Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

United Fire Group (NASDAQ:UFCS)

Q4 2013 Earnings Conference Call

February 18, 2014 10:00 a.m. ET

Executives

Anita Novak - Director, Investor Relations

Randy Ramlo - President and Chief Executive Officer

Dianne Lyons - Vice President and Chief Financial Officer

Barrie Ernst - Chief Investment Officer

Mike Wilkins - Executive Vice President

Analysts

Paul Newsome – Sandler O’Neill

Vincent DeAugustino - KBW

Craig Rothman - Millennium Partners

Operator

Good morning. My name is, Danielle, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the United Fire Group Fourth Quarter 2013 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

Thank you, I will now turn the conference over to Anita Novak, Director of Investor Relations.

Anita Novak

Good morning, everyone, and thank you for joining this call. Earlier today, we issued a news release on our results. To find a copy of this document as well as a copy of this morning’s [inaudible] slide deck that does not exist, please visit our website at www.unitedfiregroup.com. Press releases will be located under the Investor Relations tab.

Our speakers today are Randy Ramlo, President and Chief Executive Officer; Mike Wilkins, Executive Vice President; and Dianne Lyons, Vice President and Chief Financial Officer. Other members of our executive team will also be available for the question-and-answer session that will follow our prepared remarks.

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 subsequent 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 available in our press release and subsequent SEC filings.

At this time, I am pleased to present Mr. Randy Ramlo, President and Chief Executive Officer of United Fire Group.

Randy Ramlo

Thank you, Anita. Good morning, everyone, and welcome to United Fire’s fourth quarter conference call. As you may have noticed from our press release this morning, we’re pleased with our fourth quarter and year end results. Our operating income was $1 per diluted share, net income was $1.04 per diluted share and our combined ratio was 89% for the quarter.

For the year, operating income per diluted share was $2.76 per share, net income was $2.98 per diluted share and our combined ratio was 94.8%. Our book value at December 31 was $30.87 per share and our return on equity was 10.1%.

We did not see much change in the competitiveness of the market in the fourth quarter on renewals, but the competitiveness of the new business during the quarter was persistent. Nonetheless, we actually achieved more rate increases during the fourth quarter than we did in the third quarter of 2013. Commercial lines renewal pricing increased in most regions with average percentage increases in the upper single digits and most small and mid-market accounts and double digit increases on those policies with underperforming experience.

The fourth quarter was the ninth consecutive quarter of commercial lines pricing increases for us. 2013 was a less active catastrophe year, but given the potential for strong weather related events in the U.S. in recent years and the continuing low interest rate environment, we believe we’ll continue to see rate increases at least during the first half of 2014 and likely for most of the year.

Premium written from new business remained strong. It was down from the prior quarter, but up from the same quarter a year ago. Our success ratio on quoted accounts increased slightly during the quarter and remained strong. New business pricing held steady.

Overall, personal lines pricing decelerated slightly due to a slight decline in the amount of increases in the Homeowners line of business from high single digit increases to mid-single digit increases. Policy retention remained strong at 82%, but down slightly from the previous quarter. The economy continues to grow albeit at a slow rate, but enough that we continue to see positive trends in premium from endorsements and premium audits. Frequency continued to trend downward in the fourth quarter and severity overall was flat.

Mike and Dianne will give some additional color on our 2013 results in a moment or two. But I would like to spend some time this morning talking about some of the things we did in 2013 and will do in 2014 to build on what we believe was a pretty strong showing in 2013.

On February 1, 2014 we opened a new branch office in Los Angeles, California to write excess and surplus lines business. The unit will be called UFG Specialty, we hired a very experienced team from -- to underwrite the line, the branch will write business in the states of California, Oregon, Nevada and Arizona and expand down the road into additional states.

The first policies will be effective in the first quarter of 2014. We’ve wanted to expand into this business for some time and we are pleased that this opportunity has presented itself. Over the last few years, we have been working from our 2015 business plan. As we have reported to you from time-to-time, we are currently meeting or exceeding virtually all of our projected targets from that plan.

