Greetings and welcome to the United Fire Group Second Quarter 2013 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Anita Novak, Director of Investor Relations for United Fire Group. Thank you. Ms. Novak, you may now begin.

Thank you, Jessie. Good morning, everyone, and thank you for joining this call. Earlier today, we issued a news release on our results. To find a copy of this document please visit our website at www.unitedfiregroup.com. Press releases will be located under the Investor Relations tab. Our speakers today are Randy Ramlo, President and Chief Executive Officer; Mike Wilkins, Executive Vice President; and Dianne Lyons, Vice President and Chief Financial Officer. Other members of our executive team are also available for the question-and-answer session that will follow our prepared remarks. Please note that our presentation today may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The company cautions investors that any forward-looking statements include risks and uncertainties and are not a guarantee of future performance. These forward-looking statements are based on management’s current expectations and we assume no obligation to update them. The actual results may differ materially due to a variety of factors, which are described in our press release and subsequent SEC filings. Please also 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 available in our press release and subsequent SEC filings. At this time, I’m pleased to present Mr. Randy Ramlo, President and Chief Executive Officer of United Fire Group.

Thank you, Anita. Good morning, everyone, and welcome to United Fire’s second quarter conference call. I’m pleased to report another strong quarter and that United Fire's results remain well within our expectations for 2013. Operating income was $0.50 per share and net income was $0.60 per share. Our combined ratio was 99.5%. year-to-date operating income was $1.34, net income was $1.49 per share and our combined ratio was 95%. Net investment income was $55.5 million or $1.42 per share. Like many of our peers, our book value declined somewhat from first quarter however, at $29 per share. It will still exceed our December 31, 2012 book value of $28.90 per share. Our annualized return on equity at June 30 was 10.4%. We continue to get rate increases in most lines of business. Policy retention remained strong and within our comfort range and we're seeing a fair amount of new business opportunities. Net written premiums in the Property and Casualty segment increased 10.1% during the quarter and 8.9% year-to-date. Earned premium increased 10.8% for both the quarter and year-to-date. Commercial lines renewal pricing increased slightly in some and decreased slightly in other regions. With average percentage increases in the mid-single-digits on most small and mid-market accounts, we continue to see double-digit increases in underperforming accounts. Our personal lines pricing environment remains unchanged. Personal lines renewal rates are in the mid to high single-digits especially in catastrophe exposed areas of the country. We continue to evaluate the terms and conditions of both new business and renewal policies in an effort to appropriately match the degree of risk assumed with premiums. Competitive market conditions were somewhat sporadic on renewals, but persistent on new business during the quarter. Nonetheless, premium written from new business remain strong, up slightly from the prior quarter and the…

Thanks, Randy. Net written premiums in our commercial lines increased 9.5% during the second quarter and 9.0% year-to-date. The lines experiencing the greatest amount of increase were worker's compensation and fire and allied lines, which includes commercial multi-peril and inland marine. Net written premiums in our personal line segment increased 9.5% during the quarter and 4.6% year-to-date. The year-to-date growth reflects freight adjustments initiated as a result of predictive analytics evaluations, fire and allied lines, and personal auto lines, oil increased 9.5% for the quarter. Year-to-date, fire and allied lines increased 4.4% and personal auto lines 5.0% Written in the assumed reinsurance line of business increased 39.3% for the quarter and 26.4% year-to-date. We believe rate increases continue to exceed lost cost trends overall, and we believe average loss trend for the industry is currently approximately 3%. Organic growth recognized in the second quarter consisted of 81% rate increases, 14% new business and 5% net premiums from audits and endorsements. Frequency trended upward in the second quarter compared to the second quarter of 2012, due to numerous minor catastrophe events, the most numerous occurring in Texas. Severity was down significantly in the second quarter of 2013. We attribute that to the impactful number of large property claims in the 2012 due to the Branson, Missouri tornado. Overall, we do not believe frequency or severity trends are of major concern at this time. With that, I will turn the financial discussion over to Dianne Lyons.

