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What changed in UNITED FIRE GROUP INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of UNITED FIRE GROUP INC's 2024 and 2025 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 2025 report.

+316 added−329 removedSource: 10-K (2026-02-26) vs 10-K (2025-02-26)

Top changes in UNITED FIRE GROUP INC's 2025 10-K

316 paragraphs added · 329 removed · 277 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

32 edited+4 added−8 removed61 unchanged
Biggest changeUnder 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.
Biggest changeThe 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.
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.
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 ability 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. 5 Table of Contents • 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.
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.
In addition, because our primary commercial products are marketed exclusively through independent insurance agencies, all 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 independent agents, exclusive agents, as well as companies that sell insurance directly to their customers.
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.
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 written premium, which is generally highest in January and July and lowest during the fourth quarter.
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.
At December 31, 2025, all of our insurance companies had capital in excess of the required minimum 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.
Our core commercial products support a wide variety of customers, including small business owners and middle market businesses operating in industries such as construction, services, retail trade, financial and manufacturing, along with contract surety and commercial surety bonds offered through approximately 1,000 independent property and casualty agencies.
Our core commercial products support a wide variety of customers, including small business owners and middle market businesses operating in industries such as construction, services, retail trade, financial and manufacturing, through approximately 850 independent property and casualty agencies, along with contract surety and commercial surety bonds offered through approximately 160 surety agencies.
It 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.
It 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 2025 2024 2023 Employee data Workforce data Headcount 846 877 852 Average tenure in years 7.6 7.8 9.0 Percent of self-identified women in workforce 54.6% 54.7% 55.0% Percent of self-identified racial/ethnic minorities in workforce 17.7% 15.9% 14.1% Voluntary turnover rate* 14.3% 13.3% 26.8% 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 962 863 1,676 * The 2023 voluntary turnover rate includes employees who accepted the Company's early retirement plan offering.
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.
Although we experience seasonality, premium is 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.
Hernandez became our Senior Vice President and Chief Human Resources Officer in May 2024. Prior to joining UFG, he served as Senior Vice President at CNA Insurance from 2016-2024 and held various leadership roles at Chubb Group of Insurance Companies. Corey L.
Hernandez became our Senior Vice President and Chief Human Resources Officer in May 2024. Prior to joining UFG, he served as Senior Vice President at CNA Insurance from 2016-2024 and held various leadership roles at Chubb Group of Insurance Companies. Brian K. Rawlins became our Senior Vice President and Chief Claim Officer in November 2025.
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.
Restrictions on Shareholder Dividends As an insurance holding company with no significant 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.
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.
"Risk Factors" for additional information on financial strength and issuer credit ratings. 9 Table of Contents 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.
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.
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.
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.
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. Stephenson joined UFG as our Executive Vice President and Chief Operating Officer in January 2023. Ms.
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).
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 also established the Federal Insurance Office within the U.S.
A few of our 2024 sustainability-related achievements include: • Reduction in Fleet Vehicles From 2022 through the end of 2024 we minimized the size of our fleet by 28% and reduced miles driven by 38%.
A few of our 2025 sustainability-related achievements include: • Reduction in Fleet Vehicles From 2023 through the end of 2025 we minimized the size of our fleet by 68% and reduced miles driven by over 50%.
Best, 9 Table of Contents companies rated "A-" have "an excellent ability to meet their ongoing obligations to policyholders." The outlook of these credit ratings is stable and there was no change in the outlook in December 2024. Refer to Part I, Item 1A. "Risk Factors" for additional information on financial strength and issuer credit ratings.
Best, companies rated "A-" have "an excellent ability to meet their ongoing obligations to policyholders." The outlook of these credit ratings is stable and there was no change in the outlook in December 2025. Refer to Part I, Item 1A.
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.
Deepening our sensitivity and understanding towards others, 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. Inclusive conduct applies to all in-office, hybrid and remote employees.
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.
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. Eric J.
Dodd-Frank also established the Federal Insurance Office within the U.S. Department of the Treasury that is authorized to, among other things, gather data and information to monitor aspects of the insurance industry, identify issues in the regulation of insurers about insurance matters, and preempt state insurance measures under certain circumstances.
Department of the Treasury that is authorized to, among other things, gather data and information to monitor aspects of the insurance industry, identify issues in the regulation of insurers about insurance matters, and preempt state insurance measures under certain circumstances. Dodd-Frank and the Sarbanes-Oxley Act also contain several provisions related to corporate governance and disclosure matters.
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.
To view it, under the "Investors" tab, select "Governance," 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.
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.
Each jurisdiction in which we operate has established supervisory agencies with broad administrative powers. We are not aware of any currently proposed or recently enacted state or federal regulation that would have a material impact on our operations; however, changes to such regulations and the potential impact of such regulations is difficult to predict.
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.
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. Always operating with integrity. d. Continuously listening to our people, agents, partners, vendors, and community to effectuate our goals. e.
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.
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.
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.
To access these filings, go to the Company's website and under the "Investors" heading, click on "Financials" then "SEC Filings." 11 Table of Contents Our Code of Ethics and Business Conduct is also available at www.ufginsurance.com in the Investor Relations section.
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.
Personal Lines Business Our personal fire and allied lines includes proportional assumed reinsurance for homeowners multi-peril coverage. In 2020, the Company announced its intent to withdraw as a direct writer of personal lines insurance. As of December 31, 2025, no exposure to direct personal lines of business remains. 4 Table of Contents Operating Segments We operate as one operating segment.
Sustainability reporting and GHG emission data are disclosed to our employees, shareholders, and insureds on our public facing website at www.ufginsurance.com. COMPANY WEBSITE AND AVAILABILITY OF INFORMATION The Company's website is www.ufginsurance.com. Information on the Company's website is not incorporated by reference herein and is not a part of this Form 10-K.
COMPANY WEBSITE AND AVAILABILITY OF INFORMATION The Company's website is www.ufginsurance.com. Information on the Company's website is not incorporated by reference herein and is not a part of this Form 10-K.
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.
Rawlins 46 Senior Vice President and Chief Claim 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.
These initiatives and legislation include tort reform proposals, proposals addressing natural catastrophe exposures, terrorism risk mechanisms, federal financial services reforms, various tax proposals affecting insurance companies, and possible regulatory limitations, impositions and restrictions arising from the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), and the Patient Protection and Affordable Care Act.
These initiatives and legislation include tort reform proposals, proposals addressing natural catastrophe exposures, terrorism risk mechanisms, federal financial services reforms, various tax proposals affecting insurance companies, and possible regulatory limitations, impositions and restrictions arising from other legislative action. Various legislative and regulatory efforts to reform the tort liability system have impacted and will continue to impact our industry.
Financial Strength Rating Issuer Credit Rating Rating Held Since United Fire & Casualty Group A- a- 2023 United Fire Group, Inc. N/A bbb- 2023 On August 18, 2023, UFG and our property and casualty subsidiaries received a rating downgrade from A.M. Best.
Financial Strength Rating Issuer Credit Rating Rating Held Since United Fire & Casualty Group A- a- 2023 United Fire Group, Inc. N/A bbb- 2023 According to A.M.
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.
This reduction significantly decreased our carbon footprint and reduced greenhouse gas emissions. • GHG Emission Targets and Sustainability Reporting We recently implemented a sustainability platform that will allow us to measure, manage, and report sustainability metrics. Sustainability reporting and GHG emission data are disclosed to our employees, shareholders, and insureds on our public facing website at www.ufginsurance.com.