As a result, we have expanded our business initiatives and in 2013 we created a new seven year plan which we affectionately called our 20/20 vision. The new business plan is a bit more aggressive than our 2015 five year plan and has been expanded to include more internal metrics. The key components of 20/20 vision are people, service, profit and growth. Key considerations are volatility in earnings and our ROE growth regardless of the current market conditions.

In 2012, we committed to a new plan system. We have been working diligently to implement the new system since it will enhance our users’ efficiencies, save time and resources and enhance external reporting. I'm happy to report that in 2014, the system will be fully implemented, on time and on budget.

We believe additional benefits from the new system will include enhancement of our predictive analytics tools. Some of the immediate benefits of the product will be improving average paid losses, adjuster efficiency gains and significant cycle time improvements. Over several quarters, we have discussed our ongoing success with predictive analytics. We have now accumulated enough data to correlate and substantiate additional uses of this underwriting tool. We will be expanding our use of this tool in 2014.

Effective January 1, 2014 we took advantage of more favorable reinsurance pricing and expanded our catastrophe reinsurance program. Essentially we added $50 million of additional coverage, expanded the 72 hour coverage period for anyone catastrophe to 96 hours and eliminated the 5% co-participation on the program.

In our core program, we increased our maximum any one life limit to $20 million, which will help mitigate our exposure to severity losses in our workers compensation line and negotiated a more favorable reinstatement provisions. With all the enhancements we still save money.

On December 16, 2013, we bought the American building. This building is a ten story unit adjacent to our other buildings in Cedar Rapids campus. The building is currently occupied with non-UFG personnel and our intent at the moment is to use the facility as a source of rental income.

Improvements to the building are planned, so the future used by UFG employees may very well be an option. We are currently studying any and all feasibilities for the property. The last few years have been productive ones for United Fire. We have successfully integrated the Mercer Insurance acquisition and successfully created a plan to manage through the current insurance cycle.

We continue to expand our agency force and our product offerings. We are not a company that toots our horn very loudly, but we feel we have some great things moving in the right direction and I'm happy to have an opportunity to share our enthusiasm.

With that I'd like to turn the discussion over to our Executive Vice-President, Mike Wilkins.

Mike Wilkins

Thanks, Randy. Our net written premiums in our commercial lines increased 9.5% during the fourth quarter and 11.2% year-to-date. The lines experiencing the greatest amount of rate increase were primarily commercial auto, workers’ compensation and fire and allied lines, which includes commercial, multi-peril, and inland marine.

Net written premiums in our personal lines increased 9.2% during the quarter and 4.6% year-to-date. We continue to see premium growth as we more appropriately price our book of business through the use of predictive analytic rate adjustments. Year-to-date fire and allied lines, increased 4% and personal auto lines increased 5.6%.

Written premiums in the assumed reinsurance line of business decreased 3.5% for the quarter due to the timing of premiums received. Year-to-date written premiums in the assumed reinsurance line of business remained flat. We believe rate increases continue to exceed loss cost trends overall.

Average loss cost trends for the industry are currently approximately 3.5% according to a recent Towers Watson report. The organic growth recognized in the fourth quarter compared to the fourth quarter of 2012 was 9.4%. 6.2 percentage points are attributable to the renewal rate increases, 2.4 percentage points are attributed to new business and 0.8 percentage points are attributed to net premium audits endorsements and the timing of renewals.

As we mentioned in our press release this morning, our rate increases in underwriting initiatives produced a nearly one point improvement in our net loss ratio excluding catastrophes for 2013 despite slightly less benefit from our prior year reserve development.

