booked in 2023, and a favorable year for catastrophe losses.
Commercial Other Liability
We write numerous types of risk that are exposed to liability losses in our direct and assumed books of business. This includes, but is not limited to, bodily injury, property damage, standard umbrella, excess liability, and product liability (including construction defect) loss and loss adjustment expenses.
The net loss ratio increased 4.8 percentage points in 2024 compared to 2023. The Company has been strengthening reserves across our portfolio in response to increased loss settlements resulting from the impact of economic and social inflation, including increased litigation activity.
Commercial Fire and Allied Lines
The net loss ratio improved 25.1 percentage points in 2024 compared to 2023. This was driven by increased pricing and continued favorable frequency trends. In addition, large loss experience was very favorable in 2024 compared to earlier years and catastrophe experience was favorable in 2024.
Commercial Automobile
The net loss ratio improved 26.9 percentage points in 2024 compared to 2023. This was driven in part by consistent pricing increases throughout 2024 and continued favorable frequency trends associated with more restrictive underwriting guidelines and exposure appetite. Favorable prior year development also contributed in 2024 compared to 2023, given case-basis and IBNR reserve strengthening efforts over the last several years were sufficient to account for recent claim activity.
Workers' Compensation
The net loss ratio deteriorated 5.9 percentage points in 2024 compared to 2023. The Company continues to see favorable frequency trends offset by modest but positive severity pressure and medical inflation pressure. There was some prior year reserve increases in 2024 relative to 2023 due to the adjustment of ceded recovery expectations.
Fidelity and Surety
The net loss ratio improved 31.2 percentage points in 2024 compared to 2023. When surety losses occur, our loss is determined by estimating the cost to complete the remaining work and to pay the contractor's unpaid bills, offset by contract funds due to the contractor, reinsurance, and the value of any collateral to which we may have access. Significant improvement was driven by a return to longer term profitability levels and disciplined underwriting after elevated large loss activity in 2023 and 2022.
Personal Lines
The net loss ratio deteriorated 7.7 percentage points in 2024 compared to 2023, due to proportional assumed reinsurance for homeowners multi-peril coverage included in personal fire and allied lines. There is also an immaterial amount of personal lines business remaining, primarily in the state of New Jersey, with the last exposures due to certain regulatory, non-renewal limitations expected to lapse before December 31, 2025.
Reinsurance Assumed
The net loss ratio increased 1.3 percentage points in 2024 compared to 2023. Our assumed reinsurance portfolio is comprised of contracts that provide reinsurance protection to unaffiliated insurance companies. We only reinsure companies with attractive expected profitability, relevant materiality, and strong reputation. Our reinsurance business focuses on long-term relationships.
The 2024 non-catastrophe result was relatively consistent with 2023. The business is benefiting from increased pricing and tightly managed loss exposure. 2024 experienced increased catastrophe losses from one account and adverse prior year development driven by worse than expected losses associated with a few accounts.
Underwriting Expenses
The following is a summary of underwriting expenses, including the underwriting expense ratio:
| (In Thousands)Years Ended December 31, | 2024 | 2023 | 2022 |
|---|---|---|---|
| Amortization of deferred policy acquisition costs | $281,338 | $244,991 | $213,075 |
| Other underwriting expenses | 140,942 | 115,800 | 115,169 |
| Underwriting expenses | $422,280 | $360,791 | $328,244 |
| Net earned premiums | 1,176,750 | 1,034,587 | 951,541 |
| Expense ratio(1) | 35.9% | 34.9% | 34.5% |
(1) Expense ratio is calculated by dividing non-deferred underwriting expenses and amortization of deferred policy acquisition costs by net earned premiums. The expense ratio measures a company's operational efficiency in producing, underwriting and administering its insurance
business.
The increase in expense ratio in 2024 as compared to 2023 is due primarily to investments in talent to deepen expertise across the Company; accelerated development of our new policy administration system that is now poised for implementation in 2025; and increased performance-based compensation for employees and agents due to current year achievements.