Thank you, Mike. Consolidated net income was $15.5 million for second quarter and $37.9 million year-to-date, compared to net income of $14.7 million and $33.9 million for the same periods of 2012. The increases were driven primarily by growth in property and casualty premiums written which increased 10.8% both for the quarter and year-to-date when compared to the same periods of 2012. Catastrophe losses for the second quarter totaled $14.2 million which is a slight increase compared to $12 million for the second quarter of 2012. As Mike had mentioned, second quarter 2013 experienced numerous smaller catastrophe losses which were somewhat spread out across United States. Second quarter catastrophe losses generally averaged 8.9 percentage points of our combined ratio, which is just slightly higher than our second quarter 2013 result of 8.3 percentage points. Year-to-date, catastrophe losses contributed 5.6 percentage points to c combined ratio. Our annual catastrophe load is 6 percentage points. So, we are currently well within our expectations for the year so far. During second quarter 2013, we experienced favorable reserve development of $16.4 million or $0.42 per share. These results are slightly less than second quarter 2012 due to reserving philosophy differences addressed during the Mercer Insurance integration. Year-to-date, we experienced $40.5 million, which is consistent with the same period in 2012. I would like to remind investors that there is a great deal of volatility from quarter-to-quarter and year-to-year in the reported amount of prior year reserve development due to the fact that reserve development occurs and is affected by the timing associated with the settlement of claims. In second quarter 2013, our total reserves remained relatively flat and within our actuarial estimates. Losses and loss settlement expenses increased $13.7 million or 12.8% compared to second quarter 2012, partially due to the added exposure from…

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. (Operator Instructions). Thank you. Our first question comes from Vincent DeAugustino with KBW. Please proceed with your question.

If I remember correctly, one of the things that you guys have talked about in the past was recently expanded or increased [BOP] appetite. I think the reason behind that was that you kind of felt that since you wanted that big on BOP you weren't getting some of the quote volume from agents since BOP tends to be a little bit higher frequency which meant that maybe you weren't in frontline with agents when it came to larger ticket accounts. And so, I'm just curious with the commercial fire and allied top-line performance in quarter, if kind of that increased BOP appetite? Was it a driver of the top-line growth in 2Q '13?

This is Randy. Not yet. We've made some inroads in our BOP line but the project from an automation standpoint is not quite complete yet. So, our BOP line did grow a little bit but it wasn’t really a major contributor to our overall growth.

And just kind of on that topic with the automation, just kind of BOP just being more of a straight through processing type of a product I'm just curious with some of the carriers that are ramping up commercial property [inspections], just how you're kind of handling that? Just again with it being more of a straight through type processing product if you have a situation where some accounts was maybe poor property reviews are getting kicked out by competitors, can you talk about how in the coding process or in the review process you're kind of making sure that you might not end up being the destination for some of those products that point in time when you’re maybe ramping up your BOP appetite?

This is Mike Wilkins; I'll take a stab at this one. As I think we've talked before, we feel that one of our competitive advantages is our good loss control department and we still even though a piece of business may go through an automated process and get issued without a lot of touches you still have 60 days post issuing of that policy or post the effective date to make an underwriting decision. So, if you do an inspection after you write it, which we tend to do especially if there's higher values or more hazards class, we still have that 60-day window to make an underwriting decision on that account. So, we feel quite comfortable that our inspections procedures are solid. We feel that our loss control staff is better than average and we're not concerned about that. Just a little bit of a follow up to what Randy said about growth in that line The premiums are up slightly more than 10% for the fire and allied lines, our policy account is up less than 2%, so it is really still mostly rate. And we are writing a few new accounts, but it is not being driven by a huge policy account growth.

Okay. That colors actually really excellent. In your prepared remarks in the press release you mentioned with commercial lines pricing, there was some pockets of strength and some pockets of softening, or may be softening is too hard or a word. But would be able to color on where you are seeing strengths and just a little bit of decline in pricing trajectory?

Yeah, this is Mike again, I will try to address on. So, generally, the regions where we write work comp tend to have little stronger pricing performance since that is the line where we still see to be able to push price pretty aggressively. So, our Midwest region, Great Lakes region areas where we write comp are really at the bigger increases and heavy and accelerated the increases from first quarter to second quarter. Regions where we do not work comp and, especially where -- like our West Coast region it's pronominally a casualty book without work comp, that is little softer in our southern region where we do not do work comps. So, overall, I thought that kind of may be was a little confusing. We still did get rate increases in every region, it is just in some of the regions they were down slightly from first quarter and in other regions they were up slightly from first quarter.

