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.

Good morning, and thank you, Ian. Please come to order for the meeting. I want to welcome everyone to the Annual Meeting of Shareholders of United Fire Group, Inc. I am Jack Evans, Chairman of the Board of Directors, in accordance with our bylaws, I will be presiding at this meeting. Today's meeting is also being broadcast live audio webcast. We believe this virtual meeting option will maximize participation of shareholders regardless of their location. In light of the ongoing public health concerns regarding the novel coronavirus pandemic, 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. 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 are: one, to elect 3 Class C directors; ratify the Audit committee's appointment of Ernst & Young LLP as our independent registered public accounting firm for 2021; approve the amendment of the United Fire Group, Inc. 2021 stock and incentive plan, approve on an advisory basis, the compensation of our named executive officers; and finally, vote on such other matters as they properly come before the meeting, or at an adjournment or postponement thereof. Kristin Stauffer will serve as Secretary of the meeting. Computershare, the registrar and transfer agent for our common stock will be acting as the inspector of elections for this meeting. Now I would like to introduce a few members of the senior management team. Participating in today's meeting are Randy Ramlo, President and Chief Executive Officer and also a Director; Mike Wilkins, Executive Vice President and Chief Operating Officer; Dawn Jaffray, Executive Vice President and Chief Financial Officer; Neal Scharmer, Vice President and General Counsel and Corporate Secretary. I would also like to introduce you to my fellow directors participating in today's meeting. Jim Noyce, Vice Chair; John-Paul Besong, Scott Carlton, Brenda Clancy, Christopher Drahozal, Lura McBride, George Milligan, Mary Quass, Kyle Skogman and Susan Voss. Kevin Zaugg of Ernst & Young LLP is also present at the meeting. He is available to make a statement if desired and answer any questions from shareholders 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 statement. Corporate Secretary, Neil 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 at the close of business on March 22, 2021 are entitled to vote at this meeting. The inspector of elections has the shareholder list of the company as of the close of business on the record date for 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 webcast or by proxy at the 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. Any shareholder who has already voted by proxy and does not want to change their vote, should not take any further action. 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. There are 4 proposals on the agenda for this year's annual meeting of shareholders. The first proposal is the election of 3 Class C directors to serve a term expiring in 2024. The Board of Directors recommends a vote for the election of each of the following Director nominees: Christopher Drahozal, Lura McBride and George Milligan. The second proposal is ratification of the Audit Committee's appointment of Ernst & Young LLP as our independent registered public accounting firm for 2021 and the Board of Directors recommends a vote for this proposal. The third proposal is to amend the United Fire Group, Inc. 2021 stock and incentive plan. The Board 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 our 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 elections has informed me that all director nominees have been elected. The appointment of Ernst & Young LLP as our independent registered public accounting firm for 2021 has been ratified. The amendment to the 2021 stock and incentive plan has been approved, and the advisory resolution relating to the compensation of our named executive officers has been approved. I now turn this meeting over to President and Chief Executive Officer, Randy Ramlo, for his presentation. Randy?

