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What changed in UNITED FIRE GROUP INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of UNITED FIRE GROUP INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+471 added−613 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-29)

Top changes in UNITED FIRE GROUP INC's 2024 10-K

471 paragraphs added · 613 removed · 309 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

58 edited+21 added−55 removed22 unchanged
Biggest changeChampioning diversity, equity, and inclusion is not just something we do, it is the core of who we are. 2023 2022 2021 Employee data Workforce data Headcount 852 1,095 1,075 Average tenure in years 9.0 8.7 10.0 Percent of self-identified women in workforce 55.0% 57.4% 54.8% Percent of self-identified racial/ethnic minorities in workforce 14.1% 13.8% 13.8% Voluntary turnover rate* 26.8% 12.3% 11.7% Human rights/Social Equal employment opportunity policy Y Y Y Diversity, equity and inclusion policy Y Y Y Human and labor rights policy Y Y Y Ethics Anti-bribery & anti-corruption policy and training Y Y Y Code of ethics and business conduct Y Y Y Community Employee volunteer hours 1,676 1,690 720 * The 2023 voluntary turnover rate includes employees who accepted the Company's early retirement plan offering. 9 Table of Contents Fulfilling careers; health, safety and wellness; compensation and benefits; talent development Employee success is part of UFG's mission, therefore, health, wellness and education are core cultural values.
Biggest changeIt is through our shared awareness and commitment to these principles that we foster a culture of belonging, where everyone is welcome, respected and appreciated. 10 Table of Contents 2024 2023 2022 Employee data Workforce data Headcount 877 852 1,095 Average tenure in years 7.8 9.0 8.7 Percent of self-identified women in workforce 54.7% 55.0% 57.4% Percent of self-identified racial/ethnic minorities in workforce 15.9% 14.1% 13.8% Voluntary turnover rate* 13.3% 26.8% 12.3% Human rights/Social Equal employment opportunity policy Y Y Y Human and labor rights policy Y Y Y Ethics Anti-bribery & anti-corruption policy and training Y Y Y Code of ethics and business conduct Y Y Y Community Employee volunteer hours 863 1,676 1,690 * The 2023 voluntary turnover rate includes employees who accepted the Company's early retirement plan offering.
Our competitive advantages include our commitments to: • Strong agency relationships — ◦ Highly-experienced personnel focused on strong service-oriented relationships. ◦ A team of regional managers is responsible for deepening the agency relationships needed to drive profitable growth and the field execution of underwriting strategies for the core commercial business. • Exceptional service — Our agents and policyholders always have the option to speak with a real person. • Fair and prompt claims handling — We view claims handling experiences as an opportunity to demonstrate our exemplary customer service to our policyholders. • Specialized underwriting expertise — We empower our underwriters with the knowledge and tools needed to make good decisions for the Company. • Superior loss control services — Our loss control representatives make multiple visits to policyholder businesses and job sites each year to ensure safety and make loss prevention recommendations. • Effective and efficient use of technology — We use technology to provide enhanced service to our agents and policyholders, not to replace our personal relationships, but to reinforce them.
Our competitive advantages include our commitments to: • Strong agency relationships: ◦ Highly-experienced personnel focused on strong service-oriented relationships. ◦ A team of regional managers is responsible for deepening the agency relationships needed to drive profitable growth and the field execution of underwriting strategies for the core commercial business. • Exceptional service: Our agents and policyholders always have the option to speak with a real person. • Fair and prompt claims handling: We view claims handling experiences as an opportunity to demonstrate our exemplary customer service to our policyholders. 5 Table of Contents • Specialized underwriting expertise: We empower our underwriters with the knowledge and tools needed to make good decisions for the Company. • Superior loss control services: Our loss control representatives make multiple visits to policyholder businesses and job sites each year to ensure safety and make loss prevention recommendations. • Effective and efficient use of technology: We use technology to provide enhanced service to our agents and policyholders, not to replace our personal relationships, but to reinforce them.
We compete with numerous property and casualty insurance companies in the regional and national market, many of which are substantially larger and have considerably greater financial and other resources. Except for regulatory considerations, there are limited barriers to entry into the insurance industry. Our competitors may be domestic or foreign, as well as licensed or unlicensed.
We compete with numerous property and casualty insurance companies in the regional and national market, some of which are substantially larger and have considerably greater financial and other resources. Except for regulatory considerations, there are limited barriers to entry into the insurance industry. Our competitors may be domestic or foreign, as well as licensed or unlicensed.
Madsen previously served as Assistant General Counsel from 2018 - 2022. Prior to joining UFG, she served as corporate counsel for a national insurance and financial strategies firm, counsel for a global non-profit and was a partner at a St. Paul, MN-based law firm, where she practiced financial services, insurance, and commercial litigation. Ms. Madsen holds a CPCU designation.
Ms. Madsen previously served as Assistant General Counsel from 2018-2022. Prior to joining UFG, she served as corporate counsel for a national insurance and financial strategies firm, counsel for a global non-profit and was a partner at a St. Paul, MN-based law firm, where she practiced financial services, insurance, and commercial litigation. Ms. Madsen holds a CPCU designation. Steven D.
In addition, because our products are marketed exclusively through independent insurance agencies, most of which represent more than one company, we face competition within each agency and competition to retain qualified independent agents. Our competitors include companies that market their products through agents, as well as companies that sell insurance directly to their customers.
In addition, because our primary commercial products are marketed exclusively through independent insurance agencies, most of which represent more than one company, we face competition within each agency and competition to retain qualified independent agents. Our competitors include companies that market their products through agents, as well as companies that sell insurance directly to their customers.
Membership in a state's insurance guaranty association is generally mandatory for insurers wishing to do business in that state. Under these laws, associations may assess their members for certain obligations that insolvent insurance companies have incurred with regard to their policyholders and claimants.
Insurance Guaranty Associations Each state has insurance guaranty association laws. Membership in a state's insurance guaranty association is generally mandatory for insurers wishing to do business in that state. Under these laws, associations may assess their members for certain obligations that insolvent insurance companies have incurred with regard to their policyholders and claimants.
Our appointed actuaries must submit an opinion that our statutory reserves are adequate to meet policy claims-paying obligations and related expenses. Financial Solvency Ratios The NAIC annually calculates 13 financial ratios to assist state insurance regulators in monitoring the financial condition of insurance companies.
Our appointed actuary must submit an opinion that our statutory reserves are adequate to meet policy claims-paying obligations and related expenses. Financial Solvency Ratios The NAIC annually calculates 13 financial ratios to assist state insurance regulators in monitoring the financial condition of insurance companies.
Dodd-Frank expanded the federal presence in insurance oversight and may increase regulatory requirements that are applicable to us. Dodd-Frank's requirements include streamlining the state-based regulation of reinsurance and non-admitted insurance (property or casualty insurance placed with insurers that are eligible to accept insurance, but are not licensed to write insurance in a particular state).
Dodd-Frank expanded the federal presence in insurance oversight and increased regulatory requirements that are applicable to us. Dodd-Frank's requirements include streamlining the state-based regulation of reinsurance and non-admitted insurance (property or casualty insurance placed with insurers that are eligible to accept insurance, but are not licensed to write insurance in a particular state).
The speed with which we can change our rates in response to competition or in response to increasing costs depends, in part, on the willingness of state regulators to allow adequate rates for the business we write.
The speed with which we can change our rates in response to competition or in response to increasing costs depends, in part, on the responsiveness of state regulators to allow adequate rates for the business we write.
To view it, under the "Investors" tab, select "Overview," then "Governance Documents" and then "Code of Ethics and Business Conduct." Free paper copies of any materials that we file with or furnish to the SEC can also be obtained by writing to Investor Relations, United Fire Group, Inc., 118 Second Avenue SE, Cedar Rapids, Iowa 52401. 12 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table sets forth information concerning the following executive officers: Name Age Position Kevin J.
To view it, under the "Investors" tab, select "Overview," then "Governance Documents" and then "Code of Ethics and Business Conduct." 11 Table of Contents Free paper copies of any materials that we file with or furnish to the SEC can also be obtained by writing to Investor Relations, United Fire Group, Inc., 118 Second Avenue SE, Cedar Rapids, Iowa 52401. 12 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table sets forth information concerning the following executive officers as of February 26, 2025: Name Age Position Kevin J.
Participation is based upon the amount of a company's voluntary market share in a particular state for the 6 Table of Contents classes of insurance involved. Policies written through these mechanisms may require different underwriting standards and may pose greater risk than those written through our voluntary application process.
Participation is based upon the amount of a company's voluntary market share in a particular state for the classes of insurance involved. Policies written through these mechanisms may require different underwriting standards and may pose greater risk than those written through our voluntary application process.
United Fire & Casualty Company owns 100 percent of eight subsidiaries: (1) Addison Insurance Company; (2) Lafayette Insurance Company; (3) United Fire & Indemnity Company; (4) Mercer Insurance Company; (5) Financial Pacific Insurance Company; (6) UFG Specialty Insurance Company; (7) United Real Estate Holdings LLC and (8) McIntyre Cedar UK Limited.
The Company owns 100 percent of United Fire & Casualty Company ("UF&C"), which owns 100 percent of eight subsidiaries: (1) Addison Insurance Company; (2) Lafayette Insurance Company; (3) United Fire & Indemnity Company; (4) Mercer Insurance Company; (5) Financial Pacific Insurance Company; (6) UFG Specialty Insurance Company; (7) United Real Estate Holdings LLC and (8) McIntyre Cedar UK Limited.
ITEM 1. BUSINESS OVERVIEW United Fire Group, Inc. ("UFG", "United Fire", the "Registrant", the "Company", "we", "us", or "our") and its consolidated subsidiaries and affiliates are engaged in the business of writing property and casualty insurance through a network of independent agencies.
ITEM 1. BUSINESS OVERVIEW Founded in 1946, United Fire Group, Inc. ("UFG", the "Registrant", the "Company", "we", "us", or "our") and its subsidiaries are engaged in the business of writing property and casualty insurance through a network of independent agencies.
At December 31, 2023, all of our insurance companies had capital in excess of the required levels. Federal Regulation Although the federal government and its regulatory agencies generally do not directly regulate the business of insurance, federal initiatives and legislation often have an impact on our business.
At December 31, 2024, all of our insurance companies had capital in excess of the required levels. 8 Table of Contents Federal Regulation Although the federal government and its regulatory agencies generally do not directly regulate the business of insurance, federal initiatives and legislation often have an impact on our business.
REINSURANCE Incorporated by reference from Note 4 "Reinsurance" contained in Part II, Item 8, "Financial Statements and Supplementary Data." RESERVES Incorporated by reference from the "Critical Accounting Policies" section in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 5 "Reserves for Losses and Loss Settlement Expenses" contained in Part II, Item 8, "Financial Statements and Supplementary Data." 4 Table of Contents INVESTMENTS Incorporated by reference from Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," under the headings "Investments," "Market Risk" and "Critical Accounting Policies," Note 1 "Summary of Significant Accounting Policies" under the heading "Investments," Note 2 "Summary of Investments," and Note 3 "Fair Value of Financial Instruments," contained in Part II, Item 8, "Financial Statements and Supplementary Data." COMPLIANCE WITH GOVERNMENT REGULATION The insurance industry is subject to comprehensive and detailed regulation and supervision.
REINSURANCE Incorporated by reference from the "Reinsurance" section in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 4 "Reinsurance" contained in Part II, Item 8, "Financial Statements and Supplementary Data." RESERVES Incorporated by reference from the "Critical Accounting Estimates" section in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 5 "Reserves for Losses and Loss Settlement Expenses" in Part II, Item 8, "Financial Statements and Supplementary Data." INVESTMENTS Incorporated by reference from Part II, Items 7 and Item 7A, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosures about Market Risk" under the headings "Investments," "Market Risk" and "Critical Accounting Estimates," Note 1 "Summary of Significant Accounting Policies" under the heading "Investments," Note 2 "Investments," and Note 3 "Fair Value of Financial Instruments," contained in Part II, Item 8, "Financial Statements and Supplementary Data." COMPLIANCE WITH GOVERNMENT REGULATION The insurance industry is subject to comprehensive and detailed regulation and supervision.
Refer to Part II, Item 5, "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" under the heading "Dividends" and Note 6 "Statutory Reporting, Capital Requirements and Dividends and Retained Earnings Restrictions," contained in Part II, Item 8, "Financial Statements and Supplementary Data" for additional information about the dividends we paid during 2023.
Refer to Part II, Item 5, "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" under the heading "Dividends" and Note 6 "Statutory Reporting, Capital Requirements and Dividends and Retained Earnings Restrictions," in Part II, Item 8, "Financial Statements and Supplementary Data" for additional information.
While not a substitute for any GAAP measure of performance, statutory data frequently is used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies. Insurance Reserves State insurance laws require that insurance companies analyze the adequacy of their reserves annually.
While not a substitute for any GAAP measure of performance, statutory data is frequently used by independent rating agencies and industry analysts to facilitate comparisons of insurance companies. Insurance Reserves State insurance laws require that insurance companies analyze the adequacy of their reserves annually.
Because we rely solely on independent agencies, we offer a competitive commissions program and a rewarding profit-sharing plan as incentives for agents to place high-quality property and casualty insurance business with us. We tier our agents to objectively recognize our top performers including additional compensation in our profit-sharing plan. We offer incentive trips and promotions to build UFG loyalty.
Because we rely solely on independent agencies to market our primary commercial products, we offer a competitive commissions program and a rewarding profit-sharing plan as incentives for agents to place high-quality property and casualty insurance business with us. We tier our agents to objectively recognize our top performers including additional compensation in our profit-sharing plan.
These pillars provide us with a strong foundation of success as we work together to deliver on our promises to all UFG stakeholders. Diversity Equity and Inclusion We are committed to fostering, cultivating and preserving a culture of diversity, equity, and inclusion. Our purpose is to invest in people to build enduring relationships with those we serve.
These pillars provide us with a strong foundation for success as we work together to deliver on our promises to all UFG stakeholders. Corporate culture We are committed to cultivating and preserving a culture that fosters the success of our employees. Our purpose is to invest in people to build enduring relationships with those we serve.
Deepening our sensitivity and understanding towards others, so we can connect in a meaningful way. f. Ensuring that employees exhibit conduct that reflects inclusion during work, at work functions on or off the work site, and at all other company-sponsored and company-participating events.
Continuously listening to our people, agents, partners, vendors, and community to effectuate our goals. e. Deepening our sensitivity and understanding towards others, so we can connect in a meaningful way. f. Ensuring that employees exhibit conduct that reflects inclusion during work, at work functions on or off the work site, and at all other company-sponsored and company-participating events.
Dodd-Frank also contains a number of provisions related to corporate governance and disclosure matters. In response to Dodd-Frank, the SEC has adopted or proposed rules regarding director independence, director and officer hedging activities, executive compensation clawback policies, compensation advisor independence, pay versus performance disclosures, internal pay equity disclosures, and shareholder proxy access.
Dodd-Frank and the Sarbanes-Oxley Act also contain several provisions related to corporate governance and disclosure matters. In response to Dodd-Frank, the Securities and Exchange Commission ("SEC") has adopted or proposed rules regarding director independence, director and officer hedging activities, executive compensation clawback policies, compensation advisor independence, pay versus performance disclosures, internal pay equity disclosures, and shareholder proxy access.
Our insurance company subsidiaries are currently licensed as property and casualty insurers in 50 states, plus the District of Columbia. United Fire & Casualty Company was incorporated in Iowa in January 1946. Our principal executive office is located at 118 Second Avenue SE, Cedar Rapids, Iowa 52401; telephone: 319-399-5700.
Our insurance company subsidiaries are currently licensed as property and casualty insurers in all 50 states, plus the District of Columbia. Our principal executive office is located at 118 Second Avenue SE, Cedar Rapids, Iowa 52401.
Price Regulation Nearly all states have insurance laws requiring us to file rate schedules, policy or coverage forms, and other information with the state's regulatory authority. In certain states, rate schedules, policy forms, or both, must be approved prior to use.
Price Regulation Our primary commercial business is subject to regulatory constraints. Nearly all states have insurance laws requiring us to file rating manuals, policy or coverage forms, and other information with the state's regulatory authority. In certain states, rating manuals, policy forms, or both, must be approved prior to use.
Its unified ideology guides every aspect of the way we conduct business at UFG. Strategy for success Our "One UFG: Boldly Forward" strategic plan unites our people in purpose and drives our mission of superior operational and financial performance. It is centered on five strategic pillars of long-term profitability, diversified growth, people development, continuous innovation and expense management.
Strategy for success Our "One UFG: Boldly Forward" strategy unites our people in purpose and drives our mission of superior operational and financial performance. It is centered on five strategic pillars of long-term profitability, diversified growth, people development, continuous innovation and expense management.
Some states prohibit us from withdrawing one or more types of insurance business from the state, except upon prior regulatory approval. Regulations that limit policy cancellation and non-renewal may restrict our ability to exit unprofitable markets. Insurance Guaranty Associations Each state has insurance guaranty association laws.
For example, states limit, to varying degrees, our ability to cancel and non-renew insurance policies. Some states prohibit us from withdrawing one or more types of insurance business from the state, except upon prior regulatory approval. Regulations that limit policy cancellation and non-renewal may restrict our ability to exit unprofitable markets.
Such reports are made available as soon as reasonably practicable after they are filed with or furnished to the SEC. They are also available on the SEC's website at www.sec.gov. Our Code of Ethics and Business Conduct is also available at www.ufginsurance.com in the Investor Relations section.
