United Fire Group, Inc. (UFCS) Earnings Call Transcript & Summary

Hello. And welcome to the Annual Meeting of Shareholders of United Fire Group, Inc. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Jack Evans, Chairman of the Board of Directors of United Fire Group, Inc. Mr. Evans, the floor is yours.

Thank you, Liz. Good morning, everyone. Please come to order for the meeting. I want to welcome everyone to the Annual Meeting of Shareholders of United Fire Group. My name is Jack Evans. I'm Chairman of the Board of Directors. And in accordance with our bylaws, I will be presiding at this meeting. Today's meeting is also being broadcast by live audio webcast. We believe this virtual meeting option will maximize participation of shareholders regardless of their location. This technology enables us to reach a larger audience while containing our costs. In light of public health concerns regarding the novel coronavirus pandemic and related travel restrictions, we have encouraged shareholders to participate virtually rather than in person. Thank you very much to those who are participating virtually today. We will conduct our meeting in 2 parts today. First, we will address our formal items of business, followed by a question-and-answer session. If you are attending virtually, you may submit questions through the virtual meeting website. An agenda that outlines the order of business for the meeting has been made available. The matters on which the shareholders at the meeting are voting on are: elect 4 Class A directors and 1 Class C director; ratify the Audit Committee's appointment of Ernst & Young LLP as our independent registered public accounting firm for 2020; amend the United Fire Group, Inc. nonemployee director stock plan; approve on an advisory basis the compensation of our named executive officers; and finally, vote upon such other matters as may properly come before the meeting or at any adjournment or postponement thereof. Kristin Stauffer will serve as secretary of the meeting. Computershare, the registrar and transfer agent of our common stock, will be acting as the inspector of elections for this meeting. Now I would like to introduce a few members of our senior management team. Participating in today's meeting are: Randy Ramlo, President and Chief Executive Officer and also a Director of the company; Mike Wilkins, Executive Vice President and Chief Operating Officer; Dawn Jaffray, Executive Vice President and Chief Financial Officer; Neal Scharmer, Vice President, General Counsel and Corporate Secretary. I would also like to introduce you to my fellow directors participating in today's meeting: James Noyce, Vice Chair; John-Paul Besong; Scott Carlton; Brenda Clancy; Christopher Drahozal; George Milligan; Mary Quass; Kyle Skogman; and Director Nominee, Lura McBride. Kevin Zaugg and Matt Thunander of Ernst & Young are also present at the meeting and are available to make a statement if desired, any questions concerning our financial statements. I call your attention to the rules of conduct for this meeting. These were made available to each shareholder in the Files section in the lower left-hand of the screen upon entering the virtual meeting room, or for those attending in person, the rules are attached to the agenda. To conduct an orderly meeting, we ask that you abide by those rules. If you need a copy of the annual report or the proxy statement, please refer to the company's website or the hyperlinks provided with your proxy material. Corporate Secretary, Neal Scharmer, has delivered an affidavit of mailing from Computershare establishing that notice of this meeting was duly given. A copy of the notice of the meeting and the affidavit of mailing will be incorporated into the minutes of this meeting. All shareholders of record as of the close of business on March 23 are entitled to vote at this meeting. The inspector of election has the shareholder list of the company as of the close of business on March 23, 2020, the record date for the meeting, which shows the shareholders and their respective number of shares entitled to vote at this meeting. I am advised by the inspector of election that no less than a majority of the outstanding shares of common stock, which constitutes a quorum are present in person, virtually by live broadcast or by proxy at this meeting. So I declare the meeting duly and lawfully convened. We would now like to begin the formal business of the meeting. The polls are now open for voting on the 4 proposals before the meeting. If you have not voted or wish to change your vote, you may do so now through the virtual meeting website or if you are present in person by raising your hand to submit a ballot. Any shareholder who has already voted by proxy and does not want to change their vote should not take any further action. There are 4 proposals on the agenda for this year's annual meeting of shareholders. The first proposal is the election of 4 Class A directors to 3-year terms expiring in 2023 and 1 Class C Director to serve the remaining -- the remainder of a term expiring in 2021. The Board of Directors recommends a vote for the election of each of the following directors: Scott Carlton, Brenda Clancy, Randy Ramlo, Susan Voss and Lura McBride. The second proposal is ratification of the Audit Committee's appointment of Ernst & Young LLP as our independent registered public accounting firm for 2020. The Board of Directors recommends a vote for this proposal. The third proposal is to amend the United Fire Inc. nonemployee director stock plan. The Board of Directors recommends a vote for this proposal. The fourth proposal is the approval on an advisory basis of the compensation of our named executive officers. The Board of Directors recommends a vote for this proposal. No other matters for consideration at this meeting were brought to the company's attention by our shareholders in accordance with the requirements set forth in the bylaws or the applicable rules of the SEC. If you have not yet completed delivery of your proxies or ballots online or in person, please do so now since we will be closing the polls for voting at this time. [Voting]

