Good morning. My name is Nan and I’ll be your conference operator today. At this time, I would like to welcome everyone to the United Fire Group third quarter 2016 financial results conference call. All participants will be in listen-only mode today. [Operator Instructions] And please note this event is being recorded. Now, I would like to turn the conference over to Randy Patten, Assistant Vice President, Finance and Investor Relations. Please go ahead, sir.

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 ufcinsurance.com. Press releases and slides are located under the Investor Relations tab. Our speakers today are Chief Executive Officer, Randy Ramlo; Michael Wilkins, our Chief Operating Officer; and Dawn Jaffray, Chief Financial Officer. 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 includes risks and uncertainties that are not a guaranty 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, Chief Executive Officer of United Fire Group.

Thanks, Randy. Good morning, everyone, and welcome to UFG Insurance third quarter 2016 conference call. Earlier this morning, we reported net income of $0.48 per diluted share, operating income of $0.41 per diluted share and a GAAP combined ratio of 100.9% for the third quarter. This compares with net income of $0.77 per diluted share, operating income of $0.75 per diluted share and a GAAP combined ratio of 94.1% in the third quarter of 2015. Dawn will address the quarterly and year-to-date financial results later in a few minutes. The third quarter results were within our expectations and were highlighted by continued organic premium growth, increased investment income, and catastrophe losses below our ten-year historical average for third quarters. On a less positive note, our quarterly results were impacted by an increase in large commercial fire losses and an increase in commercial auto losses. I will let Mike discuss losses and the impact of our loss ratio in a few moments. In the property and casualty segment, we continue to meet our organic growth objectives, with expansion in targeted geographical locations. Net premiums earned increased 9% during the third quarter and 11% year-to-date in 2016 as compared to the same periods in 2015. We anticipate continued momentum from our expansion initiatives for the remainder of 2016 and remain focused on maintaining underwriting discipline as we grow the top line. As a reminder, some of our growth initiatives, our targeted geographic expansion include expanding into the State of Ohio in the fourth quarter of 2015 and recently the State of Kentucky in the third quarter of 2016, along with adding our workers’ compensation product in the State of Texas in the fourth quarter of 2016. I'm pleased to report that with the State of Ohio, we're off to a good start,…

Thanks, Randy. And good morning, everyone. As Randy indicated, our catastrophe losses impacted the combined ratio and the third quarter was 5.2 percentage points as compared to our ten-year historical average for third quarters of 7.8 percentage points. While the impact is below our ten-year historical average, we believe further geographical diversification will contribute to lowering our catastrophe loss impact in the future. On a year-to-date basis, for the first nine months of 2016, catastrophe losses impact to the combined ratio was 7.6 percentage points compared to our ten-year historical average for the first nine months at 7.0 percentage point. The increase is primarily due to weather-related catastrophe losses incurred during the second quarter of this year. As a reminder, our expectation for catastrophe losses in any given year is 6 percentage points for the combined ratio, with the second and third quarters being the most significant quarters with storm and catastrophe events in geographic areas where we conduct much of our business. In the third quarter of 2016, we experienced an increase in large losses, which we define as losses greater than $500,000. Large losses totaled $30 million in the third quarter of 2016 compared to $19 million in the third quarter of 2015. Year-to-date, large losses totaled $67 million in 2016 compared to $62 million in 2015. The increase in large losses is primarily due to an increase in commercial fire losses. During the third quarter, we incurred five large commercial property losses for a total of $9.6 million. These fires were geographically spread out, with no recurring patterns. However, we are in the process of completing audits and identifying changes that are needed to reduce commercial property losses. Commercial auto losses continued to deteriorate in the third quarter of 2016 due to an increase in frequency and…

