Good morning. My name is Kevin and I will be your conference operator today. At this time, I would like to welcome everyone to the United Fire Group 2015 First Quarter Financial Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now pleasure to introduce your host Anita Novak, Director of Investor Relations. Please go ahead, Ms. Novak.

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 Web site at www.unitedfiregroup.com. Press releases and slides are located under the Investor Relations tab. Our speakers today are Randy Ramlo, President and Chief Executive Officer; Michael Wilkins, Executive Vice President and Chief Operating Officer; and Kevin Helbing, Interim Principal Financial Officer, Assistant Vice President and Controller. 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 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 also available in our press release and SEC filings. At this time, I'm pleased to present Mr. Randy Ramlo, President and Chief Executive Officer at United Fire Group.

Thank you, Anita. Good morning, everyone and welcome to United Fire's 2015 first quarter conference call. I'm very pleased to report that 2015 is off to a strong start. Earlier this morning, we reported operating income of $0.92 per share and a GAAP combined ratio of 89.7% for the quarter. Our book value was $33.76 per share and our return on equity was 11.4%. Not every quarter will be a strong due to the nature of our business and the volatility of claims experience from the quarter-to-quarter, but is the level of performance we seek. Strong quarterly performance like this will come to offset those quarters when the wind blows. During the first quarter, we continued to benefit from modest rate increases a lack of catastrophic events, favorable claim activity and favorable reserve development on our prior accident year claims. With the Mercer Insurance integration for all practical purposes behind us, our primary objective remains organic growth in alignment with our 2020 vision. We believe that with a disciplined approach we will achieve our expected underwriting results and expansion. Our organic growth initiatives include adding additional producers, expanding our geographic reach, enhancing our product offering and appropriately pricing our existing products. Key initiatives such as our addition of our specialty division and expansion of our program business have also contributed to our organic growth. We have grown in the past through M&A activity and that has expanded our footprint. However, we believe commitment to our operational initiatives as previously indicated is the appropriate path towards achieving our desired growth. However, if the right deal came along, we would certainly consider it. But to be clear, our focus is on organic growth. In future quarters, we will do our best to keep you abreast of our progress. Speaking of future quarters, this seems like a good time to introduce our newest member of our executive team. Dawn Jaffray is with us this morning and is eager to assume her role as our new CFO in a few weeks. In the meantime, Dawn will continue to acclimate herself to United Fire's business and culture. I believe with her background, Dawn can be an important contributor to our strategic and organic growth objectives supporting our 2020 vision. With that this morning, I will turn it over to Mike Wilkins, our Chief Operating Officer.

Thanks, Randy, and good morning, everyone. Competitive market conditions during the quarter persisted on both renewals and on new business. Commercial lines renewal pricing varied by region with average percentage increases in the mid-low single digits on most small and mid-market accounts. Larger accounts remain more competitive with only small increases obtainable. This is the 14th consecutive quarter of commercial lines pricing increases. Personal auto renewal pricing increases during the quarter remained modest and in the low single digits. The home owners pricing experienced average percentage increases in the mid-single digits during the quarter. Overall, personal lines renewal pricing decreased slightly during the – excuse me, increased slightly during the first quarter. Premium written from new business remain strong up from the prior quarter but down slightly when compared to the same quarter a year ago. This does not surprise us giving the exceptionally large volume of new business written in the first quarter of 2014. Our success ratio on quoted accounts decreased slightly, but remained strong, new business discretionary pricing was unchanged. Current rate increases continue to meet or exceed lost cost trends depending on the line of business. We continue to believe lost cost trends will remain at low levels in 2015, but the gap between lost cost and rate increases will narrow as 2015 progresses. Policy retention remains strong at 82% decreasing slightly from the prior quarter for the group and most regions. Premium retention was down only slightly from the previous quarter and remained strong at 86%. Policies in force were down slightly in personal lines and workers compensation but up in all other lines. New policies written or sufficient to offset policies lost are non-renewed. The U.S. economy continues to grow at a slow rate, premium from endorsements and premium audit continued positive trends up…

Thanks Mike. Consolidated debt income including net realized investment gains and losses was $23.7 million or $0.94 per share for the quarter compared to $13.3 million or $0.52 per share last year. Losses and loss settlement expenses increased by $1.2 million or less than 1% during the first quarter compared to the quarter a year ago. As Mike indicated pretax catastrophe losses for the quarter totaled $200,000 or less than a $0.01 per share after-tax compared to $3.3 million or $0.08 per share after-tax last year. The losses had nearly no effect on our combined ratio for the quarter. Our expectation for catastrophe losses in any given year is 6 percentage points on the combined ratio. It's important to note, however, that our book of our business remains primarily in regions of the country that are susceptible to seasonal weather events such as winter and spring connective storms. Which will likely result in volatility in our results from quarter-to-quarter especially during the second and third quarters. As the company, we don't get too excited about volatility since our final analysis is based on annual results. Favorable reserve development for the first quarter was $16.7 million compared to $14.5 million in the first quarter of 2014. The positive impact on net income for the quarter was $0.43 per share compared to $0.37 per share in 2014. As we have stated on many occasions, reserve development will vary from quarter-to-quarter and year-to-year due to the number of claims settled and the settlement terms. During the first quarter, the increase in favorable reserve development is attributable to the timing of paid claims. The largest single contributor was workers compensation with $5.8 million of favorable reserve development followed by a long-tail liability with $4.9 million. Commercial auto contributed $3 million of favorable reserve development…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Paul Newsome from Sandler O'Neill. Please proceed with your question.