Okay. Perfect. The comment on the rate increases in all regions I think is helpful just because it tends to be up little bit too much focus more recently on like you said comments like that that may not give you the whole picture. So, on the Mercer reserve, just to make sure I have the numbers down right. It was four points on the aggregate loss ratio impact not just Mercer's book, is that correct?

That is correct.

Okay. Perfect. And then, would you be out of kind of call out just in the terms you observe review what lines and accident years that that would be coming from?

We do not have the details here but certainly can send it to you (inaudible).

Thank you. (Operator Instructions). Our next question is coming from the line of Craig Rothman with Millennium Partners. Please proceed with your question.

Can you talk a bit about the accident year margin ex cap progression year, where you see that going forward? What -- I guess we did not see much improvement in the quarter, so why that might have been ex the Mercer movement?

Well, this is Mike Wilkins again. I think from our perspective we still feel like our rate increases are exceeding the loss cost growth that we see. As we've said before, Craig, we do not get too hung up on one quarter, so we fluctuations from quarter-to-quarter. I think the general trend is good and we do not think anything has changed there and we continue to look -- continue to be positive about things going forward.

Okay. When you talked about the smaller cats, were those in the cat number you talked about or did they fall below the spectrum of what would be considered as cat and so there were may be a higher weather losses in the quarter?

Not believe those would be in the cat number that --

We know fell within the cat, yeah.

Yeah. Diane confirmed they all fell within the cat number we gave.

Okay. Can you give us a better sense on the overall loss trend that you are seeing? You mentioned the frequency up a bit but severity down. Where is that coming out to an aggregate?

Well, I think that we said in the press release. Again, just the normal volatility we see quarter-to-quarter, we have not seen anything over a period of quarters that give us any concern at this point.

Craig, this is Randy. Our peer loss ratios, we are really quite pleased with that. Unfortunately, we gave a little bit of that back on the loss adjustment side which we think we can get squared away but our peer loss experience for just about all lines is looking pretty good.

Got you. Okay. So, I'm just trying to get a sense on -- it seems like you have a nice margin there between the earned premium rate increases that are getting earned through and the loss trend that you are seeing, is that safe to say?

Yes, that I would agree.

Thank you. Our next question is a follow-up question coming from the line of Vincent DeAugustino with KVW. Please proceed with your question.

Thanks for taking my follow-up, just on two quick ones. I was curious just with 71 renewal pricing on the reinsurance side being kind of favorable for the industry, if you guys had decided to take advantage of that with any sort of changes to the reinsurance program, even understand there would be early. (inaudible) what note to that, I would guess that's not the case but just wanted to ask to be sure.

Vincent, this is Michael Wilkins. We have been -- I do not know if doing some shopping is the right term, but we have been evaluating that situation and working with our brokers on presenting some thoughts. And we did a pretty thorough review of our reinsurance program mid-year this year and we may do some things either mid-year or at the end of the year to take advantage of that pricing.

Okay, great. And then, just one other one, just kind of just more general in nature. If I recall, you guys have a newer head of marketing and just always curious, would those type of change, if there is anything new from the message standpoint to the agency force or just any changes that you guys may do from a distribution standpoint as a result?

Vincent, this is Randy. We actually just filled that position July 1, so I do not anticipate any big changes probably for the remainder of 2013. And one of the goals we have is kind of a more of consistent message, but I doubt we will probably see a lot of change in our overall message. That's kind of two early to call on that position so far.

Thank you. It appears there are no further questions in queue at this time. I would now like to turn the call back over to Ms. Novak for any concluding remarks.

Thank you, Jessie. This now concludes this conference call. As a reminder, a transcript of this call will be available on the company's website at www.unitedfiregroup.com. On behalf of the management of United Fire Group, I wish all of you a pleasant day.

Thank you. Ladies and gentleman, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.