Frequency trended downward again in the fourth quarter compared to the fourth quarter of 2012 due to a lack of any major catastrophic events in the U.S. Frequency was also down for the year. Last quarter, we were seeing some increases in large claims as compared to one year ago. We indicated at that time that one quarter does not indicate a trend. We did not see a continuation of that claims pattern in the fourth quarter and large losses for the year were consistent with previous claims history.

Our underwriting expense ratio for the fourth quarter was 31.4 percentage points compared to 29.5 percentage points for the fourth quarter of 2012. We'd like to see our underwriting expense ratio at 30 percentage points or less. It was a bit higher this quarter as a result of additional agent profit sharing attributed to more profitable business in 2013.

Our annual underwriting expense ratio of 31.8 percentage points also reflects the same impact as well as additional employee defined pension benefit cost in 2013. We continue to believe that additional expense savings will occur in 2014 and 2015 as additional financial obligations associated with the Mercer Insurance acquisition are fulfilled and further integration efficiencies occur. As we move into 2014 we will be reviewing our profit sharing and continued commission programs as well to make sure they are consistent with industry standards.

Our life segment reported net income of $3.3 million or $0.13 per share for the quarter and $8.7 million or $0.34 per share for the year. We continue to experience growth in the sales of our traditional life products with the exception of the single premium whole life products and we continue to expand our geographic footprint.

We continue to focus on properly pricing our products in this low interest rate environment. We have had good success in the latter half of 2013 as we increased renewals of our annuity products. As a result, we have slowed the net cash outflow, improved margins and increased net income. Loss and loss settlement expenses declined during the fourth quarter, but increased 4.3% for the year compared to 2012.

Net withdrawals of our annuity products increased and sales of our single premium whole life product decreased in 2013 compared to 2012, which resulted in a decline and increase in liability for future policy benefits. However, deferred annuity deposits more than doubled in the fourth quarter due to a large number of annuitants renewing their old annuities enter new contracts, which is a benefit to us as most of their old contracts were at much higher credited rates.

With that, I’ll turn the financial discussion over to Dianne Lyons.

Dianne Lyons

Thank you, Mike. Consolidated net income was $26.5 million for the fourth quarter and $76.1 million year-to-date compared to a net loss of $2.4 million and net income of $40.2 million for the same period of 2012. The increases were driven primarily by growth in property and casualty premiums earned, which increased 8.9% for the quarter and 10.3% year-to-date compared to the same periods of 2012.

Catastrophe losses for the quarter totaled $3 million in 2013 compared to $30.2 million in 2012. Normally, third quarter of any given year will experience heavier losses associated to late summer storms and hurricanes. But 2013 proved to be a benign hurricane season for the United States. Year-to-date catastrophe losses contributed 4.4 percentage points to the combined ratio. Our annual catastrophe load is 6 percentage points and that will not change for 2014.

During the fourth quarter of 2013, we experienced favorable reserve development of $8.9 million or $0.23 per share. Year-to-date, we experienced favorable reserve development of $57.5 million or $1.46 per share. I would like to remind investors that there is a great deal of volatility from quarter-to-quarter and year-to-year in the reported amounts of the prior year’s reserve development due to the fact that reserve development occurs and is primarily affected by the timing associated with the settlement of claims.

To that point, I will remind our listeners that our average favorable development for the last four years including 2013 has been $59.5 million and that our 2013 favorable development is consistent with that average.

Consolidated losses and loss settlement expenses decreased to $32 million or 22.5% compared to fourth quarter 2012. Year-to-date, losses and loss settlement expenses were virtually flat compared to 2012.

Consolidated investment income was $30 million for the quarter, which is an increase of 18.5% compared to $25.3 million a year ago. Year-to-date, consolidated investment income was $112.8 million, which is an increase of 0.8% compared to 2012. The fourth quarter improvement is attributable to limited liability partnership whose increases in fair values were recognized in investment income.

As for 2014, we expect low interest rates to persist at least for the first half of the year perhaps for all of 2014. The weighted average effective duration of our fixed maturity securities portfolio at December 31st was 4.96 years compared to four years at December 31st. Year-to-date, total return for the equity portfolio was 31.19% compared to 32.38% for the S&P 500.

