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

Hello, and welcome to the Annual Meeting of the 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 James Noyce, Chairperson of the Board of Directors of United Fire Group Inc. Mr. Noyce, the floor is yours.

The meeting will please come to order. Good morning, and welcome to the Annual Meeting of Shareholders of United Fire Group, Inc., and thank you all for attending. I am Jim Noyce, Chairperson of the Board of Directors and in accordance with the 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. Thank you very much to those who are participating virtually today. We will conduct our meeting in 2 parts. First, we will address our formal items of business, followed by a question-and-answer session. 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 include: the election of 4 Class C directors identified in the proxy statement; the ratification of the Audit Committee's appointment of Ernst & Young LLP as our independent registered public accounting firm for 2024; and approval on an advisory basis of the compensation of the company's named executive officers. Sarah Madsen, Senior Vice President, Chief Legal Officer and Corporate Secretary, will serve as Secretary of the meeting. Computershare, the registrar and transfer agent for our common stock will be acting as the Inspector of Election for this meeting. Now I would like to take an opportunity to introduce a few members of the UFG executive team, including Kevin Leidwinger, President and Chief Executive Officer and also a Director; Julie Stephenson, Executive Vice President and Chief Operating Officer; and Eric Martin, Executive Vice President and Chief Financial Officer. I would also like to introduce you to my fellow directors participating in today's meeting: John-Paul Besong, Scott Carlton; Brenda Clancy, Christopher Drahozal, Matthew Foran; Mark Green, Lura McBride, George Milligan, and Susan Voss. Chris Yusca and Syed Raza of Ernst & Young LLP, are also attending virtually and are available to make a statement of desired and answer questions concerning our financial statements. I call your attention to the rules of conduct for this meeting. These are made available to each shareholder in the document section in the top right corner of the screen upon entering the virtual meeting room. To conduct an orderly meeting, we ask that you abide by these rules. If you need a copy of the annual report or the proxy statement, please refer to the company's website or the hyperlink provided with their proxy materials. Corporate Secretary, Sarah Madsen has delivered an affidavit of mailing from Computershare, establishing that notice of this meeting was duly given. A copy of the notice of meeting and the affidavit of mailing will be incorporated in the minutes of this meeting. All shareholders of record at the close of business on March 18, 2024, 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 March 18, 2024, 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 webcast or by proxy at the meeting. So I declare the meeting duly and lawfully convened. We will now begin the formal business of the meeting. The polls are open for voting on the 3 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 3 proposals on the agenda for this year's Annual Meeting of Shareholders. Our articles of incorporation require that our Board of Directors be divided into 3 classes: A, B and C with one class elected at each annual meeting. The Board of Directors must consist of no more than 15 and no less than 9 members with the exact number being fixed by the Board of Directors. The membership of our Board of Directors will be fixed out of 11 directors following today's meeting with 3 directors in Class B and 4 directors in each of classes A and C. The first proposal is the election of 4 Class C directors to serve a term expiring in 2027. The Board of Directors recommends a vote for the election of each of the following Director nominees: Mark Green, Christopher Drahozal, Lura McBride and George Milligan as Class C directors. The second proposal is ratification of the Audit Committee's appointment of Ernst & Young LLP as our independent registered public accounting firm for 2024. The Board of Directors recommends a vote for this proposal. The third 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 as 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: one, all director nominees have been elected; two, the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2024 has been ratified; and three, the advisory resolution relating to the compensation of our named executive officers has 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. I hereby request that the final report of the inspector of election be filed with the minutes of this meeting. I now turn the meeting over to UFG President and CEO, Kevin Leidwinger, for his update.