Thanks, Mike. And good morning. For the third quarter of 2016, we reported consolidated net income of $12.4 million or $0.48 per diluted share compared to $19.5 million or $0.77 per diluted share in the third quarter of 2015. Through nine months 2016, year-to-date, consolidated net income was $37.9 million and $1.47 per diluted share as compared to $58.2 million and $2.31 per diluted share in 2015. The decrease in net income in the third quarter and year-to-date as compared to 2015 is primarily due to an increase in large losses and an increase in catastrophe losses previously discussed by Randy and Mike. Our shareholders’ equity increased 9% to $959 million at September 30, 2016 from $879 million at December 31, 2015. Book value increased $2.89 to $37.83 at September 30, 2016 from $34.94 at December 31, 2015. The increase in shareholders’ equity and book value are primarily due to net income of $37.9 million and an increase in unrealized investment gains of $51 million. Consolidated unrealized investment gains were $179.8 million at September 30, 2016. Return on equity was 5.5% in the first nine months of 2016 compared to 9.3% in the first nine months of 2015. The decrease in ROE as compared to the same quarter last year was primarily due to a combination of decrease in net income and increase in shareholders’ equity. Losses and loss settlement expenses increased by $32 million or 22% during the third quarter 2016 as compared to the third quarter of 2015. On a year-to-date basis, losses and loss settlement expenses increased $78 million or 18% compared to the same period of 2015. The primary driver of the increase in third quarter is large losses and catastrophe losses as we previously mentioned. As has been historical reserving practice at UFG, we set…

[Operator Instructions] Our first question comes from Paul Newsome of Sandler O’Neill. Please go ahead.

Good morning. Could you walk through the loss ratio deteriorations for, I guess, property, auto and workers’ comp and talk about the prospects of whether or not those loss ratios will improve prospectively, given what you're doing at the moment, and how quickly you think that could change?

Well, the tough part of that question is how quickly that can change. On the workers’ compensation part, we had some deterioration, but we’re kind of far from a disaster. That line was pretty good last year, better than – I think we said better than we probably expected it to be. I think the good news there is – it’s kind of an industry problem. So, I think a problem is always easier to cure if everybody’s kind of feeling the same pain. So far, I think this is still kind of something we can cure through rate increases and we’ve filed for rate increases already and those rate increases are going in fairly successfully. We also have had a lot of really large losses and have had to change our stance on providing large umbrellas on some heavier fleets on commercial auto. I think that will help very quickly because I think we’re pretty much around the horn on reducing the umbrella coverage on a lot of the auto fleets. Mike mentioned that we have some analytics projects underway, specifically a pilot program. And I think that will have some pay off, certainly within 12 months. And then the commercial fire, kind of the couple areas there that we did an audit and took a look at our property book. Couple of things that we found is not always having diligent implementation of loss control recommendation, and not on large accounts, but more on medium-size accounts. So, a lot of times, small insureds aren’t able to implement loss control recommendation. So, we have to do a better job of making sure that if we have loss control recommendations, we get them implemented or get off the account. And then the last thing we found is that we probably have to do a little bit better job of underwriting older buildings. Specifically, we have a church program that inherently – churches are often very old. So, we have to, again, make sure loss control reccs implemented. But, hopefully, we can see some improvement in these loss ratios certainly by the first part or the second quarter of next year.

And then maybe kind of a broad question here. Your slides that came out about the same time of the call talked about a 2020 goal of increasing return on equity. Maybe you could just walk through what the levers you’re going to pull to achieve that goal?

First of all, we’ve got to get three lines we talked about earlier under some better control. We probably have some branches that we need to become a little bit more profitable. We’re having good success with growth. And kind of interestingly, the branches that are growing the least actually have some of the more elevated loss ratios. So, we’ll continue to be diligent on rate. We think that’s always a way to kind of help things. We think property diversification, which part of our Mercer acquisition, we hope that we can continue to see the contribution of cat losses kind of slowly coming down in years to come. So, hopefully, growing property in especially the western states and parts of the northeast can help with those things. Those are kind of some of the levers that we will continue to pull.

Great. Thanks. Appreciate it.

Thank you, Paul.

[Operator Instructions] There being no more questions, this concludes our question-and-answer session. I would like to turn the conference back to Randy Patten for any closing remarks.

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

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