Net realized investment gains for the fourth quarter totaled $1.4 million compared to $0.8 million in 2012. Year-to-date, net realized investment gains totaled $8.7 million compared to $5.5 million in 2012.

Net unrealized investment gains, net of tax totaled $116.6 million as of December 31, which is a decrease of $27.5 million net of tax. This is due to unrealized investment losses in the fixed maturity investment portfolios as a result of raising interest rates, which was somewhat offset by market value increases in our equity investment portfolio.

Regarding capital management, during the fourth quarter of 2013, we declared and paid a dividend of $0.18 per share to shareholders of record on December 2, 2013. We believe that the consistent payment of dividends remains the most effective way of returning capital to our shareholders.

We have paid a dividend every quarter since March of 1968. During the fourth quarter, we repurchased 56,026 shares of our common stock for $1.5 million at an average cost of $27.58 per share. The plan continues to have approximately 1.1 million shares available for repurchase until August 2014.

It is management’s position however that our best use of capital at this time is to write new profitable business. Our stockholders' equity increased 7.4% to $782.8 million at December 31, from $729.2 million at December 31. At December 31, 2013 book value was 30.87 and our average return on equity was 10.1%. And with that I’ll open the line for questions.

Question-and-Answer Session

Operator

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Paul Newsome from Sandler O’Neill. Please proceed with your question.

Paul Newsome – Sandler O’Neill

Good morning.

Randy Ramlo

Hi, Paul.

Paul Newsome – Sandler O’Neill

I’d like to get a little bit more detail on the new excess and surplus lines business. And maybe talk a little bit about what makes you so confident in this team and what sort of the prospects – I mean, is this going to be a small business for you in the short-term or do you have great plans?

Randy Ramlo

Paul, this is Randy and I’ll maybe let Mike Wilkins answer a little bit more in depth. But we actually had a group of people approach us that had many years of experience doing this. And as I mentioned in the transcript, it’s something we’ve been looking to try to get into. We’ve looked at acquiring some E&S operations; just decided that, that didn't work out very well. But maybe I’ll ask Mike to make a few more comments on what our expectation are for in the future.

Mike Wilkins

Good morning, Paul. As Randy mentioned the group -- we hired a team of eight people. We had a previous knowledge of the head of the unit. We had met him before and knew him a little bit. We didn't know him real well, but he is somebody that we had known in the past and have been impressed with. This was a segment of the business on our strategic plan that we wanted to get into. We’re just trying to find the right way to do it and when this group approached us, we thought it made a lot of sense to move forward with it.

One of the things that we like about the -- basically doing a lift out and bringing in a team is, they have some existing relationships with brokers, which we think will bring value. Unlike an acquisition, we don't have to worry about the liabilities and proper reserves on a book of business, because we had looked at some acquisitions in this space but that was always an area concerned us and certainly it’s going to start small, but we think we can expand it fairly rapidly into other parts of the country. And we’re pretty excited about what we might be able to do with this segment.

Paul Newsome – Sandler O’Neill

Can you talk about what they’re actually going to write or think about writing given excess and surplus lines could be all sorts of different things?

Mike Wilkins

Yeah, I would say typically what they write is fringe E&S business. So it's not – we’re not doing super hazardous energy, oil and gas, not anything like that. I would say a lot of the stuffs that they write are similar classes to what we write. Maybe they don't have any prior experience, years in business. They’ll write some property that we wouldn't write if the situation is correct. Did that help?

Paul Newsome – Sandler O’Neill

Yeah. So build bonds or --

Mike Wilkins

Not yet, no.