Such reports are made available as soon as reasonably practicable after they are filed with or furnished to the SEC. To access these filings, go to the Company's website and under the "Investors" heading, click on "Financial Documents" then "SEC Filings." Our Code of Ethics and Business Conduct is also available at www.ufginsurance.com in the Investor Relations section.
Insurance Holding Company Regulation We are regulated as an insurance holding company system in the states of domicile of our property and casualty insurance companies: Iowa (United Fire & Casualty Company, UFG Specialty Insurance Company and Addison Insurance Company), California (Financial Pacific Insurance Company), Louisiana (Lafayette Insurance Company), New Jersey (Mercer Insurance Company of New Jersey, Inc.), Pennsylvania (Mercer Insurance Company and Franklin Insurance Company) and Texas (United Fire & Indemnity Company and its affiliate, United Fire Lloyds, which is organized as a Texas Lloyds plan).
The state laws and regulations that have the most significant effect on our insurance operations and financial reporting are discussed below. 6 Table of Contents Insurance Holding Company Regulation We are regulated as an insurance holding company system in the states of domicile of our property and casualty insurance companies: Iowa (UF&C, UFG Specialty Insurance Company and Addison Insurance Company), California (Financial Pacific Insurance Company), Louisiana (Lafayette Insurance Company), New Jersey (Mercer Insurance Company of New Jersey, Inc.), Pennsylvania (Mercer Insurance Company and Franklin Insurance Company) and Texas (United Fire & Indemnity Company and its affiliate, United Fire Lloyds, which is organized as a Texas Lloyds plan).
All of our property and casualty insurance subsidiaries and affiliates belong to an intercompany reinsurance pooling arrangement. Pooling arrangements permit the participating companies to rely on the capacity of the entire pool's capital and surplus, rather than being limited to policy exposures of a size commensurate with each participant's own surplus level.
Pooling arrangements permit the participating companies to rely on the capacity of the entire pool's capital and surplus, rather than being limited to policy exposures of a size commensurate with each participant's own surplus level.
Prior to joining CNA Commercial in 2015, he was global casualty manager for Chubb Commercial Insurance, and was responsible for the company's worldwide portfolio of general liability, workers' compensation, excess umbrella, auto errors and omissions, and environmental business. Eric J.
Leidwinger served as President and Chief Operating Officer at CNA Commercial from 2015 - 2022. Prior to joining CNA Commercial in 2015, he was global casualty manager for Chubb Commercial Insurance, and was responsible for the company's worldwide portfolio of general liability, workers' compensation, excess umbrella, auto errors and omissions, and environmental business. Julie A.
Corey L. Ruehle became our Vice President and Chief Claims Officer in 2019. He joined UFG as a Commercial Underwriter in 2001. Between 2001 and 2019 he served in various capacities, including as Underwriting Supervisor, Underwriting Manager and Branch Manager of the Midwest region. Mr. Ruehle has the Associate in Commercial Underwriting (AU) and Certified Insurance Counselor (CIC) professional designations.
Ruehle became our Vice President and Chief Claims Officer in 2019 and was appointed Senior Vice President in March 2024. He joined UFG as a Commercial Underwriter in 2001. Between 2001 and 2019 he served in various capacities, including as Underwriting Supervisor, Underwriting Manager and Branch Manager of the Midwest region. Mr.
Stephenson has over 25 years of experience in the insurance industry, most recently serving as global head of casualty reinsurance at Swiss Re. Prior to joining Swiss Re in 2021, she held the positions of Chief Operating Officer-Middle Market (2019-2021) and Commercial Chief Underwriting Officer (2015-2019) at CNA Insurance and Global Liability Manager for Chubb Insurance. Jeremy J.
Prior to joining Swiss Re in 2021, she held the positions of Chief Operating Officer-Middle Market (2019-2021) and Commercial Chief Underwriting Officer (2015-2019) at CNA Insurance and Global Liability Manager for Chubb Insurance. Eric J.
Prior approval from the state insurance regulatory authority must be obtained before payment of an "extraordinary dividend" as defined under the state's insurance code. The amount of ordinary dividends that may be paid to us is subject to certain limitations, the amounts of which change each year. In all cases, we may pay dividends only from our earned surplus.
The amount of ordinary dividends that may be paid to us is subject to certain limitations, the amounts of which change each year. In all cases, we may pay dividends only from our earned surplus.
Under the "Investors" tab, select "Financial Documents" and then, select "SEC Filings" to view the list of our SEC filings, which includes annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, beneficial ownership reports on Forms 3, 4 and 5 and amendments to reports filed or furnished pursuant to Section 13(a), 15(d) or 16(a) of the Exchange Act.
We provide free and timely access to the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, beneficial ownership reports on Forms 3, 4 and 5 and amendments to reports filed or furnished pursuant to Section 13(a), 15(d) or 16(a) of the Exchange Act.
In addition, some of those transactions cannot be finalized without the commissioner's prior approval. Most states have now adopted the version of the Model Insurance Holding Company System Regulation Act and Regulation as amended by the NAIC in December 2010 (the "Amended Model Act") to introduce the concept of "enterprise risk" within an insurance company holding system.
In addition, some of those transactions cannot be finalized without the state insurance commissioner's prior approval. The Model Insurance Holding Company System Regulatory Act, as amended (the "Amended Model Act") identified the concept of "enterprise risk" within an insurance company holding system.
The Amended Model Act imposes more extensive informational requirements on us, including requiring us to prepare an annual enterprise risk report that identifies the material risks within our insurance company holding system that could pose enterprise risk to our licensed insurers. 5 Table of Contents Restrictions on Shareholder Dividends As an insurance holding company with no independent operations or source of revenue, our capacity to pay dividends to our shareholders is based on the ability of our insurance company subsidiaries to pay dividends to us.
The Amended Model Act imposes more extensive informational requirements on us, including requiring us to prepare an annual enterprise risk report that identifies the material risks within our insurance company holding system that could pose enterprise risk to our licensed insurers.
Lovvorn 44 Vice President and Chief Administrative Officer A brief description of the business experience of these officers follows: Kevin J. Leidwinger became our President and Chief Executive Officer in August 2022. Prior to joining UFG, Mr. Leidwinger served as President and Chief Operating Officer at CNA Commercial from 2015 - 2022.
Hernandez 58 Senior Vice President and Chief Human Resources Officer Corey L. Ruehle 51 Senior Vice President and Chief Claims Officer A brief description of the business experience of these officers follows: Kevin J. Leidwinger became our President and Chief Executive Officer in August 2022. Prior to joining UFG, Mr.
An insurer's financial strength rating is one of the primary factors evaluated by those in the market to purchase insurance. A poor rating indicates that there is an increased likelihood that the insurer could become insolvent and therefore not able to fulfill its obligations under the insurance policies it issues.
A poor rating indicates that there is an increased likelihood that the insurer could become insolvent and therefore not able to fulfill its obligations under the insurance policies it issues. This rating can also affect an insurer's level of premium writings, the lines of business it can write and the market value of its securities. A.M.
Martin also held numerous other positions at Transamerica including: Chief Operating Officer, Individual Solutions and Retail Affiliates (2019-2020); Senior Vice President, Controller and Head of Finance (2016-2019) and various other roles dating back to 2001. Julie A. Stephenson joined UFG as our Executive Vice President and Chief Operating Officer effective as of the end of January 2023. Ms.
Martin also held numerous other positions at Transamerica including: Chief Operating Officer, Individual Solutions and Retail Affiliates (2019-2020); Senior Vice President, Controller and Head of Finance (2016-2019) and various other roles dating back to 2001. Sarah E. Madsen became our Vice President, Chief Legal Officer, and Corporate Secretary in April 2022 and was appointed Senior Vice President in March 2024.
"Risk Factors" of this Annual Report on Form 10-K for more information. HUMAN CAPITAL RESOURCES Organization core values Working together as one, we are always striving to deliver on our promises of employee success, policyholder protection, agent opportunity, shareholder value and community support. That is our mission.
HUMAN CAPITAL Organization core values Working together as one, we are always striving to deliver on our promises of employee success, policyholder protection, agent opportunity, shareholder value and community support. This unified ideology guides every aspect of the way we conduct business at UFG.
We continue to monitor developments under Dodd-Frank and their impact on us, insurers of similar size and the insurance industry as a whole. 7 Table of Contents FINANCIAL STRENGTH AND ISSUER CREDIT RATING Our financial strength is regularly reviewed by an independent rating agency that assigns a rating based upon criteria such as results of operations, capital resources and minimum policyholders' surplus requirements.
FINANCIAL STRENGTH AND ISSUER CREDIT RATING Our financial strength is regularly reviewed by an independent rating agency that assigns a rating based upon criteria such as results of operations, capital resources and minimum policyholders' surplus requirements. An insurer's financial strength rating is one of the primary factors evaluated by those in the market to purchase insurance.
Further, in some instances, state regulations require us to sell certain nonconforming investments. Exiting Geographic Markets; Canceling and Non-renewing Policies Most states regulate our ability to exit a market. For example, states limit, to varying degrees, our ability to cancel and non-renew insurance policies.
Failure to comply with these regulations leads to the treatment of nonconforming investments as non-admitted assets for purposes of measuring statutory surplus. Further, in some instances, state regulations require us to sell certain nonconforming investments. 7 Table of Contents Exiting Geographic Markets; Canceling and Non-renewing Policies Most states regulate our ability to exit a market.
The ability of our subsidiaries to pay dividends to us is regulated by the laws of their state of domicile. Under these laws, insurance companies must provide advance informational notice to the domicile state insurance regulatory authority prior to payment of any dividend or distribution to its shareholders.
Under these laws, insurance companies must provide advance informational notice to the domicile state insurance regulatory authority prior to payment of any dividend or distribution to its shareholders. Prior approval from the state insurance regulatory authority must be obtained before payment of an "extraordinary dividend" as defined under the state's insurance code.
Meeting the evolving needs of our expansive risk profile though investment in our talent through training and recruiting. c. Striving to do what is right - even when no one is looking. d. Continuously listening to our people, agents, partners, vendors, and community to effectuate our goals. e.
Treating others with dignity and respect at all times, because how we act is as important as what we accomplish. b. Meeting the evolving needs of our expansive risk profile though investment in our talent through training and recruiting. c. Striving to do what is right - even when no one is looking. d.
For a more detailed discussion of our products, refer to the "Business Overview" section in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations". Our property and casualty insurance business is reported as one business segment.
Under such arrangements, the members share substantially all of the insurance business that is written and allocate the combined premiums, losses and expenses based on percentages defined in the arrangement. For a more detailed discussion of our products, refer to the "Business Overview" section in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations".
On August 18, 2023, the Company received a credit rating downgrade from A.M. Best. The Financial Strength Rating (FSR) was downgraded to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) was downgraded to "a-" (Excellent) from "a" (Excellent) of the United Fire & Casualty Group. Concurrently, A.M.
For United Fire & Casualty Group, the financial strength rating was downgraded to A- (Excellent) from A (Excellent) and the issuer credit rating was downgraded to "a-" (Excellent) from "a" (Excellent). Concurrently, for UFG, A.M. Best downgraded the issuer credit rating to "bbb-" (Good) from "bbb" (Good). According to A.M.
Each jurisdiction in which we operate has established supervisory agencies with broad administrative powers. While we are not aware of any currently proposed or recently enacted state or federal regulation that would have a material impact on our operations, we cannot predict the effect that future regulatory changes might have on us.
While we are not aware of any currently proposed or recently enacted state or federal regulation that would have a material impact on our operations, the new presidential administration has implemented many changes to federal regulations and regulatory agencies and the potential impact of such regulations is difficult to predict.
Mercer Insurance Company owns 100 percent of two subsidiaries: (1) Franklin Insurance Company; and (2) Mercer Insurance Company of New Jersey, Inc. United Fire Lloyds, which is organized as a Texas Lloyds plan, is an affiliate of United Fire & Indemnity Company. McIntyre Cedar UK Limited owns 100 percent of McIntyre Cedar Corporate Member LLP.
Mercer Insurance Company owns 100 percent of two subsidiaries: (1) Franklin Insurance Company; and (2) Mercer Insurance Company of New Jersey, Inc. McIntyre Cedar UK Limited owns 100 percent of McIntyre Cedar Corporate Member LLP. PROPERTY AND CASUALTY INSURANCE BUSINESS Commercial Lines Business Our business is comprised primarily of commercial lines of property and casualty insurance, including surety bonds.
Sustainability As a property and casualty insurer, UFG is acutely aware of the growing risks to business, insureds and communities stemming from sustainability issues. Sustainability is top of mind for our Management Team and Board of Directors, and as a result we have made important updates to our environmental, social and governance ("ESG") structure.
Sustainability as a Driver of Shareholder Value As a property and casualty insurer, UFG is acutely aware of the growing risks to business, insureds and communities stemming from sustainability issues.
Our commitment is reinforced through initiatives centered on our people, partners, and philanthropy, creating an inclusive work environment built on the premise of a strong sense of belonging that encourages: a. Respectful communication and cooperation between all employees. b. Teamwork and participation that empowers and advances all groups and perspectives. c. Work-life balance to accommodate employees' varying needs. d.
Respectful communication and cooperation between all employees. b. Teamwork and participation that empowers and advances all perspectives. c. Work-life balance to accommodate employees' varying needs. d. Giving back to the communities we serve to advance change and promote greater understanding and respect. At UFG, inclusive conduct is centered on: a.
Leidwinger 60 President and Chief Executive Officer, Principal Executive Officer Eric J. Martin 53 Executive Vice President, Chief Financial Officer and Principal Financial Officer Julie A. Stephenson 56 Executive Vice President and Chief Operating Officer Jeremy J. Bahl 46 Vice President, Field Operations Robert F. Cataldo 53 Vice President and Chief Investment and Strategy Officer Sarah E.
Leidwinger 61 President and Chief Executive Officer, Principal Executive Officer Julie A. Stephenson 57 Executive Vice President and Chief Operating Officer Eric J. Martin 54 Executive Vice President, Chief Financial Officer and Principal Financial Officer Sarah E. Madsen 46 Senior Vice President, Chief Legal Officer and Corporate Secretary Steven D.
We invite our people to bring their authentic whole self to work, be inspired to form lasting relationships and to do their best each day, because we are all different, yet equal, humans. Our commitment extends into every facet of who we are: a. We recognize that our people are our most valuable asset.
We invite our people to bring their authentic whole self to work, be inspired to form lasting relationships and to do their best each day. Our commitment is reinforced through initiatives centered on our people, partners, and philanthropy, creating a work environment built on the premise of a strong sense of belonging that encourages: a.
In 2024, we will be implementing a sustainability platform that will allow us to measure, manage, and report out on targeted sustainability efforts. Sustainability reporting and GHG emission targets are disclosed to our employees, shareholders, and insureds on our public facing website www.ufginsurance.com.
This reduction significantly decreased our carbon footprint and reduced greenhouse gas emissions. • GHG Emission Targets and Sustainability Reporting We recently set initial GHG category and scope emissions. In 2024, we implemented a sustainability platform that will allows us to measure, manage, and report out on targeted sustainability efforts.
The reinsurance operation supports primarily commercial lines of business but also assumes risk in professional, financial and personal lines of insurance. We also partner with managing general agents ("MGAs") to offer delegated underwriting programs providing niche products including marine specialty, professional liability and earthquake coverages.
We partner with managing general agents ("MGAs") to offer delegated underwriting programs providing niche products, including marine specialty, professional liability and earthquake coverages. We also provide specialty and surplus lines coverage written exclusively through wholesale brokers on an admitted and non-admitted basis. Through its McIntyre Cedar Corporate Member ("MCCM”) subsidiary, the Company is a member of Lloyd's of London ("Lloyd's").
Woolstenhulme is a Fellow of the Casualty Actuarial Society. Kelly A. Walsh joined UFG as our Vice President and Chief Underwriting Officer in December 2023. Ms. Walsh has over two decades of insurance industry experience. Prior to joining UFG, Ms.
Stephenson joined UFG as our Executive Vice President and Chief Operating Officer in January 2023. Ms. Stephenson has over 25 years of experience in the insurance industry, most recently serving as global head of casualty reinsurance at Swiss Re.
Investment Regulation We are subject to various state regulations requiring investment portfolio diversification and limiting the concentration of investments we may maintain in certain asset categories. Failure to comply with these regulations leads to the treatment of nonconforming investments as non-admitted assets for purposes of measuring statutory surplus.
Pricing and product changes in our other businesses, though still subject to certain regulatory oversight, are afforded more flexibility by regulators to respond to emerging operating and claims costs and overall market dynamics. Investment Regulation We are subject to various state regulations requiring investment portfolio diversification and limiting the concentration of investments we may maintain in certain asset categories.
This rating can also affect an insurer's level of premium writings, the lines of business it can write and, for insurers like us that are also public registrants, the market value of its securities. Our property and casualty subsidiaries (collectively known as "United Fire & Casualty Group") are rated by A.M. Best Company, Inc. ("A.M. Best") on a group basis.
Best also assigns long-term issuer credit ratings based on a company's ability to repay its debts. Our property and casualty subsidiaries (collectively known as "United Fire & Casualty Group") are rated by A.M. Best Company, Inc. ("A.M. Best") on a group basis. The table below shows the current ratings assigned to our companies by A.M. Best.
We also provide specialty and surplus lines coverage written exclusively through wholesale brokers on an admitted and non-admitted basis. Additionally, the Company offers reinsurance coverage for property and casualty insurance through traditional treaty reinsurance channels. The Company assumes premium in Lloyd's of London syndicates through a Funds at Lloyd's subsidiary.