The online voting will now be closed. Based on a preliminary count, the inspector of election has informed me that all director nominees have been elected. The appointment of Ernst & Young LLP as our independent registered public accounting for 2020 has been ratified. The amendment to the employee to the nonemployee director stock plan has been approved. And finally, the advisory resolution relating to the compensation of our named executive officers has also been approved. A final vote count with respect to the matters voted on today will be reported on a Form 8-K as required by the SEC. It is now my pleasure to turn this meeting over to President and CEO, Randy Ramlo, for a presentation. Randy?

Thank you, Jack. Thanks to our robust business continuity plan, strong IT infrastructure and incredibly resilient people, UFG has been fully operational and open for business from day 1 of the COVID-19 pandemic. The majority of our 1,100 workforce has been working remotely since mid-March, continuing to write business, renew policies, settle claims and serve customers from their homes across the country. Our past experience in personally dealing with floods and hurricanes at our offices in recent years has made us very adept at working from home. For now, we plan to continue working remotely, through May, though we are prepared to work from home as long as needed for the safety of our employees and communities. First quarter results are typically good at UFG, but the COVID-19 pandemic has left us with far-from-typical results for the first quarter of 2020. Similar to our industry peers, the greatest impact of COVID-19 has been on our investments, with no significant impact on our core insurance operations at this time. Nearly all of our issued policies exclude business interruption coverage losses attributable to viruses related to this pandemic. But we continue to carefully scrutinize each claim, and we'll be affording coverage where appropriate. During the first quarter, we continued to make progress on our commercial auto line of business, with our frequency of auto claims now at its lowest point in the past 7 years. However, the loss ratio remains at a higher-than-acceptable rate for us. To further reduce the size of our commercial auto book of business, we plan to aggressively nonrenew accounts throughout 2020, where allowed, with intense focus on the bottom half of our book of business, underperforming accounts and accounts that model as identified as having characteristics predictive of future adverse loss experience. In addition, we do not plan to write new classes of business that are heavy in auto. Through these actions, we're confident we'll achieve better diversification in our overall book of business, which has become too heavily weighted in commercial auto in recent years. Last year, we focused on developing a new strategic direction at UFG with several initiatives currently underway to position us for sustainable and profitable financial performance. As a general overview, we're focusing on implementing more consistent underwriting practices across our 6 regions, better diversifying our overall book of business, adopting proven best practices for our agents and policyholders, enhancing claim service with new efficiencies to shorten cycle time, and leveraging analytics to improve pricing and risk selection. I believe we'll look back at 2019 as both a transitional and transformational year at UFG. We opened a new headquarters building to accommodate our future workforce, completed the first release of our multiyear Oasis initiative to upgrade our underwriting technology and analytics platform and developed a new strategic direction forward that builds on our greatest strengths as a company, our more than 1,100 experienced and knowledgeable employees who are dedicated to coming together, rolling up their sleeves and starting down a promise -- promising and more profitable path for UFG. Despite the challenges we face with COVID-19, UFG is well positioned to overcome them with a strong balance sheet, conservative investment portfolio and 0 debt. Our plans for 2020 are ambitious. But with our exceptional team of people at UFG, I believe we will achieve everything we set out to do. We are excited to move forward with our strategic initiative and optimistic that we'll have positive results to show for it next year as we celebrate the 75th anniversary of UFG in 2021. Thank you for investing in UFG and also for your continued patience and support. Jack?

Thanks much, Randy. This concludes the formal business of today's shareholder meeting, and the meeting is hereby adjourned. We will now proceed to the question-and-answer session.

We have not received any questions.

Randy Patten informs me that we have not received any questions. So with that being said, on behalf of the entire Board and management team, I would like to express our gratitude to all shareholders for their continued support, thank you all for attending today's meeting.

This concludes the meeting, you may now disconnect.