Good morning, my name is Denise and I'll be your conference operator today. At this time, I would like to welcome everyone to the UFG Insurance First Quarter 2018 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. Thank you. I would now like to turn the conference over to Randy Patten, AVP of Finance and Investor Relations.

Good morning, everyone, and thank you for joining this call. Earlier today, we issued a news release on the 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 on our press release and SEC filings. At this time, I'm pleased to present Mr. Randy Ramlo, CEO of UFG.

Thanks Randy. Good morning everyone and welcome to the UFG Insurance first quarter 2018 conference call. Earlier this morning we reported consolidated net income of $1.80 per diluted share, adjusted operating income of $1 per diluted share and a GAAP combined ratio of 93.5% for the first quarter of 2018. This compares with net income of $0.77 per diluted share, adjusted operating income of $0.67 per diluted share and a GAAP combined ratio of 96.5% for the first quarter of 2017. On March 30, 2018, the culmination of our previously announced sale of our life company to Kuvare US Holdings was completed. On a GAAP basis, the sales generated an after-tax gain of $27.3 million or $1.07 per diluted share. Dawn will provide further details on the financial impact of the sale later in this call. As we stated previously in addition to investing the proceeds we are in the process of solidifying various capital management actions for UFG. As a reminder, United Life Insurance Company was a subsidiary of United Fire and Casualty Company our lead insurance company. As a result, the distribution of any proceeds beyond our traditional dividend capacity limits requires regulatory approval. In addition to share repurchases we are pursuing the approval of an extraordinary special dividend beyond what we traditionally pay on a quarterly basis. Although subject to customary approval of the Department of Insurance we expect to announce both the amount and the timing of the dividend within the next three to six months. Moving on to P&C operations we are continuing to see some improvement in our auto lines due to the various initiatives we put in place over the past 18 months, although we still have work to do until these lines return to our desired level of probability. With the continued…

Thanks Randy and good morning everyone. As Randy indicated, we had some improvement in our auto loss ratios, our profit initiatives targeted at improving these lines including expanded risk control practices, stricter underwriting guidelines and making sure we're getting adequate rates for the exposure have all led to this improvement and we will continue to watch these lines closely throughout 2018. All of our regions continue to review underperforming accounts and are taking necessary underwriting actions and rate increases to ensure we are writing profitable business. Our continued growth in investment in enterprise analytics is providing additional tools and insights to make better decisions. Enterprise analytics remains an important aspect of our Oasis strategic initiative and will be a key component of our modernized underwriting system. We believe this focus will help revolutionize the way we underwrite and make decisions, including risk selection, pricing and renewal processing. Moving on to market conditions during the quarter of 2018 we saw an increase in competition for both renewal and new business across all regions. Overall, the average renewal pricing change for commercial lines decreased slightly, with pricing varying depending on region and size of accounts. Filed commercial auto rate increases processed during the quarter averaged in the high single-digits. The workers compensation line has been very competitive over the past several quarters our filed workers compensation rate decreases averaged in the mid-single digits during the quarter. Our personal lines renewal pricing increased during the quarter with average percentage increases in the mid-single digits. We continue to aggressively address poor performing accounts across the country through nonrenewal or significant rate increases. Our premium retention remained strong at 83% during the first quarter of 2018. Going forward our expectation is that we will see a decrease in our premium and policy retention as we continue to return our auto book of business to profitability. With that I'll let Dawn Jaffray discuss our Quarter 1 financials, Dawn.

Thanks Mike and good morning everyone. For the first quarter of 2018 we reported consolidated net income of 45.8 million compared to 19.9 million in the first quarter of 2017. The change in net income in the first quarter over the comparable period is due to the following business items. As Randy has mentioned UFG realized a one-time after-tax gain 27.3 million associated with the sale of United Life Insurance Company. The transaction received final regulatory approval and concluded with the closing of the sale at the end of the quarter on March 30, 2018. Previously on March 30, we reported in our press release and pro forma financials filed with our announcement of the closing of the sale an estimated after tax of gain 4.5 million. The earlier estimate was based on our December 31, 2017 issued financial statement and the carrying values of the subsidiary investment. During the first quarter rising interest rates decreased the value of the fixed maturity portfolio, which also correspondingly decreased the book value of our investment in United Life and this resulted in an increase in the ultimate gain we achieved at March 31, 2018. And as many of our peer companies have reported during the first quarter of 2018 we adopted new accounting guidance, which involves recognizing any changes in the value of equity securities as realized investment gains or losses in net income. Prior to 2018 changes in the value of equity securities were previously recorded in accumulated other comprehensive income in the equity section on our balance sheet. We anticipate that recognizing these gains or losses that have not been realized due to any sale or disposition were at a level of reporting volatility in net income in any quarter relative to our portfolio and market conditions. Reporting this change…

[Operator Instructions] And your first question will be from Paul Newsome of Sandler O’Neill. Please go ahead.

I’d like to ask about the increase in expenses, and maybe talk about expected payout for this over time -- you said it was a multiyear project, is this essentially something that’s permanent that you kind of want to go from a 30 to 32 expense ratio prospectively and that’s kind of the right way to go, just give us a little sense of what do you think in terms of how that’s going to return an increased expenses in return favorable profitability perspective and with the timeframe of that?