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.
Martin 55 Executive Vice President, Chief Financial Officer and Principal Financial Officer Sarah E. Madsen 47 Senior Vice President, Chief Legal Officer and Corporate Secretary Steven D. Hernandez 59 Senior Vice President and Chief Human Resources Officer Brian K.
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.
Our revenues are primarily derived from premiums earned for property and casualty insurance products issued to customers.
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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.
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The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd Frank") expanded the federal presence in insurance oversight and increased regulatory requirements that are applicable to us.
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Each jurisdiction in which we operate has established supervisory agencies with broad administrative powers.
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Such reports are made available as soon as reasonably practicable after they are filed with or furnished to the SEC.
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Various legislative and regulatory efforts to reform the tort liability system have impacted and will continue to impact our industry.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table sets forth information concerning the following executive officers as of February 26, 2026: Name Age Position Kevin J. Leidwinger 62 President and Chief Executive Officer, Principal Executive Officer Julie A. Stephenson 58 Executive Vice President and Chief Operating Officer Eric J.
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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.
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Prior to joining UFG, he held ascending leadership roles at CNA Insurance beginning in 2016, most recently serving as Vice President, Commercial Claim (General Liability and Auto) from 2021-2025. Prior to joining CNA Insurance, he held various other roles at Travelers and Nationwide Insurance. 12 Table of Contents
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Inclusive conduct applies to all in-office, hybrid, remote and field employees.
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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.
Removed
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.
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Ruehle has the Associate in Commercial Underwriting (AU) and Certified Insurance Counselor (CIC) professional designations. 13 Table of Contents

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

55 edited+7 added−10 removed55 unchanged
Biggest changeOur distribution model is subject to the risks of possible loss of independent agencies for various reasons and the discretion agencies have to reduce their business with us. Other potential consequences of not maintaining strong and beneficial relationships include the loss of sufficient business opportunities within our specific risk appetite, impacting the quality of our underwriting and loss ratio.
Biggest changeOther potential consequences of not maintaining strong and beneficial relationships include the loss of sufficient business opportunities within our specific risk appetite, impacting the quality of our underwriting and loss ratio. 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.
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.
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.
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.
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.
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.
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." Strategic The success of our strategy may be adversely impacted by various internal and external factors.
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).
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).
Risk such as inadequate loss and loss adjustment reserves, a large natural catastrophe, or unfavorable trends in litigation could potentially result in the need to sell investments to fund these liabilities. This could result in significant realized losses depending on the conditions of the general market, interest rates and credit profile of individual securities.
Risks such as inadequate loss and loss adjustment reserves, a large natural catastrophe, or unfavorable trends in litigation could potentially result in the need to sell investments to fund these liabilities. This could result in significant realized losses depending on the conditions of the general market, interest rates and credit profile of individual securities.
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.
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, including us, in purported class action litigation regarding claims handling and other practices.
Financial We are subject to certain risks related to our investment portfolio that could negatively affect our profitability. Our investments are professionally managed by New England Asset Management ("NEAM") as of February 1, 2024. NEAM's investment decisions are governed by our management team and in accordance with our investment guidelines approved by our Board of Directors.
Financial We are subject to certain risks related to our investment portfolio that could negatively affect our profitability. Our fixed maturity investments are professionally managed by New England Asset Management ("NEAM") as of February 1, 2024. NEAM’s investment decisions are governed by our management team and in accordance with our investment guidelines approved by our Board of Directors.
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.
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 prices.
Our investment performance is sensitive to various factors including general economic conditions, changes in financial markets, global disruptions, and other factors beyond our control. Although our guidelines stress diversification in investment grade fixed maturity securities, our financial results may be adversely impacted by investment creditworthiness, fluctuations in interest rates, and disruptions in the financial and capital markets.
Our investment performance is sensitive to various factors including general economic conditions, changes in financial markets, global disruptions, and other factors beyond our control. Although our guidelines stress diversification in investment grade fixed income securities, our financial results may be adversely impacted by investment creditworthiness, fluctuations in interest rates, and disruptions in the financial and capital markets.
They are not an exact calculation of liability but instead are complex estimates, which are a product of actuarial expertise and projection techniques based on assumptions and expectations about future events, many of which are highly uncertain. The process of estimating claims and claims adjustment expense reserves involves a high degree of judgment.
They are not an exact calculation of liability but instead are complex estimates, which are a product of actuarial expertise and projection techniques based on assumptions and expectations about future events, many of which are highly uncertain. The process of estimating claim and claim adjustment expense reserves involves a high degree of judgment.
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.
In addition, the payment of dividends 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.
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.
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 or data analytics.
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.
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.
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.
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 17 Table of Contents based on criteria established by the agencies.
Ordinary dividend payments, or dividends that do not require prior approval by the insurance subsidiaries' domiciliary state insurance regulator are generally limited to amounts determined by a formula which varies by jurisdiction. Extraordinary dividends, on the other hand, require prior regulatory approval by the insurance subsidiaries' domiciliary state insurance regulator before they can be made.
Ordinary dividend payments, or dividends that do not require prior approval by the insurance subsidiaries' domiciliary state insurance regulator are generally limited to amounts determined by a formula which varies by jurisdiction. Extraordinary dividends, on the 20 Table of Contents other hand, require prior regulatory approval by the insurance subsidiaries' domiciliary state insurance regulator before they can be made.
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.
For a detailed discussion of 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.
Examples of regulations that pose a risk to our ability to earn profits include but are not limited to: (1) Required licensing (2) Regulation of insurance rates, fees and approval of policy forms 20 Table of Contents (3) Restrictions on cancellation, nonrenewal or withdrawal (4) Risk-based capital and capital adequacy requirements (5) Transactions between insurance companies and their affiliates (6) Required participation in guaranty funds and assigned risk pools (7) Restrictions on the amount, type, nature, and quality of investments (8) Terrorism risk insurance (9) Accounting standards (10) Corporate governance and public disclosure regulation (11) Information privacy regulation (12) Potential assessments for the provision of funds necessary for settlement of covered claims under certain policies provided by impaired, insolvent or failed insurance companies Compliance with these laws and regulations requires us to incur administrative costs that decrease our profits.
Examples of regulations that pose a risk to our ability to earn profits include but are not limited to: • Required licensing • Regulation of insurance rates, fees and approval of policy forms • Restrictions on cancellation, nonrenewal or withdrawal • Risk-based capital and capital adequacy requirements • Transactions between insurance companies and their affiliates • Required participation in guaranty funds and assigned risk pools • Restrictions on the amount, type, nature, and quality of investments • Terrorism risk insurance • Accounting standards • Corporate governance and public disclosure regulation 19 Table of Contents • Information privacy regulation • Potential assessments for the provision of funds necessary for settlement of covered claims under certain policies provided by impaired, insolvent or failed insurance companies Compliance with these laws and regulations requires us to incur administrative costs that decrease our profits.
(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.
(3) Changes in medical care expenses and restoration costs. (4) Our selection and application of appropriate pricing techniques. 14 Table of Contents (5) Changes in the regulatory market, applicable legal liability standards and in the civil litigation system generally.
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.
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could have a material effect on our business, results of operations, financial condition and/or liquidity.
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.
We are in compliance with these regulations; however, ongoing 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, which may have an adverse effect on our financial condition and results of operations.
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.
These fluctuations may be due to our operating results or factors specific to our operations (including those discussed elsewhere 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.
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.
If we cannot use technology and data analytics as effectively as our 13 Table of Contents 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 write and retain and negatively affect our ability to meet our business objectives.
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.
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.
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.
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. (2) Market and competitive conditions.
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.
These ratings are subject to change at any time and could be revised downward or revoked at the sole discretion of the rating agency. The ratings assigned by A.M. Best are an important factor in marketing our products. Our ratings from A.M. Best affect our ability to retain our existing business, and to attract new business in our insurance operations.
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.
Insurance is a highly regulated industry. 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.
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.
We have set a strategy to grow our business through six distinct business units. We expect to execute our strategy, but our success could be impacted by several different risks including but not limited to regulatory changes, economic conditions, advancements in technology, cybersecurity threats, operational risks, intense market competition, and talent risks.
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.
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.
Catastrophes may also negatively affect our ability to write new business. In addition, it generally requires more time to determine our ultimate losses associated with a particular catastrophic event.
Catastrophes may also negatively affect our ability to write new business. 16 Table of Contents In addition, as with catastrophe losses generally, it can require time for us to determine our ultimate losses associated with a particular catastrophic event.
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.
We rely on those dividends for our liquidity, including payment of dividends to common shareholders and interest on long-term debt, and to make share repurchases. Dividends from those subsidiaries depend on their statutory surplus, earnings and regulatory restrictions.
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.
A strain in 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. We face competition within each agency and competition to retain qualified independent agents.
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.
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 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.
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.
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.
We continually monitor these risks and mitigate their potential likelihood and impact. 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.
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.
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.
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.
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.
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.
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.
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.
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. Fluctuations in demand and competition could produce underwriting results that would have a negative impact on the results of our operations and financial condition.
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.
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.
Best further downgrades our ratings or publicly indicates that our ratings are under review, it is possible that we will not be able to compete as effectively, leading to a decrease in premium revenue and earnings. For example, many of our agencies and policyholders have guidelines that require us to have an A.M.
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. Best downgrades our ratings or publicly indicates that our ratings are under review, it is possible that we will not be able to compete as effectively, leading to a decrease in premium revenue and earnings.
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.
For example, many of our agencies and policyholders have guidelines that require us to have an A.M. 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.
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.
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.
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.
Unauthorized data access, cyber attacks and other security breaches could have an adverse impact on our business and reputation. 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.
Climate change presents risks in four categories to the Company: (1) Physical Risk: The cost of natural perils may change.
Climate change presents risks in four categories to UFG: (1) Physical Risk: The cost of natural perils may change. This is a concern for our property insurance underwriting strategy and, to a lesser extent, our real estate costs.
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.
(2) 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. (3) Transition Risk: Financial risks arising from a global transition to a lower-carbon economy could impact long-term return on certain invested assets.
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.
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. 15 Table of Contents 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.
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.
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.
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.
Our competitors may also develop new products and capabilities that render our offerings less appealing. These situations may hinder our ability to retain existing business and/or procure new business. We use various actuarial techniques and data analytics to understand our risk exposures such as frequency and severity of different types of insurance claims.
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.
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. We may be unable to secure reinsurance capacity that provides necessary risk protection at a reasonable cost.
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.
The ability of our subsidiaries to pay dividends may affect our liquidity and ability to meet our obligations. As an insurance 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 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.
Our competitors include companies that market their products via independent agents, exclusive agents and companies that sell insurance directly to their customers. Our distribution model is subject to the risks of possible loss of independent agencies for various reasons and the discretion agencies have to reduce their business with us.
Efforts to disrupt the structure, management or ownership of the Company could diminish the value of our common stock.
Efforts to disrupt the structure, management or ownership of the Company could diminish the value of our common stock. Certain provisions of our articles of incorporation and bylaws and applicable provisions of laws governing corporations and insurance companies may delay, deter or prevent a change of control of the Company, in particular through unsolicited transactions.
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.
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. Although underwriting and pricing decisions are informed by these analytics, assumptions are required based on experienced judgment that may be incorrect or fail to contemplate external, unforeseeable factors.
(3) Transition Risk: Financial risks arising from a global transition to a lower-carbon economy could impact long-term return on certain invested assets. (4) Liability Risk: New areas of law enabling litigation alleging damage from climate change may present legal risk to UFG. Unauthorized data access, cyber-attacks and other security breaches could have an adverse impact on our business and reputation.
(4) Liability Risk: New areas of law enabling litigation alleging damage from climate change may present legal risk to UFG. Underwriting Our success depends primarily on our ability to underwrite risks effectively and adequately price the risks we insure.
Removed
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.
Added
Our efforts to successfully mitigate risks to our strategy are not guaranteed, which could have a material impact on our financial condition and the results of our operations. Our core insurance business is dependent on strong and beneficial relationships with a large network of independent insurance agents.
Removed
Our revenues and profitability are subject to the prevailing regulatory, legal, economic, political, competitive, weather, and other conditions in the principal states in which we do business.
Added
This may result in decisions that could result in an adverse impact on our business and financial results. Emerging technology, including artificial intelligence, offers opportunities to underwrite and price business more efficiently and accurately, thus lowering costs.
Removed
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.
Added
The timing of 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 claim adjustment expense reserves for the reporting period.
Removed
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.
Added
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 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.
Removed
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.
Added
Our business and operations rely on secure and efficient processing, storage and transmission of customer and Company data, including personally 18 Table of Contents identifiable information.
Removed
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.
Added
The New York Department of Financial Services has a cyber protection and reporting regulation for financial services companies. The NAIC has the Data Security Model Law based upon the New York regulation.
Removed
We retain multiple reinsurance intermediaries to plan, create, and facilitate our ceded reinsurance placements. These intermediaries work closely with our risk, corporate underwriting, and finance departments to design reinsurance transactions that align with corporate strategy and risk appetite.
Added
Recent amendments to our bylaws included certain governance and structural defense enhancements to protect the Company and our shareholders in the event of an activist or takeover situation. However, any such effort to disrupt the Company, regardless of its success, may still adversely affect market prices for our common stock.
Removed
These fluctuations may be due to our operating results or factors specific to our operations (including those discussed within this Item 1A.
Removed
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.
Removed
In 2024, we amended and restated our bylaws to, among other things, enhance existing procedural mechanics and require additional disclosures in connection with shareholder nominations of directors and submissions of shareholder proposals to be included in the Company's proxy statement. 21 Table of Contents Our articles of incorporation and bylaws, and state laws governing corporations and insurance companies, may discourage potential acquisition proposals, as well as delay, deter or prevent a change of control of the Company, in particular through unsolicited transactions.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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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.
Biggest changeThe 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. The ERM Committee meets independently of the Risk Management Committee. Certain members of the ERM Committee are invited to attend and participate in meetings of the Risk Management Committee.
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).
The CAO regularly reviews the lines of accountability and responsibility to ensure alignment with the ERM Committee. 21 Table of Contents 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).
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.
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. We did not experience any material cyber incidents since the beginning of our last fiscal year.
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.
In addition, we maintain internal "risk evaluation teams" dedicated to assessing and managing the entity-level risks facing the Company. 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.
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.
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. The 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.
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.
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. Refer to "Item 1A. Risk Factors" in this Annual Report on Form 10-K, for additional discussion about cybersecurity-related risks.
Removed
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.
Removed
Refer to "Item 1A. Risk Factors" in this Annual Report on Form 10-K, for additional discussion about cybersecurity-related risks.

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, 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.
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, 2025 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. 22 Table of Contents ITEM 4.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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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.
Biggest changeItem 4. Mine Safety Disclosures 23 PART II: Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 23 Item 6. [Reserved] 24 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 56 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod 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.
Biggest changePeriod Ended Index 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 United Fire Group, Inc. $ 100 $ 94 $ 114 $ 86 $ 121 $ 155 S&P 500 Index 100 129 105 133 166 196 S&P 600 P&C Index 100 117 107 113 151 169 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.
For 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.
Dividends For 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 UFG common stock on the open market or through privately negotiated transactions.
The performance shown in the graph represents past performance and should not be considered an indication of future performance. The following table shows the data used in the total return performance graph above.
The performance shown in the graph represents past performance and should not be considered an indication of future performance. 23 Table of Contents The following table shows the data used in the total return performance graph above.
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").
Common Stock Performance Graph The following graph compares the performance of an investment in the Company's common stock from December 31 , 2020 th rough December 31, 2025, 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").
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.
The graph assumes $100 was invested on December 31, 2020 in our common stock and in each of the below listed indices and that all dividends were reinvested on the date of payment without payment of any commissions. Dollar amounts in the graph are rounded to the nearest whole dollar.
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.
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.
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.
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 17, 2026, there were 566 holders of record of the Company's common stock.
The number of record holders does not reflect shareholders who beneficially own common stock in nominee or street name but does include participants in our employee stock purchase plan. Dividends Our practice has been to pay quarterly cash dividends, which we have paid every quarter since March 1968.
The number of record holders does not reflect shareholders who beneficially own common stock in nominee or street name but does include participants in our employee stock purchase plan.
Removed
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.
Added
The Board of Directors reauthorized the share repurchase program in August 2024 and extended the program through August 2026. The Company did not repurchase any shares of our common stock during the year ended December 31, 2025. As of December 31, 2025, we remain authorized to purchase up to one million shares of our 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 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.
Biggest changeFinancial Highlights Years Ended December 31, (In Thousands) 2025 2024 2023 Revenues Net earned premium $ 1,292,696 $ 1,176,750 $ 1,034,587 Net investment income 97,538 81,986 59,606 Net investment gains (losses) (3,822) (5,429) 1,274 Total revenues $ 1,386,412 $ 1,253,307 $ 1,095,467 Benefits, losses and expenses Losses and loss settlement expenses $ 764,402 $ 744,605 $ 769,414 Amortization of deferred policy acquisition costs 315,323 281,338 244,991 Other underwriting expenses 146,609 140,942 115,800 Interest expense 11,267 7,281 3,260 Other non-underwriting expenses 875 2,107 1,723 Total benefits, losses and expenses $ 1,238,476 $ 1,176,273 $ 1,135,188 Income (loss) before income taxes $ 147,936 $ 77,034 (39,721) Income tax expense (benefit) 29,745 15,077 (10,021) Net income (loss) $ 118,191 $ 61,957 $ (29,700) Combined ratio: Net loss ratio 59.1 % 63.3 % 74.4 % Underwriting expense ratio 35.7 % 35.9 % 34.9 % Combined ratio 94.8 % 99.2 % 109.3 % Additional ratios (1) : Net loss ratio 59.1 % 63.3 % 74.4 % Catastrophes 3.2 % 5.4 % 6.2 % Reserve development (favorable) unfavorable (0.4) % — % 6.0 % Underlying loss ratio (non-GAAP) 56.3 % 57.9 % 62.2 % Underwriting expense ratio 35.7 % 35.9 % 34.9 % Underlying combined ratio (non-GAAP) 92.0 % 93.8 % 97.1 % NM = not meaningful (1) Underlying loss ratio and underlying combined ratio are non-GAAP financial measures.
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.
Best S&P Rating Swiss Reinsurance American Corporation (1) A+ AA- Hannover Ruck SE (1)(2) A+ AA- 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 (2) A A+ Axis Reinsurance Company (2) A A+ (1) Primary reinsurers participating in the property and casualty excess of loss programs.
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.
We use catastrophe modeling and a risk concentration management tool to monitor and control our 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.
In addition to ISO catastrophes, we also include as catastrophes those events ("non-ISO catastrophes"), which may include U.S. or international losses, that we believe are, or will be, material to our operations, either in amount or in number of claims made. Catastrophes are not predictable and are unique in terms of timing and financial impact.
In addition to ISO catastrophes, we also include as catastrophes those events which may include U.S. or international losses, that we believe are, or will be, material to our operations, either in amount or in number of claims made. Catastrophes are not predictable and are unique in terms of timing and financial impact.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operation should be read in conjunction with Part II, Item 8, "Financial Statements and Supplementary Data." Amounts (except per share amounts) are presented in thousands, unless otherwise noted.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with Part II, Item 8, "Financial Statements and Supplementary Data." Amounts (except per share amounts) are presented in thousands, unless otherwise noted.
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.
Revenues Premiums Net earned premium is calculated on a pro-rata basis over the terms of the respective policies. Unearned premium reserves are established for the portion of written premium applicable to the unexpired terms of the insurance policies in force.
Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission ("SEC"), we do not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. 27 Table of Contents BUSINESS OVERVIEW Reportable Segments We operate as one operating segment.
Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission ("SEC"), we do not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. 26 Table of Contents BUSINESS OVERVIEW Reportable Segments We operate as one operating segment.
(2) Primary reinsurers participating in the surety excess of loss program. Refer to Part II, Item 8, Note 4 "Reinsurance" for further discussion of our reinsurance programs. 51 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Liquidity measures our ability to generate sufficient cash flows to meet our short-term cash obligations and long-term cash obligations.
(2) Primary reinsurers participating in the surety excess of loss program. Refer to Part II, Item 8, Note 4 "Reinsurance" for further discussion of our reinsurance programs. 52 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Liquidity measures our ability to generate sufficient cash flows to meet our short-term cash obligations and long-term cash obligations.
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."
Recently Issued Accounting Standards Information specific to accounting standards we adopted for the year ended December 31, 2025 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."
The methodologies relied upon for the remainder of the reserves were not altered but additional considerations were added to our models to aid in selecting key assumptions. In estimating our 2024 loss and loss settlement expense reserves, we did not anticipate future events or conditions that were inconsistent with past development patterns.
The methodologies relied upon for the remainder of the reserves were not altered but additional considerations were added to our models to aid in selecting key assumptions. In estimating our 2025 loss and loss settlement expense reserves, we did not anticipate future events or conditions that were inconsistent with past development patterns.
No discount is applied to the liability for assessments. Legal Proceedings The Company is a party to various claims and litigation incidental to its business, which, based on the facts and circumstances currently known, are not material to the Company's results of operations or financial position as of December 31, 2024.
No discount is applied to the liability for assessments. Legal Proceedings The Company is a party to various claims and litigation incidental to its business, which, based on the facts and circumstances currently known, are not material to the Company's results of operations or financial position as of December 31, 2025.
Net written premiums is frequently used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies. Management believes net written premiums is a meaningful measure for evaluating insurance company sales performance and geographical expansion efforts. Net written premiums for an insurance company consists of direct written premiums and assumed premiums, less ceded premiums.
Net written premium is frequently used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies. Management believes net written premium is a meaningful measure for evaluating insurance company sales performance and geographical expansion efforts. Net written premium for an insurance company consists of direct written premium and assumed premium, less ceded premium.
The following provides more detail on the type of assumed reinsurance business we target. 50 Table of Contents • 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.
The 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.
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.
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 earned statutory surplus.
This measure excludes development on catastrophe losses. 37 Table of Contents RESULTS OF OPERATIONS The following table includes the consolidated results of our operations for the years ended December 31, 2024, 2023 and 2022, with more detailed components and discussion in the sections that follow.
This measure excludes development on catastrophe losses. 37 Table of Contents RESULTS OF OPERATIONS The following table includes the consolidated results of our operations for the years ended December 31, 2025, 2024 and 2023, with more detailed components and discussion in the sections that follow.
Layer Limit Retention Placement First 5,000 5,000 100 % Second 15,000 10,000 100 % Third 25,000 25,000 100 % Terrorism Coverage Our principal terrorism reinsurance protection is the coverage provided through the Terrorism Risk Insurance Program Reauthorization Act of 2019 ("TRIPRA"), effective through December 31, 2027.
Layer Limit Retention Placement First 5,000 5,000 100 % Second 15,000 10,000 100 % Third 25,000 25,000 100 % Fourth 15,000 50,000 100 % Terrorism Coverage Our principal terrorism reinsurance protection is the coverage provided through the Terrorism Risk Insurance Program Reauthorization Act of 2019 ("TRIPRA"), effective through December 31, 2027.
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.
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, 2025 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.
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.
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, 2025, there were no advances outstanding under the FHLB Des Moines agreement.
Ceded Reinsurance Our reinsurance allows us to manage our risk, increase our underwriting capacity and protect us from large events.
Ceded Reinsurance Our reinsurance allows us to manage our risk, increase our underwriting capacity and protect us from large loss events.
The Company participates in Syndicate 1492, Syndicate 1729, Syndicate 1969, Syndicate 1971, Syndicate 4747, Syndicate 2988, Syndicate 1699, Syndicate 5623 and Syndicate 2358. The Company is required to maintain capital at Lloyd's, referred to as Funds at Lloyd's ("FAL"), to support the participation in these syndicates.
The Company participates in Syndicate 1492, Syndicate 1729, Syndicate 1969, Syndicate 1971, Syndicate 4747, Syndicate 2988, Syndicate 1699, Syndicate 5623, Syndicate 2358, Syndicate 1955 and Syndicate 1609. The Company is required to maintain capital at Lloyd's, referred to as Funds at Lloyd's ("FAL"), to support the participation in these syndicates.
Invested assets and reserve liability accounts with similar durations will have an offsetting effect of any change in interest rates. The primary purpose for matching invested assets and reserve liabilities is liquidity, and with appropriate matching, our investments will 47 Table of Contents mature when cash is needed, preventing the need to liquidate other assets prematurely.
Invested assets and reserve liability accounts with similar durations will have an offsetting effect of any change in interest rates. The primary purpose for matching invested assets and reserve liabilities is liquidity, and with appropriate matching, our investments will mature when cash is needed, preventing the need to liquidate other assets prematurely.
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.
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.
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").
Instead, on a quarterly basis, management performs a statistical analysis to estimate the required reserve for unpaid loss settlement expenses using historical data. 31 Table of Contents LAE is composed of two distinct kinds of expenses which are defense and cost containment ("DCC") and adjusting and other ("A&O").
Pension Benefit Obligation The process of estimating our pension benefit obligation and related benefit expense is inherently uncertain, and the actual cost of benefits may vary materially from the estimates recorded. These liabilities are particularly volatile due 36 Table of Contents to their long-term nature and are based on several assumptions.
Pension Benefit Obligation The process of estimating our pension benefit obligation and related benefit expense is inherently uncertain, and the actual cost of benefits may vary materially from the estimates recorded. These liabilities are particularly volatile due to their long-term nature and are based on several assumptions.
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.
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, as well as property-only and casualty-only towers above the multi-line exhaustion point.
Because of this, actual results may differ materially from those derived from our modeling assumptions. Commercial Automobile Reserves Commercial automobile claim reserves are established at exposure based on information either known and provided or obtained through the claims investigation.
Because of this, actual results may differ materially from those derived from our modeling assumptions. 34 Table of Contents Commercial Automobile Reserves Commercial automobile claim reserves are established at exposure based on information either known and provided or obtained through the claims investigation.
Refer to Note 2 "Investments" in Part II, Item 8 for more information on net investment income. Net Investment Gains (Losses) Net investment losses were $5.4 million for the year ended December 31, 2024 as compared to net investment gains of $1.3 million for the year ended December 31, 2023.
Refer to Note 2 "Investments" in Part II, Item 8 for more information on net investment income. Net Investment Gains (Losses) Net investment losses were $3.8 million for the year ended December 31, 2025 as compared to net investment losses of $5.4 million for the year ended December 31, 2024.
Based on business produced by the agencies in 2024, property and casualty agencies expect to receive profit-sharing payments of $31.3 million in 2025. Funding Commitments Pursuant to agreements with our limited liability partnership investments, we are contractually committed through 2030 to make capital contributions upon request of the partnerships.
Based on business produced by the agencies in 2025, property and casualty agencies expect to receive profit-sharing payments of $30.3 million in 2026. Funding Commitments Pursuant to agreements with our limited liability partnership investments, we are contractually committed through 2030 to make capital contributions upon request of the partnerships.
Appointed Actuary The Company terminated the engagement with Regnier Consulting Group, Inc. ("Regnier") as its appointed actuary for the year ended December 31, 2024. Beginning with the 2024 reporting period, the Company's Vice President of Actuarial Reserving will serve as the appointed actuary, approved by the Board of Directors.
Appointed Actuary The Company terminated the engagement with Regnier Consulting Group, Inc. ("Regnier") as its appointed actuary for the year ended December 31, 2024. Beginning with the 2024 reporting period, the Company's Vice President of Actuarial Reserving serves as the appointed actuary, approved by the Board of Directors.
Guaranty Fund Assessments The Company is subject to guaranty fund and other assessments by the states in which it writes business. At December 31, 2024 the accrued liability for guaranty fund assessments was $0 and the premium tax benefit asset was $1.7 million. Guaranty fund assets are typically realized over the next five to 10 years.
Guaranty Fund Assessments The Company is subject to guaranty fund and other assessments by the states in which it writes business. At December 31, 2025 the accrued liability for guaranty fund assessments was $0 and the premium tax benefit asset was $1.9 million. Guaranty fund assets are typically realized over the next five to 10 years.
The following table details the pre-tax impact on our property and casualty insurance business' financial results and financial condition of reasonably likely reserve development. 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.
The following table details the pre-tax impact on our financial results and financial condition of reasonably likely reserve development. 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.
We then establish a target duration for our investment portfolio so that at any given time the estimated cash generated by the investment portfolio will closely match the estimated cash required for the payment of the related reserves.
We then establish a target duration for our investment portfolio so that at any 47 Table of Contents given time the estimated cash generated by the investment portfolio will closely match the estimated cash required for the payment of the related reserves.
For further discussion of our long term debt, refer to Part II, Item 8, Note 13 "Debt." Operating Leases Our operating lease obligations are for the rental of office space, vehicles, computer equipment and office equipment.
For further discussion of our long term debt, refer to Part II, Item 8, Note 13 "Debt." 54 Table of Contents Operating Leases Our operating lease obligations are for the rental of office space, vehicles, computer equipment and office equipment.
Asbestos and Environmental Reserves Included in the other liability and assumed reinsurance lines of business are reserves for asbestos and other environmental losses and loss settlement expenses.
Asbestos and Environmental Reserves Included in the commercial other liability and assumed reinsurance lines of business are reserves for asbestos and other environmental loss and loss settlement expenses.
We structure the investment portfolio to meet the target duration to achieve the required cash flow, based on liquidity and market risk factors. The weighted average effective duration of our portfolio of fixed maturity securities was 4.2 years at December 31, 2024 compared to 4.0 years at December 31, 2023.
We structure the investment portfolio to meet the target duration to achieve the required cash flow, based on liquidity and market risk factors. The weighted average effective duration of our portfolio of fixed maturity securities was 4.3 years at December 31, 2025 compared to 4.2 years at December 31, 2024.
At December 31, 2024, our watch list included 10 fixed maturity securities in an unrealized loss position with an amortized cost of $21.8 million, no allowance for expected credit losses, unrealized losses of $2.2 million and a fair value of $24.0 million. At December 31, 2023, we had no fixed maturity securities on a watch list.
At December 31, 2024, our watch list included 10 fixed maturity securities in an unrealized loss position with an amortized cost of $21.8 million, no allowance for expected credit losses, unrealized losses of $2.2 million and a fair value of $24.0 million.
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.
For the small amount of reinsurance capacity we utilize that doesn't meet our criteria, markets are required to collateralize the risk. 51 Table of Contents The following table represents the primary reinsurers we utilize and their financial strength ratings as of December 31, 2025: Name of Reinsurer A.M.
This exposure relates to a deficiency in the design or construction of a building or structure resulting from a failure to design or construct in a reasonably workmanlike manner, and/or in accordance with a buyer's reasonable expectation.
This exposure relates to a deficiency in the design or construction of a building or structure resulting from a failure to design or construct in a reasonably workmanlike 33 Table of Contents manner, and/or in accordance with a buyer's reasonable expectation.
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.
The increases in these longer tail lines, especially in 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.
For many long-tail liability claims, significant periods of time, ranging up to several years, may elapse between the occurrence of the loss, the reporting of the loss to us and the settlement of the claim.
For many long-tail liability claims, significant periods of time, ranging up to several years, may elapse 30 Table of Contents between the occurrence of the loss, the reporting of the loss to us and the settlement of the claim.
Adjustments to the reserves could be recorded in one year or multiple years, depending on when they are identified. This would also affect our financial position in that our equity would be adjusted by an amount equivalent to the net income impact.
Adjustments to the reserves could be recorded in one year or multiple years, depending on when they are identified. This would also affect our financial position as our equity would be adjusted by an amount equal to the net income impact.
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.
These restrictions are not expected to have a material impact in meeting our cash obligations. 55 Table of Contents Share Repurchases Under our share repurchase program, we may purchase our common stock on the open market or through privately negotiated transactions.
In 2024, we broadened the scope of our assumed portfolio by growing our client base and building around the renewal business. We grew our standard property and casualty treaty business while holding our property catastrophe retrocessional and Lloyd's businesses to only modest change. We engaged in the mortgage reinsurance market where conditions were favorable.
For the year ended December 31, 2024, we broadened the scope of our assumed portfolio by growing our client base and building around the renewal business. We grew our standard property and casualty treaty business while holding our property catastrophe retrocessional and Lloyd's businesses to only modest change. We engaged in the mortgage reinsurance market where conditions were favorable.
When considering our liquidity and cash flow, it is important to distinguish between the needs of our insurance subsidiaries and the needs of the holding company, United Fire Group, Inc. As a holding company with no operations of its own, United Fire Group, Inc. derives its cash primarily from its insurance subsidiaries.
When considering our liquidity and cash flow, it is important to distinguish between the needs of our insurance subsidiaries and the needs of the holding company, United Fire Group, Inc. As an insurance holding company with no significant independent operations of our own, United Fire Group, Inc. derives its cash primarily from its insurance subsidiaries.
This result was driven by improvement in the underlying loss ratio, no prior year development compared to adverse development booked in 2023, and a favorable year for catastrophe losses. Commercial Other Liability We write numerous types of risk that are exposed to liability losses in our direct and assumed books of business.
This result was driven by improvement in the underlying loss ratio, favorable prior year development, and a favorable year for catastrophe losses. Commercial Other Liability We write numerous types of risk that are exposed to liability losses in our direct and assumed books of business.
(2) As a member of Lloyd’s, the Company participates in the Syndicate results which include the fair value of the investments. Starting in Q4 2024, these investments are included in other long-term investments. The fair value of Lloyd's syndicate investments included in other long-term investments was $82.2 million as of December 31, 2024.
(2) As a member of Lloyd’s, the Company participates in the Syndicate results which include the fair value of the investments. Starting in Q4 2024, these investments are included in other long-term investments. The fair value of Lloyd's syndicate investments included in other long-term investments was $127.9 million as of December 31, 2025.
Interest expense increased in 2024 due to the issuance of the senior unsecured notes in May 2024. Refer to Note 13 "Debt" in Part II, Item 8 for more information on our long term debt.
Interest expense increased in 2025 due to the issuance of the senior unsecured notes. Refer to Note 13 "Debt" in Part II, Item 8 for more information on long term debt.
The increase in expense ratio in 2024 as compared to 2023 is due primarily to investments in talent to deepen expertise across the Company; accelerated development of our new policy administration system that is now poised for implementation in 2025; and increased performance-based compensation for employees and agents due to current year achievements.
The increase in expense ratio in 2024 as compared to 2023 is due primarily to investments in talent to deepen expertise across the Company; accelerated development of the new policy administration system (implemented in 2025); and increased performance-based compensation for employees and agents due to current year achievements.
Catastrophe losses in 2024 added 5.4 percentage points to the combined ratio, which is below our historical 10-year average of 7.2 percentage points. The Company continues to evaluate and limit our exposure in regions prone to naturally occurring catastrophic events through a combination of geographic diversification and restrictions on the amount and location of new business production in such regions.
Catastrophe losses in 2025 added 3.2 points to the combined ratio, which is below our historical 10-year average. The Company continues to evaluate and limit our exposure in regions prone to naturally occurring catastrophic events through a combination of geographic diversification and restrictions on the amount and location of new business production in such regions.
We also incepted a few new managing general agent programs in the cyber liability and transactional liability markets. In 2023 we continued to grow our assumed programs by renewing the programs added in 2022 and continuing to diversify our risks.
We also incepted a few new managing general agent programs in the cyber liability and transactional liability markets. For the year ended December 31, 2023 we continued to grow our assumed programs by renewing the programs added in 2022 and continuing to diversify our risks.
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.
An XOL treaty, effective January 1, 2026, is in place to specifically and exclusively reinsure business written through this arrangement. This program consists of $190.0 million for losses in excess of $10.0 million and is fully placed. Each layer can be reinstated once to its full amount at the same premium.
The timing of these additional contributions is unknown and based upon the timing of when investments and agreements are executed or signed compared to when the actual commitments are funded or closed. Our remaining potential contractual obligation w as $23.1 million at December 31, 2024.
The timing of these additional contributions is unknown and based upon the timing of when investments and agreements are executed or signed compared to when the actual commitments are funded or closed. Our remaining potential contractual obligation w as $15.9 million at December 31, 2025.
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.
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, 2025 UF&C is able to make a maximum of $50.6 million in dividend payments without prior regulatory approval.
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 $ 15,000 $ 20,000 100 % Second $ 35,000 $ 35,000 100 % Third $ 80,000 $ 70,000 100 % Earthquake and Flood XOL Treaty We delegate underwriting authority to write a portfolio of Pacific Coast earthquake business. This arrangement began in 2019.
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 2025, we had cash inflows from scheduled and unscheduled investment maturities, redemptions, prepayments, and sales of investments that totaled $394.5 million compared to $680.0 million and $162.1 million for the same period in 2024 and 2023, respectively.
Adverse development in commercial other liability reflects the company's continued response to increased loss settlements resulting from the impact of economic and social inflation, including increased litigation activity. In 2024, our pre-tax catastrophe losses were $63.2 million, a decrease of $1.0 million compared to $64.2 million in 2023. In 2024, our catastrophe losses included 74 events.
Adverse development in commercial other liability reflects the company's continued response to increased loss settlements resulting from the impact of economic and social inflation, including increased litigation activity. In 2025, our pre-tax catastrophe losses were $41.1 million, a decrease of $22.1 million compared to $63.2 million in 2024. In 2025, our catastrophe losses included 62 events.
The difference between net earned premiums and net written premiums is the change in unearned premiums and the change in prepaid reinsurance premiums. Direct earned premiums are recognized ratably over the life of a policy and differ from direct written premiums, which are recognized on the effective date of the policy.
The difference between net earned premium and net written premium is the change in unearned premium and the change in prepaid reinsurance premium. Direct earned premium is recognized ratably over the life of a policy and differs from direct written premium, which is recognized on the effective date of the policy.
Risks and uncertainties that may affect the actual financial condition and results of the Company include, but are not limited to, the following: • The success of our strategy may be adversely impacted by various internal and external factors; • 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; • Geographic concentration ties our performance to the business, economic and regulatory conditions of certain states; • 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; • Our strategy's success could be affected by our timely ability to recognize and adapt to our position in the insurance cycle; 26 Table of Contents • Our success depends primarily on our ability to underwrite risks effectively and adequately price the risks we insure; • 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; • Reserves for property and casualty insurance losses and loss settlement expenses are based on estimates and may be inadequate, adversely impacting our financial results; • We insure property that is exposed to various natural perils that can give rise to significant claims cost; • We are subject to certain risks related to our investment portfolio that could negatively affect our profitability; • 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; • We may be unable to secure reinsurance capacity that provides necessary risk protection at a reasonable cost; • We may be unable to attract, retain or effectively manage the succession of key personnel; • 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 conditions; • Unauthorized data access, cyber-attacks and other security breaches could have an adverse impact on our business and reputation; • We are subject to comprehensive laws and regulations, changes to which may have an adverse effect on our financial condition and results of operations; • Macroeconomic conditions could materially and adversely affect our business, results of our operations, financial condition, and growth; • Our stock price could become more volatile, and your investment could lose value; • Efforts to disrupt the structure, management or ownership of the Company could diminish the value of our common stock; and • The ability of our subsidiaries to pay dividends to UFG may affect our liquidity and ability to pay dividends to shareholders.
A strain in these relationships could result in loss of sufficient business opportunities within our expertise and stated risk appetite; • 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 or data analytics; • Our strategy's success could be affected by our timely ability to recognize and adapt to our position in the insurance cycle; • 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; 25 Table of Contents • Our success depends primarily on our ability to underwrite risks effectively and adequately price the risks we insure; • 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; • 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; • We insure property that is exposed to various natural perils that can give rise to significant claims costs; • We are subject to certain risks related to our investment portfolio that could negatively affect our profitability; • 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; • We may be unable to secure reinsurance capacity that provides necessary risk protection at a reasonable cost; • We may be unable to attract, retain or effectively manage the succession of key personnel; • Unauthorized data access, cyber attacks and other security breaches could have an adverse impact on our business and reputation; • We are subject to comprehensive laws and regulations, which may have an adverse effect on our financial condition and results of operations; • Macroeconomic conditions could materially and adversely affect our business, results of our operations, financial condition, and growth; • Our stock price could become more volatile, and your investment could lose value; • Efforts to disrupt the structure, management or ownership of the Company could diminish the value of our common stock; and • The ability of our subsidiaries to pay dividends may affect our liquidity and ability to meet our obligations.
Interest Expenses The following is a summary of interest expense: (In Thousands) Years Ended December 31, 2024 2023 2022 Interest paid $ 7,281 $ 3,260 $ 3,188 Our long term debt obligations are $50.0 million of private placement notes issued in December 2020 and $70.0 million of senior unsecured notes issued in May 2024.
Interest Expenses The following is a summary of interest expense: (In Thousands) Years Ended December 31, 2025 2024 2023 Interest paid $ 11,267 $ 7,281 $ 3,260 Our long term debt obligations are $50.0 million of private placement notes issued in December 2020, and $70.0 million and $30.0 million of senior unsecured notes issued in May 2024 and July 2025, respectively.
Reserve Development We recognized a favorable development in our net reserves for prior accident years totaling $1.2 million for the year ended December 31, 2024 and adverse development of $67.8 million and $12.9 million for the years ended December 31, 2023 and 2022, respectively.
Reserve Development We recognized favorable development in our net reserves for prior accident years totaling $14.1 million and $1.2 million for the years ended December 31, 2025 and 2024, respectively, and adverse development of $67.8 million for the year ended December 31, 2023.
Refer to Note 2 "Investments" in Part II, Item 8 for more information on maturities. Unrealized Investment Gains and Losses As of December 31, 2024, net unrealized investment losses, after tax, totaled $72.2 million compared to net unrealized losses, after tax, of $67.0 million and unrealized losses of $88.4 million as of December 31, 2023 and 2022, respectively.
Refer to Note 2 "Investments" in Part II, Item 8 for more information on investment maturities. Unrealized Investment Gains and Losses Net unrealized investment losses, after tax, totaled $25.3 million, $72.2 million and $67.0 million as of December 31, 2025, 2024 and 2023, respectively.
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. Geographic Concentration For the year ended December 31, 2024, 47.1 percent of our property and casualty premiums were written in Texas, California, Iowa, Missouri, and Louisiana.
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. Geographic Concentration For the year ended December 31, 2025, 48.5 percent of our property and casualty premiums were written in Texas, California, Iowa, New Jersey, and Missouri.
MD&A Index Page Forward-Looking Statements 26 Business Overview 28 Critical Accounting Estimates 30 Non-GAAP Financial Measures 37 Results of Operations 38 Investments 46 Reinsurance 49 Liquidity and Capital Resources 52 Recently Issued Accounting Standards 55 FORWARD-LOOKING STATEMENTS This report may contain forward-looking statements about our operations, anticipated performance and other similar matters.
MD&A Index Page Forward-Looking Statements 25 Business Overview 27 Critical Accounting Estimates 29 Non-GAAP Financial Measures 37 Results of Operations 38 Investments 46 Reinsurance 49 Liquidity and Capital Resources 53 Recently Issued Accounting Standards 56 FORWARD-LOOKING STATEMENTS This report may contain forward-looking statements about our operations, anticipated performance and other similar matters.
Assumed Premiums Assumed premiums are the total premiums associated with the insurance risk transferred to us by other insurance and reinsurance companies pursuant to reinsurance contracts.
Assumed Premium Assumed premium is the total premium associated with the insurance risk transferred to us by other insurance and reinsurance companies pursuant to reinsurance contracts.
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.
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 33 Table of Contents table below provides some scenarios for the impact of this development volatility on our reported net loss and loss adjustment reserves of $1.6 billion as of December 31, 2024.
The table below provides some scenarios for the impact of this development volatility on our reported net loss and loss adjustment reserves of $1.7 billion as of December 31, 2025.
The primary reason for the change relates to management actions within the Company's fixed maturity portfolio to reinvest at higher rates. Net investment gains were $1.3 million for the year ended December 31, 2023 as compared to net investment losses of $15.9 million for the year ended December 31, 2022.
Net investment losses were $5.4 million for the year ended December 31, 2024 as compared to net investment gains of $1.3 million for the year ended December 31, 2023. The primary reason for the change relates to management actions within the Company's fixed income portfolio to reinvest at higher rates.
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.
Our cash flows from operating activities were sufficient to meet our liquidity needs for the years ended December 31, 2025, 2024 and 2023. 53 Table of Contents 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.
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.
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. Proportional reinsurance on these lines is also included.
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.
Refer to Note 13 "Debt" in Part II, Item 8 for further information regarding the agreement with FHLB Des Moines. Stockholders' Equity Stockholders' equity increased 20.4 percent to $941.2 million at December 31, 2025, from $781.5 million at December 31, 2024.
The ratio of ceded premiums to direct premiums remained flat for 2024 as compared to 2023 due to rate decreases in property offsetting rate increases in casualty. Ceded premiums increased $2.2 million in 2024 due to growth in the subject premium base.
Ceded premium increased $26.8 million in 2025 due to growth in the subject premium base and ceded reinsurance premium adjustments. For 2024, the ratio of ceded premium to direct premium remained flat as compared to 2023, due to rate decreases in property offsetting rate increases in casualty.
The Company entered into an investment management agreement with New England Asset Management ("NEAM") effective as of February 1, 2024, pursuant to which NEAM will provide investment management services. 46 Table of Contents Investment Portfolio Our invested assets at December 31, 2024 totaled $2.1 billion as compared to $1.9 billion at December 31, 2023.
The Company entered into an investment management agreement with NEAM effective as of February 1, 2024, pursuant to which NEAM will provide investment management services. Investment Portfolio Our invested assets at December 31, 2025 totaled $2.5 billion as compared to $2.1 billion at December 31, 2024.
During the next five years, $0.5 billion, or 25.5 percent of our fixed maturity portfolio will mature. Net cash flows used in investing activities totaled $292.5 million, $149.9 million and $19.2 million in 2024, 2023, and 2022, respectively.
During the next five years, $420.2 million, or 18.8 percent of our fixed maturity security portfolio will mature. Net cash flows used in investing activities totaled $326.0 million, $292.5 million and $149.9 million in 2025, 2024, and 2023, respectively.
Best rating or an S&P rating of at least "A-." If a reinsurer is rated by both rating agencies, then both ratings must be at least an "A-." All of our reinsurance capacity is placed with reinsurers holding a rating of A- or better.
Best rating or an S&P rating of at least "A-." If a reinsurer is rated by both rating agencies, then both ratings must be at least an "A-." Our key reinsurance programs are placed with reinsurers holding a rating of A- or better as of December 31, 2025.
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 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 property casualty XOL treaty includes a terrorism exclusion.
Commercial other - commercial theft coverage, boiler and machinery and ocean marine business managed by an MGA partner. 28 Table of Contents Personal - fire and allied lines includes proportional assumed reinsurance for homeowners multi-peril coverage. Reinsurance assumed - primarily non-proportional assumed reinsurance and Lloyd's of London property and casualty syndicates.
Commercial miscellaneous - commercial theft coverage, boiler and machinery and ocean marine business managed by an MGA partner. 27 Table of Contents Personal - primarily proportional assumed reinsurance for personal lines. Reinsurance assumed - primarily non-proportional assumed reinsurance and Lloyd's of London property and casualty syndicates.
In an effort to limit the impacts of interest rate exposure, in September 2023, we made a shift in our pension plan asset investment strategy to a liability driven investment ("LDI") approach to better match the timing of cash flows between payouts from the plan with cash flows from the asset portfolio as well as hedge interest rate risk between assets and liabilities.
In an effort to limit the impacts of interest rate exposure, in September 2023, we made a shift in our pension plan asset investment strategy to a liability driven investment ("LDI") approach to better match the timing of cash flows between payouts from the plan with cash flows from the asset portfolio as well as hedge interest rate risk between assets and liabilities. 36 Table of Contents NON-GAAP FINANCIAL MEASURES We evaluate profit or loss based upon operating and investment results.
Detailed analysis is performed for each security on the watch list to further assess the presence of credit impairment loss indicators and, where present, calculate an allowance for expected credit loss or direct write-down of a security’s amortized cost.
Factors used in preparing the watch list include fair values relative to amortized cost, ratings, negative ratings actions and other factors. Detailed analysis is performed for each security on the watch list to further assess the presence of credit impairment loss indicators and, where present, calculate an allowance for expected credit loss or direct write-down of a security’s amortized cost.
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.
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 acts of terrorism and political instability.
The commercial automobile favorable development of $34.5 million is a function of case-basis and IBNR reserve strengthening efforts over the last several years. Favorable development in fire and allied lines of $10.5 million is driven in part by reactions to favorable large loss experience in recent accident years.
The commercial automobile favorable development of $22.3 million is a function of favorable experience as well as case-basis and IBNR reserve strengthening in recent years. Favorable development in fire and allied lines of $10.0 million is driven in part by reactions to favorable large loss experience in recent accident years.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+1 added−1 removed11 unchanged
Biggest changeThe 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.
Biggest changeThe exposure to equity price risk was eliminated in 2024 with repositioning of equity securities into fixed maturity securities. 56 Table of Contents 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.
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.
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, 2025. The sensitivity analysis measures the change in fair values arising from immediate changes in selected interest rate scenarios.
Refer 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
Refer 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. 58 Table of Contents
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.
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 as of December 31, 2025.
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.
December 31, 2025 -200 Basis -100 Basis +100 Basis + 200 Basis (In Thousands) Points Points Base Points Points AVAILABLE-FOR-SALE Fixed maturities: U.S.
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.
Our five largest indirect exposures to financial guarantors accounted for $23.0 million and $10.8 million of our municipal securities at December 31, 2025 and 2024, respectively. 57 Table of Contents 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.
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.
Of the municipal securities in our investment portfolio, 86.2 percent and 93.1 percent were rated "AA" or above, and 100.0 percent and 100.0 percent were rated "A" or above at December 31, 2025 and 2024, respectively, without the benefit of insurance.
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.
The carrying value of the Company's investment portfolio at December 31, 2025 and 2024 was $2.5 billion and $2.1 billion, respectively, of which 89.5% and 89.3%, respectively, was invested in fixed maturity securities. The primary market risks to our portfolio include interest rate risk, credit risk, and foreign currency exchange rate risk.
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.
Duration of the portfolio is a key calculation that is managed relative to the payout pattern of our reserve liabilities.
Removed
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.
Added
Treasury and government agencies $ 110,480 $ 107,987 $ 104,104 $ 99,227 $ 94,277 States, municipalities and political subdivisions 284,570 273,576 261,734 246,327 229,691 Corporate 867,262 823,672 783,154 745,344 710,139 Residential mortgage-backed 772,851 745,743 715,597 679,187 639,771 Commercial mortgage-backed 166,500 155,307 145,407 136,606 128,748 Other asset-backed 234,150 213,044 195,354 180,394 167,630 Total Available-For-Sale Fixed Maturities $ 2,435,813 $ 2,319,329 $ 2,205,350 $ 2,087,085 $ 1,970,256 To the extent actual results differ from the assumptions utilized, our duration and interest rate measures could be significantly affected.

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