Thank you, Jim. Good morning, everyone, and thank you for joining us today. Looking back on 2023, I'm proud of the progress we made even in the face of some difficult challenges as we continue positioning UFG to deliver superior financial and operational performance over time. This progress included restoring growth across the core commercial portfolio by strengthening engagement with our distribution partners, introducing greater actuarial rigor into our processes with the appointment of UFG's first Chief Actuary, along with new leaders for pricing, reserving and reinsurance for more informed portfolio management. We also reduced and optimized our catastrophe footprint by refining our underwriting guidelines and risk limits for property exposed to hurricanes and earthquakes. And we evolved our capital management, premium planning and expense budget frameworks to manage the business more effectively. And our progress did not end there. We also took important steps to deepen our underwriting expertise, drive operational efficiency and evolve for the future. For example, in the underwriting organization, we established small business, middle market and construction business units to better align with our specialized needs of our distribution agents. We also appointed a new Chief Underwriting Officer as well as industry segment and line of business leaders to further enhance our knowledge and skill sets. On the field side of our business, we realigned our regional footprint for improved geographic coverage and created new head of field operations role to oversee sales and distribution, focusing on improving execution, driving new business opportunities and increasing our relevancy among distribution partners. In claims, we continue to benefit from our recent transition to a specialized operating model and also established a claims advocate team to serve as a single point of contact for agents and insurers during the claim process, elevating our customer experience. To streamline our processes and ensure the right work is getting in the right hands, we combined several support teams and formed a business enablement organization led by our newly appointed Chief Administrative Officer. And finally, we continue to take steps to modernize our technology, introducing a new small business quoting platform to agents in 12 additional stages in 2023 with the remaining states launching this year. We're also in the midst of implementing a new policy administration system with all core commercial product lines to be fully enabled by the end of 2025. Our progress continued into 2024 with our decision to partner with New England Asset Management to oversee our investment portfolio. This partnership enables us to uphold our conservative investment practices and high-quality investment portfolio while benefiting from a cost-effective and scalable way to manage assets and maximize returns. Collectively, these accomplishments demonstrate our ongoing commitment to establishing a strong foundation at UFG, one guided by our 5 strategic pillars of long-term profitability, diversified growth, continuous innovation, retaining and attracting talent and expense management as we believe each pillar is fundamental to our long-term success. Turning now to our financial performance. UFG achieved strong premium growth and investment results in 2023, yet our full year financial results were below expectations, primarily due to reserve strengthening and elevated surety losses in the second quarter. This led to AM Best decision to adjust our financial strength rating last August from A to A-. While disappointed with this outcome, we acknowledge that recent years' financial results have not met our high standards as a company. We were pleased that AM Best recognized our very strong balance sheet and revised our outlook to stable, given the initiatives underway to improve performance. Although the rating change has had little effect on our business, we're fully committed to achieving the level of performance commensurate with an A rating and will work diligently to regain our long-standing A financial strength rating with AM Best in the years ahead. Despite the challenges, we closed out the year with improved results in the fourth quarter, delivering our highest level of quarterly profit and lowest underwriting loss ratio of 2023. We started the new year with a strong balance sheet with $3.1 billion in total assets, $734 million in total stockholders' equity and a $1.9 billion investment portfolio. Last week, we released our first quarter financial results, and I'm pleased to report that our profit improvement continued into 2024, with first quarter results producing a net income of $0.52 per diluted share, a combined ratio of 98.9% and return on equity of 7.3%. Book value per common share increased $0.09 to $29.13 as of March 31, 2024, compared to December 31, 2023. All in all, it was a good start to the year, and we look forward to building on these results in the quarters ahead. At UFG, our corporate vision is to always deliver on our promises, and that includes a promise of long-term value to our shareholders. We have a 56-year history of paying dividends and recently paid a $0.16 per share cash dividend to shareholders of record as of March 8, 2024, marking our 224th consecutive quarter. We also have a proud history of support that we fulfill through the UFG Foundation. Since its establishment 24 years ago, the UFG Foundation has awarded more than $16 million in nonprofit grants and scholarship awards showing that insurance is not our only passion at UFG. In reflecting on my nearly 2 years at UFG, I remain tremendously proud of our people for their dedication and adaptability during our ongoing evolution. Within our walls, we've blended new talent and knowledge with existing leadership and insight, allowing us to evolve for the future while preserving our company's deeply valued culture rooted in doing business and treating people the right way. Looking ahead, we're committed to achieving superior performance by delivering deep underwriting expertise to our partners and policyholders with the personal relationships and responsive service that set us part of the industry today. We made significant progress on our strategic journey in 2023 and have carried this positive momentum into 2024. Through continued robust execution of our strategic initiatives and strong adherence to our core strategic pillars, we believe we are exceptionally well positioned to deliver improved performance over time. As our valued shareholder, I thank you for investing in UFG, a strong and growing 78-year-old company dedicated to delivering on our promises for the benefit of all stakeholders. We are grateful for your trust and confidence and are excited to continue to move our company boldly forward in the year ahead. Thank you, Jim.

Thank you, Kevin. Before we adjourn the meeting today, I commend Kevin and his leadership team on an outstanding year of progress that positions the company for a bright future. Kevin's commitment to evolving the company for the future while preserving our people-centered culture will serve our UFG stakeholders well. We wish him continued success as he leads the company forward to deliver superior financial and operational performance. I'm also grateful to my fellow Board members for their unwavering commitment to creating long-term value for our shareholders. It is an honor to serve alongside such dedicated and distinguished individuals. Our Board is confident in the future direction of EFG as the leadership team continues to advance strategies centered on long-term profitability, diversified growth, continuous innovation, retaining and attracting talent and expense management. The company made significant progress in 2023, and we look forward to this momentum continuing throughout 2024. I will close today by expressing my sincere thanks to our shareholders for your trust and confidence in UFG, to my fellow directors for your invaluable oversight and governance and to the employees of UFG for your relentless dedication to delivering on the company's promise for its long-term success. 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. We will wait for a moment to see if we have any questions.

Well, thank you very much. We do not have any questions. So that -- so we'll wrap things up here. On behalf of the entire Board and management team, I would like to express our gratitude to all our shareholders for their continued success and support. Thank you for attending our meeting, and I look forward to this momentum continuing in 2024 and beyond.

This concludes the meeting. You may now disconnect.