The increase in expense ratio in 2023 as compared to 2022 was primarily driven by prior year changes to our employee post-retirement benefit plans. These changes provided benefits to the underwriting expense ratio that concluded at the end of 2022. Additionally, the 2023 underwriting expense ratio increased due to reinsurance premiums which were offset by our ongoing actions to sustainably reduce expenses and direct premium growth.
Interest Expenses
The following is a summary of interest expense:
| (In Thousands)Years Ended December 31, | 2024 | 2023 | 2022 |
|---|---|---|---|
| Interest paid | $7,281 | $3,260 | $3,188 |
Our long term debt obligations are $50.0 million of private placement notes issued in December 2020 and $70.0 million of senior unsecured notes issued in May 2024. Interest expense increased in 2024 due to the issuance of the senior unsecured notes in May 2024. Refer to Note 13 "Debt" in Part II, Item 8 for more information on our long term debt.
Income Taxes
The following is a summary of income tax expense (benefit), including the effective tax rate:
| (In Thousands)Years Ended December 31, | 2024 | 2023 | 2022 |
|---|---|---|---|
| Income (loss) before income taxes | $77,034 | $(39,721) | $12,077 |
| Income tax expense (benefit) | 15,077 | (10,021) | (2,954) |
| Effective tax rate(1) | 19.6% | 25.2% | (24.5)% |
(1)The effective tax rate is calculated by dividing 'Income tax expense (benefit)' by 'Income (loss) before income taxes'
Income tax expense was $15.1 million in 2024, compared with an income tax benefit of$10.0 million in 2023 and $3.0 million in 2022. The consolidated effective tax rate for 2024 was 19.6 percent, compared with 25.2 percent in 2023 and (24.5) percent in 2022. The effective tax rate for the year ended December 31, 2024 differs from the statutory rate of 21% primarily due to interest earned on tax exempt bonds.
Refer to Note 7 "Income Tax" in Part II, Item 8 for more information on the Company's income taxes, including details regarding our deferred tax assets and liabilities.
Adjusted Operating Income (See "Non-GAAP Financial Measures")
The table below shows the adjustments made to reconcile Net income (loss) to Adjusted operating earnings:
| Net Income Reconciliation | |||
|---|---|---|---|
| (In Thousands)Years Ended December 31, | 2024 | 2023 | 2022 |
| Income statement data | |||
| Net income (loss) | $61,957 | $(29,700) | $15,031 |
| Less: Net investment gains (losses), after-tax | (4,289) | 1,006 | (12,555) |
| Adjusted operating income (loss) | $66,246 | $(30,706) | $27,586 |
Adjusted operating income reported in 2024 was primarily due to an increase in net earned premiums of $142.2 million combined with a decrease in the underlying loss ratio by 4.3 points to 57.9%, a decrease in the catastrophe loss ratio of 0.8 points to 5.4%, and no prior year reserve development. In addition, net investment income increased by $23.2 million, partially offset by net investment losses due to management actions within the Company's fixed maturity portfolio to reinvest at higher rates. The underwriting expense ratio increased 1.0 point to 35.9%.
Adjusted operating loss reported in 2023 was primarily due to an increase in losses and loss settlement expenses of $132.1 million attributable to adverse reserve development of $67.8 million which added 6.0 points to the loss ratio. In addition, an increase in amortization of deferred acquisition costs of $32.0 million contributed to the operating loss. These were partially offset with an increase in net earned premiums of $83.0 million and higher investment income of $15.0 million.
Adjusted operating income reported in 2022 was primarily due to a decrease in losses and loss settlement expenses of $14.8 million attributable to a decrease in the underlying loss ratio by 5.2 points to 59.2% and a decrease in the catastrophe loss ratio of 2.5 points to 7.7%. This was partially offset by a decrease in net earned premiums of $11.3 million and increased net investment losses on the portfolio due to $12.8 million of unrealized losses on equity securities held as of the end of the year.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.