Thanks, Jack. 2020 was a year none of us will soon forget. But thanks to the resiliency and adaptability of our people at UFG, we persevered through the challenges, seamlessly pivoting to remote work to serve our agents amid the pandemic, fully implementing our strategic plan despite our socially distant workplace. We diligently fulfilled our promise of protection to policyholders in a year with unprecedented level of catastrophe losses. Today, the majority of our 1,100 workforce continues to work from home. Due to the ongoing pandemic, however, we are hoping to reopen our UFG offices sooner than later in 2021. At UFG, we continue to take steps to position our company for superior operational and financial performance, focusing on long-term profitability, diversified growth and continuous innovation as part of our strategic plan for success. Headwinds to our profitability remain: portfolio concentration, excessive jury awards, increased litigation and reserve development. We are addressing these issues with several ambitious strategic initiatives, which are in full swing at UFG. I'll now take the opportunity to update you on the progress we've made as part of our strategic plan to return to profitability. Our underwriting branches are effectively reducing commercial auto units to rightsize this line of business that continue to plague our industry. To improve loss adjustment and reserve adequacy, we're leveraging embedded analytics and focusing on best execution. Both litigation and underwriting expense management is trending positive as a result of our improved analytics and more formalized guidelines and forecast processes. Within our portfolio, we're making good progress on repositioning our standard direct lines, particularly commercial auto. To better support our business mix, we're taking a more centralized approach in underwriting, claims, marketing, risk control and analytics. Our surety in excess and surplus lines continue to grow profitably. We're aggressively allocating resources to support the continued expansion of these lines. In addition, growth in our assumed reinsurance and managing general agent portfolios expands our scope and provides a fast path to diversification adding exposures where we don't currently have them and avoiding areas where we do. To propel our growth in the small commercial market, we're excited to launch a new small business quoting platform to select states in June. This is designed to allow us to deliver straight-through processing of policies for our agents. As part of our commitment to underwriting excellence our ultimate goal is to produce industry-leading core underwriting results in our standard, direct lines on a long-term, consistent basis. This includes curing the variability in underwriting execution to achieve improved and more consistent results across our underwriting branches. In addition to a realignment in our geographic footprint, we'll be initiating efforts toward an intense focus on underwriting discipline. This will include a more refined and consistent risk appetite, consistency in the highest standards for risk selection, risk management across our enterprise and enhanced analytics and underwriting tools to support continuous improvement in decision-making and pricing discipline. With these strategic initiatives fully underway at UFG, I believe that we will deliver improved results in the future, while we will undoubtedly face challenges and setbacks on the path to success. I firmly believe our strategic plan will get us from where we are today to where we want to be tomorrow. On July 2, this year, UFG celebrated an important milestone, our 75th anniversary. A reminder of all we've overcome over the past 3 quarters of a century from devastating catastrophes, volatile markets, a worldwide pandemic and a powerful ratio right here in our headquarter city of Cedar Rapids. After 75 years in business, we have much to be proud of at UFG, but we know we are still much work to be done as we regain our footing and aim to return to profitability. As our valued shareholder, I thank you for your continued trust and support. I believe we are well poised to deliver on our strategic plan in the future, and we'll be doubling down on our efforts throughout 2021. Here's to the next 75 years at UFG. Jack?

Thank you, Randy. Before we adjourn the meeting today, I would like to take this opportunity to thank the UFG shareholders, the executive team and my fellow directors for the trust you have placed in me these past 26 years. When I first joined the Board in 1995, UFG was a midsized regional insurer operating in 34 states, with 500 employees and less than $1 billion in assets. Since that time, UFG has grown into a national carrier licensed in all 50 states plus the district of Columbia, with more than 1,100 employees and $3 billion in assets. This year, as Randy mentioned, on January 2, UFG proudly celebrated 75 years in business and has embarked on a bold new strategic path forward for its future. As the Chairman of the Board, it has been my privilege to serve with such diverse, experienced and esteemed members, all committed to the long-term success of UFG. With the appointments of Jim Noyce as Chairman; and Kyle Skogman as Vice Chairman, the company's future is in the best hands for our shareholders. From the beginning, UFG has viewed its business as a people business. The company is homegrown, and I hope, will remain a locally managed, independent organization. As I retire from the Board today, I remain most grateful for the many people I have crossed paths with during my tenure. It is, however, a bitter sweet moment, but I will always remember what a tremendous honor it has been to work alongside such a dedicated such dedicated and caring people at UFG. In keeping with the tradition set forth by my predecessor on the Board, the late Scott McIntyre Jr., I will wrap up our 2021 annual shareholders meeting in good time, leaving you with these lasting pieces of advice. We are all in this together, stay optimistic. The P&C business is full of challenges, think long-term and support one another. Godspeed to all. And with that, 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. At this time, we would like to take any questions you might have for us today. [Operator Instructions] We will wait for a moment to see if there are any questions.

There are no questions.

Thank you, Randy. Seeing no questions from our shareholders, we will conclude the question-and-answer portion of this meeting. On behalf of the entire Board and the management team, I would like to express our gratitude to all of our shareholders for their continued support. Thank you for attending our meeting today.

This concludes the meeting. Thank you for participating. You may now disconnect.