Lloyd's operates as an insurance marketplace whereby members join syndicates to underwrite insurance through a managing agent in return for receiving premiums. The Company participates in multiple syndicates that cover a range of property and casualty insurance and reinsurance lines. The Company offers reinsurance coverage for property and casualty insurance through traditional treaty reinsurance channels.
In 2020, the Company announced its intent to withdraw as a direct writer of personal lines insurance with the last exposures related to this business expected to lapse by 2025. As of December 31, 2023, minimal exposure from the direct personal lines of business remains.
Personal Lines Business Our personal fire and allied lines includes proportional assumed reinsurance for homeowners multi-peril coverage. Our personal lines also consist of automobile and fire and allied lines coverage, including homeowners. In 2020, the Company announced its intent to withdraw as a direct writer of personal lines insurance.
Removed
United Fire Group, Inc. owns 100 percent of one subsidiary, United Fire & Casualty Company.
Added
Our primary commercial policies are tailored business packages that include the following lines of business: fire and allied lines, other liability, automobile, workers' compensation and surety.
Removed
Under such arrangements, the members share substantially all of the insurance business that is written and allocate the combined premiums, losses and expenses based on percentages defined in the arrangement. PROPERTY AND CASUALTY INSURANCE BUSINESS Products and Operations Our business is comprised primarily of commercial lines property and casualty insurance, including surety bonds.
Added
The reinsurance operation supports primarily commercial lines of business but also assumes risk in professional, financial and personal lines of insurance. All of our property and casualty insurance subsidiaries belong to an intercompany reinsurance pooling arrangement.
Removed
Underwriting, sales and distribution are supported across our key products by regional underwriters and marketing representatives executing on overall strategy and underwriting governance. These areas are supported by a business enablement function as well as claims, actuarial and business analytics and risk control enabling functions.
Added
There is an immaterial amount of personal lines business remaining, primarily in the state of New Jersey, with the last exposures due to certain regulatory, non-renewal limitations expected to lapse before December 31, 2025.
Removed
Our business enablement function provides efficient, centralized underwriting operations, premium processing, underwriting governance and product management. In addition to servicing policyholders with optimized claim processing and payment capabilities, the claims function's specialized approach supports underwriting, risk control and marketing in writing and retaining quality business.
Added
As of December 31, 2024, the Company had minimal exposure remaining from the direct personal lines business. 4 Table of Contents Operating Segments We operate as one operating segment. Our revenues are primarily derived from premiums earned for property and casualty insurance products issued to customers.
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Actuarial and business analytics provide transparency and insight to business decisions through actuarial pricing, actuarial reserving, predictive modeling, and other business analytics. Other 3 Table of Contents enabling functions that support our business include technology, finance, human capital, legal and governance functions. Competition The property and casualty insurance industry is highly competitive.
Added
For additional information, see Note 10, "Segment Information," in Part II, Item 8, "Financial Statements and Supplementary Data." Pricing Pricing levels for our property and casualty insurance products are influenced by many factors, including an estimation of expected losses; the expenses of producing, issuing and servicing business and managing claims; the time value of money associated with such loss and expense cash flows; and a reasonable allowance for profit.
Removed
Property and casualty insurance agencies are expected to receive profit-sharing payments of $23.9 million in 2024, based on profitable business produced by the agencies in 2023.
Added
We have a disciplined approach to underwriting and risk management that emphasizes profitable growth rather than premium volume or market share. Seasonality Our property and casualty insurance business experiences seasonality with regard to premiums written, which are generally highest in January and July and lowest during the fourth quarter.
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The state laws and regulations that have the most significant effect on our insurance operations and financial reporting are discussed below.
Added
Although we experience seasonality in our premiums written, premiums are earned ratably over the period of coverage. Losses and loss settlement expenses incurred tend to remain consistent throughout the year, with the exception of catastrophe losses which generally are highest in the second and third quarters.
Removed
Best has downgraded the Long-Term ICR to "bbb-" (Good) from "bbb" (Good) of UFG. The outlook of these Credit Ratings (ratings) has been revised to stable from negative. According to A.M.
Added
Catastrophes inherently are unpredictable and can occur at any time during the year from man-made or natural disaster events that include, but are not limited to, hail, tornadoes, hurricanes and windstorms. Competition The property and casualty insurance industry is highly competitive.
Removed
Best, companies rated "A-" have "an excellent ability to meet their ongoing obligations to policyholders." The Company has not experienced material impacts to its business or financial results as a result of the downgrade, but is subject to heightened risks associated with any further potential downgrades. Please see Part I, Item 1A.
Added
We offer incentive trips and promotions to build UFG loyalty.
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Diversity, equity, and inclusion are core to this purpose and are an integral part of our values and culture. We are committed to building a diverse, equitable, and inclusive culture that encourages, supports, and celebrates the distinct voices of our people.
Added
Each jurisdiction in which we operate has established supervisory agencies with broad administrative powers.
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To excel, we must each feel that we belong to a welcoming environment that values both our differences and the collective sum of our individuality, experiences, knowledge, creativity, innovation, self-expression, unique capabilities, talents, beliefs and points of view. b.
Added
Restrictions on Shareholder Dividends As an insurance holding company with no independent operations or source of revenue, our capacity to pay dividends to our shareholders is based on the ability of our insurance company subsidiaries to pay dividends to us. The ability of our subsidiaries to pay dividends to us is regulated by the laws of their state of domicile.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFurther examples of these issues 19 Table of Contents include: (1) judicial expansion of policy coverage and the impact of new theories of liability; (2) an increase in plaintiffs targeting property and casualty insurers, including us, in purported class action litigation regarding claims handling and other practices; (3) medical developments that link health issues to particular causes, resulting in liability or workers' compensation (for example, cumulative trauma); (4) claims relating to unanticipated consequences of current or new technologies; (5) an increase in the variety, number and size of claims relating to liability losses, which often present complex coverage and damage valuation questions; (6) claims relating to potentially changing climate conditions, including higher frequency and severity of weather-related events; and (7) adverse changes in loss cost trends, including inflationary pressure in medical cost and automobile repair costs.
Biggest change(3) Medical developments that link health issues to specific causes, resulting in liability or workers' compensation (for example, cumulative trauma). (4) Claims relating to unanticipated consequences of current or new technologies. (5) An increase in the variety, number and size of claims relating to liability losses, which often present complex coverage and damage valuation questions.
Many of the policies we issue include exclusions and other conditions that define and limit coverage, which exclusions and conditions are designed to manage our exposure to certain types of risks and expanding theories of legal liability.
Many of the policies we issue include exclusions and other conditions that define, and limit coverage, which are designed to manage our exposure to certain types of risks and expanding theories of legal liability.
We face competition within each agency and competition to retain qualified independent agents. Our competitors include companies that market their products via independent agents, exclusive agents and companies that sell insurance directly to their customers.
We face competition within each agency to retain qualified independent agents. Our competitors include companies that market their products via independent agents, exclusive agents and companies that sell insurance directly to their customers.
We maintain cyber liability insurance coverage that provides both third-party liability and first-party insurance coverages; however, our insurance may be insufficient to cover all losses and expenses related to a cyber-attack. Federal and state policymakers have and will likely continue to propose increased regulation of the protection of personally identifiable information and appropriate protocols after a related cybersecurity breach.
We maintain cyber liability insurance coverage that provides both third-party liability and first-party insurance coverage; however, our insurance may be insufficient to cover all losses and expenses related to a cyber-attack. Federal and state policymakers have and will likely continue to propose increased regulation of the protection of personally identifiable information and appropriate protocols after a related cybersecurity breach.
Liquidity Risk – We seek to match the maturities of our investment portfolio with the estimated payment date of our loss and loss adjustment expense reserves to ensure strong liquidity and avoid having to liquidate securities to fund claims.
We seek to match the maturities of our investment portfolio with the estimated payment date of our loss and loss adjustment expense reserves to ensure strong liquidity and avoid having to liquidate securities to fund claims.
We maintain insurance reserves to cover our estimated ultimate unpaid liability for claim and claim adjustment expenses, including the estimated cost of the claims adjustment process, for reported and unreported claims and for future policy benefits.
We maintain insurance reserves to cover our estimated ultimate unpaid liability for claims and claims adjustment expenses, including the estimated cost of the claims adjustment process, for reported and unreported claims and for future policy benefits.
The property and casualty insurance marketplace is cyclical in nature and has historically been characterized by soft markets (periods of relatively high levels of price competition, less restrictive underwriting standards and generally low premium rates) followed by hard markets (periods of capital shortages resulting in a lack of insurance availability, relatively low levels of price competition, more selective underwriting of risks and relatively high premium rates).
The property and casualty insurance marketplace is cyclical in nature and has historically been characterized by soft markets (i.e., periods of relatively high levels of price competition, less restrictive underwriting standards and generally low premium rates) followed by hard markets (i.e., periods of capital shortages resulting in a lack of insurance availability, relatively low levels of price competition, more selective underwriting of risks and relatively high premium rates).
We continue to compete with many major U.S. and non-U.S. insurers and smaller regional companies, as well as mutual companies, specialty insurance companies, underwriting agencies, and diversified financial services companies, including banks, mutual funds, broker-dealers and asset-managers. Our competitors may always attempt to increase their market share by lowering rates.
We compete with many major U.S. and non-U.S. insurers and smaller regional companies, as well as mutual companies, specialty insurance companies, underwriting agencies, and diversified financial services companies, including banks, mutual funds, broker-dealers and asset-managers. Our competitors may attempt to increase their market share by lowering rates.
" Our core insurance business is dependent on strong and beneficial relationships with a large network of independent insurance agents and not maintaining these relationships could result in loss of sufficient business opportunities within our expertise and stated risk appetite. 21 Table of Contents Our direct insurance products are marketed exclusively through independent insurance agencies, all of which represent more than one company.
Our core insurance business is dependent on strong and beneficial relationships with a large network of independent insurance agents and not maintaining these relationships could result in loss of sufficient business opportunities within our expertise and stated risk appetite. Our direct insurance products are marketed exclusively through independent insurance agencies, all of which represent more than one company.
Our reserves may prove to be inadequate, which may result in future charges to earnings and/or a downgrade of our financial strength rating or the financial strength ratings of our insurance company subsidiaries. Insurance reserves represent our best estimate at a given point in time.
Our reserves may prove to be inadequate, which may result in future charges to earnings and/or a downgrade of our financial strength rating or the financial strength ratings of our insurance company subsidiaries. 16 Table of Contents Insurance reserves represent our best estimate at a given point in time.
Many of these factors are not quantifiable. The inherent uncertainties of estimating reserves are greater for certain types of liabilities, particularly those in which the various considerations affecting the type of claim are subject to change and in which long periods of time may elapse before a definitive determination of liability is made.
The inherent uncertainties of estimating reserves are greater for certain types of liabilities, particularly those in which the various considerations affecting the type of claim are subject to change and in which long periods of time may elapse before a definitive determination of liability is made.
We rely on computer systems to conduct our business for our customer service, marketing and sales activities, customer relationship management and producing financial statements. Our business and operations rely on secure and efficient processing, storage and transmission of customer and Company data, including personally identifiable information.
We rely on computer systems to conduct critical business functions, such as customer service, marketing and sales activities, customer relationship management and producing financial statements. Our business and operations rely on secure and efficient processing, storage and transmission of customer and Company data, including personally identifiable information.
Such changes in climate conditions could cause our underlying modeling data to be less accurate, limiting our ability to evaluate and manage our risk. Climate change also adds to the unpredictability of natural disasters and creates uncertainty as to future trends and exposures. Climate change presents risks in four categories to UFG: a.
Such changes in climate conditions could cause our underlying modeling data to be less accurate, limiting our ability to evaluate and manage our risk. Climate change also adds to the unpredictability of natural disasters and creates uncertainty as to future trends and exposures.
These fluctuations may be due to our operating results or factors specific to our operations (including those discussed in our risk factors), changes in securities analysts' estimates of our future financial performance, ratings or recommendations, our results falling below our expectations and analysts' and investors' expectations, the failure of our capital return programs to meet analysts' and investors' expectations, significant catastrophe events, departure of key personnel, cyber-attacks, or factors largely outside of our control, including those affecting the property and casualty insurance industry.
Risk Factors section), changes in securities analysts' estimates of our future financial performance, ratings or recommendations, our results falling below our expectations and analysts' and investors' expectations, the failure of our capital return programs to meet analysts' and investors' expectations, significant catastrophe events, departure of key personnel, cyber-attacks, or factors largely outside of our control, including those affecting the property and casualty insurance industry.
Compliance with these laws and regulations requires us to incur administrative costs that decrease our profits. These laws and regulations may also prevent or limit our ability to underwrite and price risks accurately, obtain timely premium rate increases necessary to cover increased costs, discontinue unprofitable relationships or exit unprofitable markets and otherwise continue to operate our business profitably.
These laws and regulations may also prevent or limit our ability to underwrite and price risks accurately; obtain timely premium rate increases necessary to cover increased costs; discontinue unprofitable relationships; or exit unprofitable markets and otherwise continue to operate our business profitably.
As such, deviations from one or more of these assumptions could result in a material adverse impact on our Consolidated Financial Statements and our financial strength rating or the financial strength ratings of our insurance company subsidiaries could be downgraded.
As such, deviations from one or more of these assumptions could result in a material adverse impact on our Consolidated Financial Statements and/or our financial strength rating.
We are subject to extensive supervision and regulation by the states in which we operate. As a public company, we are also subject to increased regulation at the federal level.
We are subject to extensive supervision and regulation by the states in which we operate. As a public company, we are also subject to regulation at the federal level, which is susceptible to changes in the new presidential term.
We invest premiums received from policyholders and other available cash to generate investment income and capital appreciation, while also maintaining sufficient liquidity to pay covered claims, operating expenses, and dividends.
Investment income is an important component of our net income and overall profitability. We invest premiums received from policyholders and other available cash to generate investment income and capital appreciation, while also maintaining sufficient liquidity to pay covered claims, operating expenses, and dividends.
Finally, we could face individual, group and class action lawsuits by our policyholders and others for alleged violations of certain state laws and regulations. Each of these regulatory risks could have a negative effect on our profitability.
Finally, we could face individual, group and class action lawsuits by our policyholders and others for alleged violations of certain state laws and regulations. Each of these regulatory risks could have a negative effect on our profitability. Macroeconomic conditions could materially and adversely affect our business, results of our operations, financial condition, and growth.
Dividends from those subsidiaries depend on their statutory surplus, earnings and regulatory restrictions. State insurance laws limit the ability of insurance subsidiaries to pay dividends and require our insurance subsidiaries to maintain specified minimum levels of statutory capital and surplus.
State insurance laws limit the ability of insurance subsidiaries to pay dividends and require our insurance subsidiaries to maintain specified minimum levels of statutory capital and surplus.
Any unplanned turnover or our failure to develop an adequate succession plan for one or more of our executive officers or other key positions could compromise our institutional knowledge base and erode our competitive advantage.
Our success depends on our ability to attract and retain key personnel, including members of our executive and senior management team. Any unplanned turnover or our failure to develop an adequate succession plan for one or more of our executive officers or other key positions could compromise our institutional knowledge base and erode our competitive advantage.
Threats to data security can emerge from a variety of sources and change rapidly, resulting in the ongoing need to expend resources to secure our data in accordance with customer expectations and statutory and regulatory requirements.
Cyber-attacks could result in the modification or theft of data, the distribution of false information, or the denial of service to users. Threats to data security can emerge from a variety of sources and change rapidly, resulting in the ongoing need to expend resources to secure our data in accordance with customer expectations and statutory and regulatory requirements.
However, in hard reinsurance market conditions, reinsurance capacity can become constrained as reinsurers are pressed with concerns about capital or profitability. In these conditions, we may be unable to secure our desired reinsurance protection at a reasonable cost. Lost reinsurance capacity could expose the Company to larger retained losses per loss occurrence, per risk, or per year in total.
In these conditions, we may be unable to secure our desired reinsurance protection at a reasonable cost. Lost reinsurance capacity could expose the Company to larger retained losses per loss occurrence, per risk, or per year in total.
Our articles of incorporation and bylaws, as well as applicable laws governing corporations and insurance companies, contain provisions that could impede an attempt to replace or remove our management or prevent the sale of the Company that, in either case, shareholders might not consider being in their best interests. Our Board of Directors is divided into three classes.
Our articles of incorporation and bylaws, as well as applicable laws governing corporations and insurance companies, contain provisions that could impede an attempt to replace or remove our management or prevent the sale of the Company that, in either case, could cause shareholders to believe that we are acting contrary to their best interests.
All of these factors can contribute to adverse financial consequences for UFG. These risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also have a material effect on our business, results of operations, financial condition and/or liquidity. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
These risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem immaterial could have a material effect on our business, results of operations, financial condition and/or liquidity.
We may be unable to predict the rising cost of insurance claims resulting from changing societal expectations that lead to increasing litigation, broader definitions of liability, broader contract interpretations, more plaintiff-friendly legal decisions and larger compensatory jury awards.
Fluctuations in demand and competition could produce underwriting results that would have a negative impact on the results of our operations and financial condition. 15 Table of Contents Claims We may be unable to predict the rising cost of insurance claims resulting from changing societal expectations that lead to increasing litigation, broader definitions of liability, broader contract interpretations, more plaintiff-friendly legal decisions and larger compensatory jury awards.
At times we may not be able to pay dividends on our common stock, or we may be required to seek prior approval from the applicable regulatory authority before we can pay any such dividends.
At times the Company may be unable to pay dividends on our common stock or we may be required to seek prior approval from the applicable regulatory authority before our insurance subsidiaries can make a dividend payment to the Company for distribution.