We are redoing our [Technical Difficulty] with that building in some more additional analytics tools with that, we mentioned it in our conference call, the Oasis project, its required us to hire some additional IT and PMO staff, and purchase some hardware and software items, we do think it’s going to add, 0.5 to two points, but not forever, this project is basically a five year project and we’re kind of one year into it, and then we think we’ll be able to also see some efficiencies, it’s going to also help the expense ratio as well. Mike do you have anything further to add there?

I would echo Randy’s comments, I think post implementation we’re looking at probably a 0.5 to a point additional expense with the new system but as Randy said we hope to offset that with efficiencies, gains, and productivity.

How quickly could those productivity gains show up, or in five years, I’d be happy if I had sort of job in five years, let alone owning your stock. So, is that essentially permanent, five years is essentially permanent from our perspective, do these efficiencies show up after five years or is it something we’d see in the next year or two?

You won’t see it in the next year too far, it would be down the road, we won’t implement the first parts of the system, it's over the year away before we start implementation and then it’ll be five years before we fully implement. So, we won’t see, how the productivity gains in the short term, we also hope to see loss ratio improvements from the better analytical tools that we’ll have built into the system and underwriting dashboard we are building and better tools for the underwriters to make their decisions.

So, second question, a different one, in conclusion I guess its permanent increasing expenses, the second question I have is on pricing, your result of slightly down is different than every other company that I covered, and particularly in the small middle market commercial area, what about your book view different from other companies that it gives you that sort of adverse results, is there something that you are more workers comp than others, or are some others are swapped that would make you so different, I mean we’re targeting, other companies you’re targeting up 2% or 3%, you’re down something, that’s kind of a big difference?

Paul, we did a poor job of wording that, so we were not down, we’re still getting rate increases on the commercial side, we were getting less rate increases than we got fourth quarter, so during 2017 we saw the rates pick up every quarter, so second quarter was higher than first, third quarter was higher than second and fourth quarter was our best quarter as far as being rate increases last year. Q1 was down a little bit from Q4, but still positive and I would say in that, that low single digit range that you're talking about we measure exposure and pricing in our system and our exposure plus pricing increase was 5% in the quarter, so you figure a couple of points that's probably exposure growth we're probably looking at around three. We still saw momentum building on the commercial auto pricing, we had pricing increases of over 9% in commercial auto line and that was up from 7.5 in the fourth quarter, so some momentum building there but other lines definitely saw some competition pick up, probably the most, pick up the most in work comp, which is a smaller line for UFG about 12% of our premiums which is quite a bit smaller than our peer group on the work comp side, but also I would say large accounts in particular quality large accounts we saw competition pick up in the first quarter and just felt a little more competitive out there. But, but still had increases just not decelerating from Q4.

Okay, okay that makes much more sense, thank you, I'll let some other folks ask questions.

[Operator Instructions] And the next question will come from Brian Hollenden of Sidoti, please go ahead.

Yeah good morning and thanks for taking my question. Just wanted to follow-up on the sale just closed of the Life Insurance Company, I guess just potential timing for any one-time special dividend, any acquisitions that you're looking at, maybe you could just give us some characteristics of things you're looking at and maybe what the issue is in terms of not being able to purchase anything to date, is it just price, is it the book of business, maybe you can just talk broadly about your after-tax proceeds, thanks.

Brian, this is Randy, thanks for the call. We do continue to look for acquisitions, prices are maybe a little bit of a factor right now. But probably more of a factor for us is just we really haven't found the exact very good fit. if you look at the publicly traded universe of insurance companies that are smaller than us, it's a pretty small group and so we've kind of going back to 2011 made a more concentrated effort on organic growth which has worked very well for us and we also think is a lot less risky, so we've really kind of been focusing on organic growth even though we continue to look for acquisitions fairly regularly, we just really haven't found a lot and maybe haven't got a lot of confidence that there's a whole lot out there. So, we'll continue to grow organically. We don't mean to be vague about the timing of a special dividend but we are subject to regulatory approval and that can always be a little bit of a wild card even though we don't anticipate any issues, we've been in communications with Iowa's insurance department and we feel very good but the three to six-month timeframe that we put in the French group that’s just kind of the best estimate we’ve right now.

And Brian for the record, our statutory gain on the sale transaction after tax is about 106 million, obviously that’s different, and that’s going to weigh in relative to the decision from the Department of Insurance, Iowa in approving any special or extraordinary dividend that we’re seeking.

And then maybe just on the overall portfolio consolidated income yield down couple of basis points year-over-year. I guess with the questions with rising rates at what point is sort of weighted average income yield kind of tick up or turnaround?

This is Bob Cataldo. I'm a Portfolio Manager within the Investment Department. We’re starting to see those yields pick up now with money we’re redeploying back into the market, we’re still seeing very liquid, same high quality and consistent with our investment philosophy but we’re experiencing an improvement in investment yields as we continue to redeploy cash.

And then can you just remind us what’s your sort of weighted average duration there on your fixed income portfolio?

Right around five years and we intend to keep it within that range.

And ladies and gentlemen this will conclude our question-and-answer session. I would like to hand the conference back over to Randy Patten for closing remarks.

This now concludes our conference call, thank you for joining us and have a great day.