Good morning. Congratulations on the quarter.

Thanks Paul.

I wanted to ask about expense ratio guidance in – obviously, you are down at both – but you mentioned that pension could hurt on the revenues of the year. My understanding is, is the pension expense essentially gets set at the beginning of each year and should be largely unchanged quarter-to-quarter, am I wrong in that?

You are correct, Paul. Our impact over the course of the year will be $7 million gross of tax.

Okay.

We have a good favorable quarter in relation to our losses and with the GAAP results we had a great quarter with less premium deficiency in our [debt] [ph] calculation.

So should there be, I mean this is a good run rate for the expense ratio perspectively?

We expect it would be close to 31% for the year. We just had a really good quarter.

Okay. Terrific. And the – maybe you can talk a little bit about the combined ratio excluding reserves and catastrophe losses and how that – whether or not that's a good run rate for the remainder of the year as well?

Mike will take that one, Paul.

Good morning, Paul. How are you?

I'm very good. Thank you.

I think the run rate we hope to do a little better than that during the year. We in the first quarter had some IBNR adjustments based on actuarial calculations that impacted particularly our commercial auto line of business. But, if you look at the direct numbers, they improve quite bit from a year ago, so we are encouraged by that and optimistic going forward.

Well, I will requeue, see if there is anybody else who wants to ask a question.

Thank you. [Operator Instructions] Our next question is coming from Joab Dempsey from KBW. Please proceed with your question.

Hi. Good morning, everyone, and thanks for taking my questions, since [indiscernible] you could have wound the call today. But, just had a couple of questions. The first is on the core loss ratio with non-existing cats this quarter. Are there any considerations that should be made for elevated into weathered losses that sell into the core loss ratio for the quarter?

This is Mike, again. There is probably some of that in the core loss ratio particularly from the East Coast with some winter storm activity out there, some freeze losses and that type of thing, I don't get captured in the cat loss numbers. We don't quantify that or have that number available, but I'm sure it had an impact.

Okay. Great. And then, the second is around workers comp, we have seen workers comp claim ratio fall a little bit each in the last three years, so I'm curious if you know attribute this to some of the workers comp initiative, or if there is something going on from say a mix or an actual settlement speed issue that could account for the numbers?

Yes. Mike, again, here. The improvement we think is a result of our initiatives. We work very hard on that line of business over the last couple of years in particular trying to reduce the high-hazard classes that's in that book. And target lower hazard classes make sure the pricing was appropriate in the higher hazard book of business. And the second part of your question, Chief Claims Officer is here, I will let Dave take a shot at that.

Hi. This is Dave Connor. That timing correspondence directly with our consolidation of the work comp unit at the corporate headquarters here and what was not an insignificant upgrade in our operations. So I think from both angles you are recognizing that improvement.

Yes. We can certainly see that improvement coming. So if we can maybe stick with workers comp for a second, did the maturation of any of these initiatives drive any additional reserve releases this quarter?

No. I don't think so.

Okay. Okay. And then just – this is my last question within commercial auto, what's the industry has been seeing and I was hoping to get maybe an update from what you are seeing between lost cost trends and rate increases with the slight up tick on the lost ratio this quarter?

Yes. That's the line we are paying close attention to. We are able to get still solid rate increases in that line particularly if it's an auto driven line. If it's just a small part of the package, the auto – maybe the increases aren't quite there. But, if it's an auto driven line, we are getting good mid to upper single digit increases on the auto. Joab, I guess it's a line where we are keeping close eye on. We have seen a couple of point deterioration here in the first quarter on a direct basis to. And then also on the IBNR side, we strengthened a little bit.

Okay. Great. That's all I had. And thanks again for taking my questions [indiscernible] best of luck guys.

Thank you.

Thank you. [Operator Instructions] Our next question is a follow-up from Paul Newsome from Sandler O'Neill. Please proceed with your question.

I have to ask about the life operation and the prospects there?

Well, we – as you know, this is Randy. We have had this conversation a couple of times but the annuity businesses is really difficult right now. And so our annuity deposits as you can see are down quite a bit that affected our net investment income. And we don't like to see the annuity deposits leave, but unfortunately the only way to stop that is to offer higher rates. And we don't really want to do that either or materially change the way we invest that book of business. So we are kind of de-emphasizing the annuity business and trying to push the life business which is more profitable and we think this is a cyclical thing. If you kind of look back at a 15-year look at our life business, there has some been terrific years, but unfortunately the last four or five have been pretty difficult.

Fantastic. Thank you.

Thank you. We have reached the end of our question-and-answer session. I would like to now turn the floor back over to Ms. Novak.

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

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time. And have a wonderful day. We thank you for your participation today.