Paul Newsome – Sandler O’Neill

Wind coverage in Florida or –

Mike Wilkins

No cat exposed property, no -- obviously California being the state, we’re not doing any earthquake business, no cat exposed business, that's really not going to be the target at all. They do some liquor liability, they do a lot of excess liability over classes that we maybe would write. The underlying – a few special classes that they do, but I don’t want get into too many specifics there.

Paul Newsome – Sandler O’Neill

Great. I'll get back in queue and let some other folks ask questions.

Operator

Thank you. Our next question comes from Vincent DeAugustino with KBW. Please proceed with your questions.

Vincent DeAugustino - KBW

Hi, good morning everyone.

Mike Wilkins

Good mooring.

Dianne Lyons

Good morning.

Vincent DeAugustino – KBW

I guess, first, congrats on the nice quarter. So, it’s very good to see to cap off 2013. And just to follow up on some of Paul’s questions. Just with E&S expansion. I’m just curious if you’d be able to share how much premium the team was handling kind of maybe this year and 2013 and then any detail that you might have as far as their underwriting performance over the last couple of years?

Mike Wilkins

This is Mike Wilkins again. I don’t think we want to share any of the premium information. I can say their underlying performance had been excellent and I think we have a pretty good documentation of that from public sources. So we’ve felt pretty confident about that. One other thing I probably should mention when Paul asked the questions, we also look at this unit as something we can leverage with our existing agency plan. So maybe some business that we would have rejected in the past now we can channel it to this unit to take another look at it from our existing agency plan versus just a straight rejection.

Vincent DeAugustino – KBW

Just I mean one of your competitors kind of looks at their startup E&S operation kind of a similar way, and I know they do some surveys to gauge how big of a pipeline that might be. To your comment on E&S business that your current agency relationships are placing, do you happen to know how big that pipeline might be for United Fire, if you were able to shift some of that over?

Mike Wilkins

I don’t, not at this time.

Vincent DeAugustino – KBW

All right, cool. So just moving on to some of the points in the quarter; I’m just curious if you might be able to provide the reserve release details from fourth quarter ’12 just so we can get it to an apples-to-apples core loss ratio on ’13.

Dianne Lyons

The funds, Vincent, again is just a matter of timing and there was no change in reserve philosophy, no significant reserve strengthening, it was just timing of when the losses were settled.

Vincent DeAugustino – KBW

Okay. Would I be able to roughly use statutory reserve releases from last year as a proxy? Okay, perfect. And then just kind of, two other ones real quick if I could. On the workers’ comp and then the personal auto loss ratios -- just touch elevated sequentially. And I’m just curious if there were any reserve movements that were impactful there in the fourth quarter of ’13.

Mike Wilkins

We're kind of looking to each other, wondering who'd be the best one to answer this question. This is Mike Wilkins. I’ll comment on the lines individually. So for work comp, that is a line that has picked up a little bit on us. We had been writing a little bit more of that business. We’re kind of reevaluating our underwriting guidelines there and doing a little re-underwriting of that business. Our results have been horrible, but they have picked up. That was really the only line this year that we saw an accident year increase in loss ratio. So we are trying to address that and see if we can get that moving in the right direction again.

The personal auto actually looked good all year long and then sort of saw a little pick up in November and December. So we think that was just a little bit of a blip with a couple of large losses. But we’ll continue to watch that really closely. And Dianne, if you have any comments on the reserve strengthening in those lines, I don’t know the details by lines.

Dianne Lyons

No, there wasn’t a lot of reserve strengthening in either one of those lines. And in fact, as far as the commercial lines go, we’ve seen it actually come down over the past couple of years, but we’ve made changes in that line -- underwriting -- changing underwriting guidelines that we think what keep improving the results in that line.

Vincent DeAugustino – KBW

Okay, great. And then just one last one, just from some of the data that I looked at; it looks like the weather was fairly good across the decent portion of your geographic footprint and the fire and allied lines kind of show that with the nice result there. So, I'm just curious if you could split out the benefit coming from a lot of the rates and underwriting actions that you’ve been kind of putting through of the last bunch of quarters versus any sort of impact that we might be seeing from favorable non-cat weather. Thank you.