To price our products accurately, we must collect and properly analyze a substantial amount of data, develop, and apply appropriate pricing techniques, closely monitor changes in trends and project both severity and frequency of losses with reasonable accuracy. We could underprice risks which would adversely affect our profit margins.
Adequate rates are necessary to generate premiums sufficient to pay losses, loss settlement expenses and underwriting expenses and to earn a profit. To price our products accurately, we must collect and properly analyze a substantial amount of data, develop, and apply appropriate pricing techniques, closely monitor changes in trends and project both severity and frequency of losses with reasonable accuracy.
Best financial strength rating of "A-" or higher. A reduction of our A.M. Best ratings below "A-" could prevent us from issuing policies to a portion of our current policyholders or other potential policyholders with ratings requirements.
Best financial strength rating of "A-" or higher. A reduction of our A.M. Best ratings below "A-" could prevent us from issuing policies to a portion of our current or future policyholders with ratings requirements. The failure of our insurance company subsidiaries to maintain their current ratings could dissuade a lender or reinsurance company from conducting business with us.
Our reinsurance strategy seeks to protect the Company from extremely adverse underwriting outcomes as well as unnecessary volatility in underwriting results. We purchase conservative levels of reinsurance as measured by our property catastrophe models, our economic capital model, and benchmarking with our peers. We retain multiple reinsurance intermediaries to plan, create, and facilitate our ceded reinsurance placements.
We may be unable to secure reinsurance capacity that provides necessary risk protection at a reasonable cost. Our reinsurance strategy seeks to protect the Company from extremely adverse underwriting outcomes as well as unnecessary volatility in underwriting results. We purchase conservative levels of reinsurance as measured by our property catastrophe models, our economic capital model, and benchmarking with our peers.
These estimates are based on historical data and the impact of various factors such as: (1) actuarial and statistical projections of the cost of settlement and administration of claims reflecting facts and circumstances then known; (2) historical claims information and loss emergence patterns; (3) assessments of currently available data; (4) estimates of future trends in claims severity and frequency; (5) judicial theories of liability; (6) economic factors such as inflation; (7) estimates and assumptions regarding social, judicial and legislative trends, and actions such as class action lawsuits and judicial interpretation of coverages or policy exclusions; and (8) the level of insurance fraud.
These estimates are based on historical data and the impact of various factors such as: (1) Actuarial and statistical projections of the cost of settlement and administration of claims reflecting facts and circumstances known. (2) Historical claims information and loss emergence patterns. (3) Assessments of currently available data. (4) Estimates of future trends in claims severity and frequency.
Cyber-attacks involving these systems, or those of our third-party vendors, could be carried out remotely and from multiple sources and could interrupt, damage, or otherwise adversely affect the operations of these critical systems. Cyber-attacks could result in the modification or theft of data, the distribution of false information, or the denial of service to users.
Our systems may be vulnerable to unauthorized access and hackers, computer viruses, and other scenarios in which our data may be compromised. Cyber-attacks involving these systems, or those of our third-party vendors, could be carried out remotely and from multiple sources and could interrupt, damage, or otherwise adversely affect the operations of these critical systems.
We retain confidential information on our computer systems, including customer information and proprietary business information belonging to us and our policyholders. Our business and operations depend upon our ability to safeguard this personally identifiable information. Our systems may be vulnerable to unauthorized access and hackers, computer viruses, and other scenarios in which our data may be compromised.
We retain confidential information on our computer systems, including customer information and proprietary business information belonging to us, our policyholders, third party claimants and vendors. Our business and operations depend upon our ability to safeguard this personally identifiable information.
We continually enhance our operating procedures and internal controls to effectively support our business and comply with our regulatory and financial reporting requirements, but there can be no assurances that we will be able to implement security measures adequate to prevent every security breach. 20 Table of Contents Although, to date, we have not identified any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents that have, or are likely to, materially affect us, our business strategy, results of operation or financial condition, the scope and effect of any cyber-attack may remain undetected for a period of time.
Although, to date, we have not identified any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents that have, or are likely to, materially affect us, our business strategy, results of operation or financial condition, the scope and effect of any cyber-attack may remain undetected for a period of time.
Our ability to comply with these laws and regulations and obtain necessary and timely regulatory action is, and will continue to be, critical to our success and ability to earn profits. Examples of regulations that pose particular risks to our ability to earn profits are discussed as follows. Required licensing .
Our ability to comply with these laws and regulations and obtain necessary and timely regulatory action is, and will continue to be, critical to our success.
Such complex factors include, but are not limited to: determining the cause of the damage, evaluating general liability exposures, estimating additional living expenses, the impact of demand surge, infrastructure disruption, fraud, business interruption costs and reinsurance collectability.
Such complex factors include, but are not limited to: determining the cause of the damage, evaluating general liability exposures, estimating additional living expenses, the impact of demand surge, infrastructure disruption, fraud, business interruption costs and reinsurance collectability. 17 Table of Contents A catastrophic occurrence at the end or near the end of a reporting period may also affect the information available to us when estimating claims and claims adjustment expense reserves for the reporting period.
The risk presented by market conditions presents a unique set of challenges in the property and casualty insurance industry.
Our strategy's success could be affected by our timely ability to recognize and adapt to our position in the insurance cycle. The risk presented by market conditions presents a unique set of challenges in the property and casualty insurance industry.
For a detailed discussion of our reserving process and the factors we consider in estimating reserves, refer to the "Critical Accounting Policies" section in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations.
For additional information about our reserving process and the factors we consider in estimating reserves, refer to the "Critical Accounting Estimates" section in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." We insure property that is exposed to various natural perils that can give rise to significant claims costs.
The data we rely on for these analytics includes experience data from our own business (policies written, characteristics, coverages, and details of associated losses) and data attained from third parties, including industry results. We use outputs of predictive models and other analytics to assist in decision making related to underwriting, pricing, claims management (including reserving), and catastrophe risk exposure management.
The data we rely on for these analytics includes experience data from our own business (e.g., policies written, characteristics, coverages, and details of associated losses) and data attained from third parties, including industry results.
Our ability to undertake these efforts successfully is subject to a number of risks and uncertainties, including but not limited to: (1) the availability of sufficient reliable data and our ability to properly analyze available data; (2) market and competitive conditions; (3) changes in medical care expenses and restoration costs; (4) our selection and application of appropriate pricing techniques; and (5) changes in the regulatory market, applicable legal liability standards and in the civil litigation system generally.
(2) Market and competitive conditions. (3) Changes in medical care expenses and restoration costs. (4) Our selection and application of appropriate pricing techniques. (5) Changes in the regulatory market, applicable legal liability standards and in the civil litigation system generally.
Additional information concerning factors that could cause actual results to differ materially from those contained in the forward-looking statements is set forth in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." Risks Relating to Our Operations: Underwriting Risks, Claims Risks, Investments Risks, Management Risks, Cyber Risks and Legal Risks Our success depends primarily on our ability to underwrite risks effectively and adequately price the risks we insure.
Additional information concerning factors that could cause actual results to differ materially from those contained in the forward-looking statements is set forth in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." Business Strategy The success of our strategy may be adversely impacted by various internal and external factors.
With respect to regulatory conditions, 16 Table of Contents the NAIC and state legislators continually reexamine existing laws and regulations, specifically focusing on modifications to holding company regulations, interpretations of existing laws and the development of new laws and regulations.
With respect to regulatory conditions, the NAIC and state legislators continually reexamine existing laws and regulations, specifically focusing on modifications to holding company regulations, interpretations of existing laws and the development of new laws and regulations. In a time of financial uncertainty or a prolonged economic downturn, regulators may choose to adopt more restrictive insurance laws and regulations.
In addition, our exposure to severe losses from localized natural perils, such as tornadoes, wildfires or hailstorms, is increased in those areas where we have written a significant amount of property insurance policies. We insure property that is exposed to various natural perils that can give rise to significant claims costs.
Changes in regulatory or any other of these conditions could make it less attractive for us to do business in such states. In addition, our exposure to severe losses from localized natural perils, such as tornadoes, wildfires or hailstorms, is increased in those areas where we have written a significant amount of property insurance policies.
N/A bbb- 2023 Financial strength and issuer credit ratings are used by policyholders, insurers, reinsurers and insurance and reinsurance intermediaries as an important means of assessing the financial strength, creditworthiness and quality of insurers and reinsurers.
Financial strength ratings and issuer credit ratings are used by policyholders, insurers, reinsurers and insurance and reinsurance intermediaries as an important means of assessing the financial strength, creditworthiness and quality of insurers and reinsurers. These ratings are not evaluations directed to potential purchasers of our common stock, and are not recommendations to buy, sell or hold our common stock.
The results of our operations and our financial condition depend on our ability to underwrite and set premium rates accurately for a wide variety of risks based on available information. Adequate rates are necessary to generate premiums sufficient to pay losses, loss settlement expenses and underwriting expenses and to earn a profit.
Underwriting Risks Our success depends primarily on our ability to underwrite risks effectively and adequately price the risks we insure. The results of our operations and our financial condition depend on our ability to underwrite and set premium rates accurately for a wide variety of risks based on available information.
Catastrophes may reduce our net income, cause substantial volatility in our financial results for any fiscal quarter or year or otherwise adversely affect our financial condition, liquidity or results of operations. Catastrophes may also negatively affect our ability to write new business.
Property damage resulting from catastrophes is perhaps the largest short-term underwriting loss we face in the ordinary course of our business. Catastrophes may reduce our net income, cause substantial volatility in our financial results for any fiscal quarter or year or otherwise adversely affect our financial condition, liquidity or results of operations.
In addition, the payment of dividends by us is within the discretion of our Board of Directors and will depend on numerous factors, including our financial condition, our capital requirements and other factors that our Board of Directors considers relevant. General Risk Factor Macroeconomic conditions could materially and adversely affect our business, results of operations, financial condition, and growth.
In addition, the payment of dividends to shareholders is within the discretion of our Board of Directors and will depend on numerous factors, including our financial condition, our capital requirements and other factors that our Board of Directors considers relevant. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Compliance with these regulations and efforts to address continually developing cybersecurity risks may result in a material adverse effect on our results of operations, liquidity, financial condition, and financial strength. Our reserves for property and casualty insurance losses and loss settlement expenses are based on estimates and may be inadequate, adversely impacting our financial results.
Compliance with these regulations and efforts to address continually developing cybersecurity risks may result in a material adverse effect on our results of operations, liquidity, financial condition, and financial strength. We are subject to comprehensive laws and regulations, changes to which may have an adverse effect on our financial condition and results of operations. Insurance is a highly regulated industry.
During soft markets, we may lose business to competitors offering competitive insurance at lower prices. We may reduce our premiums or limit premium increases leading to a reduction in our profit margins and revenues. The demand for property and casualty insurance can also vary significantly, rising as the overall level of economic activity increases and falling as that activity decreases.
During soft markets, we may lose business to competitors offering competitive insurance at lower prices. We may reduce our premiums or limit premium increases leading to a reduction in our profit margins and revenues. During hard markets, we may underprice our competition resulting in adverse selection and missed opportunities for higher profit margins.
Our ability to manage catastrophic exposure may be limited by public policy considerations, the political environment, changes in the general economic climate and/or social responsibilities. 17 Table of Contents Changing weather patterns and climate change add to the unpredictability, frequency and severity of catastrophe losses and may adversely affect our results of operations, liquidity and financial condition.
Changing weather patterns and climate change add to the unpredictability, frequency and severity of catastrophe losses and may adversely affect the results of our operations, liquidity and financial condition.
As a holding company, we have no significant independent operations of our own. Our principal sources of funds are dividends and other payments received from our subsidiaries. We rely on those dividends for our liquidity, and to meet our obligations to pay dividends to shareholders and make share repurchases.
Our principal sources of funds are dividends and other payments received from our subsidiaries. We rely on those subsidiaries' dividends for our liquidity, payment of dividends to shareholders and to make share repurchases. Dividends from those subsidiaries depend on their statutory surplus, earnings and regulatory restrictions.
Following catastrophes there are also sometimes legislative, administrative, and judicial decisions that seek to expand insurance coverage for claims beyond the original intent of the policies or seek to prevent the application of deductibles.
Following catastrophes there may be legislative, administrative, and judicial decisions that seek to expand insurance coverage for claims beyond the original intent of the policies or seek to prevent the application of deductibles. Our ability to manage catastrophic exposure may be limited by public policy considerations, the political environment, changes in the general economic climate and/or social responsibilities.
As a result, the full extent of liability under our insurance contracts may not be known for many years after a policy is issued. We maintain an internal education plan on the risk of social inflation. We endeavor to find ways to keep claims out of litigation and manage downward the length of time that certain claims are open.
As a result, the full extent of liability under our insurance contracts may not be known for many years after a policy is issued. We actively educate employees on the risk of social inflation and how best to defend against social inflation tactics.
Failure to maintain our ratings, or any other further adverse changes with respect to our ratings, could motivate current and future independent agents and policyholders to choose to transact their business with more highly rated competitors. If A.M.
Best affect our ability to retain our existing business, and to attract new business in our insurance operations. Failure to maintain our ratings could motivate current and future independent agents and policyholders to transact their business with higher rated competitors. If A.M.
Due to the inherent uncertainties involved in these judgments, we may incur unrealized losses and subsequently conclude that other-than-temporary write downs of our investments are required. Our geographic concentration ties our performance to the business, economic and regulatory conditions of certain states.
Due to the inherent uncertainties involved in these judgments, we may incur unrealized losses and subsequently conclude that other-than-temporary write downs of our investments are required. A downgrade in our financial strength or issuer credit ratings could result in a loss of business and could have a material adverse effect on our financial condition, results of operations and liquidity.
Emerging technology, including artificial intelligence, offers opportunities to underwrite and price business more efficiently and accurately, thus lowering costs. If we are not able to use technology and data analytics as effectively as our competitors, our competitiveness and ability to write and retain business within our risk appetite will be impacted.
If we are not able to use technology and data analytics as effectively as our competitors, our competitiveness and ability to write and retain business within our risk appetite will be impacted. This may reduce the profitability of the business we do write or retain and negatively affect our ability to meet our business objectives.
The market price of our common stock historically has been, and we expect will continue to be, subject to fluctuations.
All these factors can contribute to adverse financial consequences for UFG. Shareholders Our stock price could become more volatile, and your investment could lose value. The market price of our common stock historically has been, and we expect will continue to be, subject to fluctuations.
Third-party rating agencies assess and rate the claims-paying ability, capital strength and creditworthiness of insurers and reinsurers based on criteria established by the agencies. A.M. Best rates our property and casualty insurance companies on a group basis. Since 2012, A.M. Best has also provided an issuer credit rating to our parent holding company.
Ratings are an important factor in establishing the competitive position of insurance companies. Third-party rating agencies assess and rate the claims-paying ability, capital strength and creditworthiness of insurers and reinsurers based on criteria established by the agencies.
These ratings are not evaluations directed to potential purchasers of our common stock, and are not recommendations to buy, sell or hold our common stock. These ratings are subject to change at any time and could be revised downward or revoked at the sole discretion of the rating agency.
These ratings are subject to change at any time and could be revised downward or revoked at the sole discretion of the rating agency. 18 Table of Contents The ratings assigned by A.M. Best are an important factor in marketing our products. Our ratings from A.M.
If the quality of the independent agencies with which we do business were to decline, policyholders might consider purchasing their insurance through different agencies or channels. We are subject to comprehensive laws and regulations, changes to which may have an adverse effect on our financial condition and results of operations. Insurance is a highly regulated industry.
If the quality of the independent agencies with which we do business were to decline, policyholders might consider purchasing their insurance through different agencies or channels. Our geographic concentration ties our performance to the business, economic and regulatory conditions of certain states.
These intermediaries work closely with our risk, corporate underwriting, and finance departments to design reinsurance transactions that align with corporate strategy and risk appetite. Reinsurance transactions are supported by a large and diverse array of reinsurance providers to ensure that the capacity is reliable in each underwriting year.
Reinsurance transactions are supported by a large and diverse array of reinsurance providers to ensure that the capacity is reliable in each underwriting year. However, in hard reinsurance market conditions, reinsurance capacity can become constrained as reinsurers are pressed with concerns about capital or profitability.
We have a clear view of the criticality of various components of our reinsurance program. Finally, we maintain active dialogue with intermediaries and underwriters throughout the year. 24 Table of Contents Risks Relating to Our Common Stock Our stock price could become more volatile and your investment could lose value.
We have a clear view of the criticality of various components of our reinsurance program. Finally, we maintain active dialogue with intermediaries and underwriters throughout the year. Operations We may be unable to attract, retain or effectively manage the succession of key personnel.
We also steer our portfolio away from business that is most exposed to these trends, and we target business in our assumed reinsurance operations and other alternative distribution channels that offer more short tail risks. Unauthorized data access, cyber-attacks and other security breaches could have an adverse impact on our business and reputation.
We endeavor to find ways to keep claims out of litigation and manage downward the length of time that certain claims are open. We also steer our portfolio away from business that is most exposed to these trends, and we target business in our assumed reinsurance operations and other alternative distribution channels that offer shorter tail risks.
Regulatory Risk: Certain regulatory bodies may impose laws that require UFG to report GHG emissions from our own operations and our strategies to mitigate emissions, resulting in compliance with such regulations requiring increased time and expense. c. Transition Risk: Financial risks arising from a global transition to a lower-carbon economy could impact long-term return on certain invested assets. d.
This is a concern for our property insurance underwriting strategy and, to a lesser extent, our real estate costs. 19 Table of Contents (2) Regulatory Risk: Certain regulatory bodies may impose laws that require UFG to report Greenhouse Gas (GHG) emissions from our own operations and our strategies to mitigate emissions, resulting in compliance with such regulations requiring increased time and expense.
