Good day and welcome to the United Fire Group, Inc. 2017 First Quarter Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instruction] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Randy Patten, Assistant Vice President of Finance and Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining this call. Earlier today, we issued a new release on our results. To find a copy of this document, please visit our website at ufginsurance.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 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, Chief Executive Officer of United Fire Group.

Thanks, Randy. Good morning everyone and welcome to the UFG Insurance first quarter 2017 conference call. Earlier this morning, we reported net income of $0.77 per diluted share, operating income of $0.67 per share, and a GAAP combined ratio of 96.5% for the first quarter of 2017. This compares with net income of $0.88 per diluted share, operating income of $0.83 per diluted share, and a GAAP combined ratio of 92.3% in the first quarter of 2016. During the first quarter of 2017, our growth in premiums and total revenues slowed moderately compared to the last few years. Net premiums earned grew 5.2%, which is in line with our expectation of 4% to 6% growth for the full year 2017. Likewise, total revenues also grew 6.5%. During the first quarter of 2017, we had an increase in losses in our P&C segment driven by two items, first an increase in catastrophe losses; and second, a deterioration in our core loss ratio, primarily in our commercial and personal auto lines of business. For the quarter, catastrophe losses added 4.1 percentage points to the combined ratio compared to 2.0 percentage points in the first quarter of 2016. Our ten-year historical average for the first quarter is 2.6 percentage points. This increase in the first quarter of 2017 was primarily due to hailstorms in the southern United States in the month of March. The deterioration in the core loss ratio added 3.3 percentage points to the combined ratio. This deterioration was driven by an increase in frequency and severity of losses in our auto lines of business. As we mentioned during our fourth quarter conference call, we are continuing to implement many new initiatives including pricing increases, stricter underwriting guidelines, new analytical tools, and more rigorous loss control requirements. These new initiatives are…

Thanks, Randy, and good morning, everyone. As Randy indicated, one of the items impacting our results in 2017 was an increase in catastrophe losses as compared to the first quarter of 2016. This year’s catastrophe losses for the most part were driven by an increase in frequency of claims related to hailstorms in the southern United States in the month of March. In the first quarter of 2017, we received 389 catastrophe claims compared to a 190 catastrophe claims in the first quarter of 2016. The second item which impacted our results in the first quarter of 2017 was a deterioration in our core loss ratio impacted by an increase in frequency in severity losses in our auto lines of business. As Randy mentioned, we believe the majority of this increase is due to distracted driving which are addressing with the following initiatives: Implementation of a distracted driving campaign aimed at our agency partners and our insurance; enhanced focus on distracted driving in our loss control efforts including the enforcement of vehicle use policies; driver training programs and driver screening processes; and continuing to evaluate and pilot telematic solutions that have the capability to identify distracted driving issues as well as other risky driving behaviors. In addition to the efforts to address distracted driving, we continue to push rate especially on marginally performing accounts, evaluate predictive analytics solutions and including the implementation of a new model targeted for Q2 and emphasize our auto lines as an area focus with all of our regional profit centers, as Randy mentioned in his comment. Also to improve profitability in our commercial auto book, we are currently asking for and receiving rate increases in the mid to upper single digits. We believe we can continue to push for rate increases in our commercial auto…

Thanks, Mike, and good morning. First quarter of 2017, we reported consolidated net income of $19.9 million or $0.77 per diluted share compared to $22.4 million or $0.88 per diluted share in the first quarter of 2016. The decrease in net income in the first quarter as compared to 2016 is primarily due to an increase in catastrophe losses and deterioration in our core loss ratio, previously discussed by Randy and Mike. Consolidated net premiums earned increased 5.2% in the first quarter 2017 as compared to 2016, in line with previously mentioned expectations. Consolidated net investment income was $25 million for the first quarter 2017 or a 12.6% increase compared to $22 million in the first quarter of 2016. The increase in net investment income for the first quarter was primarily driven by the change in value of our investments and limited liability partnership as compared to the same periods in 2016 and not due to a change in our investment philosophy. This resulted in an increase of $2.5 million in investment income during the first quarter as compared to the same period during 2016. Losses and loss settlement expenses increased by $25 million or 17.9% during first quarter 2017 compared to first quarter 2016. The two primary drivers of the increase in 2017 were an increase in capacity losses and increase in commercial and personal auto losses as we previously discussed. Favorable reserve development for the first quarter 2017 was $24.9 million compared to $23.9 million in the first quarter 2016. The impact on net income for the first quarter 2017 was $0.63 per diluted share compared to $0.61 per diluted share in the first quarter 2016. As a reminder, our first quarter favorable development is generally higher than other quarters with the annual shift of IBNR reserves from…

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

Good morning, everyone. I was wondering if you could talk a little bit about sort of what we should see from a net price increasing or decreasing situation for the firm. I understand that the commercial auto and the personal auto prices are up, but it also looks like you’re lowering prices for the other businesses. Do you see there is a crossover point or do you think that the current situation is -- basically flat pricing is the most likely scenario for the near-term?

Paul, this is Mike. I’ll try to take this question. We think overall pricing is pretty flat. I would say that probably over the last quarter, we saw a little bit of a rebound, maybe tick back up a little with trouble in the auto line helping to support that line a little bit, but overall, pretty flat. We are seeing decreases in liability and we are confident mostly offset increases in the auto lines.

I am sorry. That sounds like a commentary in the market. I was asking about your own positioning.

Our own would be the same, Paul. The commentary that was given was on our own base.

Okay. Thank you.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Randy Patten for any closing remarks.

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

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.