Mike Wilkins

This is Mike again. We’ve estimated – I mentioned the margin expansion was about one point in our loss ratio and then the reserve differences, the reserve redundancy differences between the two years, contributed a couple more points. So we were anticipating we’d get about three points of margin expansion with 6%, 7% rate increase that we've been reporting and then the 3%, 3.5% loss cost inflation. So it appears to us that those numbers are about what we would have expected.

Vincent DeAugustino – KBW

So, I guess, just to reconcile that, I mean, based off of the -- kind of using the last year's fourth quarter statutory reserve releases that would basically show about almost a 28 point year-over-year for loss ratio improvement. So I should roughly think about 3 to 4 points of that being, call it, core sustainable improvement and then roughly call it 24 points of that being favorable weather?

Mike Wilkins

And that's probably right. I haven't done that math and I was really talking more in terms of the year. But we did have Sandy in fourth quarter of 2012, so we had a significant number of additional points from Hurricane Sandy that apply to fourth quarter last year.

Vincent DeAugustino – KBW

I'm also looking at the core, so I stripped that out but, cool, thank you very much for the color, guys.

Operator

[Operator Instructions] We have another question from Paul Newsome with Sandler O’Neill. Please proceed with your question.

Paul Newsome - Sandler O’Neill

Could you folks talk a little bit more about the cost reduction efforts, and what gives you confidence you can take that expense ratio down a little bit more? I know you have already said some things, but if you can give us some more specifics, that would be great.

Mike Wilkins

Well, I think, one sure way is our agent profit sharing and commission schedule. I think we redid our profit sharing plan a couple of years ago and I think this was -- 2013 ended up being somewhat of a perfect storm of a lot of agencies being extremely profitable and growing. We have a growth component in our profit sharing plan that rewards profitable agents, they do have to be profitable, but if they also were profitable in group, our plan is pretty lucrative. And you might say, well, that's exactly who you would want to reward which we do, but I think we are looking at our peers, we probably went a little bit too far. That's something I think we can reevaluate and correct pretty easily.

We're also kind of on our loss adjustment side, our construction defect book of business kind of continues to generate fairly hefty legal involvement, I'll say and our claims people and our attorneys have been working hard and then I think we can make some significant improvements in that area. And then we still have some Mercer systems that we're continuing to have to pay for, that will slowly go away as time goes on.

So I think we have -- we subscribe to Wards [ph] financial and we really went over all the areas that we have even slight increases over our peered group and will be focusing on all of those to try to get that expense ratio down a little bit. Interestingly this year we were extremely happy with our loss experience which I think is kind of the hard one, but some of the expense area that I think we kind of need to work on a little bit going forward.

Dianne Lyons

Paul, I might add to that our cost for pension plan benefit and other employee retirement benefit are heavily influenced by the interest rate and the discount rates that's used. And you know that the interest rates have been low for the last couple of years, which has driven that cost up and we expect if and when interest rates start to go up, that cost will come down.

Paul Newsome - Sandler O’Neill

Does the new business plan change how the management team is compensated?

Mike Wilkins

I doubt it. I guess, our board could always change our compensation method going forward, so I can't necessarily say that. But I would say that our new plan will hopefully take better advantage of our current compensation plan.

Paul Newsome - Sandler O’Neill

And then, lastly, I just wanted to touch on the buyback sheet, you bought in less amount of shares, in the first quarter that is pretty cheap, but how you are thinking about buybacks, especially to these valuations.

Barrie Ernst

It's Barrie Ernst, Chief Investment Officer. We bought back 56,000 shares in the fourth quarter and we thought it dropping below book value the way it did, that it was a good buy. We only had a few days to do that before the blackout and so this was the amount of shares that we could accumulate in that period of time. Going forward, if we see it below book value, we think that's a good place to enter in a transaction and that's what we’ll be doing in the future.