We will be at a competitive disadvantage if, over time, our competitors are more effective than us in their utilization of technology and evolving data analytics. We use various actuarial techniques and data analytics to understand our risk exposures such as frequency and severity of different types of insurance claims.
We will be at a competitive disadvantage if, over time, our competitors are more effective in pricing their products, development of new product offering, implementation of technology and data analytics.
The failure of our insurance company subsidiaries to maintain their current ratings could dissuade a lender or reinsurance company from conducting business with us. A further ratings downgrade could also cause some of our existing liabilities to be subject to acceleration, additional collateral support, changes in terms, or creation of additional financial obligations.
A ratings downgrade could also cause some of our existing liabilities to be subject to acceleration, additional collateral support, changes in terms, or creation of additional financial obligations. For more information, refer to the "Financial Strength and Issuer Credit Rating" " section in Part I, Item 1 and Note 13 "Debt" contained in Part II, Item 8.
Losing business to competitors offering similar products at lower prices or who have a competitive advantage may adversely affect the results of our operations. We are subject to certain risks related to our investment portfolio that could negatively affect our profitability. Investment income is an important component of our net income and overall profitability.
Losing business to competitors offering similar products at lower prices or who have a competitive advantage may adversely affect the results of our operations. 14 Table of Contents We use various actuarial techniques and data analytics to understand our risk exposures such as frequency and severity of different types of insurance claims.
As a result, efforts by our shareholders to change the direction or the Company's management may be unsuccessful, and the existence of such provisions may adversely affect market prices for our common stock if they are viewed as discouraging takeover attempts. The ability of our subsidiaries to pay dividends may affect our liquidity and ability to meet our obligations.
However, any such activity, regardless of its success, may still adversely affect market prices for our common stock. The ability of our subsidiaries to pay dividends to UFG may affect our liquidity and ability to pay dividends to shareholders. As a holding company, we have no significant independent operations of our own.
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Conversely, we could overprice risks, leading to reduced sales volume and competitiveness.
Added
We have set a strategy to grow our business. We expect to execute on our strategy, but our success could be impacted by several different risks including but not limited to regulatory changes, economic conditions, technological advancements, cybersecurity threats, operational risks, intense market competition, and talent risks. We continually monitor these risks and mitigate their potential likelihood and impact.
Removed
Fluctuations in demand and competition could produce underwriting results that would have a negative impact on the results of our operations and financial condition.
Added
We also adjust our strategy as needed as results are realized or projections indicate any potential weaknesses in the adequacy or execution of our strategic plan. Our efforts to successfully mitigate risks to our strategy are not guaranteed, which could materially impact our financial condition and the results of our operations.
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As discussed in detail below, general economic conditions, changes in financial markets, global events, and many other factors beyond our control can adversely affect the value of our investments and the realization of investment income. 15 Table of Contents We manage our investment portfolio internally under required statutory guidelines and investment guidelines approved by our Board of Directors and the boards of directors of our subsidiaries.
Added
We use outputs of predictive models and other analytics to assist in decision making related to underwriting, pricing, claims management (including reserving), and catastrophe risk exposure management. Emerging technology, including artificial intelligence, offers opportunities to underwrite and price business more efficiently and accurately, thus lowering costs.
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Although these guidelines stress diversification and capital preservation, our investments are subject to a variety of risks discussed as follows. Credit Risk – The value of our investment in marketable securities is subject to credit losses as a result of deterioration in the creditworthiness of the issuer.
Added
We could underprice risks which would adversely affect our profit margins. Conversely, we could overprice risks, leading to reduced sales volume and competitiveness. Our ability to undertake these efforts successfully is subject to a number of risks and uncertainties, including but not limited to: (1) The availability of sufficient reliable data and our ability to properly analyze available data.
Removed
Such impairments could reduce our net investment income and result in realized investment losses. The vast majority of our investments (98.4 percent of core fixed income portfolio at December 31, 2023) are investment-grade securities. Despite efforts to diversify our portfolio and emphasize credit quality, our investments are subject to losses as a result of a general downturn in the economy.
Added
The demand for property and casualty insurance can also vary significantly, rising as the overall level of economic activity increases and falling as that activity decreases.
Removed
Interest Rate Risk – A significant portion of our investment portfolio (89.4 percent at December 31, 2023) consists of fixed income securities, primarily U.S. government agency, corporate and municipal bonds (70.0 percent at December 31, 2023). These securities are sensitive to changes in interest rates.
Added
The effects of these and other unforeseen emerging claims and coverage issues are difficult to predict. Further examples of these issues include: (1) Judicial expansion of policy coverage and the impact of new theories of liability. (2) An increase in plaintiffs targeting property and casualty insurers in purported class action litigation regarding claims handling and other practices.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Chief Administrative Officer provides a quarterly report to the Risk Management Committee that summarizes cybersecurity risks, relevant events and other items of note identified by management or the Executive ERM Committee. The Executive ERM Committee meets independently of the Risk Management Committee, with a representative from the Risk Management Committee in attendance.
Biggest changeThe ERM Committee, as part of its comprehensive risk management 22 Table of Contents duties, discusses Company strategies to prevent cyber-attacks and the Company's response and remediation of threats. The CAO provides a quarterly report to the Risk Management Committee that summarizes cybersecurity risks, relevant events and other items of note identified by management or the ERM Committee.
We use a variety of inputs in such risk assessments, including information supplied by third parties and information obtained through other channels. In addition, we require our 27 Table of Contents providers to adhere to appropriate security requirements and controls, and we investigate security incidents that have impacted our third-party service providers, as appropriate.
We use a variety of inputs in such risk assessments, including information supplied by third-parties and information obtained through other channels. In addition, we require our providers to adhere to appropriate security requirements and controls, and we investigate security incidents that have impacted our third-party service providers, as appropriate.
The Chief Administrative Officer likewise serves on the Business Continuity Team as the business continuity technology lead, a role in which she comprehensively evaluates IT system readiness and preparedness should a business continuity event involving cybersecurity or technology interruption occur.
The CAO likewise serves on the Business Continuity Team as the business continuity technology lead, a role in which she comprehensively evaluates IT system readiness and preparedness should a business continuity event involving cybersecurity or technology interruption occur.
We have made ongoing continuous improvements to our information security program; specifically in the implementation of secure remote access solutions with multifactor authentication, next-generation endpoint detection and remediation, cloud-based security controls, automated scanning and outside validation of security controls. Additionally, we require employees to complete cybersecurity training at least annually.
We make ongoing continuous improvements to our information security program; specifically in the implementation of secure remote access solutions with multifactor authentication, next-generation endpoint detection and remediation, cloud-based security controls, automated scanning and outside validation of security controls. Additionally, we require all employees to complete cybersecurity training at least annually, with additional training targeted for employees with greater data access.
The lead management team member responsible for cybersecurity matters is the Chief Administrative Officer, who has 20 years of experience in information technology and a B.A. in Management Information Systems. She is assisted by the Information Security Manager and the Assistant Vice President and Senior Corporate Counsel for Privacy and Governance.
The lead management team member responsible for cybersecurity matters is the CAO, who has 20 years of experience in information technology and a B.A. in Management Information Systems. She is assisted by the Vice President of Technology Operations, the Information Security Manager and Corporate Counsel, Privacy.
The Risk Management Committee's charter requires it to assist the Board of Directors in identifying and evaluating risks inherent in our business and to oversee and review the significant policies, procedures, and practices employed to manage risks. The Risk Management Committee receives a quarterly cybersecurity update from the Chief Administrative Officer, which is shared with the full Board of Directors.
Oversight Cybersecurity risk oversight is a focus area of our Risk Management Committee and the full Board of Directors. The Risk Management Committee's charter requires it to assist the Board of Directors in identifying and evaluating risks inherent in our business and to oversee and review the significant policies, procedures, and practices employed to manage risks.
Cybersecurity Program We have adopted a Written Information Security Program (WISP) designed to align with the guidelines recommended by the National Institute of Standards and Technology (NIST).
The CAO regularly reviews the lines of accountability and responsibility to ensure alignment with the ERM Committee. Cybersecurity Program We have adopted a Written Information Security Program (WISP) designed to align with the guidelines recommended by the National Institute of Standards and Technology (NIST).
Certain members of the Executive ERM Committee are invited to attend and participate in meetings of the Risk Management Committee. In addition, we maintain internal working groups called "corporate risk register groups" dedicated to assessing and managing the various ERM risks facing the Company.
The ERM Committee meets independently of the Risk Management Committee, with a representative from the Risk Management Committee in attendance. Certain members of the ERM Committee are invited to attend and participate in meetings of the Risk Management Committee. In addition, we maintain internal "risk evaluation teams" dedicated to assessing and managing the entity-level risks facing the Company.
Our cybersecurity risks are identified and addressed through a comprehensive, cross-functional approach to develop strategies for preserving the confidentiality, integrity and availability of Company and customer information, identifying, preventing and mitigating cybersecurity threats, and effectively responding to cybersecurity incidents. 26 Table of Contents Oversight Cybersecurity risk oversight is a focus area of our Risk Management Committee and the full Board of Directors.
ITEM 1C. CYBERSECURITY Overview We recognize the importance of assessing, identifying, and managing risks associated with cybersecurity threats. Our cybersecurity risks are identified and addressed through a comprehensive, cross-functional approach to develop strategies for preserving the confidentiality, integrity and availability of Company and customer information, identifying, preventing and mitigating cybersecurity threats, and effectively responding to cybersecurity incidents.
The Board of Directors discusses cybersecurity matters and risks on a quarterly basis or more frequently, as needed, at the recommendation of the Risk Management Committee. The Company's executive enterprise risk management committee (the "Executive ERM Committee") is tasked with, among other responsibilities, identifying and evaluating operational risks, which includes risks associated with information technology and cybersecurity.
The Company's enterprise risk management committee (the "ERM Committee") is tasked with, among other responsibilities, identifying and evaluating operational risks, which includes risks associated with information technology and cybersecurity.
The Executive ERM Committee regularly reviews and evaluates the corporate incident response plan and business continuity plan. Cybersecurity Threats To date, we have not identified any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have, or are likely to, materially affect us, our business strategy, results of operation or financial condition.
We did not experience any material cyber incidents since the beginning of our last fiscal year. 23 Table of Contents Cybersecurity Threats To date, we have not identified any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have, or are likely to, materially affect us, our business strategy, results of operation or financial condition.
The Executive ERM Committee includes senior leaders across business functions, including the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Legal Officer, Chief Risk Officer and Chief Administrative Officer. The Executive ERM Committee, as part of its comprehensive risk management duties, discusses Company strategies to prevent cyber-attacks and the Company's response and remediation of threats.
The ERM Committee includes senior leaders across business functions, including the Chief Executive Officer (CEO), Chief Operating Officer (COO), Chief Financial Officer (CFO), Chief Legal Officer, Chief Risk Officer (CRO) and CAO.
There are two corporate risk register groups that relate to cybersecurity risk: Cyber Incident Prevention and Cyber Incident Recovery; the Chief Administrative Officer is the leader of both of these risk register groups.
There are two risk evaluation teams that relate to cybersecurity risk: Cyber-Attack Prevention and Cyber-Attack Recovery. The CAO and Vice President of Technology Operations participate in both risk evaluation teams.
We have established comprehensive incident response and recovery plans and continue to regularly test and evaluate the effectiveness of those plans.
We have established comprehensive incident response and recovery plans and intend to test and refine the effectiveness of those plans under the leadership of the Chief Human Resources Officer, who is accountable for the overall business continuity program at UFG.
Removed
ITEM 1C. CYBERSECURITY Overview We recognize the importance of assessing, identifying, and managing risks associated with cybersecurity threats.
Added
The Risk Management Committee receives a quarterly cybersecurity update from the Chief Administrative Officer (CAO), which is shared with the full Board of Directors. The Board of Directors discusses cybersecurity matters and risks on a quarterly basis or more frequently, as needed, at the recommendation of the Risk Management Committee.
Added
The ERM Committee is accountable for regularly reviewing and evaluating the corporate incident response plan and business continuity plan. We have a process to appropriately identify and escalate incidents that would be considered "material" in nature and require disclosure under the SEC's reporting requirements.
Added
Our identification and escalation process requires any potentially material incidents to be escalated to the CAO, who would promptly meet with the ERM Committee to determine if the incident is considered material and trigger a reporting obligation through a Current Report on Form 8-K.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our headquarters are located in Cedar Rapids, Iowa, where we own approximately 235,000 square feet of office and building space. In addition, we lease office and building space, including underwriting and claims offices, throughout the U.S. We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business.
Biggest changeITEM 2. PROPERTIES Our headquarters are located in Cedar Rapids, Iowa, where we own approximately 235,000 square feet of office and building space. In addition, we lease office and building space throughout the U.S. primarily for underwriting and claims operations in those locations.
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We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile the final outcome of these legal proceedings cannot be predicted with certainty, management believes all of the proceedings pending as of December 31, 2023 to be ordinary and routine and does not expect these legal proceedings to have a material adverse effect on the Company's financial position or results of operations. ITEM 4.
Biggest changeWhile the final outcome of these legal proceedings cannot be predicted with certainty, management believes all of the proceedings pending as of December 31, 2024 to be ordinary and routine and does not expect these legal proceedings to have a material adverse effect on the Company's financial position or results of operations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.
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MINE SAFETY DISCLOSURES Not applicable. 28 Table of Contents PART II.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 28 PART II: Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29 Item 6. [Reserved] 30 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 66 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 24 PART II: Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 24 Item 6. [Reserved] 25 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 55 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAdditional information about these restrictions is incorporated by reference from Note 6 "Statutory Reporting, Capital Requirements and Dividends and Retained Earnings Restrictions" contained in Part II, Item 8, "Financial Statements and Supplementary Data." Issuer Purchases of Equity Securities Under our share repurchase program, we may purchase our common stock from time to time on the open market or through privately negotiated transactions.
Biggest changeFor information regarding dividends paid to shareholders and the declaration and payment of future dividends, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", under heading "Liquidity and Capital Resources", subheading "Commitments for Capital Expenditures." Issuer Purchases of Equity Securities Under our share repurchase program, we may purchase our common stock from time to time on the open market or through privately negotiated transactions.
The graph assumes $100 was invested on December 31, 2018 in our common stock and in each of the below listed indices and that all dividends were reinvested on the date of payment withou t payment of any commissions. Dollar amounts in the graph are rounded to 29 Table of Contents the nearest whole dollar.
The graph assumes $100 was invested on December 31, 2019 in our common stock and in each of the below listed indices and that all dividends were reinvested on the date of payment withou t payment of any commissions. Dollar amounts in the graph are rounded to the nearest whole dollar.
Common Stock Performance Graph The following graph compares the performance of an investment in United Fire Group Inc.'s common stock from December 31 , 2018 th rough December 31, 2023, with the Standard & Poor's 500 Index ("S&P 500 Index"), and the Standard & Poor's 600 Property and Casualty Index ("S&P 600 P&C Index").
Common Stock Performance Graph The following graph compares the performance of an investment in the Company's common stock from December 31 , 2019 th rough December 31, 2024, with the Standard & Poor's 500 Index ("S&P 500 Index"), and the Standard & Poor's 600 Property and Casualty Index ("S&P 600 P&C Index").
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Shareholders United Fire Group, Inc.'s common stock is traded on the Nasdaq stock market under the symbol "UFCS." On February 23, 2024 , t here were 645 holders of record of United Fire Group, Inc. common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Shareholders The Company's common stock is traded on the Nasdaq stock market under the symbol "UFCS." On February 18, 2025 , t here were 606 holders of record of the Company's common stock.
Period Ended Index 12/31/2018 12/31/2019 12/31/2020 12/31/21 12/31/22 12/31/23 United Fire Group, Inc. $ 100.00 $ 81.12 $ 48.48 $ 45.79 $ 55.17 $ 41.77 S&P 500 Index 100.00 131.49 155.68 200.38 164.05 207.13 S&P 600 P&C Index 100.00 109.99 110.97 129.93 118.03 124.69 The foregoing performance graph is being furnished as part of this Annual Report on Form 10-K solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish our shareholders with such information, and therefore, shall not be deemed to be filed or incorporated by reference into any filings by the Company under the Securities Act or Exchange Act.
Period Ended Index 12/31/2019 12/31/2020 12/31/2021 12/31/22 12/31/23 12/31/24 United Fire Group, Inc. $ 100.00 $ 59.76 $ 56.44 $ 68.01 $ 51.49 $ 72.60 S&P 500 Index 100.00 118.40 152.39 124.79 157.60 197.03 S&P 600 P&C Index 100.00 100.89 118.13 107.88 114.50 152.77 The foregoing performance graph is being furnished as part of this Annual Report on Form 10-K solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish our shareholders with such information, and therefore, shall not be deemed to be filed or incorporated by reference into any filings by the Company under the Securities Act or Exchange Act.
The amount and timing of any purchases will be at our discretion and will depend upon a number of factors, including the share price, general economic and market conditions, and corporate and regulatory requirements. Our share repurchase program may be modified or discontinued at any time. There were no repurchases during the year ended December 31, 2023.
The amount and timing of any purchases will be at our discretion and will depend upon a number of factors, including the share price, general economic and market conditions, and corporate and regulatory requirements. Our share repurchase program may be modified or discontinued at any time. Our share repurchase program was most recently renewed in August 2024 through August 2026.
Removed
As a holding company with no independent operations of its own, United Fire Group, Inc. relies on dividends received from its insurance company subsidiaries in order to pay dividends to its common shareholders. Dividends payable by our insurance subsidiaries are governed by the laws in the states in which they are domiciled.
Added
There were no repurchases during the year ended December 31, 2024. As of December 31, 2024, there are 1,719,326 shares of common stock remaining under this authorization. 24 Table of Contents United Fire Group, Inc.
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In all cases, these state laws permit the payment of dividends only from earned surplus arising from business operations.
Removed
For example, under Iowa law, the maximum dividend or distribution that may be paid within a 12-month period without prior approval of the Iowa Insurance Commissioner is generally restricted to the greater of 10 percent of statutory surplus as of the preceding December 31, or net income of the preceding calendar year on a statutory basis, not greater than earned statutory surplus.
Removed
Other states in which our insurance company subsidiaries are domiciled may impose similar restrictions on dividends and distributions. Based on these restrictions, at December 31, 2023, our insurance company subsidiary, United Fire & Casualty, is able to make a maximum of $58.6 million in dividend payments without prior regulatory approval.
Removed
Payments of any future dividends and the amounts of such dividends will depend upon factors such as net income, financial condition, capital requirements, and general business conditions.
Removed
We will only pay dividends if declared by our Board of Directors out of legally available funds and there can be no assurance that we will continue to pay such dividends or the amount of such dividends.
Removed
Our share repurchase program was most recently renewed in November 2022 through August 2024. As of December 31, 2023, we remained authorized to repurchase 1,719,326 shares of common stock. United Fire Group, Inc.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following provides more detail on the type of assumed reinsurance business we target. • Treaty reinsurance with regional property and casualty carriers, including casualty XOL, property per risk, and property catastrophe XOL. • Treaty reinsurance with professional reinsurers and Lloyd's syndicates. • Mortgage reinsurance with Freddie Mac and Fannie Mae, private mortgage insurers and surety carriers. • Treaty reinsurance on risks underwritten by managing general agents. • Treaty reinsurance underwritten on our behalf through reinsurance intermediary management agreements (RIMA) that define underwriting boundaries by product, class and type. 36 Table of Contents RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 FINANCIAL HIGHLIGHTS Years Ended December 31, % Change 2023 2022 (In Thousands) 2023 2022 2021 vs. 2022 vs. 2021 Revenues Net premiums earned $ 1,034,587 $ 951,541 $ 962,823 8.7 % (1.2) % Investment income, net of investment expenses 59,606 44,932 55,778 32.7 (19.4) Net investment gains (losses) 1,274 (15,892) 47,383 (108.0) (133.5) Other income — (295) 207 (100.0) (242.5) Total revenues $ 1,095,467 $ 980,286 $ 1,066,191 11.7 % (8.1) % Benefits, losses and expenses Losses and loss settlement expenses $ 769,414 $ 637,301 $ 652,155 20.7 % (2.3) % Amortization of deferred policy acquisition costs 244,991 213,075 203,432 15.0 4.7 Other underwriting expenses 115,800 115,169 110,103 0.5 4.6 Interest expense 3,260 3,188 3,187 2.3 — Other non-underwriting expenses 1,723 (524) 471 (428.8) (211.3) Total benefits, losses and expenses $ 1,135,188 $ 968,209 $ 969,348 17.2 % (0.1) % Income (loss) before income taxes $ (39,721) $ 12,077 $ 96,843 (428.9) (87.5) % Federal income tax expense (benefit) (10,021) (2,954) 16,249 239.2 (118.2) % Net income (loss) $ (29,700) $ 15,031 $ 80,594 (297.6) (81.3) % GAAP Ratios: Net loss ratio (1) 74.4 % 67.0 % 67.7 % 11.0 % (1.0) % Expense ratio (2) 34.9 % 34.5 % 32.6 % 1.2 % 5.8 % Combined ratio (3) 109.3 % 101.5 % 100.3 % 7.7 % 1.2 % Additional Loss Ratios: Net loss ratio (1) 74.4 % 67.0 % 67.7 % 11.0 % (1.0) % Catastrophes - effect on net loss ratio (4) 6.2 % 7.7 % 10.2 % (19.5) % (24.5) % Reserve development-effect on net loss ratio (4) 6.0 % 0.1 % (6.9) % NM (101.4) % Underlying loss ratio (4) (Non-GAAP) 62.2 % 59.2 % 64.4 % 5.1 % (8.1) % NM = not meaningful (1) Net loss ratio is calculated by dividing the sum of losses and loss settlement expenses by net premiums earned.
Biggest changeFinancial Highlights Years Ended December 31, % Change 2024 2023 (In Thousands) 2024 2023 2022 vs. 2023 vs. 2022 Revenues Net earned premiums $ 1,176,750 $ 1,034,587 $ 951,541 13.7 % 8.7 % Net investment income 81,986 59,606 44,932 37.5 32.7 Net investment gains (losses) (5,429) 1,274 (15,892) NM NM Other income (loss) — — (295) NM (100.0) Total revenues $ 1,253,307 $ 1,095,467 $ 980,286 14.4 % 11.7 % Benefits, losses and expenses Losses and loss settlement expenses $ 744,605 $ 769,414 $ 637,301 (3.2) % 20.7 % Amortization of deferred policy acquisition costs 281,338 244,991 213,075 14.8 15.0 Other underwriting expenses 140,942 115,800 115,169 21.7 0.5 Interest expense 7,281 3,260 3,188 123.3 2.3 Other non-underwriting expenses 2,107 1,723 (524) 22.3 NM Total benefits, losses and expenses $ 1,176,273 $ 1,135,188 $ 968,209 3.6 % 17.2 % Income (loss) before income taxes $ 77,034 $ (39,721) $ 12,077 NM NM Income tax expense (benefit) 15,077 (10,021) (2,954) NM NM Net income (loss) $ 61,957 $ (29,700) $ 15,031 NM NM GAAP Ratios: Net loss ratio (1) 63.3 % 74.4 % 67.0 % (14.9) % 11.0 % Expense ratio (2) 35.9 % 34.9 % 34.5 % 2.9 % 1.2 % Combined ratio (3) 99.2 % 109.3 % 101.5 % (9.2) % 7.7 % Additional Loss Ratios: Net loss ratio (1) 63.3 % 74.4 % 67.0 % (14.9) % 11.0 % Catastrophes (4) 5.4 % 6.2 % 7.7 % (12.9) % (19.5) % Reserve development (4) — % 6.0 % 0.1 % NM NM Underlying loss ratio (4) (Non-GAAP) 57.9 % 62.2 % 59.2 % (6.9) % 5.1 % NM = not meaningful (1) Net loss ratio is calculated by dividing the sum of losses and loss settlement expenses by net earned premiums.
The underlying combined ratio represents the combined ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The Company believes that the underlying loss ratio and underlying combined ratio are meaningful measures to understand the underlying trends in the core business in the current accident year, removing the volatility of prior period impacts and catastrophes.
The underlying combined ratio represents the combined ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The Company believes that the underlying loss ratio and underlying combined ratio are meaningful measures to understand the underlying trends in the core business in the current accident year, removing the volatility of catastrophes and prior period impacts.
(2) Expense ratio is calculated by dividing non-deferred underwriting expenses and amortization of deferred policy acquisition costs by net premiums earned. The expense ratio measures a company's operational efficiency in producing, underwriting and administering its insurance business. (3) Combined ratio is a commonly used financial measure of property and casualty underwriting performance.
(2) Expense ratio is calculated by dividing non-deferred underwriting expenses and amortization of deferred policy acquisition costs by net earned premiums. The expense ratio measures a company's operational efficiency in producing, underwriting and administering its insurance business. (3) Combined ratio is a commonly used financial measure of property and casualty underwriting performance.
Catastrophe Losses In 2023, our pre-tax catastrophe losses were $64.2 million, a decrease of $9.3 million compared to $73.5 million in 2022 and a decrease of $25.2 million as compared to $98.6 million in 2021. In 2023, our catastrophe losses included 61 events.
In 2023, our pre-tax catastrophe losses were $64.2 million, a decrease of $9.3 million compared to $73.5 million in 2022, and a decrease of $25.2 million as compared to $98.6 million in 2021. In 2023, our catastrophe losses included 61 events.
Because of these variables, the process of reserving for the ultimate loss and loss settlement expense to be incurred requires the use of informed judgment and is inherently uncertain. Consequently, actual loss and loss settlement expense reserves may deviate from our estimates. Such deviations may be significant.
Because of these variables, the process of reserving for the ultimate loss and loss settlement expense to be incurred requires the use of informed judgment and is inherently uncertain. Consequently, actual loss and loss settlement expense reserves may deviate from our estimates and such deviations may be significant.
Factors that can cause reserve uncertainty in estimating reserves in this line include: reporting time lags; the number of parties involved in the underlying tort action; whether the "event" triggering coverage is confined to only one time period or is spread over multiple time periods; the potential dollars involved in the individual claim actions; whether such claims were reasonably foreseeable and intended to be covered at the time the contracts were written (i.e., coverage disputes); and the potential for mass claim actions.
Factors that can cause uncertainty in estimating reserves in this line include: reporting time lags; the number of parties involved in the underlying tort action; whether the "event" triggering coverage is confined to only one time period or is spread over multiple time periods; the potential dollars involved in the individual claim actions; whether such claims were reasonably foreseeable and intended to be covered at the time the contracts were written (i.e., coverage disputes); and the potential for mass claim actions.
As our claim investigation progresses, and as our claims personnel identify trends in claims activity, we may refine and adjust our estimates of case reserves. To evaluate and refine our overall reserving process, we track and monitor all claims until they are settled and paid in full, with all salvage, subrogation claims, and liability deductible recoveries being resolved.
As our claim investigation progresses, and as our claims personnel identify trends in claims activity, we may refine and adjust our estimates of case-basis reserves. To evaluate and refine our overall reserving process, we track and monitor all claims until they are settled and paid in full, with all salvage, subrogation claims, and liability deductible recoveries being resolved.
Ceded reserves for reported claims are calculated by subtracting the primary retention from the claim value established by our claim adjuster. Ceded IBNR comes from multiple treaties and is reviewed quarterly by our reserving actuaries in conjunction with the direct reviews. Multiple methods are utilized in the ceded reviews which vary by line of business.
Ceded reserves for reported claims are calculated by subtracting the primary retention from the claim value established by our claim adjuster. Ceded IBNR comes from multiple treaties and is reviewed quarterly by our reserving actuaries in conjunction with the direct IBNR. Multiple methods are utilized in the ceded IBNR which vary by line of business.
Reserves for unpaid A&O are estimated quarterly by line of business for each individual accident year using a single method. This method consists of applying a percentage factor to unpaid loss reserves. The percentage factor used differs by line of business and is evaluated and established on an annual basis using year-end data.
Reserves for unpaid A&O are estimated quarterly by line of business for each individual accident year using a single method. This method consists of applying a percentage factor to unpaid loss reserves. The percentage factor used differs by line of business and is established on an annual basis using year-end data.
These include estimates based on the relationship of ceded premium to direct premium, Bornhuetter Ferguson methods, and methods based on industry excess of loss factors. Some of our business is 100.0 percent ceded or based on a set quota share percentage. In those cases, ceded loss IBNR is typically formulaic based on direct loss IBNR.
These include estimates based on the relationship of ceded premium to direct premium, Bornhuetter Ferguson methods, and methods based on industry excess of loss factors. Some of our business is 100 percent ceded or based on a set quota share percentage. In those cases, ceded loss IBNR is typically formulaic based on direct loss IBNR.
Fidelity and Surety When surety losses occur, our loss is determined by estimating the cost to complete the remaining work and to pay the contractor's unpaid bills, offset by contract funds due to the contractor, reinsurance, and the value of any collateral to which we may have access.
When surety losses occur, our loss is determined by estimating the cost to complete the remaining work and to pay the contractor's unpaid bills, offset by contract funds due to the contractor, reinsurance, and the value of any collateral to which we may have access.
For the small amount of reinsurance capacity we utilize that doesn't meet our criteria, markets are required to collateralize the risk. The following table represents the primary reinsurers we utilize and their financial strength ratings as of December 31, 2023: Name of Reinsurer A.M.
For the small amount of reinsurance capacity we utilize that doesn't meet our criteria, markets are required to collateralize the risk. The following table represents the primary reinsurers we utilize and their financial strength ratings as of December 31, 2024: Name of Reinsurer A.M.
The increase in expense ratio in 2023 as compared to 2022 was primarily driven by prior year changes to our employee post-retirement benefit plans. These changes provided benefits to the underwriting expense ratio in 2022 and 2021 that concluded at the end of 2022.
The increase in expense ratio in 2023 as compared to 2022 was primarily driven by prior year changes to our employee post-retirement benefit plans. These changes provided benefits to the underwriting expense ratio that concluded at the end of 2022.
Also, it is reasonably possible that changes in the value of our investments in trading securities and limited liability partnerships could occur in the future and such changes could materially affect our results of operations as reported in our Consolidated Financial Statements.
Also, it is reasonably possible that changes in the value of our investments in limited liability partnerships could occur in the future and such changes could materially affect our results of operations as reported in our Consolidated Financial Statements.
Our cash inflows are primarily a result of the receipt of premiums, reinsurance recoveries, sales or maturities of investments, and investment income. Cash provided from these sources is used to fund the payment of losses and loss settlement expenses, the purchase of investments, operating expenses, dividends, pension plan contributions, and in recent years, common stock repurchases.
Our cash inflows are primarily a result of the receipt of premiums, reinsurance recoveries, sales or maturities of investments, and investment income. Cash provided from these sources is used to fund the payment of losses and loss settlement expenses, the purchase of investments, operating expenses, dividends, pension plan contributions, and common stock repurchases.
We record investments in available-for-sale and trading fixed maturity securities and equity securities at fair value. Other long-term investments consist primarily of our interests in limited liability partnerships that are recorded on the equity method of accounting. We record mortgage loans at their amortized cost less any valuation allowance.
We record investments in fixed maturity securities classified as available-for-sale and equity securities at fair value. Other long-term investments consist primarily of our interests in limited liability partnerships that are recorded on the equity method of accounting. We record mortgage loans at their amortized cost less any valuation allowance.
For more information, refer to Part I, Item 1 "Property and Casualty Insurance Business" under "Products and Operations" (1) Treaty Reinsurance is split between proportional reinsurance (P) and non-proportional reinsurance (NP) Commercial other liability - primarily business insurance covering bodily injury and property damage including construction defect, excess and surplus lines excess casualty, and standard umbrella.
For more information, refer to Part I, Item 1 "Property and Casualty Insurance Business" under "Personal Lines Business." (1) Treaty Reinsurance is split between proportional reinsurance (P) and non-proportional reinsurance (NP) Commercial other liability - primarily business insurance covering bodily injury and property damage including construction defect, excess and surplus lines excess casualty, and standard umbrella.
In addition, long-tail liability claims are more susceptible to litigation and can be significantly affected by changing contract interpretations and the legal environment. Consequently, the estimation of loss reserves for long-tail coverages is more complex and subject to a higher degree of variability than for short-tail coverages.
In addition, long-tail liability claims are more susceptible to litigation 31 Table of Contents and can be significantly affected by changing contract interpretations and the legal environment. Consequently, the estimation of loss reserves for long-tail coverages is more complex and subject to a higher degree of variability than for short-tail coverages.
We regularly assess our concentration of risk exposures in natural catastrophe exposed areas and consider the impacts of climate change and the unpredictability of future trends in adjusting our geographic concentrations. We have strategies and underwriting standards to manage these exposures through individual risk selection, subject to regulatory constraints.
We regularly assess our concentration of risk in natural catastrophe exposed areas and consider the impacts of climate change and the unpredictability of future trends in adjusting our geographic concentrations. We have strategies and underwriting standards to manage these exposures through individual risk selection, subject to regulatory constraints, and through the purchase of catastrophe reinsurance coverage.
Due to the inherent uncertainty in the loss reserving process, management believes that there is a reasonable chance that modification to key assumptions could individually, or in aggregate, result in reserve levels that are either significantly above or below the actual amount for which the related claims will eventually settle.
Due to the inherent uncertainty in the loss reserving process, management believes that there is a reasonable chance that modification to key assumptions could individually, or in aggregate, result in reserve levels above or below the actual amount for which the related claims will eventually settle.
Exposures are identified and reserves established within 30 to 60 days depending on the complexity of the case. Workers' Compensation Reserves Like the other liability line of business, workers' compensation losses and loss settlement expense reserves are based upon variables that create uncertainty in estimating the ultimate reserve.
Exposures are identified and reserves established within 30 to 60 days depending on the complexity of the case. 35 Table of Contents Workers' Compensation Reserves Like the other liability line of business, workers' compensation losses and loss settlement expense reserves are based upon variables that create uncertainty in estimating the ultimate reserve.
Our cash flows from operating activities were sufficient to meet our liquidity needs for 2023, 2022 and 2021. Investing Activities Cash in excess of operating requirements is generally invested in fixed maturity securities and equity securities. Fixed maturity securities provide regular interest payments and allow us to match the duration of our liabilities.
Our cash flows from operating activities were sufficient to meet our liquidity needs for 2024, 2023 and 2022. Investing Activities Cash in excess of operating requirements is generally invested in fixed maturity securities. Fixed maturity securities provide regular interest payments and allow us to match the duration of our liabilities.
Losses and Loss Settlement Expenses Reserves for losses and loss settlement expenses are reported using our best estimate of ultimate liability for claims that occurred prior to the end of any given reporting period but have not yet been paid. Before credit for reinsurance recoverables, these reserves were $1.6 billion and $1.5 billion at December 31, 2023 and 2022, respectively.
Losses and Loss Settlement Expenses Reserves for losses and loss settlement expenses are reported using our best estimate of ultimate liability for claims that occurred prior to the end of any given reporting period but have not yet been paid. Before credit for reinsurance recoverables, these reserves were $1.8 billion and $1.6 billion at December 31, 2024 and 2023, respectively.
In December 2023, the Company became a member of the Federal Home Loan Bank of Des Moines ("FHLB Des Moines"). Membership allows access to loans or advances. As of December 31, 2023, there were no advances outstanding under the FHLB Des Moines agreement.
Credit Facilities In December 2023, the Company became a member of the Federal Home Loan Bank of Des Moines ("FHLB Des Moines"). Membership allows access to loans or advances. As of December 31, 2024, there were no advances outstanding under the FHLB Des Moines agreement.
Loss Settlement Expense Reserves 60 Table of Contents Loss settlement expense reserves include amounts ultimately allocable to individual claims, as well as amounts required for the general overhead of the claims handling operation that are not specifically allocable to individual claims. We do not establish case reserves for these expenses.
Loss Settlement Expense Reserves Loss settlement expense reserves include amounts ultimately allocable to individual claims, as well as amounts required for the general overhead of the claims handling operation that are not specifically allocable to individual claims. We do not establish case reserves for these expenses.
The pressure on these longer tailed lines, especially in accident years 2016-2019, related to 41 Table of Contents social and economic inflation, continued in 2023 and prompted a re-evaluation of trend assumptions for more recent accident years. The commercial automobile line of business also experienced adverse development of $9.0 million related to increasing severity largely in post-COVID-19 accident years.
The increases in these longer tailed lines, especially in 41 Table of Contents accident years 2016-2019, related to social and economic inflation, and prompted a re-evaluation of trend assumptions for more recent accident years. The commercial automobile line of business also experienced adverse development of $9.0 million related to increasing severity largely in post-COVID-19 accident years.
Fair Value Measurement 57 Table of Contents Information specific to the fair value measurement of our financial instruments and disclosures is incorporated by reference from Note 3 "Fair Value of Financial Instruments" contained in Part II, Item 8.
Fair Value Measurement Information specific to the fair value measurement of our financial instruments and disclosures is incorporated by reference from Note 3 "Fair Value of Financial Instruments" contained in Part II, Item 8.
Establishing the case reserve for an individual claim is subjective and complex, requiring us to estimate future payments and values that will be sufficient to settle an individual claim. Setting a reserve for an individual claim is an inherently uncertain process.
Establishing the case reserve for an individual claim is subjective and complex, requiring us to estimate future payments and values sufficient to settle the claim. Setting a reserve for an individual claim is an inherently uncertain process.
A 100 basis point decrease in our estimated long-term rate of return on pension plan assets would increase the benefit expense for the year ended December 31, 2023 by $2.6 million, while a 100 basis point increase in the rate would decrease benefit expense by $2.6 million, for the same period.
A 100 basis point decrease in our estimated long-term rate of return on pension plan assets would increase the benefit expense for the year ended December 31, 2024 by $2.3 million, while a 100 basis point increase in the rate would decrease benefit expense by $2.3 million, for the same period.
When we establish and adjust individual claim reserves, we do so based on our knowledge of the circumstances and facts of the claim. Upon notice of a claim, we establish a preliminary (average claim cost) reserve based on the limited claim information initially reported.
When we establish and adjust individual claim reserves, we do so based on our knowledge of the circumstances and facts of the claim at a point in time. Upon notice of a claim, we establish a preliminary (average claim cost) reserve based on the limited claim information initially reported.
We use catastrophe modeling and a risk concentration management tool to monitor and control our accumulations of potential losses in natural catastrophe exposed areas of the United States, such as the Gulf Coast and East Coast, as well as in areas of exposure in other countries where we are exposed to a portion of an insurer ’ s underwriting risk under our assumed reinsurance contracts.
We use catastrophe modeling and a risk concentration management tool to monitor and control our accumulations of potential losses in natural catastrophe exposed areas, such as the Gulf Coast and East Coast, as well as in areas of exposure in other countries where we are exposed to a portion of an insurer's underwriting risk under our assumed reinsurance contracts.
Instead, on a quarterly basis, our internal reserving department performs a detailed statistical analysis (using historical data) to estimate the required reserve for unpaid loss settlement expenses. LAE is composed of two distinct kinds of expenses which are defense and cost containment ("DCC") and adjusting and other ("A&O").
Instead, on a quarterly basis, management performs a statistical analysis to estimate the required reserve for unpaid loss settlement expenses using historical data. LAE is composed of two distinct kinds of expenses which are defense and cost containment ("DCC") and adjusting and other ("A&O").
The primary driver for the decline is a reduction of loss and loss settlement expenses of $27.0 million in personal lines related to our exit of that business. This was offset by an increase in reinsurance assumed related to our growth in that business from the prior year, and a slight decrease in our commercial lines.
The primary driver was a reduction in loss and loss settlement expenses of $27.0 million in personal lines related to our exit of that business. This was offset by an increase in reinsurance assumed related to our growth in that business from and a decrease in our commercial lines.
These restrictions are not expected to have a material impact in meeting our cash obligations. Share Repurchases Under our share repurchase program, first announced in August 2007, we may purchase our common stock from time to time on the open market or through privately negotiated transactions.
These restrictions are not expected to have a material impact in meeting our cash obligations. Share Repurchases Under our share repurchase program, we may purchase our common stock on the open market or through privately negotiated transactions.
Prior period reserve development is the increase (unfavorable) or decrease (favorable) in incurred loss and loss adjustment expense reserves at the valuation dates for losses which occurred in previous calendar years. This measure excludes development on catastrophe losses.
Prior period reserve development is the increase (unfavorable) or decrease (favorable) in incurred loss and loss adjustment expense reserves at the valuation dates for losses which occurred in previous calendar years.
The amounts of the case-basis loss reserves that we establish for claims in long-tail lines of business depends upon various factors, including individual claim facts (including type of coverage, severity of loss and underlying policy limits), company historical loss experience, changes in underwriting practice, legislative enactments, judicial decisions, legal developments in the awarding of damages, changes in political attitudes and trends in general economic conditions, including inflation.
The amounts of the case-basis loss reserves that we establish for claims in long-tail lines of business depend upon various factors, including individual claim facts (including type of coverage, severity of loss and underlying policy limits), company historical loss experience, legislative enactments, judicial decisions, legal developments in the awarding of damages, experience with alternative dispute resolution, changes in political attitudes and trends in general economic conditions, including the effects of inflation.
Pooling Arrangement All of our property and casualty insurance subsidiaries are members of an intercompany reinsurance pooling arrangement. The Company's pooling arrangement permits the participating companies to rely on the capacity of the entire pool's capital and surplus, rather than being limited to policy exposures of a size commensurate with each participant's own surplus level.
Pooling Arrangement All of our property and casualty insurance subsidiaries belong to an intercompany reinsurance pooling arrangement. Pooling arrangements permit the participating companies to rely on the capacity of the entire pool's capital and surplus, rather than being limited to policy exposures of a size commensurate with each participant's own surplus level.
For example, under Iowa law, the maximum dividend or distribution that may be paid within a 12-month period without prior approval of the Iowa Insurance Commissioner is generally restricted to the greater of 10 percent of statutory surplus as of the preceding December 31, or net income of the preceding calendar year on a statutory basis, not greater than earned statutory surplus.
For example, under Iowa law, the maximum dividend or distribution that may be paid within a 12-month period without prior approval of the Iowa Insurance Commissioner is generally restricted to the greater of 10 percent of statutory surplus as of the preceding December 31 less any dividends paid in the previous 12 months, or net income of the preceding calendar year on a statutory basis less any dividends paid in the previous 12 months, not greater than 54 Table of Contents earned statutory surplus.
The favorable development for commercial automobile was from both loss and LAE where reductions of reserves for unpaid liabilities were more than sufficient to offset actual paid loss and paid LAE.
The favorable development for commercial automobile was from both loss and LAE where reductions of reserves for unpaid liabilities were more than sufficient to offset actual paid loss and paid LAE. Reductions in reserves for IBNR claims also contributed favorable development.
Management uses metrics to provide financial statement users with a better understanding of results of operations, including net premiums written and three components of the loss ratio: underlying loss ratio, impacts of catastrophes and non-catastrophe prior period reserve development.
Management uses metrics to provide financial statement users with a better understanding of results of operations, including adjusted operating income and three components of the loss ratio: underlying loss ratio, impacts of catastrophes and non-catastrophe prior period reserve development.
Losses and Loss Settlement Expenses Climate Change and Catastrophe Exposures Catastrophe losses are inherent risks of the property and casualty insurance business. Catastrophic events include, without limitation, hurricanes, tornadoes, earthquakes, hailstorms, wildfires, high winds, winter storms and other natural disasters, along with man-made exposures to losses resulting from, without limitation, acts of war, acts of terrorism and political instability.
Catastrophe Event Reserves Catastrophe losses are inherent risks of the property and casualty insurance business. Catastrophic events include, without limitation, hurricanes, tornadoes, earthquakes, hailstorms, wildfires, high winds, winter storms and other natural disasters, along with man-made exposures to losses resulting from, without limitation, acts of terrorism and political instability.
Recently Issued Accounting Standards Information specific to accounting standards that we adopted in 2023 or pending accounting standards that we expect to adopt in the future is incorporated by reference from Note 1 "Summary of Significant Accounting Policies" contained in Part II, Item 8, "Financial Statements and Supplementary Data."
Recently Issued Accounting Standards Information specific to accounting standards we adopted for the year ended December 31, 2024 or pending accounting standards we expect to adopt in the future is incorporated by reference from Note 1 "Summary of Significant Accounting Policies" contained in Part II, Item 8, "Financial Statements and Supplementary Data."
We engage a consulting actuary from Principal Financial Group, an independent firm, to assist in evaluating and establishing assumptions used in the valuation of our benefit obligations. A change in any one or more of these assumptions is likely to result in an ultimate liability different from the original actuarial estimate. Such changes in estimates may be material.
We have engaged an independent firm to assist in evaluating and establishing assumptions used in the valuation of our pension benefit obligations. A change in any one or more of these assumptions is likely to result in an ultimate liability different from the original actuarial estimate. Such changes in estimates may be material.
The program consists of $45 million in coverage for losses in excess of $5 million per principal. The first layer includes three reinstatements, while the second and third include one. Losses are considered discovered to the treaty year in accordance with the contract terms and conditions.
The program consists of $45 million in coverage for losses in excess of $5 million per principal. The first layer includes three paid reinstatements, while the second and third include one paid reinstatement. Losses are considered discovered to the treaty year in accordance with the contract terms and conditions. The surety treaty is largely unchanged from the 2024 treaty year.
Operating Leases Our operating lease obligations are for the rental of office space, vehicles, computer equipment and office equipment. For further discussion of our operating leases, refer to Part II, Item 8, Note 12 "Lease Commitments." Profit-Sharing Commissions We offer our agents a profit-sharing plan as an incentive for them to place high-quality property and casualty insurance business with us.
For further discussion of our operating leases, refer to Part II, Item 8, Note 12 "Lease Commitments." Profit-Sharing Commissions We offer our agents a profit-sharing plan as an incentive for them to place high-quality property and casualty insurance business with us.
Profit or loss described in the following sections of this Management's Discussion and Analysis is reported on a pre-tax basis. Our primary sources of revenue are premiums and investment income. Major categories of expenses include losses and loss settlement expenses, underwriting and other operating expenses.
NON-GAAP FINANCIAL MEASURES We evaluate profit or loss based upon operating and investment results. Profit or loss described in the following sections of this Management's Discussion and Analysis is reported on a pre-tax basis. Our primary sources of revenue are premiums and investment income. Major categories of expenses include losses and loss settlement expenses, underwriting and other operating expenses.
The main assumptions used in the valuation of our benefit obligation are: estimated mortality of the employees and retirees eligible for benefits; estimated expected long-term rates of return on investments; estimated compensation increases; estimated employee turnover; and estimated rate used to discount the ultimate estimated liability to a present value.
The main assumptions used in the valuation of our pension benefit obligation are estimates related to: mortality of the employees and retirees eligible for benefits; expected long-term rates of return on investments; compensation increases; employee turnover; and liability discount rate.
Estimates for workers' compensation are particularly sensitive to assumptions about medical cost inflation, which has been relatively stable over the past few years. Other variables that we consider and that contribute to the uncertainty in establishing reserves for workers' compensation claims include: state legislative and regulatory environments; trends in jury awards; and mortality rates.
Estimates for workers' compensation are particularly sensitive to assumptions about medical cost inflation. Other variables we consider and that contribute to the uncertainty in establishing reserves for workers' compensation claims include: state legislative and regulatory environments; trends in jury awards; and mortality rates.
Cash outflows may be variable because of the uncertainty regarding settlement dates for losses. In addition, the timing and amount of individual catastrophe losses are inherently unpredictable and could increase our liquidity requirements.
Cash outflows may be variable because of the uncertainty regarding settlement dates for losses. In addition, the timing and amount of individual catastrophe losses are inherently unpredictable and could increase our liquidity requirements. The timing and amount of reinsurance recoveries may be affected by reinsurer solvency and reinsurance coverage disputes.
Other states in which our insurance company subsidiaries are domiciled may impose similar restrictions on dividends and distributions. Based on these restrictions, at December 31, 2023, our insurance company subsidiary, United Fire & Casualty, is able to make a maximum of $58.6 million in dividend payments without prior regulatory approval.
Other states in which our insurance company subsidiaries are domiciled may impose similar restrictions on dividends and distributions. Based on these restrictions, at December 31, 2024, our insurance company subsidiary, UF&C, is able to make a maximum of $40.7 million in dividend payments without prior regulatory approval.
The program consists of $110 million in coverage for losses in excess of $20 million. The treaty protects from catastrophic events such as earthquakes, hail, windstorms, and fires. The treaty consists of three layers and is fully placed. It includes exclusions for communicable diseases and cyber loss. In addition, it includes a terrorism exclusion.
The program consists of $110 million in coverage for losses in excess of $20 million. The treaty protects from catastrophic events such as earthquakes, hail, windstorms, and fires. The treaty consists of three layers and is fully placed. It includes provisions providing for extra-contractual and excess of policy limit losses and contains exclusions for communicable diseases and cyber loss.
The following table displays a summary of cash sources and uses in 2023, 2022 and 2021: Cash Flow Summary Years Ended December 31, (In Thousands) 2023 2022 2021 Cash provided by (used in) Operating activities $ 171,736 $ (1,251) $ 29,917 Investing activities (149,886) (19,171) 31,731 Financing activities (16,454) (15,032) (17,492) Net increase (decrease) in cash and cash equivalents $ 5,396 $ (35,454) $ 44,156 Our cash flows were sufficient to meet our current liquidity needs for the full-year periods ended December 31, 2023, 2022 and 2021 and we anticipate they will be sufficient to meet our future liquidity needs.
The following table displays a summary of cash sources and uses in 2024, 2023 and 2022: Cash Flow Summary Years Ended December 31, (In Thousands) 2024 2023 2022 Cash provided by (used in) Operating activities $ 340,304 $ 171,736 $ (1,251) Investing activities (292,487) (149,886) (19,171) Financing activities 51,086 (16,454) (15,032) Net increase (decrease) in cash and cash equivalents $ 98,903 $ 5,396 $ (35,454) Our cash flows were sufficient to meet our current liquidity needs for the years ended December 31, 2024, 2023 and 2022 and we anticipate they will be sufficient to meet our future liquidity needs.
For example, a 100 basis point decrease in our estimated discount rate would increase the benefit obligation at December 31, 2023 by $28.0 million while a 100 basis point increase in the rate would decrease the benefit obligation by $22.9 million, for the same period.
For example, a 100 basis point decrease in our estimated discount rate would increase the benefit obligation at December 31, 2024 by $22.1 million while a 100 basis point increase in the rate would decrease the pension benefit obligation by $18.2 million, for the same period.
Our reserve for workers' compensation claims at December 31, 2023 was $121.0 million and consisted of 1,077 claims, compared with $138.9 million, consisting of 1,414 claims, at December 31, 2022.
Our reserve for workers' compensation claims at December 31, 2024 was $115.6 million and consisted of 1,042 claims, compared with $121.0 million, consisting of 1,077 claims, at December 31, 2023.
Fidelity and surety - contract and commercial surety bond coverage which guarantees performance and payment by our bonded principals, protects owners from failure to perform on the part of our principals, and protects material suppliers and subcontractors from nonpayment by our contractors. Commercial other - commercial theft coverage, boiler and machinery and ocean marine business managed by an MGA partner.
Fidelity and surety - contract and commercial surety bond coverage which guarantees performance and payment by our bonded principals, protects owners from failure to perform on the part of our principals, and protects material suppliers and subcontractors from nonpayment by our contractors.
Most of our insurance policies are written on an occurrence basis that provides coverage if a loss occurs during the policy period, even if the insured reports the loss many years later.
Incurred But Not Reported Reserves ("IBNR") Most of our insurance policies are written on an occurrence basis that provides coverage if a loss occurs during the policy period, even if the insured reports the loss many years later. On a quarterly basis, the Company performs a detailed analysis of IBNR reserves.
IBNR estimates are derived by subtracting reported loss from the final point estimates. Senior management meets with our actuarial team and controller quarterly to review the adequacy of carried IBNR reserves based on results from this actuarial analysis and makes adjustments for changes in business and other factors not completely captured by the data within the actuarial analysis.
Senior management meets with our actuarial team and controller on a quarterly basis to review the adequacy of carried IBNR reserves based on the results of this actuarial analysis. Adjustments for changes in business and other factors not completely captured by the data within the actuarial analysis are made as deemed necessary.
Net cash flows provided by investing activities totaled $31.7 million in 2021. In 2023, we had cash inflows from scheduled and unscheduled investment maturities, redemptions, prepayments, and sales of investments that totaled $162.1 million compared to $280.4 million and $451.1 million for the same period in 2022 and 2021, respectively.
In 2024, we had cash inflows from scheduled and unscheduled investment maturities, redemptions, prepayments, and sales of investments that totaled $680.0 million compared to $162.1 million and $280.4 million for the same period in 2023 and 2022, respectively.
In addition to these issues, other variables also contribute to a high degree of uncertainty in establishing reserves for construction defect claims. These variables include: whether coverage exists; when losses occur; the size of each loss; expectations for future interpretive rulings concerning contract provisions; and the extent to which the assertion of these claims will expand geographically.
These variables include: whether coverage exists; when losses occur; the size of each loss; expectations for future interpretive rulings concerning contract provisions; and the extent to which the assertion of these claims will expand geographically.
We purchase reinsurance to mitigate the impact of large losses and catastrophic events. Loss and loss settlement expense reserves ceded to reinsurers were $191.6 million for 2023 and $146.9 million for 2022.
We purchase reinsurance to mitigate the impact of large losses and catastrophic events. Loss and loss settlement expense reserves ceded to reinsurers were $198.1 million and $191.6 million at December 31, 2024 and 2023, respectively.
Please refer to "Forward-Looking Information" and Part I, Item 1A, "Risk Factors" of this report for information concerning factors that could cause actual results to differ materially from the forward-looking statements contained in this Annual Report on Form 10-K.
See Part I, Item 1A "Risk Factors" of this report for more information concerning factors that could cause actual results to differ materially from those in the forward-looking statements.
Key Assumptions Our actuarial reserving department uses a number of key assumptions in establishing an estimate of loss and loss settlement expense reserves, including the following assumptions: future loss settlement expenses can be estimated based on the Company's historical ratios of loss settlement expenses paid to losses; the Company's case-basis reserves reflect the most up-to-date information available about the unique circumstances of each individual claim; 61 Table of Contents no new judicial decisions or regulatory actions will increase our case-basis obligations; historical aggregate claim reporting and payment patterns will continue into the future consistent with the observable past; significant unique and unusual claim events have been identified and appropriate adjustments have been made; and, to the best of our knowledge, there are no new latent trends that would impact our case-basis reserves.
Key Assumptions The Company uses a number of key assumptions in establishing an estimate of loss and loss settlement expense reserves, including but not limited to the following: the Company's case-basis reserves reflect the most up-to-date information available about the unique circumstances of each individual known claim; judicial decisions or regulatory actions have been considered to the extent of our knowledge; new, emerging claim reporting and payment patterns will continue into the future consistent with the observable past; adjustments have been made for significant unique and unusual known claim events; and, to the best of our knowledge, there are no new, unidentified latent trends that would impact our overall reserves.
Best S&P Rating Swiss Re (2) A+ AA- Hannover Re (1)(2) A+ AA- Everest Re (1)(2) A+ AA- Lloyd's (1)(2) A AA- Arch Re (1) A+ A+ Berkely Re (1) A+ A+ Partner Re (1)(2) A+ A+ R&V Re (1)(2) NR A+ MS Amlin (1)(2) A A Renaissance Re (1) A+ A+ SCOR (1)(2) A A+ (1) Primary reinsurers participating in the property and casualty excess of loss programs.
Best S&P Rating Swiss Reinsurance American Corporation (1) A+ AA- Hannover Ruck SE (1)(2) A+ AA- Everest Reinsurance Company (1)(2) A+ A+ Certain Underwriting Members of Lloyd's of London (1)(2) A+ AA- Arch Reinsurance Company (1) A+ A+ Berkely Reinsurance Company (1) A+ A+ Partner Reinsurance Company of the US (1)(2) A+ A+ R&V Versicherung AG (1) NR A+ MS Amlin AG (1)(2) A+ A+ Renaissance Reinsurance US Inc (1) A+ A+ SCOR Reinsurance Company (1)(2) A A+ Axis Reinsurance Company (2) A A+ (1) Primary reinsurers participating in the property and casualty excess of loss programs.
Commercial fire and allied lines experienced adverse development of $4.4 million largely due to development on both catastrophe and non-catastrophe losses, primarily from accident year 2022.
Commercial fire and allied lines experienced adverse development of $4.4 million largely due to development on both catastrophe and non-catastrophe losses, primarily from accident year 2022. The assumed reinsurance line of business contributed an additional $3.5 million of adverse development largely driven by catastrophe losses.
The unrealized investment loss position is a result of continued elevated interest rates during 2023, with a slight improvement from 2022 that resulted in a small change in unrealized gains for 2023.
The unrealized investment loss position is a result of continued elevated interest rates during 2024, that resulted in a change in unrealized gains/losses for the year.
The following table shows the principle types of property and casualty insurance policies we write and issue, and which lines of business they are reported in: 31 Table of Contents Direct Writer Treaty Reinsurance (1) Funds at Lloyd's MGAs Commercial Lines Other Liability x P x Fire and allied lines x P x Automobile x P Workers' compensation x P Fidelity and surety x P Other x x Personal Lines Fire and allied lines * P Automobile * Other * Reinsurance Assumed NP x * Personal lines direct business was discontinued in 2020 with only a minimal number of exposures still in force due to certain regulatory non-renewal limitations.
For additional information, see Note 10, Segment Information, in Part II, Item 8, "Financial Statements and Supplementary Data." The following table shows the principle types of property and casualty insurance policies we write and issue, and which lines of business they are reported in: Direct Writer Treaty Reinsurance (1) Lloyd's of London MGAs Commercial Lines Other Liability x P x Fire and allied lines x P x Automobile x P Workers' compensation x P Fidelity and surety x P Other x x Personal Lines Fire and allied lines * P Automobile * Other * Reinsurance Assumed NP x * Personal lines direct business was discontinued in 2020 with an immaterial amount of exposure still in force due to certain regulatory non-renewal limitations.
The net cash flows used in financing activities are 54 Table of Contents primarily the payment of cash dividends of $16.2 million, $15.9 million and $15.1 million in 2023, 2022 and 2021, respectively, along with share repurchases of $2.0 million in 2021.
Net cash flows used in financing activities totaled $16.5 million and $15.0 million in 2023 and 2022, respectively. The net cash flows used in financing activities are primarily the payment of cash dividends of $16.2 million, $16.2 million and $15.9 million in 2024, 2023 and 2022, respectively.
Layer Limit Retention Placement First 5,000 5,000 100 % Second 15,000 10,000 100 % Third 25,000 25,000 100 % 35 Table of Contents Earthquake and Flood XOL Treaty We delegate underwriting authority to write a specific portfolio of flood and earthquake difference in conditions ("DIC") business. This arrangement began in 2019.
Layer Limit Retention Placement First $ 10,000 $ 20,000 100 % Second $ 30,000 $ 30,000 100 % Third $ 70,000 $ 60,000 100 % Earthquake and Flood XOL Treaty We delegate underwriting authority to write a portfolio of Pacific Coast earthquake business. This arrangement began in 2019.
Layer Limit Retention Placement First $ 10,000 $ 20,000 100 % Second $ 30,000 $ 30,000 100 % Third $ 70,000 $ 60,000 100 % Property & Casualty Core XOL Treaty Our property and casualty working program, which we refer to as the core treaty, includes a multi-line layer which applies in excess of our retention and annual aggregate deductible, as well as property-only and casualty-only towers above the multi-line exhaustion point.
A summary of our key reinsurance programs are as follows: Property & Casualty Core Excess of Loss ("XOL") Treaty Our property and casualty working program, which we refer to as the core treaty, includes a multi-line layer which applies in excess of our retention and annual aggregate deductible, as well as property-only and casualty-only towers above the multi-line exhaustion point.
Results of the projection methods are compared, and a point estimate of ultimate loss (or LAE) is established for each individual accident year and line of business. The specific projection methods used to establish point estimates vary depending on what is deemed most appropriate for a particular line of business and accident year.
The specific projection methods used to establish point estimates vary depending on what is deemed most appropriate for a particular line of business and accident year. IBNR estimates are derived by subtracting reported loss from the final point estimates.
Unearned premium reserves are established for the portion of premiums written applicable to the unexpired terms of the insurance policies in force.
Revenues Premiums Net earned premiums are calculated on a pro-rata basis over the terms of the respective policies. Unearned premium reserves are established for the portion of written premiums applicable to the unexpired terms of the insurance policies in force.
An excess of loss treaty, effective January 1, 2024, is in place to specifically and exclusively reinsure business written through this arrangement. This program consists of $160 million for losses in excess of $10 million and is fully placed.
An excess of loss treaty, effective January 1, 2025, is in place to specifically and exclusively reinsure business written through this arrangement. This program consists of $130 million for losses in excess of $10 million and is fully placed. Each layer can be reinstated once to its full amount at the same premium.
Because the timing of future payments may vary from the stated contractual obligation, these amounts are estimates based upon historical payment patterns and may not represent actual future payments. Refer to "Critical Accounting Policies — Losses and Loss Settlement Expenses" in this section for further discussion.
Because the timing of future payments may vary from the stated contractual obligation, these amounts are estimates based upon historical payment patterns and may not represent actual future payments.
For further information regarding the agreement with FHLB Des Moines, see Note 13 "Debt" contained in Part II, Item 8. 56 Table of Contents Stockholders' Equity Stockholders' equity decreased 0.9 percent to $733.7 million at December 31, 2023, from $740.1 million at December 31, 2022.
For further information regarding the agreement with FHLB Des Moines, refer to Note 13 "Debt" in Part II, Item 8. Stockholders' Equity Stockholders' equity increased 6.5 percent to $781.5 million at December 31, 2024, from $733.7 million at December 31, 2023.
Dividends payable by our insurance subsidiaries are governed by the laws in the states in which they are domiciled. In all cases, these state laws permit the payment of dividends only from earned surplus arising from business operations.
In all cases, these state laws permit the payment of dividends only from earned surplus arising from business operations.
Construction defect exposure is unique because of its very long tail as claims can often take over six years to be reported to us and another four years to settle.
Included in the other liability line of business are gross reserves for construction defect losses and loss settlement expenses. Construction defect exposure is unique because of its very long tail as claims can often take over six years to be reported to us and another four years to settle, on average.
Our lines of business that have historically been most susceptible to significant volatility in reserve development have been shown separately and utilize hypothetical levels of volatility of 5.0 percent and 10.0 percent. Our other, less volatile, lines of business have been aggregated and utilize hypothetical levels of volatility of 3.0 percent and 5.0 percent.
Our other, less volatile, lines of business have been aggregated and utilize hypothetical levels of volatility of 3.0 percent and 5.0 percent.
Accordingly, long-tail insurance products can have significant implications on the reserving process. 59 Table of Contents Our short-tail lines of business include fire and allied lines, commercial property, automobile physical damage and inland marine.
The longer the time span between the incidence of a loss and the settlement of the claim, the more the final settlement can vary from the reserves initially established. Accordingly, long-tail insurance products can have significant implications on the reserving process. Our short-tail lines of business include fire and allied lines, commercial property, automobile physical damage and inland marine.
For calendar year 2024, the aggregate losses exceeding a threshold of $200.0 million industry-wide would be covered under this protection. Our TRIPRA deductible was $124.8 million for 2023 and our TRIPRA deductible is expected to be $132.6 million for 2024.
For calendar year 2024, the aggregate losses exceeding a threshold of $200.0 million industry-wide would be covered under this protection. Our TRIPRA deductible was $132.6 million for 2024 and our TRIPRA deductible is expected to be $137.2 million for 2025. Our catastrophe and non-catastrophe reinsurance programs provide limited coverage for terrorism exposure excluding nuclear, biological and chemical-related claims.
We will only pay dividends if declared by our Board of Directors out of legally available funds. As a holding company with no independent operations of its own, United Fire Group, Inc. relies on dividends received from its insurance company subsidiaries in order to pay dividends to its common shareholders.
As a holding company with no independent operations of its own, United Fire Group, Inc. relies on dividends received from its insurance company subsidiaries in order to pay dividends to its common shareholders. Dividends payable by our insurance subsidiaries are governed by the laws in the states in which they are domiciled.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information required by this Item 7A is incorporated by reference from Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the headings "Investments" and "Market Risk." 66 Table of Contents
Biggest changeRefer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the headings "Investments" and "Part II, Item 8, Note 2 "Investments" for more information on our investments. 57 Table of Contents
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk Our Consolidated Balance Sheets include financial instruments whose fair values are subject to market risk. The active management of market risk is integral to our operations.
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Market risk is the potential for loss due to a decrease in the fair value of securities resulting from uncontrollable fluctuations, such as: interest rate risk, equity price risk, foreign exchange risk, credit risk, inflation, or geopolitical conditions.
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Our primary market risk exposures are: changes in interest rates, deterioration of credit quality of specific issuers, sectors or the economy as a whole, and an unforeseen decrease in the liquidity of securities we hold.
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The carrying value of the Company's investment portfolio at December 31, 2024 and 2023 was $2.1 billion and $1.9 billion, respectively, of which 89% and 89.4%, respectively, was invested in fixed maturity securities.
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The exposure to equity price risk was minimized during 2023 and eliminated in 2024 with repositioning of equity securities into fixed maturity securities. 55 Table of Contents Primary market risks to the portfolio as outlined above with the majority in fixed maturity securities include interest rate risk, credit risk, and foreign currency exchange rate risk.
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Duration of the portfolio is a key calculation that is managed relative to the payout pattern of our reserve liabilities. Interest Rate Risk Interest rate risk is the price sensitivity of a fixed maturity security or portfolio of securities to changes in level of interest rates.
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Generally, there is an inverse relationship between changes in interest rates and changes in the price of a fixed maturity security. Plainly stated, if interest rates go up (down), bond prices go down (up). A vast majority of our holdings are fixed maturity and other interest rate sensitive securities that will decrease (increase) in value as interest rates increase (decrease).
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Available-for-sale fixed maturity securities are carried at fair value on the Consolidated Balance Sheets with unrealized gains or losses reported, net of tax, in accumulated other comprehensive income. A change in the prevailing interest rates generally translates into a change in the fair value of our fixed maturity securities, and by extension, our overall book value.
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The amounts set forth in the following table detail the impact of hypothetical interest rate changes on the fair value of fixed maturity securities held at December 31, 2024. The sensitivity analysis measures the change in fair values arising from immediate changes in selected interest rate scenarios.
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We employed hypothetical parallel shifts in the yield curve of plus or minus 100 and 200 basis points in the simulations. Additionally, based upon the yield curve shifts, we employ estimates of prepayment speeds for mortgage-related products and the likelihood of call or put options being exercised within the simulations.
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The selection of a 100-basis-point and 200-basis-point increase or decrease in interest rates should not be construed as a prediction by our management of future market events, but rather as an illustration of the potential impact of an event.
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December 31, 2024 -200 Basis -100 Basis +100 Basis + 200 Basis (In Thousands) Points Points Base Points Points AVAILABLE-FOR-SALE Fixed maturities: Bonds U.S.
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Treasury and government agencies $ 126,090 $ 122,197 $ 117,301 $ 111,723 $ 105,976 States, municipalities and political subdivisions 259,526 254,623 247,904 236,404 222,945 Corporate 760,430 723,600 689,382 657,624 628,193 Asset Backed: Residential mortgage-backed 653,172 618,207 583,411 548,715 514,993 Commercial mortgage-backed 117,005 109,895 103,554 97,871 92,755 Other asset-backed 144,355 135,053 126,779 119,380 112,734 Total asset-backed 914,532 863,155 813,744 765,966 720,482 Total Available-For-Sale Fixed Maturities $ 2,060,578 $ 1,963,575 $ 1,868,331 $ 1,771,717 $ 1,677,596 To the extent actual results differ from the assumptions utilized, our duration and interest rate measures could be significantly affected.
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As a result, these calculations may not fully capture the impact of nonparallel changes in the relationship between short-term and long-term interest rates. Credit Risk Credit risk is the willingness and ability of a borrower to repay on time and in full any principal and interest due to the lender.
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Losses related to credit risk are realized through the income statement and have a direct impact on earnings. We believe that we maintain the appropriate balance of risk in our portfolio, consistent with our Investment Policy Statement and ensure the portfolio is compensated appropriately for the credit risk it holds.
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We do have within our municipal bond holdings a small number of securities whose ratings were enhanced by third-party insurance for the payment of principal and interest in the event of an issuer default.
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Of the municipal securities in our investment portfolio, 93.1 percent and 98.2 percent were rated "A" or above, and 100.0 percent and 95.0 percent 56 Table of Contents were rated "AA" or above at December 31, 2024 and 2023, respectively, without the benefit of insurance.
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Due to the underlying financial strength of the issuers of the securities, we believe that the loss of insurance would not have a material impact on our operations, financial position, or liquidity. We have no direct exposure in any of the guarantors of our investments.
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Our five largest indirect exposures to financial guarantors accounted for $10.8 million and $28.6 million of our municipal securities at December 31, 2024 and 2023, respectively. Foreign Currency Exchange Rate Risk Foreign currency exchange rate risk arises from the possibility that changes in foreign exchange rates will impact our financial results.
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Foreign currency exchange rate risk can occur as a result of investment holdings in foreign currency, settlement of amounts due to or from foreign reinsurers or our participation in Lloyd's. We consider this risk to be immaterial to our operations.

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