Paul Newsome – Sandler O’Neill

Perfect. Thank you.

Mike Wilkins

Thank you, Paul.

Operator

Our next question comes from Craig Rothman with Millennium Partners. Please proceed with your question.

Craig Rothman – Millennium Partners

Hey, guys. I was also going to ask on expenses I guess, you hit on that a bit. But is there an expense ratio target we should be thinking about in the next couple of years and where do we stand as far as savings from the merger deal go?

Mike Wilkins

Well, we traditionally have shot for an underwriting expense ratio of 30% and at 31.8%, we’re a little over that. I don't necessarily think we want to go much below that. As we get to the larger company, maybe that's possible. But there were a couple of reasons that we tend to think going lower would be counterproductive. We have a little bit larger surety operations and some of our competitors which is little bit higher expense operation; that is one that we’re big believers in. We use a lot more loss control than some of our competitors do if there is a benefit from that.

We're a little less on the personal lines side which – that’s a little bit lower cost segment. So that tends to move us upward a little bit and then we mentioned earlier, we are believers in having a good profit sharing plan for our agents, but maybe not quite as lucrative as it was in 2013. So kind of with those reasons, we think we can justify being at 30, when maybe some of our competitors are on the upper 20's. But that's kind of where we like to get back to.

Craig Rothman – Millennium Partners

Gotcha. Anything notable on the mix on small versus larger account size on premium growth, this quarter?

Mike Wilkins

I didn’t see anything material. One of our growth initiatives is to be a better market for accounts over $100,000 for our agency force. We think that that’s a kind of value added; we can kind of leverage writing larger, more complicated accounts and thus request some more middle market and smaller accounts from our agency force. We’re trying to focus a little bit more on larger accounts and have done pretty well with that in most of our branches. Other than that, I didn’t see much difference in the mix.

Craig Rothman – Millennium Partners

So when you’re just talking about increased competitiveness on large commercial accounts, is that over $100,000 –

Mike Wilkins

Yeah, I think -- it seems like -- I don't know if I'm necessarily predicting softening of the market, but that's often times where you see it first done on larger accounts.

Craig Rothman – Millennium Partners

Okay. And then your comments about getting rate increases in the next two or three quarters, is it a lot of scrutiny from investors on the whole rate outlook in the market? Is there anything to read into on that as far as looking out past three quarters, you don't see the ability – the rate increases or is that just more of a general comment?

Mike Wilkins

For us in general, I think we mentioned this was -- the fourth quarter is the ninth straight quarter of getting rate increases. So if you go back to what we see that meaning was that the policies of ours that renewed in the fourth quarter of 2013 that was their third consecutive quarter of rate increases. And they accepted that, I mentioned that our retention held pretty well assuming that. So with the lower interest rates continuing into the foreseeable future and the fact that we’re successful getting rate increases a third consecutive time on our fourth quarter policy holders, we’re at least pretty optimistic about the first, second and maybe even third quarters of 2014.

Also, I think we mentioned that we’ve had nine straight quarters of rate increases. I think some of the larger national carriers were maybe boasting rate increases a quarter or two earlier than we were. So I think we’re in same pool with a lot of our peers and competitors. But I think we may be a little bit a quarter or two behind some of the national carriers. So, hopefully, we can still get a little momentum going forward into 2014.

Craig Rothman – Millennium Partners

Great, thanks.

Operator

Thank you. I’d like to now turn the floor back over to Anita Novak.

Anita Novak

Thanks, Daniele. This now concludes this conference call. As a reminder, a transcript of this call will be available on the company website at www.unitedfiregroup.com. On behalf of the management of United Fire Group, I wish all of you a very pleasant day.

Operator

Thank you, ladies and gentlemen. This concludes today’s program. You may disconnect your lines at this time. Thank you all for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: United Fire Group's CEO Discusses Q4 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts