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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-34257
________________________
UNITED FIRE GROUP, INC.
(Exact name of registrant as specified in its charter)

Iowa |  | 45-2302834
(State of incorporation) |  | (I.R.S. Employer Identification No.)

118 Second Avenue SE
Cedar Rapids | Iowa | 52401
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (319) 399-5700
Securities Registered Pursuant to Section 12(b) of the Exchange Act of 1934:

Title of each class | Trading Symbol | Name of each exchange on which registered
Common Stock, $0.001 par value | UFCS | The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☐ | Accelerated filer | ☒ | Non-accelerated filer | ☐ | Smaller reporting company | ☐
Emerging growth company | ☐ |  |  |  |  |  |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No ☒
As of August 1, 2024, 25,336,103 shares of common stock were outstanding.

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United Fire Group, Inc.
Index to Quarterly Report on Form 10-Q
June 30, 2024

| Page
Forward-Looking Information | 1
Part I. Financial Information |
Item 1. Financial Statements |
Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023 | 3
Consolidated Statements of Income and Comprehensive Income (unaudited) for the three- and six- month periods ended June 30, 2024 and 2023 | 4
Consolidated Statement of Stockholders' Equity (unaudited) for the three- and six- month periods ende d June 30, 2024 and 2023 | 5
Consolidated Statements of Cash Flows (unaudited) for the six-month periods ended June 30, 2024 and 2023 | 7
Notes to Unaudited Consolidated Financial Statements | 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 37
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 53
Item 4. Controls and Procedures | 53
Part II. Other Information |
Item 1. Legal Proceedings | 54
Item 1A. Risk Factors | 54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 54
Item 3. Defaults Upon Senior Securities | 54
Item 4. Mine Safety Disclosures | 54
Item 5. Other Information | 54
Item 6. Exhibits | 56
Signatures | 57

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FORWARD-LOOKING INFORMATION
This report may contain forward-looking statements about our operations, anticipated performance and other similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor under the Securities Act of 1933, as amended (the "Securities Act") and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for forward-looking statements. The forward-looking statements are not historical facts and involve risks and uncertainties that could cause actual results to differ from those expected and/or projected. Such forward-looking statements are based on current expectations, estimates, forecasts and projections about United Fire Group, Inc. ("UFG," the "Registrant," the "Company," "we," "us," or "our"), the industry in which we operate, and beliefs and assumptions made by management. Words such as "expect(s)," "anticipate(s)," "intend(s)," "plan(s)," "believe(s)," "continue(s)," "seek(s)," "estimate(s)," "goal(s)," "remain(s) optimistic," "target(s)," "forecast(s)," "project(s)," "predict(s)," "should," "could," "may," "will," "might," "hope," "can" and other words and terms of similar meaning or expression in connection with a discussion of future operations, financial performance or financial condition, are intended to identify forward-looking statements. See Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023 and in our other filings with the Securities and Exchange Commission ("SEC") for more information concerning factors that could cause actual results to differ materially from those in the forward-looking statements.
Risks and uncertainties that may affect the actual financial condition and results of the Company include, but are not limited to, the following:
◦Our ability to effectively underwrite and adequately price insured risks;
◦Risks related to our investment portfolio that could negatively affect our profitability;
◦General macroeconomic conditions, interest rate risk, the impact of inflation and changes in governmental regulations and monetary policy;
◦Geographic concentration risk in our property and casualty insurance business;
◦The properties we insure are exposed to various natural perils that can give rise to significant claims costs;
◦Changing weather patterns and climate change add to the unpredictability, frequency and severity of catastrophe losses and may adversely affect our results of operations, liquidity and financial condition;
◦Further downgrades of the financial strength ratings of our operating subsidiaries or our issuer credit ratings and the adverse impact such action may have on our premium writings, policy retention, profitability and liquidity;
◦We may be unable to attract, retain or effectively manage the succession of key personnel;
◦The risk of not being able 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;
◦The potential disruption of our operations and reputation due to unauthorized data access, cyber-attacks or cyber-terrorism and other security breaches;
◦The adequacy of our reserves for property and casualty insurance losses and loss settlement expenses;
◦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;
◦Competitive, legal, regulatory or tax changes that affect the distribution cost or demand for our products through our independent agent/agency distribution network;
◦Governmental actions, policies and regulations, including, but not limited to, domestic health care reform, financial services regulatory reform, and other federal stimulus relief legislation, corporate governance, new laws or regulations or court decisions interpreting existing laws and regulations or policy provisions; changes in laws, regulations and stock exchange requirements relating to corporate governance and the cost of compliance;
◦We will be at a competitive disadvantage if, over time, our competitors are more effective than us in their utilization of technology and evolving data analytics;
◦We may be unable to secure reinsurance capacity that provides necessary risk protection at a reasonable cost; and
1

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◦Our stock price could become more volatile and your investment could lose value.
These are representative of the risks, uncertainties, and assumptions that could cause actual outcomes and results to differ materially from what is expressed in forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report or as of the date they are made. Except as required under the federal securities laws and the rules and regulations of the 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.
2

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PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

United Fire Group, Inc. Consolidated Balance Sheets

(In Thousands, Except Share Data) | June 30, 2024 |  | December 31, 2023
| (unaudited) |  |
ASSETS |  |  |
Investments: |  |  |
Fixed maturities, available-for-sale, at fair value (amortized cost $1,895,582 in 2024 and $1,771,041 in 2023) | $ | 1,796,133 |  |  | $ | 1,686,502 |
Equity securities at fair value (cost $0 in 2024 and $29,238 in 2023) | — |  |  | 55,019 |
Mortgage loans | 41,283 |  |  | 45,421 |
Less: allowance for mortgage loan losses | 45 |  |  | 55 |
Mortgage loans, net | 41,238 |  |  | 45,366 |
Other long-term investments | 98,405 |  |  | 99,507 |
Short-term investments | 100 |  |  | 100 |
Total investments | 1,935,876 |  |  | 1,886,494 |
Cash and cash equivalents | 153,430 |  |  | 102,046 |
Accrued investment income | 16,543 |  |  | 15,934 |
Premiums receivable (net of allowance for doubtful accounts of $1,752 in 2024 and $1,794 in 2023) | 584,521 |  |  | 464,791 |
Deferred policy acquisition costs | 144,044 |  |  | 126,532 |
Property and equipment at cost (less accumulated depreciation of $72,697 in 2024 and $68,242 in 2023) | 134,622 |  |  | 134,247 |
Reinsurance receivables (net of allowance for credit losses of $102 in 2024 and $97 in 2023) | 243,988 |  |  | 223,269 |
Prepaid reinsurance premiums | 32,899 |  |  | 27,682 |
Intangible assets | 4,261 |  |  | 4,615 |
Deferred tax asset | 26,585 |  |  | 13,621 |
Income taxes receivable | 19,600 |  |  | 21,463 |
Other assets | 112,328 |  |  | 123,496 |
TOTAL ASSETS | $ | 3,408,697 |  |  | $ | 3,144,190 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |
Liabilities |  |  |
Losses and loss settlement expenses | $ | 1,755,739 |  |  | $ | 1,638,755 |
Unearned premiums | 633,648 |  |  | 549,384 |
Accrued expenses and other liabilities | 175,750 |  |  | 172,306 |
Long term debt | 116,965 |  |  | 50,000 |
TOTAL LIABILITIES | $ | 2,682,102 |  |  | $ | 2,410,445 |
Stockholders' Equity |  |  |
Common stock, $0.001 par value; authorized 75,000,000 shares; 25,336,103 and 25,269,842 shares issued and outstanding in 2024 and 2023, respectively | $ | 25 |  |  | $ | 25 |
Additional paid-in capital | 212,327 |  |  | 209,986 |
Retained earnings | 577,359 |  |  | 574,691 |
Accumulated other comprehensive income (loss), net of tax | (63,116) |  |  | (50,957) |
TOTAL STOCKHOLDERS' EQUITY | $ | 726,595 |  |  | $ | 733,745 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 3,408,697 |  |  | $ | 3,144,190 |

The Notes to unaudited Consolidated Financial Statements are an integral part of these statements.

3

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United Fire Group, Inc.
Consolidated Statements of Income and Comprehensive Income (Unaudited)

| Three Months Ended June 30, |  | Six Months Ended June 30,
(In Thousands, Except Share Data) | 2024 |  | 2023 |  | 2024 |  | 2023
Revenues |  |  |  |  |  |  |
Net premiums earned | $ | 287,569 |  |  | $ | 254,638 |  |  | $ | 568,428 |  |  | $ | 510,765 |
Net investment income | 18,029 |  |  | 11,327 |  |  | 34,371 |  |  | 24,049 |
Net investment gains (losses) (includes reclassifications for net unrealized investment gains (losses) on available-for-sale securities of $(1,229) and $(3,793) in 2024 and $(152) and $(692) in 2023; previously included in accumulated other comprehensive income (loss)) | (1,229) |  |  | 1,124 |  |  | (2,431) |  |  | (621) |
Other income (loss) | (3,200) |  |  | — |  |  | (3,200) |  |  | — |
Total revenues | $ | 301,169 |  |  | $ | 267,089 |  |  | $ | 597,168 |  |  | $ | 534,193 |
Benefits, Losses and Expenses |  |  |  |  |  |  |
Losses and loss settlement expenses | $ | 201,325 |  |  | $ | 250,730 |  |  | $ | 380,971 |  |  | $ | 425,327 |
Amortization of deferred policy acquisition costs | 67,389 |  |  | 59,156 |  |  | 133,079 |  |  | 118,991 |
Other underwriting expenses (includes reclassifications for employee benefit costs of $0 and $0 in 2024 and $52 and $104 in 2023; previously included in accumulated other comprehensive income (loss)) | 34,613 |  |  | 28,832 |  |  | 67,078 |  |  | 59,135 |
Interest expense | 1,460 |  |  | 797 |  |  | 2,319 |  |  | 1,594 |
Other non-underwriting expenses | 152 |  |  | (199) |  |  | 1,207 |  |  | 1,374 |
Total benefits, losses and expenses | $ | 304,939 |  |  | $ | 339,316 |  |  | $ | 584,654 |  |  | $ | 606,421 |
Income (loss) before income taxes | $ | (3,770) |  |  | $ | (72,227) |  |  | $ | 12,514 |  |  | $ | (72,228) |
Federal income tax expense (benefit) (includes reclassifications of $259 and $797 in 2024 and $43 and $167 in 2023; previously included in accumulated other comprehensive income (loss)) | (1,035) |  |  | (15,845) |  |  | 1,747 |  |  | (16,540) |
Net Income (loss) | $ | (2,735) |  |  | $ | (56,382) |  |  | $ | 10,767 |  |  | $ | (55,688) |
Other comprehensive income (loss) |  |  |  |  |  |  |
Change in net unrealized gain (loss) on investments | $ | (6,654) |  |  | $ | (19,616) |  |  | $ | (17,750) |  |  | $ | (1,612) |
Change in liability for underfunded employee benefit plans | (724) |  |  | (820) |  |  | (1,448) |  |  | (1,640) |
Foreign currency translation adjustment | 35 |  |  | — |  |  | 12 |  |  | — |
Other comprehensive income (loss), before tax and reclassification adjustments | $ | (7,343) |  |  | $ | (20,436) |  |  | $ | (19,186) |  |  | $ | (3,252) |
Income tax effect | 1,549 |  |  | 4,293 |  |  | 4,031 |  |  | 684 |
Other comprehensive income (loss), after tax, before reclassification adjustments | $ | (5,794) |  |  | $ | (16,143) |  |  | $ | (15,155) |  |  | $ | (2,568) |
Reclassification adjustment for net investment losses included in income | $ | 1,229 |  |  | $ | 152 |  |  | $ | 3,793 |  |  | $ | 692 |
Reclassification adjustment for employee benefit costs included in expense | — |  |  | 52 |  |  | — |  |  | 104 |
Total reclassification adjustments, before tax | $ | 1,229 |  |  | $ | 204 |  |  | $ | 3,793 |  |  | $ | 796 |
Income tax effect | (259) |  |  | (43) |  |  | (797) |  |  | (167) |
Total reclassification adjustments, after tax | $ | 970 |  |  | $ | 161 |  |  | $ | 2,996 |  |  | $ | 629 |
Comprehensive income (loss) | $ | (7,559) |  |  | $ | (72,364) |  |  | $ | (1,392) |  |  | $ | (57,627) |
Diluted weighted average common shares outstanding | 25,314,456 |  |  | 25,249,073 |  |  | 25,895,481 |  |  | 25,234,834 |
Earnings per common share: |  |  |  |  |  |  |
Basic | $ | (0.11) |  |  | $ | (2.23) |  |  | $ | 0.43 |  |  | $ | (2.21) |
Diluted | (0.11) |  |  | (2.23) |  |  | 0.42 |  |  | (2.21) |

The Notes to unaudited Consolidated Financial Statements are an integral part of these statements.

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United Fire Group, Inc.
Consolidated Statement of Stockholders' Equity (Unaudited)

| Common Stock |  |  |
(In Thousands, Except Share Data) | Shares outstanding | Common stock | Additional paid-in capital | Retaining Earnings | Accumulated other comprehensive income (loss) | Total
Balance January 1, 2024 | 25,269,842 |  | $ | 25 |  | $ | 209,986 |  | $ | 574,691 |  | $ | (50,957) |  | $ | 733,745 |
Net income (loss) | — |  | — |  | — |  | 13,502 |  | — |  | 13,502 |
Stock based compensation | 23,314 |  | — |  | 900 |  | — |  | — |  | 900 |
Dividends on common stock ($0.16 per share) | — |  | — |  | — |  | (4,046) |  | — |  | (4,046) |
Change in net unrealized investment gain (loss)(1) | — |  | — |  | — |  | — |  | (6,740) |  | (6,740) |
Change in liability for underfunded employee benefit plans(2) | — |  | — |  | — |  | — |  | (572) |  | (572) |
Foreign currency translation adjustment | — |  | — |  | — |  | — |  | (23) |  | (23) |
Balance March 31, 2024 | 25,293,156 |  | $ | 25 |  | $ | 210,886 |  | $ | 584,147 |  | $ | (58,292) |  | $ | 736,766 |
Net income (loss) | — |  | $ | — |  | $ | — |  | $ | (2,735) |  | $ | — |  | $ | (2,735) |
Stock based compensation | 42,947 |  | — |  | 1,441 |  | — |  | — |  | 1,441 |
Dividends on common stock ($0.16 per share) | — |  | — |  | — |  | (4,053) |  | — |  | (4,053) |
Change in net unrealized investment gain (loss)(1) | — |  | — |  | — |  | — |  | (4,287) |  | (4,287) |
Change in liability for underfunded employee benefit plans(2) | — |  | — |  | — |  | — |  | (572) |  | (572) |
Foreign currency translation adjustment | — |  | — |  | — |  | — |  | 35 |  | 35 |
Balance June 30, 2024 | 25,336,103 |  | $ | 25 |  | $ | 212,327 |  | $ | 577,359 |  | $ | (63,116) |  | $ | 726,595 |

(1)The change in net unrealized gain (loss) is net of reclassification adjustments and income taxes.
(2)The change in liability for underfunded employee benefit plans is net of reclassification adjustments and income taxes.

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| Common Stock |  |  |
(In Thousands, Except Share Data) | Shares outstanding | Common stock | Additional paid-in capital | Retaining Earnings | Accumulated other comprehensive income (loss) | Total
Balance January 1, 2023 | 25,210,541 |  | $ | 25 |  | $ | 207,030 |  | $ | 620,555 |  | $ | (87,496) |  | $ | 740,114 |
Net income (loss) | — |  | — |  | — |  | 694 |  | — |  | 694 |
Stock based compensation | 21,012 |  | — |  | 980 |  | — |  | — |  | 980 |
Dividends on common stock ($0.16 per share) | — |  | — |  | — |  | (4,037) |  | — |  | (4,037) |
Change in net unrealized investment gain (loss)(1) | — |  | — |  | — |  | — |  | 14,650 |  | 14,650 |
Change in liability for underfunded employee benefit plans(2) | — |  | — |  | — |  | — |  | (607) |  | (607) |
Balance March 31, 2023 | 25,231,553 |  | $ | 25 |  | $ | 208,010 |  | $ | 617,213 |  | $ | (73,453) |  | $ | 751,795 |
Net income (loss) | — |  | $ | — |  | $ | — |  | $ | (56,382) |  | $ | — |  | $ | (56,382) |
Stock based compensation | 31,396 |  | — |  | 977 |  | — |  | — |  | 977 |
Dividends on common stock ($0.16 per share) | — |  | — |  | — |  | (4,042) |  | — |  | (4,042) |
Change in net unrealized investment gain (loss)(1) | — |  | — |  | — |  | — |  | (15,376) |  | (15,376) |
Change in liability for underfunded employee benefit plans(2) | — |  | — |  | — |  | — |  | (606) |  | (606) |
Balance June 30, 2023 | 25,262,949 |  | $ | 25 |  | $ | 208,987 |  | $ | 556,789 |  | $ | (89,435) |  | $ | 676,366 |

(1)The change in net unrealized gain (loss) is net of reclassification adjustments and income taxes.
(2)The change in liability for underfunded employee benefit plans is net of reclassification adjustments and income taxes.
The Notes to unaudited Consolidated Financial Statements are an integral part of these statements.

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United Fire Group, Inc.
Consolidated Statements of Cash Flows (Unaudited)

| Six Months Ended June 30,
(In Thousands) | 2024 |  | 2023
Cash Flows From Operating Activities |  |  |
Net income (loss) | $ | 10,767 |  |  | $ | (55,688) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities |  |  |
Net accretion of bond premium | 3,061 |  |  | 3,491 |
Depreciation and amortization | 5,820 |  |  | 5,182 |
Stock-based compensation expense | 2,711 |  |  | 2,175 |
Net investment (gains) losses | 2,672 |  |  | 312 |
Net cash flows from equity and trading investments | 56,381 |  |  | 39,553 |
Deferred income tax expense (benefit) | (9,729) |  |  | (6,433) |
Changes in: |  |  |
Accrued investment income | (609) |  |  | (258) |
Premiums receivable | (119,730) |  |  | (97,957) |
Deferred policy acquisition costs | (17,512) |  |  | (18,424) |
Reinsurance receivables | (20,719) |  |  | (23,913) |
Prepaid reinsurance premiums | (5,217) |  |  | (1,670) |
Income taxes receivable | 1,863 |  |  | (11,432) |
Other assets | 12,121 |  |  | (248) |
Losses and loss settlement expenses | 116,984 |  |  | 117,558 |
Unearned premiums | 84,264 |  |  | 63,249 |
Accrued expenses and other liabilities | 1,996 |  |  | 16,997 |
Other, net | 2,368 |  |  | 5,370 |
Net cash provided by (used in) operating activities | $ | 127,492 |  |  | $ | 37,864 |
Cash Flows From Investing Activities |  |  |
Proceeds from sale of available-for-sale investments | $ | 233,999 |  |  | $ | 43,809 |
Proceeds from call and maturity of available-for-sale investments | 67,124 |  |  | 28,036 |
Proceeds from sale of other investments | 6,097 |  |  | 2,111 |
Purchase of investments in mortgage loans | — |  |  | (8,137) |
Purchase of investments available-for-sale | (432,768) |  |  | (94,204) |
Purchase of other investments | (3,216) |  |  | (12,511) |
Net purchases and sales of property and equipment | (5,840) |  |  | (5,617) |
Net cash provided by (used in) investing activities | $ | (134,604) |  |  | $ | (46,513) |
Cash Flows From Financing Activities |  |  |
Debt Note Issuance | $ | 66,965 |  |  | $ | — |
Issuance of common stock | $ | (370) |  |  | $ | (218) |
Payment of cash dividends | $ | (8,099) |  |  | (8,079) |
Net cash provided by (used in) financing activities | $ | 58,496 |  |  | $ | (8,297) |
Net Change in Cash and Cash Equivalents | $ | 51,384 |  |  | $ | (16,946) |
Cash and Cash Equivalents at Beginning of Period | 102,046 |  |  | 96,650 |
Cash and Cash Equivalents at End of Period | $ | 153,430 |  |  | $ | 79,704 |
Supplemental Disclosures of Cash Flow Information |  |  |
Income taxes paid | $ | 9,612 |  |  | $ | 1,324 |
Interest paid | $ | 2,319 |  |  | $ | 1,594 |

The Notes to unaudited Consolidated Financial Statements are an integral part of these statements.

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UNITED FIRE GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share amounts or as otherwise noted)
NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Nature of Business
United Fire Group, Inc. ("UFG," the "Registrant," the "Company," "we," "us," or "our") and its consolidated subsidiaries and affiliates are engaged in the business of writing property and casualty insurance through a network of independent agencies. Our insurance company subsidiaries are licensed as property and casualty insurers in 50 states and the District of Columbia.
Basis of Presentation
The financial information for interim periods presented in these Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and with the instructions to Form 10-Q and Regulation S-X promulgated by the SEC. Certain financial information that is included in our Annual Report on Form 10-K for the year ended December 31, 2023, including certain financial statement footnote disclosures, is not required by the rules and regulations of the SEC for interim financial reporting and has been condensed or omitted.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The financial statement categories that are most dependent on management estimates and assumptions include: investments; deferred policy acquisition costs; reinsurance receivables and recoverables; loss settlement expenses; and pension benefit obligations.
Management believes the accompanying Consolidated Financial Statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. All significant intercompany transactions have been eliminated in consolidation. The results reported for the interim periods are not necessarily indicative of the results of operations that may be expected for the year. The Consolidated Financial Statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023, filed on February 29, 2024.
Segment Information
UFG has one reporting segment, which is consistent with and reflects the manner by which our Chief Operating Decision Maker views and manages the business. The property and casualty insurance business profit or loss is consistent with consolidated reporting as disclosed on the Consolidated Statements of Income and Comprehensive Income. We analyze the property and casualty insurance business results based on profitability (i.e., loss ratios), expenses and return on equity. The Company's property and casualty insurance business was determined using a management approach to make decisions on operating matters, including allocating resources, assessing performance, determining which products to market and sell, determining distribution networks with insurance agents and monitoring the regulatory environment. The property and casualty insurance business products have similar economic characteristics and use a similar marketing and distribution strategy with our independent agents. We will continue to evaluate our operations on the basis of both statutory accounting principles prescribed or permitted by our states of domicile and GAAP.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash, money market accounts and non-negotiable certificates of deposit with original maturities of three months or less.

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Deferred Policy Acquisition Costs ("DAC")
Deferred policy acquisition costs include commissions, premium taxes and variable underwriting and policy issue expenses, which are incremental direct costs of successful contract acquisitions. Property and casualty insurance policy acquisition costs deferred are amortized ratably as the related premium revenue is recognized. The following table is a summary of the components of DAC, including the related amortization recognized for the six-month period ended June 30, 2024.

| Total
Recorded asset at beginning of period | $ | 126,532 |
Underwriting costs deferred | 150,591 |
Amortization of deferred policy acquisition costs | (133,079) |
Recorded asset at June 30, 2024 | $ | 144,044 |

The method followed in computing DAC limits the amount of such deferred costs to their estimated realizable value. This takes into account the premium to be earned, losses and loss settlement expenses expected to be incurred and certain other costs expected to be incurred as the premium is earned.
Other Intangible Assets
Our other intangible assets, which consist primarily of agency relationships, trade names, state insurance licenses, and software, are being amortized using the straight-line method over periods ranging from two years to 15 years, with the exception of state insurance licenses, which are indefinite-lived and not amortized.
Long Term Debt
The Company issues debt through private placement transactions in the form of senior unsecured notes and surplus notes. The notes are presented as a long-term debt liability in the Consolidated Balance Sheets and as a financing activity in the Consolidated Statement of Cash Flows. Costs incurred in the issuance of debt are capitalized and amortized over the life of the non-cancellable period of the debt. The capitalization of such debt issuance costs are included as an offset to the long-term debt liability and the related amortization is included in interest expense.
Interest payments under the long-term debt are paid quarterly each year. The interest rate will be defined in each respective Note Purchase Agreement. Interest is included in accrued expenses and other liabilities in the Consolidated Balance Sheets and as interest expense in the Consolidated Statements of Income and Comprehensive Income. For more information on long-term debt refer to Note 8 "Debt."
Income Taxes
Deferred tax assets and liabilities are established based on differences between the financial statement bases of assets and liabilities and the tax bases of those same assets and liabilities, using the currently enacted statutory tax rates. Deferred income tax expense is measured by the year-to-year change in the net deferred tax asset or liability, except for certain changes in deferred tax amounts that affect stockholders' equity and do not impact federal income tax expense.
We reported a consolidated federal income tax expense of $1,747 for the six-month period ended June 30, 2024 compared to an income tax benefit of $16,540 during the same period of 2023. Our effective tax rate for 2024 and 2023 is different than the federal statutory rate of 21 percent, due principally to the net effect of tax-exempt municipal bond interest income.
The Company performs a quarterly review of its tax positions and makes a determination of whether it is more likely than not that the tax position will be sustained upon examination. If, based on this review, it appears not more likely than not that the positions will be sustained, the Company will calculate any unrecognized tax benefits and, if

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necessary, calculate and accrue any related interest and penalties. We did not recognize any liability for unrecognized tax benefits at June 30, 2024 or December 31, 2023. In addition, we have not accrued for interest and penalties related to unrecognized tax benefits. However, if interest and penalties would need to be accrued related to unrecognized tax benefits, such amounts would be recognized as a component of federal income tax expense.
Deferred tax assets are reduced by a valuation allowance when management believes it is more likely than not that some, or all, of the deferred taxes will not be realized. After considering all positive and negative evidence of taxable income in the carryback and carryforward periods and our tax planning strategy of holding debt securities with unrealized losses to maturity or recovery, we believe it is more likely than not that all the deferred assets will be realized. As a result, we have no valuation allowance at June 30, 2024 or December 31, 2023.
For each of the six-month periods ended June 30, 2024 and 2023, we made payments for income taxes totaling $9,612 and $1,324, respectively. We did not receive a federal tax refund for the six-month periods ended June 30, 2024 and 2023.
We file a consolidated federal income tax return. We also file income tax returns in various state jurisdictions. We are no longer subject to federal or state income tax examination for years before 2018.
Leases
The Company determines if a contract contains a lease at inception of the contract. The Company's inventory of leases consists of operating leases which are recorded as a lease obligation liability disclosed in the "Accrued expenses and other liabilities" line on the Consolidated Balance Sheets and as a lease right-of-use asset disclosed in the "Other assets" line on the Consolidated Balance Sheets. The Company's operating leases consist of office space, vehicles, computer equipment and office equipment. The lease right-of-use asset represents the Company's right to use each underlying asset for the lease term and the lease obligation liability represents the Company's obligation over the lease term. The Company's lease obligation is recorded at the present value of the lease payments based on the term of the applied lease. Short-term leases of 12 months or less are recorded on the Consolidated Balance Sheets and lease payments are recognized on the Consolidated Statements of Income and Comprehensive Income. For more information on leases refer to Note 10 "Leases."
Credit Losses
The Company recognizes credit losses for our available-for-sale fixed-maturity portfolio, reinsurance receivables, mortgage loans and premium receivables by setting up allowances which are remeasured each reporting period and recorded in the Consolidated Statements of Income and Comprehensive Income.
For our available-for-sale fixed-maturity portfolio an allowance for credit losses is recorded net of available-for-sale fixed maturities in the Consolidated Balance Sheets and a corresponding credit loss recognized as a realized loss or gain in the Consolidated Statements of Income and Comprehensive Income. The Company determines if an allowance for credit losses is recorded based on a number of factors including current economic conditions, management's expectations of future economic conditions and performance indicators, such as market value versus amortized cost, investment spreads widening or contracting, rating actions, payment and default history. For more information on credit losses and the allowance for credit losses for our available-for-sale fixed-maturity portfolio, see Note 2 "Summary of Investments."
An allowance for mortgage loan losses is established based on historical loss information of the collective pool of the Company's commercial mortgage loan investments which have similar risk characteristics. To calculate the allowance for mortgage loan losses, the Company starts with historical loan experience to predict the future expected losses and then layers on a market-linked adjustment. On a quarterly basis, quantitative credit risk metrics, including, for example, cash-flows, rent rolls and financial statements are reviewed for each loan to determine if it is performing in line with its expectations. This allowance is presented as a separate line in the Consolidated Balance Sheets beneath the asset value as well as presented net and recorded through "Net investment gains (losses)" in the

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Consolidated Statements of Income and Comprehensive Income. For more information on credit losses and the allowance for credit losses for our investment in mortgage loans see Note 3 "Fair Value of Financial Instruments."
For reinsurance receivables, the Company's model estimates expected credit loss by multiplying the exposure at default by both the probability of default and loss given default ("LGD"). The LGD is estimated by the rating of the reinsurer, historical relationship with UFG, existence of letters of credit and known regulation for which the Company may be held accountable. The ultimate LGD percentage is estimated after considering Moody's experience with unsecured year one bond recovery rates from 1983-2017. The allowance calculated as of June 30, 2024 is recorded through the line "Reinsurance receivables and recoverables" in the Consolidated Balance Sheets and through the line "Other underwriting expenses" in the Consolidated Statements of Income and Other Comprehensive Income. As of June 30, 2024, the Company had a credit loss allowance for reinsurance receivables of $102.

Rollforward of credit loss allowance for reinsurance receivables:
|  | As of
|  | June 30, 2024
Beginning balance, January 1, 2024 |  | $ | 97 |
Current-period provision for expected credit losses |  | 5 |
Write-off charged against the allowance, if any |  | — |
Recoveries of amounts previously written off, if any |  | — |
Ending balance of the allowance for reinsurance receivables, June 30, 2024 |  | $ | 102 |

With respect to premiums receivable, the Company utilizes an aging method to estimate credit losses. An allowance for doubtful accounts is based on a periodic evaluation of the aging and collectability of amounts due from agents and policyholders. "Premiums receivable" are presented in the Consolidated Balance Sheets net of an estimated allowance for doubtful accounts and recorded through "Other underwriting expenses" in the Consolidated Statements of Income and Comprehensive Income.
Subsequent Events
In the preparation of the accompanying financial statements, the Company has evaluated all material subsequent events or transactions that occurred after the balance sheet date through the date on which the financial statements were issued for potential recognition or disclosure in the Company's financial statements.
In July 2024, the Company identified rating errors related to umbrella and general liability products that resulted in an overcharge to certain policyholders. Corrective actions are currently underway, and we are voluntarily notifying and cooperating with state insurance regulators to determine the appropriate extent of refunds to impacted policyholders. We may receive requests for information in the future from regulators in connection with this matter.
As a result of this issue, the Company recorded an estimated liability of $3.2 million to cover our anticipated exposure for this matter based on information available to management at this time. This amount is recorded through the line "Other income (loss)" in the Consolidated Statement of Income and Comprehensive Income. However, our estimate of the anticipated exposure may change as additional information becomes available and we continue our discussions with regulatory agencies. The Company is reviewing other business lines to determine whether other similar issues exist. Fines, penalties or further refunds related to the foregoing are reasonably possible, but the amount of such losses, if any, cannot be estimated at this time.
Recently Issued Accounting Standards
Adopted Pronouncements
We have not adopted any Accounting Standard Update (“ASU”) in the current period nor year-to-date.

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Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the Chief Operating Decision Maker ("CODM") and included in each reported measure of a segment’s profit or loss. In addition, the amendments enhance interim disclosure requirements that are currently required annually, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, and contain other disclosure requirements. Additionally, the amendments require that entities with a single reportable segment must now provide all the disclosures previously required under Topic 280. The amendments in this update are incremental to the current requirements of Topic 280 and do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The enhanced segment disclosure requirements apply retrospectively to all prior periods presented in the financial statements. The significant segment expense and other segment item amounts disclosed in prior periods shall be based on the significant segment expense categories identified and disclosed in the period of adoption. The amendments in this update are effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Early adoption is permitted, and the updates must be applied retrospectively to all periods presented in the financial statements. We do not expect to early adopt this standard and are in the process of assessing its impact on our disclosures upon adoption.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update enhance the transparency of the income tax disclosures by expanding on the disclosures required annually. The amendments require entities to disclose in their rate reconciliation table additional categories of information about federal, state, and foreign income taxes, in addition to providing details about the reconciling items in some categories if above a quantitative threshold. Additionally, the amendments require annual disclosure of income taxes paid (net of refunds received) disaggregated by jurisdiction based on a quantitative threshold. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments should be applied on a prospective basis, and retrospective application is permitted. We do not expect to early adopt this standard and are in the process of assessing its impact on our disclosures upon adoption.
NOTE 2. SUMMARY OF INVESTMENTS
Fair Value of Investments
A reconciliation of the amortized cost to fair value of investments in our available-for-sale fixed maturity portfolio, presented on a consolidated basis, as of June 30, 2024 and December 31, 2023, is provided below:

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June 30, 2024 |  |
Type of Investment | Amortized Cost |  | Gross Unrealized Gain |  | Gross Unrealized Loss |  | Allowance for Credit Losses |  | Fair Value |
AVAILABLE-FOR-SALE |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |
Bonds |  |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 51,211 |  |  | $ | 56 |  |  | $ | 618 |  |  | $ | — |  |  | $ | 50,649 |  |
U.S. government agency | 97,438 |  |  | 57 |  |  | 9,154 |  |  | — |  |  | 88,341 |  |
States, municipalities and political subdivisions |  |  |  |  |  |  |  |  |  |
General obligations: |  |  |  |  |  |  |  |  |  |
Midwest | 38,918 |  |  | — |  |  | 469 |  |  | — |  |  | 38,449 |  |
Northeast | 7,121 |  |  | — |  |  | 122 |  |  | — |  |  | 6,999 |  |
South | 36,875 |  |  | — |  |  | 768 |  |  | — |  |  | 36,107 |  |
West | 58,789 |  |  | 35 |  |  | 939 |  |  | — |  |  | 57,885 |  |
Special revenue: |  |  |  |  |  |  |  |  |  |
Midwest | 64,440 |  |  | 2 |  |  | 729 |  |  | — |  |  | 63,713 |  |
Northeast | 50,012 |  |  | 23 |  |  | 767 |  |  | — |  |  | 49,268 |  |
South | 121,547 |  |  | 21 |  |  | 2,932 |  |  | — |  |  | 118,636 |  |
West | 86,246 |  |  | 8 |  |  | 1,485 |  |  | — |  |  | 84,769 |  |
Foreign bonds | 16,210 |  |  | 11 |  |  | 1,083 |  |  | — |  |  | 15,138 |  |
Public utilities | 141,202 |  |  | 286 |  |  | 10,720 |  |  | — |  |  | 130,768 |  |
Corporate bonds |  |  |  |  |  |  |  |  |  |
Energy | 41,879 |  |  | 3 |  |  | 2,245 |  |  | — |  |  | 39,637 |  |
Industrials | 58,647 |  |  | 86 |  |  | 5,011 |  |  | — |  |  | 53,722 |  |
Consumer goods and services | 101,945 |  |  | 52 |  |  | 8,675 |  |  | — |  |  | 93,322 |  |
Health care | 31,795 |  |  | — |  |  | 4,939 |  |  | — |  |  | 26,856 |  |
Technology, media and telecommunications | 82,279 |  |  | — |  |  | 7,305 |  |  | — |  |  | 74,974 |  |
Financial services | 233,099 |  |  | 852 |  |  | 6,379 |  |  | — |  |  | 227,572 |  |
Mortgage-backed securities | 219,159 |  |  | 500 |  |  | 3,380 |  |  | — |  |  | 216,279 |  |
Collateralized mortgage obligations |  |  |  |  |  |  |  |  |  |
Government National Mortgage Association | 151,577 |  |  | 161 |  |  | 14,138 |  |  | — |  |  | 137,600 |  |
Federal Home Loan Mortgage Corporation | 79,811 |  |  | — |  |  | 14,502 |  |  | — |  |  | 65,309 |  |
Federal National Mortgage Association | 46,395 |  |  | 23 |  |  | 5,201 |  |  | — |  |  | 41,217 |  |
Asset-backed securities | 78,987 |  |  | 123 |  |  | 187 |  |  | — |  |  | 78,923 |  |
Total Available-for-Sale Fixed Maturities | $ | 1,895,582 |  |  | $ | 2,299 |  |  | $ | 101,748 |  |  | $ | — |  |  | $ | 1,796,133 |  |

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December 31, 2023 |
Type of Investment | Amortized Cost |  | Gross Unrealized Gain |  | Gross Unrealized Loss |  | Allowance for Credit Losses |  | Fair Value
AVAILABLE-FOR-SALE |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |
Bonds |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 51,211 |  |  | $ | 325 |  |  | $ | 675 |  |  | $ | — |  |  | $ | 50,861 |
U.S. government agency | 102,540 |  |  | 255 |  |  | 8,302 |  |  | — |  |  | 94,493 |
States, municipalities and political subdivisions |  |  |  |  |  |  |  |  |
General obligations: |  |  |  |  |  |  |  |  |
Midwest | 52,712 |  |  | 132 |  |  | 137 |  |  | — |  |  | 52,707 |
Northeast | 11,422 |  |  | 1 |  |  | 43 |  |  | — |  |  | 11,380 |
South | 54,560 |  |  | 47 |  |  | 400 |  |  | — |  |  | 54,207 |
West | 77,874 |  |  | 23 |  |  | 471 |  |  | — |  |  | 77,426 |
Special revenue: |  |  |  |  |  |  |  |  |
Midwest | 101,037 |  |  | 302 |  |  | 358 |  |  | — |  |  | 100,981 |
Northeast | 52,708 |  |  | 79 |  |  | 560 |  |  | — |  |  | 52,227 |
South | 166,119 |  |  | 302 |  |  | 2,155 |  |  | — |  |  | 164,266 |
West | 102,254 |  |  | 147 |  |  | 836 |  |  | — |  |  | 101,565 |
Foreign bonds | 21,255 |  |  | — |  |  | 2,083 |  |  | — |  |  | 19,172 |
Public utilities | 149,734 |  |  | 787 |  |  | 10,054 |  |  | — |  |  | 140,467 |
Corporate bonds |  |  |  |  |  |  |  |  |
Energy | 45,351 |  |  | 249 |  |  | 2,127 |  |  | — |  |  | 43,473 |
Industrials | 74,760 |  |  | 727 |  |  | 4,939 |  |  | — |  |  | 70,548 |
Consumer goods and services | 103,315 |  |  | 271 |  |  | 7,665 |  |  | — |  |  | 95,921 |
Health care | 37,872 |  |  | 99 |  |  | 4,499 |  |  | — |  |  | 33,472 |
Technology, media and telecommunications | 87,002 |  |  | 451 |  |  | 5,665 |  |  | — |  |  | 81,788 |
Financial services | 152,329 |  |  | 743 |  |  | 7,381 |  |  | 1 |  |  | 145,690 |
Mortgage-backed securities | 23,800 |  |  | 11 |  |  | 2,328 |  |  | — |  |  | 21,483 |
Collateralized mortgage obligations |  |  |  |  |  |  |  |  |
Government National Mortgage Association | 164,666 |  |  | 1,282 |  |  | 12,742 |  |  | — |  |  | 153,206 |
Federal Home Loan Mortgage Corporation | 84,842 |  |  | 20 |  |  | 13,177 |  |  | — |  |  | 71,685 |
Federal National Mortgage Association | 50,284 |  |  | 33 |  |  | 4,664 |  |  | — |  |  | 45,653 |
Asset-backed securities | 3,394 |  |  | 524 |  |  | 87 |  |  | — |  |  | 3,831 |
Total Available-for-Sale Fixed Maturities | $ | 1,771,041 |  |  | $ | 6,810 |  |  | $ | 91,348 |  |  | $ | 1 |  |  | $ | 1,686,502 |

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Maturities
The amortized cost and fair value of available-for-sale fixed maturity securities at June 30, 2024, by contractual maturity, are shown in the following tables. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Asset-backed securities, mortgage-backed securities and collateralized mortgage obligations may be subject to prepayment risk and are therefore not categorized by contractual maturity.

Maturities |  |  |  |  |  |  |
| Available-For-Sale |  |
June 30, 2024 | Amortized Cost |  | Fair Value |  |  |  |
Due in one year or less | $ | 119,744 |  |  | $ | 118,585 |  |  |  |  |
Due after one year through five years | 418,408 |  |  | 406,880 |  |  |  |  |
Due after five years through 10 years | 415,686 |  |  | 385,942 |  |  |  |  |
Due after 10 years | 365,815 |  |  | 345,398 |  |  |  |  |
Asset-backed securities | 78,987 |  |  | 78,923 |  |  |  |  |
Mortgage-backed securities | 219,159 |  |  | 216,279 |  |  |  |  |
Collateralized mortgage obligations | 277,783 |  |  | 244,126 |  |  |  |  |
| $ | 1,895,582 |  |  | $ | 1,796,133 |  |  |  |  |

Net Investment Gains and Losses
Net gains (losses) on disposition of investments are computed using the specific identification method and are included in the computation of net income. A summary of the components of net investment gains (losses) is as follows:

| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Net investment gains (losses): |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |
Available-for-sale | $ | (1,382) |  |  | $ | (248) |  |  | $ | (4,044) |  |  | $ | (426) |
Allowance for credit losses | 1 |  |  | 177 |  |  | 1 |  |  | 1 |
Equity securities |  |  |  |  |  |  |
Net gains (losses) recognized on equity securities sold during the period | — |  |  | 1,735 |  |  | 1,362 |  |  | 2,235 |
Unrealized gains (losses) recognized during the period on equity securities held at reporting date | — |  |  | (459) |  |  | — |  |  | (2,164) |
Net gains (losses) recognized during the reporting period on equity securities | — |  |  | 1,276 |  |  | 1,362 |  |  | 71 |
Mortgage loans allowance for credit losses | — |  |  | (6) |  |  | 10 |  |  | (6) |
Other long-term investments | 152 |  |  | (122) |  |  | 241 |  |  | (308) |
Real estate | — |  |  | 47 |  |  | — |  |  | 47 |
Total net investment gains (losses) | $ | (1,229) |  |  | $ | 1,124 |  |  | $ | (2,431) |  |  | $ | (621) |

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The proceeds and gross realized gains (losses) on the sale of available-for-sale fixed maturity securities are as follows:

| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Proceeds from sales | $ | 145,621 |  |  | $ | 33,941 |  |  | $ | 233,999 |  |  | $ | 43,809 |
Gross realized gains | 133 |  |  | 110 |  |  | 1,498 |  |  | 121 |
Gross realized losses | 1,515 |  |  | 358 |  |  | 5,542 |  |  | 547 |

Funding Commitment
Pursuant to agreements with our limited liability partnership investments, we are contractually committed through July 10, 2030 to make capital contributions upon the request of certain of the partnerships. Our remaining potential contractual obligation was $25,442 at June 30, 2024.
Unrealized Gain and Loss
A summary of the changes in net unrealized investment gain (loss) during the reporting period is as follows:

| Six Months Ended June 30,
| 2024 |  | 2023
Change in net unrealized investment gain (loss) |  |  |
Available-for-sale fixed maturities | $ | (13,958) |  |  | $ | (919) |
Income tax effect | 2,931 |  |  | 193 |
Total change in net unrealized investment gain (loss), net of tax | $ | (11,027) |  |  | $ | (726) |

Credit Risk
An allowance for credit losses is recorded based on a number of factors including current economic conditions, management's expectations of future economic conditions and performance indicators, such as market value versus amortized cost, investment spreads widening or contracting, rating actions, payment and default history. The following table contains a rollforward of the allowance for credit losses for available-for-sale fixed maturity securities at June 30, 2024.

Rollforward of allowance for credit losses for available-for-sale fixed maturity securities:
|  | As of
|  | June 30, 2024
Beginning balance, January 1, 2024 |  | $ | 1 |
Additions to the allowance for credit losses for which credit losses were not previously recorded |  |
Reductions for securities sold during the period (realized) |  |
Write-offs charged against the allowance |  |
Recoveries of amounts previously written off |  | (1) |
Ending balance, June 30, 2024 |  | $ | — |

Fixed Maturities Unrealized Loss
The following tables summarize our fixed maturity securities that were in an unrealized loss position reported on a consolidated basis at June 30, 2024 and December 31, 2023. The securities are presented by the length of time they have been continuously in an unrealized loss position. Non-credit related unrealized losses are recognized as a component of other comprehensive income and represent other market movements that are not credit related, for

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example interest rate changes. We have no intent to sell, and it is more likely than not that we will not be required to sell these securities until the fair value recovers to at least equal our cost basis or the securities mature.

June 30, 2024 | Less than 12 months |  | 12 months or longer |  | Total
Type of Investment | Number of Issues |  | Fair Value |  | Gross Unrealized Loss |  | Number of Issues |  | Fair Value |  | Gross Unrealized Loss |  | Fair Value |  | Gross Unrealized Loss
AVAILABLE-FOR-SALE |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bonds |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury | 2 |  |  | $ | 24,891 |  |  | $ | 47 |  |  | 8 |  |  | $ | 16,856 |  |  | $ | 571 |  |  | $ | 41,747 |  |  | $ | 618 |
U.S. government agency | 4 |  |  | 13,890 |  |  | 91 |  |  | 23 |  |  | 70,493 |  |  | 9,063 |  |  | 84,383 |  |  | 9,154 |
States, municipalities and political subdivisions |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Midwest | 7 |  |  | 18,941 |  |  | 123 |  |  | 7 |  |  | 18,388 |  |  | 346 |  |  | 37,329 |  |  | 469 |
Northeast | 9 |  |  | 3,566 |  |  | 64 |  |  | 1 |  |  | 3,433 |  |  | 58 |  |  | 6,999 |  |  | 122 |
South | 4 |  |  | 8,914 |  |  | 59 |  |  | 14 |  |  | 26,042 |  |  | 709 |  |  | 34,956 |  |  | 768 |
West | 6 |  |  | 9,558 |  |  | 46 |  |  | 12 |  |  | 36,434 |  |  | 893 |  |  | 45,992 |  |  | 939 |
Special revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Midwest | 14 |  |  | 23,903 |  |  | 238 |  |  | 18 |  |  | 33,974 |  |  | 491 |  |  | 57,877 |  |  | 729 |
Northeast | 3 |  |  | 6,844 |  |  | 28 |  |  | 13 |  |  | 32,544 |  |  | 739 |  |  | 39,388 |  |  | 767 |
South | 13 |  |  | 24,560 |  |  | 213 |  |  | 42 |  |  | 89,295 |  |  | 2,719 |  |  | 113,855 |  |  | 2,932 |
West | 14 |  |  | 17,608 |  |  | 207 |  |  | 30 |  |  | 63,881 |  |  | 1,278 |  |  | 81,489 |  |  | 1,485 |
Foreign bonds | — |  |  | — |  |  | — |  |  | 5 |  |  | 11,190 |  |  | 1,083 |  |  | 11,190 |  |  | 1,083 |
Public utilities | 5 |  |  | 12,656 |  |  | 148 |  |  | 48 |  |  | 107,286 |  |  | 10,572 |  |  | 119,942 |  |  | 10,720 |
Corporate bonds |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Energy | 3 |  |  | 7,613 |  |  | 52 |  |  | 13 |  |  | 31,759 |  |  | 2,193 |  |  | 39,372 |  |  | 2,245 |
Industrials | 1 |  |  | 2,931 |  |  | 63 |  |  | 19 |  |  | 40,660 |  |  | 4,948 |  |  | 43,591 |  |  | 5,011 |
Consumer goods and services | 6 |  |  | 11,860 |  |  | 155 |  |  | 29 |  |  | 76,528 |  |  | 8,520 |  |  | 88,388 |  |  | 8,675 |
Health care | 3 |  |  | 5,412 |  |  | 95 |  |  | 9 |  |  | 21,444 |  |  | 4,844 |  |  | 26,856 |  |  | 4,939 |
Technology, media and telecommunications | 4 |  |  | 13,285 |  |  | 344 |  |  | 27 |  |  | 61,689 |  |  | 6,961 |  |  | 74,974 |  |  | 7,305 |
Financial services | 13 |  |  | 69,749 |  |  | 557 |  |  | 38 |  |  | 100,662 |  |  | 5,822 |  |  | 170,411 |  |  | 6,379 |
Mortgage-backed securities | 18 |  |  | 128,323 |  |  | 777 |  |  | 50 |  |  | 17,020 |  |  | 2,603 |  |  | 145,343 |  |  | 3,380 |
Collateralized mortgage obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government National Mortgage Association | 11 |  |  | 39,696 |  |  | 304 |  |  | 41 |  |  | 69,975 |  |  | 13,834 |  |  | 109,671 |  |  | 14,138 |
Federal Home Loan Mortgage Corporation | 1 |  |  | 2,528 |  |  | 12 |  |  | 32 |  |  | 62,781 |  |  | 14,490 |  |  | 65,309 |  |  | 14,502 |
Federal National Mortgage Association | 3 |  |  | 5,464 |  |  | 74 |  |  | 20 |  |  | 30,266 |  |  | 5,127 |  |  | 35,730 |  |  | 5,201 |
Asset-backed securities | 6 |  |  | 22,483 |  |  | 115 |  |  | 1 |  |  | 2,612 |  |  | 72 |  |  | 25,095 |  |  | 187 |
Total Available-for-Sale Fixed Maturities | 150 |  |  | $ | 474,675 |  |  | $ | 3,812 |  |  | 500 |  |  | $ | 1,025,212 |  |  | $ | 97,936 |  |  | $ | 1,499,887 |  |  | $ | 101,748 |

The unrealized losses on our investments in available-for-sale fixed maturities were the result of interest rate movements. We have no intent to sell, and it is more likely than not that we will not be required to sell these securities until the fair value recovers to at least equal our cost basis or the securities mature. In determining whether an allowance for credit losses is necessary, the expected credit loss allowance model procedurally narrows down assets, including based on risk criteria, and then targets those assets which have met specific quantitative thresholds

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of price decrease and operating adjusted increase in spread. Assets meeting those thresholds are processed through models, such as present value of cash flows, to determine any necessary credit allowance adjustment.

December 31, 2023 | Less than 12 months |  | 12 months or longer |  | Total
Type of Investment | Number of Issues |  | Fair Value |  | Gross Unrealized Loss |  | Number of Issues |  | Fair Value |  | Gross Unrealized Loss |  | Fair Value |  | Gross Unrealized Loss
AVAILABLE-FOR-SALE |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bonds |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury | 2 |  |  | $ | 4,138 |  |  | $ | 46 |  |  | 6 |  |  | $ | 12,717 |  |  | $ | 629 |  |  | $ | 16,855 |  |  | $ | 675 |
U.S. government agency | 3 |  |  | 10,986 |  |  | 14 |  |  | 23 |  |  | 71,375 |  |  | 8,288 |  |  | 82,361 |  |  | 8,302 |
States, municipalities and political subdivisions |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Midwest | 11 |  |  | 19,534 |  |  | 61 |  |  | 3 |  |  | 10,737 |  |  | 76 |  |  | 30,271 |  |  | 137 |
Northeast | 3 |  |  | 5,371 |  |  | 8 |  |  | 1 |  |  | 3,469 |  |  | 35 |  |  | 8,840 |  |  | 43 |
South | 12 |  |  | 21,753 |  |  | 91 |  |  | 9 |  |  | 16,610 |  |  | 309 |  |  | 38,363 |  |  | 400 |
West | 17 |  |  | 38,204 |  |  | 140 |  |  | 7 |  |  | 20,064 |  |  | 331 |  |  | 58,268 |  |  | 471 |
Special revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Midwest | 17 |  |  | 29,535 |  |  | 113 |  |  | 11 |  |  | 23,375 |  |  | 245 |  |  | 52,910 |  |  | 358 |
Northeast | 6 |  |  | 15,131 |  |  | 67 |  |  | 8 |  |  | 24,271 |  |  | 493 |  |  | 39,402 |  |  | 560 |
South | 21 |  |  | 45,639 |  |  | 232 |  |  | 32 |  |  | 66,925 |  |  | 1,923 |  |  | 112,564 |  |  | 2,155 |
West | 20 |  |  | 32,789 |  |  | 248 |  |  | 16 |  |  | 38,495 |  |  | 588 |  |  | 71,284 |  |  | 836 |
Foreign bonds | — |  |  | — |  |  | — |  |  | 9 |  |  | 19,172 |  |  | 2,083 |  |  | 19,172 |  |  | 2,083 |
Public utilities | 4 |  |  | 7,151 |  |  | 74 |  |  | 48 |  |  | 111,793 |  |  | 9,980 |  |  | 118,944 |  |  | 10,054 |
Corporate bonds |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Energy | — |  |  | — |  |  | — |  |  | 15 |  |  | 34,331 |  |  | 2,127 |  |  | 34,331 |  |  | 2,127 |
Industrials | 1 |  |  | 1,210 |  |  | 19 |  |  | 21 |  |  | 47,462 |  |  | 4,920 |  |  | 48,672 |  |  | 4,939 |
Consumer goods and services | 4 |  |  | 14,724 |  |  | 98 |  |  | 28 |  |  | 68,837 |  |  | 7,567 |  |  | 83,561 |  |  | 7,665 |
Health care | 1 |  |  | 3,000 |  |  | 2 |  |  | 11 |  |  | 26,544 |  |  | 4,497 |  |  | 29,544 |  |  | 4,499 |
Technology, media and telecommunications | 1 |  |  | 3,969 |  |  | 35 |  |  | 27 |  |  | 62,988 |  |  | 5,630 |  |  | 66,957 |  |  | 5,665 |
Financial services | 5 |  |  | 14,327 |  |  | 223 |  |  | 44 |  |  | 112,517 |  |  | 7,158 |  |  | 126,844 |  |  | 7,381 |
Mortgage-backed securities | 3 |  |  | 2,783 |  |  | 33 |  |  | 48 |  |  | 15,758 |  |  | 2,295 |  |  | 18,541 |  |  | 2,328 |
Collateralized mortgage obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government National Mortgage Association | 2 |  |  | 7,055 |  |  | 27 |  |  | 40 |  |  | 72,565 |  |  | 12,715 |  |  | 79,620 |  |  | 12,742 |
Federal Home Loan Mortgage Corporation | 2 |  |  | 2,589 |  |  | 22 |  |  | 31 |  |  | 66,361 |  |  | 13,155 |  |  | 68,950 |  |  | 13,177 |
Federal National Mortgage Association | 2 |  |  | 5,454 |  |  | 55 |  |  | 20 |  |  | 31,460 |  |  | 4,609 |  |  | 36,914 |  |  | 4,664 |
Asset-backed securities | — |  |  | — |  |  | — |  |  | 1 |  |  | 2,962 |  |  | 87 |  |  | 2,962 |  |  | 87 |
Total Available-for-Sale Fixed Maturities | 137 |  |  | $ | 285,342 |  |  | $ | 1,608 |  |  | 459 |  |  | $ | 960,788 |  |  | $ | 89,740 |  |  | $ | 1,246,130 |  |  | $ | 91,348 |

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NOTE 3. FAIR VALUE OF FINANCIAL INSTRUMENTS
Current accounting guidance on fair value measurements includes the application of a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Our financial instruments that are recorded at fair value are categorized into a three-level hierarchy, which is based upon the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (i.e., Level 1) and the lowest priority to unobservable inputs (i.e., Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the financial instrument.
Financial instruments recorded at fair value are categorized in the fair value hierarchy as follows:
•Level 1: Valuations are based on unadjusted quoted prices for identical financial instruments in active markets that we have the ability to access at the measurement date.
•Level 2: Valuations are based on quoted prices for similar financial instruments in active markets, in markets that are not active or on inputs that are observable either directly or indirectly for the full term of the financial instrument.
•Level 3: Valuations are based on pricing or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement of the financial instrument. Such inputs may reflect management's own assumptions about the assumptions a market participant would use in pricing the financial instrument.
We review our fair value hierarchy categorizations on a quarterly basis at which time the classification of certain financial instruments may change if the input observations have changed. Transfers between levels, if any, are recorded as of the beginning of the reporting period.
To determine the fair value of the majority of our investments, we utilize prices obtained from independent, nationally recognized pricing services. We obtain one price for each security. When the pricing services cannot provide a determination of fair value for a specific security, we obtain non-binding price quotes from broker-dealers with whom we have had several years' experience and who have demonstrated knowledge of the subject security.
In order to determine the proper classification in the fair value hierarchy, we obtain and evaluate the vendors' pricing procedures and inputs used to price the security, which include unadjusted quoted market prices for identical securities, such as a New York Stock Exchange closing price, and quoted prices for identical securities in markets that are not active. For fixed maturity securities, an evaluation of interest rates and yield curves observable at commonly quoted intervals, volatility, prepayment speeds, credit risks and default rates may also be performed. We have determined that these processes and inputs result in fair values and classifications consistent with the applicable accounting guidance on fair value measurements.
When possible, we use quoted market prices to determine the fair value of fixed maturities, equity securities and short-term investments. When quoted market prices do not exist, we base estimates of fair value on market information obtained from independent pricing services and brokers or on valuation techniques that are both unobservable and significant to the overall fair value measurement of the financial instrument. Such inputs may reflect management's own assumptions about the assumptions a market participant would use in pricing the financial instrument. Our valuation techniques are discussed in more detail throughout this section.
The mortgage loan portfolio consists entirely of commercial mortgage loans. The fair value of our mortgage loans is determined by modeling performed by our third-party fund manager based on the stated principal and coupon payments provided for in the loan agreements. These cash flows are then discounted using an appropriate risk-adjusted discount rate to determine the security's fair value.

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Our other long-term investments consist primarily of our interests in limited liability partnerships that are recorded on the equity method of accounting. The fair value of the partnerships is obtained from the fund managers, which is based on the fair value of the underlying investments held in the partnerships. In management's opinion, these values represent a reasonable estimate of fair value. We have not adjusted the net asset value provided by the fund managers.
For cash and cash equivalents and accrued investment income, carrying value is a reasonable estimate of fair value due to the short-term nature of these financial instruments.
The Company formed a rabbi trust in 2014 to fund obligations under the United Fire & Casualty Company Supplemental Executive Retirement and Deferral Plan (the "Executive Retirement Plan"). Within the rabbi trust, corporate-owned life insurance ("COLI") policies are utilized as an investment vehicle and source of funding for the Company's Executive Retirement Plan. The COLI policies invest in mutual funds, which are priced daily by independent sources. As of June 30, 2024, the cash surrender value of the COLI policies was $12,450 w hich is equal to the fair value measured using Level 2 inputs, based on the underlying assets of the COLI policie s, and is included in other assets in the Consolidated Balance Sheets.
Our long-term debt is not carried in the Consolidated Balance Sheet at fair value. The fair value of our long-term debt is estimated using Level 2 inputs based on quoted prices for similar financial instruments. The fair value is estimated using a discounted cash flow analysis.
A summary of the carrying value and estimated fair value of our financial instruments at June 30, 2024 and December 31, 2023 is as follows:

| June 30, 2024 |  | December 31, 2023
| Fair Value |  | Carrying Value |  | Fair Value |  | Carrying Value
Assets |  |  |  |  |  |  |
Investments |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |
Available-for-sale securities | $ | 1,796,133 |  |  | $ | 1,796,133 |  |  | $ | 1,686,503 |  |  | $ | 1,686,502 |
Equity securities | — |  |  | — |  |  | 55,019 |  |  | 55,019 |
Mortgage loans | 38,737 |  |  | 41,238 |  |  | 42,632 |  |  | 45,366 |
Other long-term investments | 98,405 |  |  | 98,405 |  |  | 99,507 |  |  | 99,507 |
Short-term investments | 100 |  |  | 100 |  |  | 100 |  |  | 100 |
Cash and cash equivalents | 153,430 |  |  | 153,430 |  |  | 102,046 |  |  | 102,046 |
Corporate-owned life insurance | 12,450 |  |  | 12,450 |  |  | 11,913 |  |  | 11,913 |
Liabilities |  |  |  |  |  |  |
Long Term Debt | 107,959 |  |  | 116,965 |  |  | 38,413 |  |  | 50,000 |

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The following tables present the categorization for our financial instruments measured at fair value on a recurring basis. The table includes financial instruments at June 30, 2024 and December 31, 2023:

June 30, 2024 |  |  | Fair Value Measurements
Description | Total |  | Level 1 |  | Level 2 |  | Level 3
AVAILABLE-FOR-SALE |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |
Bonds |  |  |  |  |  |  |
U.S. Treasury | $ | 50,649 |  |  | $ | — |  |  | $ | 50,649 |  |  | $ | — |
U.S. government agency | 88,341 |  |  | — |  |  | 88,341 |  |  | — |
States, municipalities and political subdivisions |  |  |  |  |  |  |
General obligations |  |  |  |  |  |  |
Midwest | 38,449 |  |  | — |  |  | 38,449 |  |  | — |
Northeast | 6,999 |  |  | — |  |  | 6,999 |  |  | — |
South | 36,107 |  |  | — |  |  | 36,107 |  |  | — |
West | 57,885 |  |  | — |  |  | 57,885 |  |  | — |
Special revenue |  |  |  |  |  |  |
Midwest | 63,713 |  |  | — |  |  | 63,713 |  |  | — |
Northeast | 49,268 |  |  | — |  |  | 49,268 |  |  | — |
South | 118,636 |  |  | — |  |  | 118,636 |  |  | — |
West | 84,769 |  |  | — |  |  | 84,769 |  |  | — |
Foreign bonds | 15,138 |  |  | — |  |  | 15,138 |  |  | — |
Public utilities | 130,768 |  |  | — |  |  | 130,768 |  |  | — |
Corporate bonds |  |  |  |  |  |  |
Energy | 39,637 |  |  | — |  |  | 39,637 |  |  | — |
Industrials | 53,722 |  |  | — |  |  | 53,722 |  |  | — |
Consumer goods and services | 93,322 |  |  | — |  |  | 93,322 |  |  | — |
Health care | 26,856 |  |  | — |  |  | 26,856 |  |  | — |
Technology, media and telecommunications | 74,974 |  |  | — |  |  | 74,974 |  |  | — |
Financial services | 227,572 |  |  | — |  |  | 227,572 |  |  | — |
Mortgage-backed securities | 216,279 |  |  | — |  |  | 216,279 |  |  | — |
Collateralized mortgage obligations |  |  |  |  |  |  |
Government National Mortgage Association | 137,600 |  |  | — |  |  | 137,600 |  |  | — |
Federal Home Loan Mortgage Corporation | 65,309 |  |  | — |  |  | 65,309 |  |  | — |
Federal National Mortgage Association | 41,217 |  |  | — |  |  | 41,217 |  |  | — |
Asset-backed securities | 78,923 |  |  | — |  |  | 78,647 |  |  | 276 |
Total Available-for-Sale Fixed Maturities | $ | 1,796,133 |  |  | $ | — |  |  | $ | 1,795,857 |  |  | $ | 276 |
Short-Term Investments | $ | 100 |  |  | $ | 100 |  |  | $ | — |  |  | $ | — |
Money Market Accounts | $ | 51,654 |  |  | $ | 51,654 |  |  | $ | — |  |  | $ | — |
Corporate-Owned Life Insurance | $ | 12,450 |  |  | $ | — |  |  | $ | 12,450 |  |  | $ | — |
Total Assets Measured at Fair Value | $ | 1,860,337 |  |  | $ | 51,754 |  |  | $ | 1,808,307 |  |  | $ | 276 |

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The fair value of financial instruments that are not carried at fair value on a recurring basis in the financial statements at June 30, 2024 are summarized below:

Description | Fair Value Total | Level 1 | Level 2 | Level 3 | Net Asset Value
Financial assets: |  |  |  |  |
Cash and cash equivalents | $ | 101,776 |  | $ | 101,776 |  | $ | — |  | $ | — |  | $ | — |
Other Long Term Investments | $ | 98,405 |  | $ | — |  | $ | 1,277 |  | $ | — |  | $ | 97,128 |
Mortgage Loans | $ | 38,737 |  | $ | — |  | $ | — |  | $ | 38,737 |  | $ | — |
Total Financial assets not accounted for at fair value | $ | 238,918 |  | $ | 101,776 |  | $ | 1,277 |  | $ | 38,737 |  | $ | 97,128 |
Long Term Debt | $ | 107,959 |  |  | $ | 107,959 |  |  |
Total Financial liabilities not accounted for at fair value | $ | 107,959 |  | $ | — |  | $ | 107,959 |  | $ | — |  | $ | — |

December 31, 2023 |  |  | Fair Value Measurements
Description | Total |  | Level 1 |  | Level 2 |  | Level 3
AVAILABLE-FOR-SALE |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |
Bonds |  |  |  |  |  |  |
U.S. Treasury | $ | 50,861 |  |  | $ | — |  |  | $ | 50,861 |  |  | $ | — |
U.S. government agency | 94,493 |  |  | — |  |  | 94,493 |  |  | — |
States, municipalities and political subdivisions |  |  |  |  |  |  |
General obligations |  |  |  |  |  |  |
Midwest | 52,707 |  |  | — |  |  | 52,707 |  |  | — |
Northeast | 11,380 |  |  | — |  |  | 11,380 |  |  | — |
South | 54,207 |  |  | — |  |  | 54,207 |  |  | — |
West | 77,426 |  |  | — |  |  | 77,426 |  |  | — |
Special revenue |  |  |  |  |  |  |
Midwest | 100,981 |  |  | — |  |  | 100,981 |  |  | — |
Northeast | 52,227 |  |  | — |  |  | 52,227 |  |  | — |
South | 164,266 |  |  | — |  |  | 164,266 |  |  | — |
West | 101,565 |  |  | — |  |  | 101,565 |  |  | — |
Foreign bonds | 19,172 |  |  | — |  |  | 19,172 |  |  | — |
Public utilities | 140,467 |  |  | — |  |  | 140,467 |  |  | — |
Corporate bonds |  |  |  |  |  |  |
Energy | 43,473 |  |  | — |  |  | 43,473 |  |  | — |
Industrials | 70,548 |  |  | — |  |  | 70,548 |  |  | — |
Consumer goods and services | 95,921 |  |  | — |  |  | 95,921 |  |  | — |
Health care | 33,472 |  |  | — |  |  | 33,472 |  |  | — |
Technology, media and telecommunications | 81,788 |  |  | — |  |  | 81,788 |  |  | — |
Financial services | 145,691 |  |  | — |  |  | 140,799 |  |  | 4,892 |
Mortgage-backed securities | 21,483 |  |  | — |  |  | 21,483 |  |  | — |

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Collateralized mortgage obligations |  |  |  |  |  |  |
Government National Mortgage Association | 153,206 |  |  | — |  |  | 153,206 |  |  | — |
Federal Home Loan Mortgage Corporation | 71,685 |  |  | — |  |  | 66,862 |  |  | 4,823 |
Federal National Mortgage Association | 45,653 |  |  | — |  |  | 45,653 |  |  | — |
Asset-backed securities | 3,831 |  |  | — |  |  | 2,962 |  |  | 869 |
Total Available-for-Sale Fixed Maturities | $ | 1,686,503 |  |  | $ | — |  |  | $ | 1,675,919 |  |  | $ | 10,584 |
EQUITY SECURITIES |  |  |  |  |  |  |
Common stocks |  |  |  |  |  |  |
Public utilities | $ | 3,993 |  |  | $ | 3,993 |  |  | $ | — |  |  | $ | — |
Energy | 9,477 |  |  | 9,477 |  |  | — |  |  | — |
Industrials | 14,164 |  |  | 14,164 |  |  | — |  |  | — |
Consumer goods and services | 11,385 |  |  | 11,385 |  |  | — |  |  | — |
Health care | 2,060 |  |  | 2,060 |  |  | — |  |  | — |
Technology, media and telecommunications | 6,405 |  |  | 6,405 |  |  | — |  |  | — |
Financial services | 7,535 |  |  | 7,535 |  |  | — |  |  | — |
Total Equity Securities | $ | 55,019 |  |  | $ | 55,019 |  |  | $ | — |  |  | $ | — |
Short-Term Investments | $ | 100 |  |  | $ | 100 |  |  | $ | — |  |  | $ | — |
Money Market Accounts | $ | 20,333 |  |  | $ | 20,333 |  |  | $ | — |  |  | $ | — |
Corporate-Owned Life Insurance | $ | 11,913 |  |  | $ | — |  |  | $ | 11,913 |  |  | $ | — |
Total Assets Measured at Fair Value | $ | 1,773,868 |  |  | $ | 75,452 |  |  | $ | 1,687,832 |  |  | $ | 10,584 |

The fair value of financial instruments that are not carried at fair value on a recurring basis in the financial statements at December 31, 2023 are summarized below:

Description | Fair Value Total | Level 1 | Level 2 | Level 3 | Net Asset Value
Financial assets: |  |  |  |  |
Cash and cash equivalents | $ | 81,713 |  | $ | 81,713 |  | $ | — |  | $ | — |  | $ | — |
Other Long Term Investments | $ | 99,507 |  | $ | — |  | $ | 1,249 |  | $ | — |  | $ | 98,258 |
Mortgage Loans | $ | 42,632 |  | $ | — |  | $ | — |  | $ | 42,632 |  | $ | — |
Total Financial assets not accounted for at fair value | $ | 223,852 |  | $ | 81,713 |  | $ | 1,249 |  | $ | 42,632 |  | $ | 98,258 |
Long Term Debt | $ | 38,413 |  | $ | — |  | $ | 38,413 |  | $ | — |  | $ | — |
Total Financial liabilities not accounted for at fair value | $ | 38,413 |  | $ | — |  | $ | 38,413 |  | $ | — |  | $ | — |

The fair value of securities that are categorized as Level 1 is based on quoted market prices that are readily and regularly available.
We use a market-based approach for valuing all of our Level 2 securities and submit them primarily to a third-party valuation service provider. Any of these securities not valued by this service provider are submitted to another third-party valuation service provider. Both service providers use a market approach to find pricing of similar financial instruments. The market inputs our service providers normally seek to value our securities include the following,

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listed in approximate order of priority: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. The method and inputs for these securities classified as Level 2 are the same regardless of industry category, credit quality, duration, geographical concentration or economic characteristics. For our mortgage-backed securities, collateralized mortgage obligations and asset-backed securities, our service providers use additional market inputs to value these securities, including the following: new issue data, periodic payment information, monthly payment information, collateral performance and real estate analysis from third parties. Our service providers prioritize inputs based on market conditions, and not all inputs listed are available for use in the valuation process for each security on any given day.
The Company receives updated prices from a third-party on a monthly basis. The third party obtains pricing information from independent pricing services and brokers and validates for reasonableness prior to use for reporting purposes on a monthly basis. At least annually, we review the methodologies and assumptions used by our third-party and verify that they are reasonable and representative of the fair value of the underlying securities held in the investment portfolio. In our opinion, the pricing obtained at June 30, 2024 and December 31, 2023 was reasonable.
For the three- and six-month periods ended June 30, 2024, the change in our available-for-sale securities categorized as Level 1 and Level 2 is the result of investment purchases that were made using funds held in our money market accounts, disposals, funds from debt issuance proceeds, and the change in unrealized gains.
Securities categorized as Level 3 include holdings in certain private placement fixed maturity securities for which an active market does not currently exist. The fair value of our Level 3 private placement securities is determined by management relying on pricing received from our independent pricing services and brokers consistent with the process to estimate fair value for Level 2 securities. However, securities are categorized as Level 3 if these quotes cannot be corroborated by other market observable data due to the unobservable nature of the brokers' valuation processes. There is inherent uncertainty of the fair value measurement of Level 3 securities due to the use of significant unobservable inputs. A change in significant unobservable inputs may result in a significantly higher or lower fair value measurement as of the reporting date.
The following table provides quantitative information about our Level 3 securities at June 30, 2024:

Quantitative Information about Level 3 Fair Value Measurements
|  | Fair Value at |  | Valuation Technique(s) |  | Unobservable inputs |  | Range of weighted average significant unobservable inputs
|  | June 30, 2024 |  |  |
Fixed Maturities asset-backed securities |  | 276 |  |  | Book Value |  | Probability of default |  | 0% - 100%

The following table provides a summary of the changes in fair value of our Level 3 securities for the three-month period ended June 30, 2024:

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|  |  |  |  |  |  | Corporate bonds |  | Asset-backed securities |  |  |  | Total
Beginning Balance - April 1, 2024 |  |  |  |  |  |  | $ | — |  |  | $ | 276 |  |  |  |  | $ | 276 |
Realized gains (losses) |  |  |  |  |  |  | — |  |  | — |  |  |  |  | — |
Net unrealized gains (losses)(1) |  |  |  |  |  |  | — |  |  | — |  |  |  |  | — |
Amortization |  |  |  |  |  |  | — |  |  | — |  |  |  |  | — |
Purchases |  |  |  |  |  |  | — |  |  | — |  |  |  |  | — |
Disposals |  |  |  |  |  |  | — |  |  | — |  |  |  |  | — |
Transfers in |  |  |  |  |  |  | — |  |  | — |  |  |  |  | — |
Transfers out |  |  |  |  |  |  | — |  |  | — |  |  |  |  | — |
Ending Balance - June 30, 2024 |  |  |  |  |  |  | $ | — |  |  | $ | 276 |  |  |  |  | $ | 276 |

(1) Net unrealized gains (losses) are recorded as a component of comprehensive income in the line item "Change in net unrealized gain (loss) on investments."
During the three-month period ended June 30, 2024, there were zero securities transferred out of Level 3 due to the use of observable inputs in pricing the securities.
The following table provides a summary of the changes in fair value of our Level 3 securities for the six-month period ended June 30, 2024:

|  | Corporate bonds |  | Asset-backed securities |  |  |  | Total
Beginning Balance - January 1, 2024 |  | $ | 4,892 |  |  | $ | 5,692 |  |  |  |  | $ | 10,584 |
Realized gains (losses) |  | — |  |  | — |  |  |  |  | — |
Net unrealized gains (losses)(1) |  | — |  |  | (593) |  |  |  |  | (593) |
Purchases |  | — |  |  | — |  |  |  |  | — |
Disposals |  | — |  |  | — |  |  |  |  | — |
Amortization |  | — |  |  | — |  |  |  |  | — |
Transfers in |  | — |  |  | — |  |  |  |  | — |
Transfers out |  | (4,892) |  |  | (4,823) |  |  |  |  | (9,715) |
Ending Balance - June 30, 2024 |  | $ | — |  |  | $ | 276 |  |  |  |  | $ | 276 |

(1) Net unrealized gains (losses) are recorded as a component of comprehensive income in the line item "Change in net unrealized gain (loss) on investments."
During the six-month period ended June 30, 2024, there were two securities transferred out of Level 3 due to the use of observable inputs in pricing the securities.
Commercial Mortgage Loans
The following tables present the carrying value of our commercial mortgage loans and additional information at June 30, 2024 and December 31, 2023:

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Commercial Mortgage Loans
| June 30, 2024 |  | December 31, 2023
Loan-to-value | Carrying Value |  | Carrying Value
Less than 65% | $ | 32,718 |  |  | $ | 36,762 |
65%-75% | 8,565 |  |  | 8,659 |
Total amortized cost | $ | 41,283 |  |  | $ | 45,421 |
Allowance for mortgage loan losses | (45) |  |  | (55) |
Mortgage loans, net | $ | 41,238 |  |  | $ | 45,366 |

Mortgage Loans by Region
| June 30, 2024 |  | December 31, 2023
| Carrying Value |  | Percent of Total |  | Carrying Value |  | Percent of Total
East North Central | $ | 3,245 |  |  | 7.9 | % |  | $ | 3,245 |  |  | 7.1 | %
Southern Atlantic | 17,119 |  |  | 41.5 |  |  | 17,217 |  |  | 37.9 |
East South Central | 7,393 |  |  | 17.9 |  |  | 7,526 |  |  | 16.6 |
New England | 6,588 |  |  | 15.9 |  |  | 6,588 |  |  | 14.5 |
Middle Atlantic | 2,102 |  |  | 5.1 |  |  | 5,979 |  |  | 13.2 |
Mountain | 1,992 |  |  | 4.8 |  |  | 1,992 |  |  | 4.4 |
West North Central | 2,844 |  |  | 6.9 |  |  | 2,874 |  |  | 6.3 |
Total mortgage loans at amortized cost | $ | 41,283 |  |  | 100.0 | % |  | $ | 45,421 |  |  | 100.0 | %

Mortgage Loans by Property Type
| June 30, 2024 |  | December 31, 2023
| Carrying Value |  | Percent of Total |  | Carrying Value |  | Percent of Total
Commercial |  |  |  |  |  |  |
Multifamily | $ | 8,448 |  |  | 20.5 | % |  | $ | 8,507 |  |  | 18.7 | %
Office | 10,784 |  |  | 26.1 |  |  | 10,950 |  |  | 24.1 |
Industrial | 9,949 |  |  | 24.1 |  |  | 9,985 |  |  | 22.0 |
Retail | 10,000 |  |  | 24.2 |  |  | 10,000 |  |  | 22.0 |
Mixed use/Other | 2,102 |  |  | 5.1 |  |  | 5,979 |  |  | 13.2 |
Total mortgage loans at amortized cost | $ | 41,283 |  |  | 100.0 | % |  | $ | 45,421 |  |  | 100.0 | %

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Amortized Cost Basis by Year of Origination and Credit Quality Indicator
|  | 2023 |  | 2022 |  | 2020 |  | 2019 |  | 2018 |  | Total
Commercial mortgage loans: |  |  |  |  |  |  |  |  |  |  |  |
Risk Rating: |  |  |  |  |  |  |  |  |  |  |  |
1-2 internal grade |  | $ | 8,134 |  |  | $ | 99 |  |  | 5,204 |  |  | $ | 7,802 |  |  | $ | 13,456 |  |  | $ | 34,695 |
3-4 internal grade |  | — |  |  | — |  |  | — |  |  | — |  |  | 6,588 |  |  | 6,588 |
5 internal grade |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
6 internal grade |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
7 internal grade |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total commercial mortgage loans |  | $ | 8,134 |  |  | $ | 99 |  |  | $ | 5,204 |  |  | $ | 7,802 |  |  | $ | 20,044 |  |  | $ | 41,283 |
Current-period write-offs |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Current-period recoveries |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Current-period net write-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |

Commercial mortgage loans carrying value excludes accrued interest of $156. As of June 30, 2024, all loan receivables were current, with no delinquencies. The commercial mortgage loans originate with an initial loan-to-value ratio that provides sufficient collateral to absorb losses should a loan be required to foreclose. Mortgage loans are evaluated on a quarterly basis for impairment on an individual basis through a monitoring process and review of key credit indicators, such as economic trends, delinquency rates, property valuations, occupancy and rental rates and loan-to-value ratios. A loan is considered impaired when the Company believes it will not collect the principal and interest set forth in the contractual terms of the loan. An internal grade is assigned to each mortgage loan, with a grade of 1 being the highest and least likely for an impairment and the lowest rating of 7 being the most likely for an impairment. An allowance for mortgage loan losses is established on each loan recognizing a loss for amounts which we believe will not be collected according to the contractual terms of the respective loan agreement. As of June 30, 2024, the Company had an allowance for mortgage loan losses of $45, summarized in the following rollforward:

Rollforward of allowance for mortgage loan losses:
|  | As of
|  | June 30, 2024
Beginning balance, January 1, 2024 |  | $ | 55 |
Current-period provision for expected credit losses |  | — |
Write-off charged against the allowance, if any |  | — |
Recoveries of amounts previously written off, if any |  | $ | (10) |
Ending balance of the allowance for mortgage loan losses, June 30, 2024 |  | $ | 45 |

NOTE 4. RESERVES FOR LOSSES AND LOSS SETTLEMENT EXPENSES
Property insurance indemnifies an insured with an interest in physical property for loss of, or damage to, such property or the loss of its income-producing abilities. Casualty insurance is primarily concerned with losses caused by injuries to persons and legal liability imposed on the insured for such injury or for damage to property of others. In most cases, casualty insurance also obligates the insurance company to provide a defense for the insured in litigation, arising out of events covered by the policy.
Liabilities for losses and loss settlement expenses reflect management's best estimates at a given point in time of what we expect to pay for claims that have been reported and those that have been incurred but not reported ("IBNR"), based on known facts, circumstances, and historical trends. Because property and casualty insurance reserves are estimates of the unpaid portions of incurred losses that have been reported to us, as well as losses that have been incurred but not reported, the establishment of appropriate reserves, including reserves for catastrophes, is

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an inherently uncertain and complex process. The ultimate cost of losses and related loss settlement expenses may vary materially from recorded amounts. We regularly update our reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in prior year reserve estimates, which may be material, are reported as a component of losses and loss settlement expenses incurred in the period such changes are determined.
The determination of reserves (particularly those relating to liability lines of insurance that have relatively longer lag in claim reporting) requires significant work to reasonably project expected future claim reporting and payment patterns. If, during the course of our regular monitoring of reserves, we determine that coverages previously written are incurring higher than expected losses, we will evaluate an appropriate response that may include, among other things, increasing the related reserves. Any adjustments we make to reserves are reflected in operating results in the year in which we make those adjustments. We engage an independent actuary, Regnier Consulting Group, Inc. ("Regnier"), to render an opinion as to the reasonableness of our statutory reserves annually. The actuarial opinion is filed in those states where we are licensed.
On a quarterly basis, our actuarial reserving department performs a detailed review of IBNR reserves. This review includes a comparison of results from the most recent analysis of reserves completed by both our internal and external actuaries. Senior management meets with our actuarial team to review, on a regular and quarterly basis, the adequacy of carried reserves based on results from this actuarial analysis. There are two fundamental types or sources of IBNR reserves. We record IBNR reserves for "normal" types of claims and also specific IBNR reserves related to unique circumstances or events. A major hurricane is an example of an event that might necessitate establishing specific IBNR reserves because an analysis of existing historical data would not provide an appropriate estimate.
Our IBNR methodologies and assumptions are reviewed periodically for reasonability.
We do not discount loss reserves based on the time value of money.

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The following table provides an analysis of changes in our property and casualty losses and loss settlement expense reserves at June 30, 2024 and December 31, 2023 (net of reinsurance amounts):

| June 30, 2024 |  | December 31, 2023
Gross liability for losses and loss settlement expenses at beginning of year | $ | 1,638,755 |  |  | $ | 1,497,274 |
Ceded losses and loss settlement expenses | (191,640) |  |  | (146,875) |
Net liability for losses and loss settlement expenses at beginning of year | $ | 1,447,115 |  |  | $ | 1,350,399 |
Losses and loss settlement expenses incurred for claims occurring during |  |  |
Current year | $ | 378,121 |  |  | $ | 701,664 |
Prior years | 2,850 |  |  | 67,750 |
Total incurred | $ | 380,971 |  |  | $ | 769,414 |
Losses and loss settlement expense payments for claims occurring during |  |  |
Current year | $ | 61,548 |  |  | $ | 191,899 |
Prior years | 216,453 |  |  | 480,800 |
Total paid | $ | 278,001 |  |  | $ | 672,699 |
Net liability for losses and loss settlement expenses at end of period | $ | 1,550,085 |  |  | $ | 1,447,115 |
Ceded losses and loss settlement expenses | 205,654 |  |  | 191,640 |
Gross liability for losses and loss settlement expenses at end of period | $ | 1,755,739 |  |  | $ | 1,638,755 |

There are a multitude of factors that can impact loss reserve development. Those factors include, but are not limited to: historical data, the potential impact of various loss reserve development factors and trends including historical loss experience, legislative enactments, judicial decisions, legal developments in imposition of damages, experience with alternative dispute resolution, results of our medical bill review process, the potential impact of salvage and subrogation and changes and trends in general economic conditions, including the effects of inflation. All of these factors influence our estimates of required reserves and for long tail lines these factors can change over the course of the settlement of the claim. However, there is no precise method for evaluating the specific monetary impact of any individual factor on the development of reserves.
Generally, we base reserves for each claim on the estimated ultimate exposure for that claim. We believe that it is appropriate and reasonable to establish a best estimate for reserves within a range of reasonable estimates, especially when we are reserving for claims for bodily injury, disabilities and similar claims, for which settlements and verdicts can vary widely. We believe our approach produces recorded reserves that are reasonably consistent as to their relative position within a range of reasonable reserves from year-to-year. However, conditions and trends that have affected the reserve development for a given year do change.
Because of the type of property coverage we write, we have potential exposure to environmental pollution, mold and asbestos claims. Our underwriters are aware of these exposures and use riders or endorsements to limit exposure. We are not aware of any significant contingent liabilities related to environmental issues.
Reserve Development
Reserve development in the six-month period ended June 30, 2024 was adverse $2.9 million driven primarily by catastrophe loss development within the Assumed book. In addition, there was proactive strengthening in other

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liability lines of business due to continued uncertainty in future loss cost trends related to economic and social inflation, offset by favorable development in commercial auto, workers compensation and fire and allied lines.
During the first six months of 2023, the Company made additional refinements to its reserve review processes and analyses, including increased segmentation on unique exposures, which resulted in deeper insights and understanding of loss experience and significant movements in reserve development across a range of commercial liability lines of business. The significant driver of the reserve strengthening was an increase in long-tailed other liability reserves primarily due to increased loss cost trends related to economic and social inflation. The commercial automobile line of business also experienced reserve strengthening in reaction to continuing loss trends in post-2020 accident years. These increases were partially offset by favorable development in workers' compensation and fire and allied lines.
NOTE 5. EMPLOYEE BENEFITS
Net Periodic Benefit Cost
The components of the net periodic benefit cost for our pension benefit plan are as follows:

| Pension Plan |  |
Three Months Ended June 30, | 2024 |  | 2023 |  |  |  |
Net periodic benefit cost |  |  |  |  |  |  |
Service cost | $ | 822 |  |  | $ | 954 |  |  |  |  |
Interest cost | 2,478 |  |  | 2,526 |  |  |  |  |
Expected return on plan assets | (3,635) |  |  | (3,756) |  |  |  |  |
Amortization of prior service credit | (724) |  |  | (820) |  |  |  |  |
Amortization of net loss | — |  |  | 52 |  |  |  |  |
Net periodic benefit cost | $ | (1,059) |  |  | $ | (1,044) |  |  |  |  |

| Pension Plan |  |
Six Months Ended June 30, | 2024 |  | 2023 |  |  |  |
Net periodic benefit cost |  |  |  |  |  |  |
Service cost | $ | 1,643 |  |  | $ | 1,909 |  |  |  |  |
Interest cost | 4,957 |  |  | 5,053 |  |  |  |  |
Expected return on plan assets | (7,271) |  |  | (7,513) |  |  |  |  |
Amortization of prior service credit | (1,448) |  |  | (1,640) |  |  |  |  |
Amortization of net loss | — |  |  | 104 |  |  |  |  |
Net periodic benefit cost | $ | (2,118) |  |  | $ | (2,087) |  |  |  |  |

A portion of the service cost component of net periodic pension benefit costs is capitalized and amortized as part of deferred acquisition costs and is included in the line "Amortization of deferred policy acquisition costs" in the Consolidated Statements of Income and Comprehensive Income. The portion not related to the compensation and other components of net periodic pension benefit costs is included in the line "Other underwriting expenses" in the Consolidated Statements of Income and Comprehensive Income.
Employer Contributions
We previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 that we are not required to make a contribution to the pension plan for 2024.
NOTE 6. STOCK-BASED COMPENSATION
Non-Qualified Employee Stock Award Plan

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At June 30, 2024, there were 938,814 authorized shares remaining available for future issuance pursuant to the United Fire Group, Inc. 2021 Stock and Incentive Plan (as amended, the "Stock Plan"). The Stock Plan is administered by the Board of Directors, which determines those employees who will receive awards, when awards will be granted, and the terms and conditions of the awards. The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Stock Plan. Pursuant to the Stock Plan, the Board of Directors may, at its sole discretion, grant awards to our employees, who are in positions of substantial responsibility with UFG. The Board of Directors, in its discretion, has also delegated authority to management to grant a limited number of restricted stock units in situations where the Company is seeking to recruit or retain individuals.
Options granted pursuant to the Stock Plan are granted to buy shares of UFG's common stock at the market value of the stock on the date of grant. Options granted prior to March 2017 vest and are exercisable in installments of 20.0 percent of the number of shares covered by the option award each year from the grant date, unless the Board of Directors authorizes the acceleration of vesting. Options granted after March 2017 vest and are exercisable in installments of 33.3 percent of the number of shares covered by the option award each year from the grant date, unless the Board of Directors authorizes the acceleration of vesting. To the extent not exercised, vested option awards accumulate and are exercisable by the awardee, in whole or in part, in any subsequent year included in the option period, but not later than 10 years from the grant date. Restricted and unrestricted stock awards granted pursuant to the Stock Plan are granted at the market value of UFG's common stock on the date of the grant. Restricted stock units fully vest after three years or five years from the date of grant, unless accelerated upon the approval of the Board of Directors, at which time UFG common stock will be issued to the awardee.
The activity in the Stock Plan is displayed in the following table:

Authorized Shares Available for Future Award Grants | Six Months Ended June 30, 2024 |  | From Inception to June 30, 2024
Beginning balance | 1,150,834 |  |  | 1,900,000 |
Additional shares authorized | — |  |  | 2,150,000 |
Number of awards granted | (374,839) |  |  | (4,348,696) |
Number of awards forfeited or expired | 162,819 |  |  | 1,237,510 |
Ending balance | 938,814 |  |  | 938,814 |
Number of option awards exercised | — |  |  | 1,537,336 |
Number of unrestricted stock awards granted | — |  |  | 10,090 |
Number of restricted stock awards vested | 34,881 |  |  | 335,317 |

Non-Qualified Non-Employee Director Stock Plan
The United Fire Group, Inc. Non-Employee Director Stock Plan (formerly known as the 2005 Non-Qualified Non- Employee Director Stock Option and Restricted Stock Plan) (the "Director Stock Plan") authorizes the issuance of restricted stock awards and non-qualified stock options to purchase shares of UFG's common stock to non-employee directors. At June 30, 2024, the Company had 71,410 authorized shares available for future issuance pursuant to the Director Stock Plan.
The Board of Directors has the authority to determine which non-employee directors receive awards, when restricted stock, restricted stock units and options shall be granted, the option price, the option expiration date, the date of grant, the vesting schedule of options or whether the options shall be immediately vested, the terms and conditions of options, restricted stock and restricted stock units (other than those terms and conditions set forth in the plan) and the number of shares of common stock to be issued pursuant to an option, restricted stock or restricted stock unit agreements (subject to limits set forth in the Director Stock Plan). The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Director Stock Plan.
The activity in the Director Stock Plan is displayed in the following table:

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Authorized Shares Available for Future Award Grants | Six Months Ended June 30, 2024 |  | From Inception to June 30, 2024
Beginning balance | 103,600 |  |  | 300,000 |
Additional authorization | — |  |  | 150,000 |
Number of awards granted | (32,190) |  |  | (418,808) |
Number of awards forfeited or expired | — |  |  | 40,218 |
Ending balance | 71,410 |  |  | 71,410 |
Number of option awards exercised | — |  |  | 152,336 |
Number of restricted stock awards vested | 31,380 |  |  | 169,336 |

Stock-Based Compensation Expense
For the three-month periods ended June 30, 2024 and 2023, we recognized stock-based compensation expense of $1,555 and $1,100, respectively.
As of June 30, 2024, we had $11,158 in stock-based compensation expense that has yet to be recognized through our results of operations. We expect this compensation to be recognized over the remainder of 2024 and subsequent years according to the table below, except with respect to awards that are accelerated by the Board of Directors, in which case we will recognize any remaining compensation expense in the period in which the awards are accelerated.

2024 |  | $ | 3,155 |
2025 |  | 4,707 |
2026 |  | 2,746 |
2027 |  | 550 |
2028 |  | — |
Total |  | $ | 11,158 |

NOTE 7. EARNINGS PER COMMON SHARE
Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share gives effect to all dilutive common shares outstanding during the reporting period. The dilutive shares we consider in our diluted earnings per share calculation relate to our outstanding stock options, restricted stock awards and restricted stock unit awards.
We determine the dilutive effect of our outstanding stock options using the "treasury stock" method. Under this method, we assume the exercise of all of the outstanding stock options whose exercise price is less than the weighted-average market value of our common stock during the reporting period. This method also assumes that the proceeds from the hypothetical stock option exercises are used to repurchase shares of our common stock at the weighted-average market value of the stock during the reporting period. The net of the assumed stock options exercised and assumed common shares repurchased represents the number of dilutive common shares, which we add to the denominator of the earnings per share calculation.

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The components of basic and diluted earnings per share were as follows for the three- and six-month periods ended June 30, 2024 and 2023:

| Three Months Ended June 30,
(In Thousands, Except Share Data) | 2024 |  | 2023
| Basic |  | Diluted |  | Basic |  | Diluted
Net income (loss) | $ | (2,735) |  |  | $ | (2,735) |  |  | $ | (56,382) |  |  | $ | (56,382) |
Weighted-average common shares outstanding | 25,314,456 |  |  | 25,314,456 |  |  | 25,249,073 |  |  | 25,249,073 |
Add dilutive effect of restricted stock unit awards | — |  |  | — |  |  | — |  |  | — |
Add dilutive effect of stock options | — |  |  | — |  |  | — |  |  | — |
Weighted-average common shares outstanding | 25,314,456 |  |  | 25,314,456 |  |  | 25,249,073 |  |  | 25,249,073 |
Earnings (loss) per common share | $ | (0.11) |  |  | $ | (0.11) |  |  | $ | (2.23) |  |  | $ | (2.23) |
Awards excluded from diluted earnings per share calculation(1) | — |  |  | 662,378 |  |  | — |  |  | 826,259 |

(1)Outstanding awards that are not "in-the-money" are excluded from the diluted earnings per share calculation because the effect of including them would inherently have been anti-dilutive.

| Six Months Ended June 30,
(In Thousands, Except Share Data) | 2024 |  | 2023
| Basic |  | Diluted |  | Basic |  | Diluted
Net income (loss) | $ | 10,767 |  |  | $ | 10,767 |  |  | $ | (55,688) |  |  | $ | (55,688) |
Weighted-average common shares outstanding | 25,294,698 |  |  | 25,294,698 |  |  | 25,234,834 |  |  | 25,234,834 |
Add dilutive effect of restricted stock unit awards | — |  |  | 599,982 |  |  | — |  |  | — |
Add dilutive effect of stock options | — |  |  | 801 |  |  | — |  |  | — |
Weighted-average common shares outstanding | 25,294,698 |  |  | 25,895,481 |  |  | 25,234,834 |  |  | 25,234,834 |
Earnings (loss) per common share | $ | 0.43 |  |  | $ | 0.42 |  |  | $ | (2.21) |  |  | $ | (2.21) |
Awards excluded from diluted earnings per share calculation(1) | — |  |  | 662,378 |  |  | — |  |  | 822,692 |

(1)Outstanding awards that are not "in-the-money" are excluded from the diluted earnings per share calculation because the effect of including them would inherently have been anti-dilutive.
NOTE 8. DEBT
Long Term Debt
December 2020 Private Placement
The Company executed a private placement debt transaction on December 15, 2020, by and between United Fire & Casualty Company ("UF&C"), and Federated Mutual Insurance Company, a mutual insurance company domiciled in Minnesota ("Federated Mutual"), and Federated Life Insurance Company, an insurance company domiciled in Minnesota ("Federated Life" and, together with Federated Mutual, the "Note Purchasers").
UF&C sold an aggregate principal amount of $50,000 of notes due in 2040 to the Note Purchasers. One note with a principal amount of $35,000 was issued to Federated Mutual and one note with a principal amount of $15,000 was issued to Federated Life subject to the terms of their respective notes.
Interest payments under the long-term debt will be paid quarterly on March 15, June 15, September 15 and December 15 of each year (each such date, an "Interest Payment Date"). The interest rate will equal the rate that corresponds to the A.M. Best Co. (or its successor's) financial strength rating for members of the United Fire & Casualty Pooled Group as of the applicable Interest Payment Date, as set forth in the table below. For the six-month

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period ended June 30, 2024, interest expense totaled $1,719. Payment of interest is subject to approval by the Iowa Insurance Division.

A.M. Best Co. Financial Strength Rating | Applicable Interest Rate
A+ | 5.875%
A | 6.375%
A- | 6.875%
B++ (or lower) | 7.375%

May 2024 Private Placement
On May 31, 2024, the Company completed the private placement of $70,000 aggregate principal of senior unsecured notes due May 31, 2039 (the "Notes"), to certain qualified institutional buyers pursuant to a Master Note Purchase Agreement, dated as of May 31, 2024, by and among the Company, Ares Management, LLC ("Ares") as the lead investor (including several affiliate investors of Ares), American Republic Insurance Company and Illinois Casualty Company. The Notes were issued in a single series, with a maturity date of May 31, 2039, and bearing interest at an annual rate of 9%. Costs incurred in the issuance of debt of $3,050 are capitalized and amortized over the life of the non-cancellable period of the debt. The capitalization of such debt issuance costs are included as an offset to the "Long Term Debt" in the Consolidated Balance Sheets and the related amortization is included in "Interest expense" in the Consolidated Statements of Income and Comprehensive Income. The interest on the Notes will be payable quarterly in arrears beginning on August 31, 2024. For the six-month period ended June 30, 2024, interest expense totaled $540.
Credit Facilities
In December 2023, UF&C became a member of the Federal Home Loan Bank of Des Moines ("FHLB Des Moines"). As part of the FHLB Des Moines application process and in connection with its membership in FHLB Des Moines, UF&C entered into FHLB Des Moines' standard Advances, Pledge and Security Agreement (the "Advances Agreement"). The Advances Agreement governs the terms and conditions under which UF&C may borrow and FHLB Des Moines may make loans or advances from time to time. The Advances Agreement requires UF&C to pledge certain collateral, including the capital stock in FHLB Des Moines owned by UF&C and such other assets (including mortgage-related securities, loans, and stock in the Company) as agreed by UF&C and FHLB Des Moines in connection with any such loans or advances.
Membership in FHLB Des Moines provides the Company with access to FHLB Des Moines' product line of financial services, including funding agreements, general asset/liability management, and collateralized advances that can be used for liquidity management. As a member, the Company has an aggregate borrowing capacity of up to 20.0 percent of total assets of UF&C. As of June 30, 2024, the Company has FHLB Des Moines borrowing capacity up to $452.7 million if an immediate liquidity need would arise. The Company had no outstanding balance as of June 30, 2024 and 2023 related to these lines of credit.

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NOTE 9. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the three-month period ended June 30, 2024:

|  |  | Liability for |  | Foreign |  |
| Net unrealized |  | underfunded |  | currency |  |
| gain (loss) |  | employee |  | translation |  |
| on investments |  | benefit costs(1) |  | adjustment |  | Total
Balance as of March 31, 2024 | (73,707) |  |  | 15,438 |  |  | $ | (23) |  |  | $ | (58,292) |
Change in accumulated other comprehensive income (loss) before reclassifications | (5,257) |  |  | (572) |  |  | 35 |  |  | (5,794) |
Reclassification adjustments from accumulated other comprehensive income (loss) | 970 |  |  | — |  |  | — |  |  | 970 |
Balance as of June 30, 2024 | $ | (77,994) |  |  | $ | 14,866 |  |  | $ | 12 |  |  | $ | (63,116) |

(1) The preparation of financial statements in conformity with GAAP requires us to make various estimates and assumptions that affect the reporting of net periodic benefit cost, plan assets and plan obligations for each plan at the date of the financial statements. Actual results could differ from these estimates. One significant estimate relates to the calculation of the benefit obligation for each plan. We annually establish the discount rate, which is an estimate of the interest rate at which these benefits could be effectively settled, that is used to determine the present value of the respective plan's benefit obligations as of December 31.
The following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the six-month period ended June 30, 2024:

|  |  | Liability for |  | Foreign |  |
| Net unrealized |  | underfunded |  | currency |  |
| gain (loss) |  | employee |  | translation |  |
| on investments |  | benefit costs(1) |  | adjustment |  | Total
Balance as of January 1, 2024 | (66,967) |  |  | 16,010 |  |  | — |  |  | $ | (50,957) |
Change in accumulated other comprehensive income (loss) before reclassifications | (14,023) |  |  | (1,144) |  |  | 12 |  |  | (15,155) |
Reclassification adjustments from accumulated other comprehensive income (loss) | 2,996 |  |  | — |  |  | — |  |  | 2,996 |
Balance as of June 30, 2024 | $ | (77,994) |  |  | $ | 14,866 |  |  | $ | 12 |  |  | $ | (63,116) |

(1) The preparation of financial statements in conformity with GAAP requires us to make various estimates and assumptions that affect the reporting of net periodic benefit cost, plan assets and plan obligations for each plan at the date of the financial statements. Actual results could differ from these estimates. One significant estimate relates to the calculation of the benefit obligation for each plan. We annually establish the discount rate, which is an estimate of the interest rate at which these benefits could be effectively settled, that is used to determine the present value of the respective plan's benefit obligations as of December 31.
Income tax effects are released from accumulated other comprehensive income (loss) for unrealized gains or losses when the gains or losses are realized.
NOTE 10. LEASES
The Company has operating leases consisting of office space, vehicle leases, computer equipment, and office equipment. Lease terms and options vary in the Company's operating leases dependent upon the underlying leased asset. We exclude options to extend or terminate a lease from our recognition as part of our right-of-use assets and lease liabilities until those options are known and/or executed, as we typically do not exercise options to purchase the underlying leased asset. As of June 30, 2024, we have leases with remaining terms of one year to seven years, some of which may include no options for renewal and others with options to extend the lease terms from six months to five years.

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The Company has six lease agreements under which the Company serves as the lessor. The properties are used for office space and parking. The terms of the leases vary depending on the property and range from two years to nine years, which may include options for renewal or to extend lease terms. The Company has elected to categorize these leases into four categories based on length of lease terms and applies an incremental borrowing rate.
The components of our operating leases were as follows for the three- and six-month periods ended June 30, 2024 and 2023:

|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2024 |  | 2023 |  | 2024 |  | 2023
Components of lease expense: |  |  |  |  |  |  |  |
Operating lease expense |  | $ | 2,354 |  |  | $ | 2,210 |  |  | $ | 4,754 |  |  | $ | 4,397 |
Less lessor income |  | 145 |  |  | 133 |  |  | 291 |  |  | 266 |
Less sublease income |  | 133 |  |  | 126 |  |  | 266 |  |  | 160 |
Net lease expense |  | 2,076 |  |  | 1,951 |  |  | 4,197 |  |  | 3,971 |
Cash flows information related to leases: |  |  |  |  |  |  |  |
Operating cash outflow from operating leases |  | 2,080 |  |  | 1,991 |  |  | 4,184 |  |  | 4,043 |

There have been no allowances for credit losses recorded or write-offs against our receivables related to our lessor agreements because, due to the nature of the operating leases and history of collectability, there is no expectation of credit quality concerns.

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ITEM 2. 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 I, Item 1 "Financial Statements."
CRITICAL ACCOUNTING POLICIES
Critical accounting policies are defined as those that are representative of significant judgments and uncertainties and that potentially may result in materially different results under different assumptions and conditions. We base our discussion and analysis of our consolidated financial condition and results of operations on the amounts reported in our Consolidated Financial Statements, which we have prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). As we prepare these Consolidated Financial Statements, we must make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates. Our critical accounting policies are more fully described in our Management's Discussion and Analysis of Financial Condition and Results of Operations presented in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed on February 29, 2024. There have been no changes in our critical accounting policies from December 31, 2023.
INTRODUCTION
The purpose of this Management's Discussion and Analysis is to provide an understanding of our results of operations and consolidated financial condition. Our Management's Discussion and Analysis should be read in conjunction with our Consolidated Financial Statements and related notes, including those in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023. Our Consolidated Financial Statements are prepared in accordance with GAAP. We also prepare financial statements for each of our insurance company subsidiaries based on statutory accounting principles and file them with insurance regulatory authorities in the states where they do business.
When we provide information on a statutory or other basis, we label it as such, otherwise all other data is presented in accordance with GAAP.
BUSINESS OVERVIEW
Originally founded in 1946 as United Fire & Casualty Company, United Fire Group, Inc. ("UFG," the "Company," "we," "us," or "our") and its consolidated insurance subsidiaries provide insurance protection for individuals and businesses through several regional companies. Our property and casualty insurance company subsidiaries are licensed in 50 s tates and the District of Columbia and are represented by approximately 1,000 independent agencies.
Reportable Segments
Our property and casualty insurance business operates and reports as one business segment. For more information, refer to Part I, Item 1, Note 1. "Nature of Operations and Basis of Presentation."

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Products and Lines of Business
Our business consists primarily of commercial lines property and casualty insurance, including surety bonds. In 2020, the Company announced its intent to withdraw as a direct writer of personal lines insurance, with the last exposures related to this business expected to lapse by 2025. As of June 30, 2024, minimal exposure from the direct personal lines of business remains.
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. We also provide specialty and surplus lines coverage written exclusively through wholesale brokers on an admitted and non-admitted basis. Additionally, the Company offers reinsurance coverage for property and casualty insurance through traditional treaty reinsurance channels. The Company assumes premium in Lloyd's of London syndicates through a Funds at Lloyd's subsidiary. The reinsurance operation supports primarily commercial lines of business but also assumes risk in professional, financial and personal lines of insurance. We also partner with Management General Agents ("MGAs") to offer delegated underwriting programs providing niche products including marine specialty, professional liability and earthquake coverages.
We review and report our results using lines of business. The following table shows the principal types of property and casualty insurance policies we write and issue, and which lines of business they are reported in:

| Direct Writer | Treaty Reinsurance(1) | Funds at Lloyd's | MGAs
Commercial Lines |  |  |  |
Other Liability | x | P |  | x
Fire and allied lines | x | P |  | x
Automobile | x | P |  |
Workers' compensation | x | P |  |
Fidelity and surety | x | P |  |
Other | x |  |  | x
Personal Lines |  |  |  |
Fire and allied lines | * | P |  |
Automobile | * |  |  |
Other | * |  |  |
Reinsurance Assumed |  | NP | x |

* Personal lines direct business was discontinued in 2020 with only a minimal number of exposures still in force due to certain regulatory non-renewal limitations.
(1) Treaty Reinsurance is split between proportional reinsurance (P) and non-proportional reinsurance (NP).
Commercial other liability - primarily business insurance covering bodily injury and property damage including construction defect, excess and surplus lines excess casualty, and standard umbrella. Proportional assumed reinsurance on these lines and professional liability coverage managed by an MGA partner.
Commercial fire and allied lines - primarily multi-peril non-liability property coverage and inland marine. Proportional assumed reinsurance on these lines and earthquake coverage managed by an MGA partner.
Commercial automobile - physical damage to an insured's vehicle, as well as liabilities to third parties. Automobile physical damage insurance covers loss or damage to vehicles from collision, vandalism, fire, theft, flood or other causes. Automobile liability insurance covers bodily injury, damage to property resulting from automobile accidents caused by the insured, uninsured or under-insured motorists and the legal costs of defending the insured against

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lawsuits. Proportional reinsurance on these lines is also included.
Workers' compensation - business coverage for employees who are injured or become ill as a result of their job, including proportional assumed reinsurance for this coverage. Our workers' compensation insurance covers primarily small- to mid-sized accounts.
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. Proportional reinsurance on these lines is also included.
Commercial other - commercial theft coverage, boiler and machinery and ocean marine business managed by an MGA partner.
Personal fire and allied lines - proportional assumed reinsurance for homeowners multi-peril coverage.
Reinsurance assumed - primarily non-proportional assumed reinsurance and Funds at Lloyd's property and casualty syndicates.
Lloyd's Syndicates
As of January 1, 2021, the Company became a member of Lloyd's of London ("Lloyd's") through McIntyre Cedar Corporate Member LLP. As a member of Lloyd's, the Company is required to maintain capital at Lloyd's, referred to as Funds at Lloyd's ("FAL"), to support underwriting of property and casualty and reinsurance business by Syndicate 1492, Syndicate 1729, Syndicate 1969, Syndicate 1971, Syndicate 4747, Syndicate 2988, Syndicate 1699, Syndicate 5623 and Syndicate 2358.
Pooling Arrangement
All of our property and casualty insurance subsidiaries are members of an intercompany reinsurance pooling arrangement. The Company's pooling arrangement permits the participating companies to rely on the capacity of the entire pool's capital and surplus, rather than being limited to policy exposures of a size commensurate with each participant's own surplus level.
Geographic Concentration
For the six-month period ended June 30, 2024, approximately 48.5 percent of our property and casualty premiums were written in Texas, California, Iowa, Louisiana and New Jersey.

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FINANCIAL HIGHLIGHTS

| Three Months Ended June 30, |  | Six Months Ended June 30,
(In Thousands, Except Ratios) | 2024 |  | 2023 |  | % |  | 2024 |  | 2023 |  | %
Revenues |  |  |  |  |  |  |  |  |  |  |
Net premiums earned | $ | 287,569 |  |  | $ | 254,638 |  |  | 12.9 | % |  | $ | 568,428 |  |  | $ | 510,765 |  |  | 11.3 | %
Investment income, net of investment expenses | 18,029 |  |  | 11,327 |  |  | 59.2 |  |  | 34,371 |  |  | 24,049 |  |  | 42.9 |
Net investment gains (losses) | (1,229) |  |  | 1,124 |  |  | (209.3) |  |  | (2,431) |  |  | (621) |  |  | (291.5) |
Other income (loss) | (3,200) |  |  | — |  |  | NM |  | (3,200) |  |  | — |  |  | NM
Total revenues | $ | 301,169 |  |  | $ | 267,089 |  |  | 12.8 | % |  | $ | 597,168 |  |  | $ | 534,193 |  |  | 11.8 | %
Benefits, Losses and Expenses |  |  |  |  |  |  |  |  |  |  |
Losses and loss settlement expenses | $ | 201,325 |  |  | $ | 250,730 |  |  | (19.7) | % |  | $ | 380,971 |  |  | $ | 425,327 |  |  | (10.4) | %
Amortization of deferred policy acquisition costs | 67,389 |  |  | 59,156 |  |  | 13.9 |  |  | 133,079 |  |  | 118,991 |  |  | 11.8 |
Other underwriting expenses | 34,613 |  |  | 28,832 |  |  | 20.1 |  |  | 67,078 |  |  | 59,135 |  |  | 13.4 |
Interest expense | 1,460 |  |  | 797 |  |  | 83.2 |  |  | 2,319 |  |  | 1,594 |  |  | 45.5 |
Other non-underwriting expenses | 152 |  |  | (199) |  |  | 176.4 |  |  | 1,207 |  |  | 1,374 |  |  | (12.2) |
Total benefits, losses and expenses | $ | 304,939 |  |  | $ | 339,316 |  |  | (10.1) | % |  | $ | 584,654 |  |  | $ | 606,421 |  |  | (3.6) | %
Income (loss) before income taxes | $ | (3,770) |  |  | $ | (72,227) |  |  | 94.8 |  |  | $ | 12,514 |  |  | $ | (72,228) |  |  | 117.3 |
Federal income tax expense (benefit) | (1,035) |  |  | (15,845) |  |  | 93.5 |  |  | 1,747 |  |  | (16,540) |  |  | 110.6 |
Net income (loss) | $ | (2,735) |  |  | $ | (56,382) |  |  | 95.1 | % |  | $ | 10,767 |  |  | $ | (55,688) |  |  | 119.3 | %
GAAP Ratios: |  |  |  |  |  |  |  |  |  |  |
Net loss ratio(1) | 70.1 | % |  | 98.4 | % |  | (28.8) | % |  | 67.0 | % |  | 83.3 | % |  | (19.6) | %
Expense ratio(2) | 35.5 |  |  | 34.6 |  |  | 2.6 |  |  | 35.2 |  |  | 34.9 |  |  | 0.9 |
Combined ratio(3) | 105.6 | % |  | 133.0 | % |  | (20.6) | % |  | 102.2 | % |  | 118.2 | % |  | (13.5) | %
Additional Loss Ratios: |  |  |  |  |  |  |  |  |  |  |
Net loss ratio(1) | 70.1 | % |  | 98.4 | % |  | (28.8) | % |  | 67.0 | % |  | 83.3 | % |  | (19.6) | %
Catastrophes - effect on net loss ratio(4) | 11.2 |  |  | 13.0 |  |  | (13.8) |  |  | 7.9 |  |  | 8.8 |  |  | (10.2) |
Reserve development - effect on net loss ratio(4) | — |  |  | 20.8 |  |  | (100.0) |  |  | — |  |  | 10.4 |  |  | (100.0) |
Underlying loss ratio(4) (Non-GAAP) | 58.9 | % |  | 64.6 | % |  | (8.8) | % |  | 59.1 | % |  | 64.1 | % |  | (7.8) | %

NM = Not meaningful
(1) Net loss ratio is calculated by dividing the sum of losses and loss settlement expenses by net premiums earned. We use the net loss ratio as a measure of the overall underwriting profitability of the insurance business we write and to assess the adequacy of our pricing. Our net loss ratio is meaningful in evaluating our financial results as reported in our Consolidated Financial Statements.
(2) Expense ratio is calculated by dividing non-deferred underwriting expenses and amortization of deferred policy acquisition costs by net premiums earned. The expense ratio measures a company's operational efficiency in producing, underwriting and administering its insurance business.
(3) Combined ratio is a commonly used financial measure of property and casualty underwriting performance. A combined ratio below 100.0 percent generally indicates a profitable book of business. The combined ratio is the sum of the net loss ratio and the underwriting expense ratio.
(4) Underlying loss ratio is defined as the net loss ratio less impacts of catastrophes and non-catastrophe prior year reserve development.
RESULTS OF OPERATIONS
For the three-month period ended June 30, 2024, net loss was $2.7 million compared to net loss of $56.4 million for the same period of 2023. For the six-month period ended June 30, 2024, net income was $10.8 million compared to

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a net loss of $55.7 million for the same period of 2023. These changes from the prior year are primarily due to higher underwriting income and higher investment income.
Net premiums earned increased 12.9 percent and 11.3 percent during the three- and six-month periods ended June 30, 2024, compared to the same periods of 2023, due to growth in net premiums written in both prior and current quarters. Commercial lines net premiums written, excluding surety and specialty, increased 13.2 percent supported by increased pricing. For the three-month period ended June 30, 2024, the overall average increase in renewal premiums was 12.3 percent, with 2.3 percent from exposure increases and 9.8 percent from rate increases. Excluding the workers' compensation line of business, the overall average increase in renewal premiums was 13.5 percent, with 2.2 percent from exposures changes and 11.0 percent from rate increases.
Net investment income was $18.0 million for the second quarter of 2024, an increase of $6.7 million compared to the second quarter of 2023. Income from our fixed income portfolio increased by $2.5 million as we invested at higher interest rates. In addition, income from cash and cash equivalents increased by $1.8 million. Income on other long-term investments resulted in an additional $4.1 million as the valuation of our investments in limited liability partnerships varies from period to period. Investment expenses increased by $0.5 million. Dividends on equity securities decreased by $1.2 million due to a strategic reallocation of equity securities to fixed income assets over the past year. Net investment income for the six-month period ended June 30, 2024 was $34.4 million, an increase of $10.3 million compared to the same period of 2023. The change in value of our limited liability partnerships contributed $4.9 million, higher investment yields from our fixed income portfolio increased $4.4 million, interest received on cash and cash equivalent balances increased $3.8 million and was partially offset by $2.1 million decrease in dividends on equity securities and higher investment expenses of $0.7 million.
The Company recognized net investment losses of $1.2 million during the second quarter of 2024, compared to net investment gains of $1.1 million for the same period in 2023. The decrease of $2.3 million was due primarily to net gains on equity securities of $1.3 million in 2023 and an increase of $1.1 million of net losses on the sale of fixed maturity securities in 2024. The Company recognized net investment losses of $2.4 million and $0.6 million during the six-month periods ended June 30, 2024 and 2023, respectively. The increase of $1.8 million was primarily due to an increase of $3.6 million related to losses on the sale of fixed maturity securities offset by $1.3 million of gains on equity securities in 2024.
In July 2024, the Company identified rating errors related to umbrella and general liability products that resulted in an overcharge to certain policyholders. Corrective actions are currently underway, and we are voluntarily notifying and cooperating with state insurance regulators to determine the appropriate extent of refunds to impacted policyholders. For more information on this item, refer to Note 1 "Nature of Operations and Basis of Presentation" under "Subsequent Events" subheading in the Notes to the Consolidated Financial Statements.
Losses and loss settlement expenses decreased by 19.7 percent and 10.4 percent during the three- and six-month periods ended June 30, 2024, compared to the same periods of 2023. The decreases are primarily driven by neutral prior year reserve development in the current period compared to the unfavorable prior year reserve development in the prior period. The prior year was also impacted by elevated surety losses, which did not repeat in the current year.
The GAAP combined ratio improved by 27.4 percentage points to 105.6 percent for the second quarter of 2024, compared to 133.0 percent for the same period in 2023. The improvement was driven by a decrease in the underlying loss ratio of 5.7 percentage points, prior period reserve improvement of 20.8 percentage points, catastrophe loss ratio improvement of 1.8 percentage points, slightly offset by the underwriting expense ratio deterioration of 0.9 percentage points. The GAAP combined ratio improved by 16.0 percentage points to 102.2 percent for six-month period ended June 30, 2024, compared to the same period in 2023. The improvement was driven by a decrease in the underlying loss ratio of 5.0 percentage points, prior period reserve improvement of 10.4 percentage points, catastrophe loss ratio improvement of 0.9 points, slightly offset with an increase in the underwriting expense ratio of 0.3 points. Each of these are explained in more detail below.
The underlying loss ratio improved 5.7 and 5.0 percentage points during the three- and six-month periods ended June 30, 2024, respectively, as compared to the same periods in 2023, reflecting improvement in our core commercial lines from a combination of underwriting actions, increased pricing, expense management and lower claim count trends. The prior year was also impacted by elevated surety losses as mentioned above. The net loss

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ratio improved 28.3 and 16.3 percentage points during the three- and six-month periods ended June 30, 2024, respectively, as compared to the same periods in 2023. Prior period reserve strengthening was neutral this quarter compared to 20.8 percent in the second quarter of 2023.
Pre-tax catastrophe losses in the second quarter of 2024 added 11.2 percentage points to the GAAP combined ratio compared to 13.0 percentage points added to the GAAP combined ratio in the second quarter of 2023 and added 7.9 percentage points to the loss ratio for the six-month period ended June 30, 2024 as compared to 8.8 percentage points during the same time period in 2023. The catastrophe loss ratio was below both our five-year and ten-year historical averages for the second quarter of 2024.
The underwriting expense ratio for the second quarter of 2024 was 35.5 percent compared to 34.6 percent for the second quarter of 2023, a deterioration of 0.9 percentage points due to investments in underwriting talent and technology offset by premium growth. The underwriting expense ratio for the six-month period ended June 30, 2024 was 35.2 percent compared to 34.9 percent for the same time period for 2023.
For a detailed discussion of our investment results, refer to the "Investment Portfolio" section below.
Reserve Development
For many liability claims, significant periods of time, ranging up to several years, and for certain construction defect claims, more than a decade, may elapse between the occurrence of the loss, the reporting of the loss to us and the settlement or other disposition of the claim. As a result, loss experience in the more recent accident years for the long-tail liability coverages has limited statistical credibility in our reserving process because a relatively small proportion of losses in these accident years are reported claims and an even smaller proportion are paid losses. 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. Reserves for these long-tail coverages represent a significant portion of our overall carried reserves.
When establishing reserves and monitoring reserve adequacy, we analyze historical data and consider the potential impact of various loss development factors and trends, including historical loss experience, legislative enactments, judicial decisions, legal developments in imposition of damages, experience with alternative dispute resolution, results of our medical bill review process, the potential impact of salvage and subrogation, and changes and trends in general economic conditions, including the effects of inflation. All of these factors influence our estimates of required reserves, and for long-tail lines these factors can change over the course of the settlement of the claim. However, there is no precise method for evaluating the specific dollar impact of any individual factor on the development of reserves.
Our reserving philosophy is to reserve claims to their ultimate expected loss amount as soon as practicable after information about a claim becomes available.
Reserve development amounts can vary significantly from quarter-to-quarter and year-to-year depending on a number of factors, including the number of claims settled and the settlement terms, and are subject to reallocation between accident years and lines of business. At June 30, 2024, our total reserves were within a reasonable range of our actuarial estimates.
2024 Development
The property and casualty insurance business experienced $0.4 million and $2.9 million of reserve strengthening in net reserves for prior accident years for the three- and six-month periods ended June 30, 2024. The unfavorable reserve development of $2.4 million in the first quarter of 2024 was driven by catastrophe losses within our assumed business. There was proactive strengthening in other liability lines of business due to continued uncertainty in future loss cost trends related to economic and social inflation, offset by favorable development in commercial automobile, workers compensation and fire and allied lines.

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2023 Development
The property and casualty insurance business experienced $50.7 million and $54.8 million of reserve strengthening in net reserves for prior accident years for the three- and six-month periods ended June 30, 2023. During the first six months of 2023, the Company made additional advancements to its reserve review processes and analyses, including increased segmentation on unique exposures, which resulted in deeper insights and understanding of loss experience and significant movements in reserve development across a range of commercial liability lines of business. The significant driver of the reserve strengthening in the six-month period ended June 30, 2023 was an increase in long-tailed other liability reserves primarily due to increased loss cost trends related to economic and social inflation. The commercial automobile line of business also experienced reserve strengthening in reaction to continuing loss trends in post-2020 accident years. These increases were offset by favorable development in workers' compensation and fire and allied lines.
The following tables display our net premiums earned, net losses and loss settlement expenses and net loss ratio by line of business:

Three Months Ended June 30, | 2024 |  | 2023
|  |  | Net Losses |  |  |  |  |  | Net Losses |  |
|  |  | and Loss |  |  |  |  |  | and Loss |  |
| Net |  | Settlement |  | Net |  | Net |  | Settlement |  | Net
(In Thousands, Except Ratios) | Premiums |  | Expenses |  | Loss |  | Premiums |  | Expenses |  | Loss
Unaudited | Earned |  | Incurred |  | Ratio |  | Earned |  | Incurred |  | Ratio
Commercial lines |  |  |  |  |  |  |  |  |  |  |
Other liability(1) | $ | 84,926 |  |  | $ | 70,702 |  |  | 83.3 | % |  | $ | 81,028 |  |  | $ | 106,805 |  |  | 131.8 | %
Fire and allied lines(2) | 63,643 |  |  | 39,402 |  |  | 61.9 |  |  | 61,808 |  |  | 52,056 |  |  | 84.2 |
Automobile | 57,690 |  |  | 44,790 |  |  | 77.6 |  |  | 51,905 |  |  | 53,908 |  |  | 103.9 |
Workers' compensation | 13,515 |  |  | 8,402 |  |  | 62.2 |  |  | 13,802 |  |  | 1,649 |  |  | 11.9 |
Surety(3) | 13,944 |  |  | 6,632 |  |  | 47.6 |  |  | 6,386 |  |  | 7,872 |  |  | 123.3 |
Miscellaneous | 2,172 |  |  | 946 |  |  | 43.6 |  |  | 374 |  |  | 28 |  |  | 7.5 |
Total commercial lines | $ | 235,890 |  |  | $ | 170,874 |  |  | 72.4 | % |  | $ | 215,303 |  |  | $ | 222,318 |  |  | 103.3 | %
Personal lines |  |  |  |  |  |  |  |  |  |  |
Fire and allied lines(4) | $ | 2,748 |  |  | $ | 1,206 |  |  | 43.9 | % |  | $ | 1,000 |  |  | $ | 141 |  |  | 14.1 |
Automobile | 243 |  |  | 106 |  |  | NM |  | — |  |  | (121) |  |  | NM
Miscellaneous | 3 |  |  | (15) |  |  | NM |  | 6 |  |  | (19) |  |  | NM
Total personal lines | $ | 2,994 |  |  | $ | 1,297 |  |  | 43.3 | % |  | $ | 1,006 |  |  | $ | 1 |  |  | 0.1 | %
Assumed reinsurance | $ | 48,685 |  |  | $ | 29,154 |  |  | 59.9 | % |  | $ | 38,329 |  |  | $ | 28,411 |  |  | 74.1 | %
Total | $ | 287,569 |  |  | $ | 201,325 |  |  | 70.1 | % |  | $ | 254,638 |  |  | $ | 250,730 |  |  | 98.5 | %

(1) Commercial lines "Other liability" is business insurance covering bodily injury and property damage arising from general business operations, accidents on the insured's premises and products manufactured or sold.
(2) Commercial lines "Fire and allied lines" includes fire, allied lines, commercial multiple peril and inland marine.
(3) Commercial lines "Surety" previously referred to as "Fidelity and surety."
(4) Personal lines "Fire and allied lines" includes fire, allied lines, homeowners and inland marine.
NM = Not meaningful

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Six Months Ended June 30, | 2024 |  | 2023
|  |  | Net Losses |  |  |  |  |  | Net Losses |  |
|  |  | and Loss |  |  |  |  |  | and Loss |  |
| Net |  | Settlement |  | Net |  | Net |  | Settlement |  | Net
(In Thousands, Except Ratios) | Premiums |  | Expenses |  | Loss |  | Premiums |  | Expenses |  | Loss
Unaudited | Earned |  | Incurred |  | Ratio |  | Earned |  | Incurred |  | Ratio
Commercial lines |  |  |  |  |  |  |  |  |  |  |
Other liability | $ | 165,323 |  |  | $ | 132,499 |  |  | 80.1 | % |  | $ | 159,433 |  |  | $ | 159,649 |  |  | 100.1 | %
Fire and allied lines | 126,053 |  |  | 75,180 |  |  | 59.6 |  |  | 118,274 |  |  | 97,937 |  |  | 82.8 |
Automobile | 114,199 |  |  | 87,410 |  |  | 76.5 |  |  | 100,877 |  |  | 90,689 |  |  | 89.9 |
Workers' compensation | 25,942 |  |  | 14,661 |  |  | 56.5 |  |  | 27,047 |  |  | 9,700 |  |  | 35.9 |
Surety | 28,848 |  |  | 10,193 |  |  | 35.3 |  |  | 18,332 |  |  | 9,093 |  |  | 49.6 |
Miscellaneous | 3,739 |  |  | 2,012 |  |  | 53.8 |  |  | 639 |  |  | 165 |  |  | 25.8 |
Total commercial lines | $ | 464,104 |  |  | $ | 321,955 |  |  | 69.4 | % |  | $ | 424,602 |  |  | $ | 367,233 |  |  | 86.5 | %
Personal lines |  |  |  |  |  |  |  |  |  |  |
Fire and allied lines | $ | 7,643 |  |  | $ | 4,968 |  |  | 65.0 | % |  | $ | 2,952 |  |  | $ | 2,327 |  |  | 78.8 | %
Automobile | 243 |  |  | 110 |  |  | NM |  | — |  |  | (375) |  |  | NM
Miscellaneous | 6 |  |  | 23 |  |  | NM |  | 13 |  |  | (65) |  |  | NM
Total personal lines | $ | 7,892 |  |  | $ | 5,101 |  |  | 64.6 | % |  | $ | 2,965 |  |  | $ | 1,887 |  |  | 63.6 | %
Assumed reinsurance | $ | 96,432 |  |  | $ | 53,915 |  |  | 55.9 | % |  | $ | 83,198 |  |  | $ | 56,207 |  |  | 67.6 | %
Total | $ | 568,428 |  |  | $ | 380,971 |  |  | 67.0 | % |  | $ | 510,765 |  |  | $ | 425,327 |  |  | 83.3 | %

Below are explanations regarding significant changes in the net loss ratios by line of business:
•Other liability lines - The net loss ratio improved 48.5 and 20.0 percentage points in the three- and six-month periods ended June 30, 2024, as compared to the same periods in 2023, driven by a reduction in the level of prior year reserve strengthening. The prior year strengthening is primarily related to a revised recognition of the increased growth in the Excess Casualty portfolio and the continued uncertainty of increasing severity of losses and social inflation impacts.
•Commercial fire and allied lines - The net loss ratio improved 22.3 and 23.2 percentage points in the three- and six-month periods ended June 30, 2024, as compared to the same periods in 2023, driven by favorable catastrophe losses in the current year and underlying loss ratio improvement driven by rate achievement in excess of trend and improving frequency and lower severity of losses.
•Commercial automobile - The net loss ratio improved 26.3 and 13.4 percentage points in the three- and six-month periods ended June 30, 2024, as compared to the same periods in 2023, primarily driven by favorable prior year development in the current year as compared to adverse development in 2023. The loss emergence seen in 2024 is driving favorable development as older accident years are maturing below expectation. The impact of increased pricing and continued improvement in claim count trends are also favorably impacting results.
•Workers' compensation - The net loss ratio deteriorated 50.3 and 20.6 percentage points in the three- and six-month periods ended June 30, 2024, as compared to the same periods in 2023, driven by lower favorable prior year development in 2024 as compared to 2023. The frequency of losses continues to improve, driving favorable development. Favorable development in 2023 was primarily due to a large reserve take-down on one claim during the quarter ended June 30, 2023. Quarterly results can be volatile due to smaller volume.

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•Surety - The net loss ratio improved 75.7 and 14.3 percentage points in the three- and six-month periods ended June 30, 2024, as compared to the same periods in 2023, driven by a few large losses and associated reinstatement premium in the prior year. The surety market has experienced pressure from construction industry factors, such as increased material costs and limited contractor availability. Due to the nature of this business, quarterly results can be volatile over an otherwise very profitable longer time horizon.
•Assumed reinsurance - The net loss ratio improved 14.2 and 11.7 percentage points in the three- and six-month periods ended June 30, 2024, as compared to the same periods in 2023, driven by favorable prior year reserve development in the current year and improvements in the underlying loss ratio.
Financial Condition
Stockholders' equity decreased to $726.6 million at June 30, 2024, from $733.7 million at December 31, 2023. The Company's book value per share was $28.68, which is a decrease of $0.36 per share, or 1.2 percent, from December 31, 2023. The decrease is primarily attributable to net income of $10.8 million, offset by net unrealized loss after tax of $11.0 million on fixed maturity securities, and shareholder dividends of $8.1 million during the first six months of 2024.
Investment Portfolio
Our invested assets totaled $1.94 billion at June 30, 2024, compared to $1.89 billion at December 31, 2023, an increase of $49.4 million. During the first quarter of 2024, we liquidated the remainder of our equity securities portfolio to complete the strategic reallocation of equity securities to fixed income assets. At June 30, 2024, fixed maturity securities made up 92.8 percent of the value of our investment portfolio. Because the primary purpose of our investment portfolio is to fund future claims payments, we use a conservative investment philosophy, investing in a diversified portfolio of high-quality, intermediate-term taxable corporate bonds, taxable U.S. government and government agency bonds and tax-exempt U.S. municipal bonds. Our overall investment strategy is to stay fully invested (i.e., minimize cash balances). If additional cash is needed, we have the ability to take advances through the Federal Home Loan Bank of Des Moines ("FHLB Des Moines") facility. During the first quarter of 2024, the Company announced and 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.
Composition
We develop our investment strategies based on a number of factors, including estimated duration of reserve liabilities, short- and long-term liquidity needs, projected tax status, general economic conditions, expected rates of inflation, regulatory requirements, interest rates and credit quality of assets. We administer our investment portfolio based on investment guidelines approved by management and the investment committee of our Board of Directors that comply with applicable statutory regulations.
The composition of our investment portfolio at June 30, 2024 is presented at carrying value in the following table:

| Property & Casualty Insurance
|  |  | Percent
(In Thousands, Except Ratios) | Carrying Value |  | of Total
Fixed maturities, available-for-sale(1) | $ | 1,796,133 |  |  | 92.8 | %
Mortgage loans | 41,238 |  |  | 2.1 |
Other long-term investments | 98,405 |  |  | 5.1 |
Short-term investments | 100 |  |  | — |
Total | $ | 1,935,876 |  |  | 100.0 | %

(1) Available-for-sale securities with fixed maturities are carried at fair value.

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As of June 30, 2024 and December 31, 2023, we did not have direct exposure to investments in subprime mortgages or other credit enhancement vehicles.
Credit Quality
The table below shows the composition of fixed maturity securities held in our available-for-sale security portfolios by credit rating at June 30, 2024 and December 31, 2023. Information contained in the table is generally based upon the issued credit ratings provided by Moody's, unless the rating is unavailable, in which case we obtain credit ratings from Standard & Poor's.

(In Thousands, Except Ratios) | June 30, 2024 |  | December 31, 2023
Rating | Carrying Value |  | % of Total |  | Carrying Value |  | % of Total
AAA | $ | 767,622 |  |  | 42.8 | % |  | $ | 635,023 |  |  | 37.7 | %
AA | 368,801 |  |  | 20.5 |  |  | 456,310 |  |  | 27.1 |
A | 327,582 |  |  | 18.2 |  |  | 255,490 |  |  | 15.1 |
Baa/BBB | 269,942 |  |  | 15.0 |  |  | 312,246 |  |  | 18.5 |
Other/Not Rated | 62,186 |  |  | 3.5 |  |  | 27,433 |  |  | 1.6 |
| $ | 1,796,133 |  |  | 100.0 | % |  | $ | 1,686,502 |  |  | 100.0 | %

Duration
Our investment portfolio is invested primarily in fixed maturity securities whose fair value is susceptible to market risk, specifically interest rate changes. Duration is a measurement we use to quantify our inherent interest rate risk and analyze our ability to match our invested assets to our reserve liabilities. If our invested assets and reserve liabilities have similar durations, then any change in interest rates will have an equal effect on these accounts. The primary purpose for matching invested assets and reserve liabilities is liquidity. With appropriate matching, our investments will mature when cash is needed, preventing the need to liquidate other assets prematurely. Mismatches in the duration of assets and liabilities can cause significant fluctuations in our results of operations.
Investment Results
We invest the premiums received from our policyholders in order to generate investment income, which is an important component of our revenues and profitability. The amount of investment income that we are able to generate is affected by many factors, some of which are beyond our control. Some of these factors are volatility in the financial markets, economic growth, inflation, interest rates, world political conditions, terrorist attacks or threats of terrorism, adverse events affecting other companies in our industry or the industries in which we invest and other unpredictable national or world events. Our net investment income increased in the three- and six-month periods ended June 30, 2024, compared with the same periods of 2023, primarily due to the higher yields in the fixed income portfolio, reinvestment in the fixed income portfolio, higher income on cash and cash equivalents, and an increase in the value of our investments in limited liability partnerships.

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Investment Results
(unaudited) | Three Months Ended June 30, |  | Six Months Ended June 30,
(In Thousands) | 2024 |  | 2023 | Change % |  | 2024 |  | 2023 | Change %
Investment income: |  |  |  |  |  |  |  |  |
Interest on fixed maturities | $ | 15,947 |  |  | $ | 13,423 |  | 18.8 | % |  | $ | 31,107 |  |  | $ | 26,720 |  | 16.4 | %
Dividends on equity securities | — |  |  | 1,185 |  | (100.0) | % |  | 341 |  |  | 2,428 |  | (86.0) | %
Income on other long-term investments | 623 |  |  | (3,504) |  | 117.8 | % |  | 381 |  |  | (4,584) |  | (108.3) | %
Other | 4,188 |  |  | 2,434 |  | 72.1 | % |  | 8,086 |  |  | 4,294 |  | 88.3 | %
Total investment income | $ | 20,758 |  |  | $ | 13,538 |  | 53.3 | % |  | $ | 39,915 |  |  | $ | 28,858 |  | 38.3 | %
Less investment expenses | 2,729 |  |  | 2,211 |  | 23.4 | % |  | 5,544 |  |  | 4,809 |  | 15.3 | %
Net investment income | $ | 18,029 |  |  | $ | 11,327 |  | 59.2 | % |  | $ | 34,371 |  |  | $ | 24,049 |  | 42.9 | %
Average yields: |  |  |  |  |  |  |  |  |
Fixed income securities: |  |  |  |  |  |  |  |  |
Pre-tax(1) | 3.62 | % |  | 3.24 | % | 0.38 | % |  | 3.43 | % |  | 3.25 | % | 0.18 | %

(1) Fixed income securities yield excluding net unrealized investment gains/losses and expenses
We hold certain investments in limited liability partnerships that are recorded on the equity method of accounting, with changes in the value of these investments recorded in investment income. In the three- and six-month periods ended June 30, 2024, the change in total value of our investments in limited liability partnerships resulted in investment gains of $0.6 million and $0.4 million as compared to investment losses of $3.5 million and $4.6 million in the same periods of 2023.
We had net investment losses of $1.2 million and $2.4 million during the three- and six-month periods ended June 30, 2024, as compared to net investment gains of $1.1 million and net investment losses of $0.6 million during the same periods of 2023.
We regularly monitor the difference between our cost basis and the estimated fair value of our investments. For our available-for-sale fixed-maturity portfolio an allowance for credit losses is recorded net of available-for-sale fixed maturities in the Consolidated Balance Sheets and a corresponding credit loss recognized as a realized loss or gain in the Consolidated Statements of Income and Comprehensive Income. The Company determines if an allowance for credit losses is recorded based on a number of factors including current economic conditions, management's expectations of future economic conditions and performance indicators, such as market value versus amortized cost, investment spreads widening or contracting, rating actions, payment and default history.
Non-credit related changes in unrealized gains and losses on available-for-sale fixed maturity securities are recognized as a component of other comprehensive income, stockholders' equity and book value per share, but do not affect net income. We believe that any unrealized losses on our available-for-sale securities at June 30, 2024 are temporary based upon our current analysis of the issuers of the securities that we hold and current market conditions. We have no intent to sell, and it is more likely than not that we will not be required to sell, these securities until the fair value recovers to at least equal our cost basis or the securities mature.
For mortgage loans, an allowance for credit losses is established based on historical loss information of the collective pool of the Company's commercial mortgage loan investments that have similar risk characteristics. This allowance is presented as a separate line in the Consolidated Balance Sheets with an offset to "Net investment gains (losses)" in the Consolidated Statements of Income and Comprehensive Income.
To calculate the allowance for mortgage loan credit losses, the Company starts with historical loan experience to predict the future expected losses and then layers on a market-linked adjustment. An example of a market-linked adjustment is the change in commercial market price appreciation or change in gross domestic product, with every point of fall leading to an increase in loss reserve. Local market economics are also considered. On a quarterly basis, quantitative credit risk metrics, including for example, cash flows, rent rolls and financial statements are reviewed for each loan to determine if it is performing in line with its expectations.

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LIQUIDITY AND CAPITAL RESOURCES
Liquidity measures our ability to generate sufficient cash flows to meet our short- and long-term cash obligations. Our cash inflows are primarily a result of the receipt of premiums, reinsurance recoveries, sales or maturities of investments, and investment income. Cash provided from these sources is used to fund the payment of losses and loss settlement expenses, the purchase of investments, operating expenses, dividends, pension plan contributions, and in recent years, common stock repurchases.
We monitor our capital adequacy to support our business on a regular basis. The future capital requirements of our business will depend on many factors, including our ability to write new business successfully and to establish premium rates and reserves at levels sufficient to cover losses. Our ability to underwrite is largely dependent upon the quality of our claims paying and financial strength ratings as evaluated by independent rating agencies. In particular, we require (1) sufficient capital to maintain our financial strength ratings, as issued by various rating agencies, at a level considered necessary by management to enable our insurance company subsidiaries to compete and (2) sufficient capital to enable our insurance company subsidiaries to meet the capital adequacy tests performed by regulatory agencies in the United States.
Cash outflows may be variable because of the uncertainty regarding settlement dates for losses. In addition, the timing and amount of individual catastrophe losses are inherently unpredictable and could increase our liquidity requirements. The timing and amount of reinsurance recoveries may be affected by reinsurer solvency and reinsurance coverage disputes.
Historically, we have generated substantial cash inflows from operations. It is our policy to invest the cash generated from operations in securities with maturities that, in the aggregate, correlate to the anticipated timing of payments for losses and loss settlement expenses. The majority of our assets are invested in available-for-sale fixed maturity securities.
The following table displays a consolidated summary of cash sources and uses for the six-month periods ended June 30, 2024 and 2023:

Cash Flow Summary | Six Months Ended June 30,
(In Thousands) | 2024 |  | 2023
Cash provided by (used in) |  |  |
Operating activities | $ | 127,492 |  |  | $ | 37,864 |
Investing activities | (134,604) |  |  | (46,513) |
Financing activities | 58,496 |  |  | (8,297) |
Net change in cash and cash equivalents | $ | 51,384 |  |  | $ | (16,946) |

Our cash flows were sufficient to meet our liquidity needs for the six-month periods ended June 30, 2024 and 2023 and we anticipate they will be sufficient to meet our future liquidity needs for at least the next 12 months. We also have the ability to draw on our credit facility if needed.
Operating Activities
Net cash flows from operating activities had inflows of $127.5 million and inflows of $37.9 million for the six-month periods ended June 30, 2024 and 2023, respectively. In the six-month period ended June 30, 2024, the net operating cash inflows were driven by premium and investment income offsetting loss and expense outflows.
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. For further discussion of our

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investments, including our philosophy and strategy for our portfolio, see the "Investment Portfolio" section of this Item 2.
In addition to investment income, possible sales of investments and proceeds from calls or maturities of fixed maturity securities can also provide liquidity. During the next five years, $566.7 million, or 31.5 percent, of our fixed maturity portfolio will mature.
We invest funds required for short-term cash needs primarily in money market accounts, which are classified as cash equivalents. At June 30, 2024, our cash and cash equivalents included $51.7 million related to these money market accounts, compared to $20.3 million at December 31, 2023.
Net cash flows used in investing activities were $134.6 million for the six-month period ended June 30, 2024, compared to net cash flows used in investing activities of $46.5 million for the six-month period ended June 30, 2023. For the six-month periods ended June 30, 2024 and 2023, we had cash inflows from scheduled and unscheduled investment maturities, redemptions, prepayments, and sales of investments of $307.2 million and $74.0 million, respectively. Our cash outflows for investment purchases were $436.0 million for the six-month period ended June 30, 2024, compared to $114.9 million for the same period of 2023.
Financing Activities
Net cash flows provided by financing activities were $58.5 million for the six-month period ended June 30, 2024, compared to compared to $8.3 million used in the six-month period ended June 30, 2023. This increase of $66.8 million was the result of our successful completion of $70 million private placement offering of senior unsecured notes completed in the second quarter of 2024.
Credit Facilities
On December 22, 2023, UF&C became a member of the Federal Home Loan Bank of Des Moines ("FHLB Des Moines"). Membership allows access to loans or advances. As of June 30, 2024, there were no advances outstanding under the FHLB Des Moines agreement. For further information regarding the agreement with FHLB Des Moines, see Note 8 "Debt" contained in Part I, Item 1.
Dividends
Dividends paid to shareholders totaled $8.1 million and $8.1 million in each of the six-month periods ended June 30, 2024 and 2023. Our practice has been to pay quarterly cash dividends, which we have paid every quarter since March 1968.
Payments of any future dividends and the amounts of such dividends will depend upon factors such as net income, financial condition, capital requirements, and general business conditions. We will only pay dividends if declared by our Board of Directors out of legally available funds.
As a holding company with no independent operations of its own, we rely on dividends received from our insurance company subsidiaries in order to pay dividends to our common shareholders. Dividends payable by our insurance subsidiaries are governed by the laws of the states in which they are domiciled, and if applicable, commercially domiciled. In all cases, these state laws permit the payment of dividends only from earned surplus arising from business operations. For example, under Iowa law, the maximum dividend or distribution that may be paid within a 12-month period without prior approval of the Iowa Insurance Commissioner is generally restricted to the greater of 10 percent of statutory surplus as of the preceding December 31, or net income of the preceding calendar year on a statutory basis, not greater than earned statutory surplus. Other states in which our insurance company subsidiaries are domiciled may impose similar restrictions on dividends and distributions. Based on these restrictions, at June 30, 2024, UFG's sole direct insurance company subsidiary, UF&C, is able to make a maximum of $44.8 million in dividend payments without prior regulatory approval. We do not believe that these restrictions have a material impact in meeting the cash obligations of UFG.

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Funding Commitments
Pursuant to an agreement with our limited liability partnership investments, we are contractually committed through July 10, 2030, to make capital contributions upon the request of certain of the partnerships. Our remaining potential contractual obligation was $25.4 million at June 30, 2024. These partnerships are included in our other long term investments on the Consolidated Balance Sheets with a current fair value of $97.1 million, or 5.0 percent of our total invested assets, as of June 30, 2024.

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MEASUREMENT OF RESULTS
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. Management uses metrics to provide financial statement users with a better understanding of results of operations, including net premiums written and three components of the loss ratio: underlying loss ratio, impacts of catastrophes and non-catastrophe prior period reserve development.
Net premiums written is frequently used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies. Net premiums written is the amount charged for insurance policy contracts issued and recognized on an annualized basis at the effective date of the policy. Management believes net premiums written is a meaningful measure for evaluating insurance company sales performance and geographical expansion efforts. Net premiums written for an insurance company consists of direct premiums written and premiums assumed, less premiums ceded. Net premiums earned is calculated on a pro-rata basis over the terms of the respective policies. Unearned premium reserves are established for the portion of premiums written applicable to the unexpired terms of the insurance policies in force. The difference between net premiums earned and net premiums written is the change in unearned premiums and the change in prepaid reinsurance premiums.
Underlying loss ratio represents the net loss ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The underlying combined ratio represents the GAAP combined ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The Company believes that the underlying loss ratio and underlying combined ratio are meaningful measures to understand the underlying trends in the core business in the current accident year, removing the volatility of prior period impacts and catastrophes. Management believes separate discussions on catastrophe losses and prior period reserve development are important to understanding how the Company is managing catastrophe risk and in identifying developments in longer-tailed business.
Prior period reserve development is the increase (unfavorable) or decrease (favorable) in incurred loss and loss adjustment expense reserves at the valuation dates for losses which occurred in previous calendar years. This measure excludes development on catastrophe losses.
Catastrophe losses is an operational measure which utilizes the designations of the Insurance Services Office ("ISO") and is reported with losses and loss settlement expense amounts net of reinsurance recoverables, unless specified otherwise. In addition to ISO catastrophes, we also include 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. While management estimates catastrophe losses as incurred, due to the inherently unique nature of catastrophe losses, the impact in a reporting period is inclusive of catastrophes that occurred in the reporting period, as well as development on catastrophes that may have occurred in prior periods. The following table shows the breakdown of ISO and non-ISO catastrophes for the three- and six-month periods ended June 30, 2024 and 2023.

| Three Months Ended June 30, |  | Six Months Ended June 30,
(In Thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
ISO catastrophes | $ | 32,171 |  |  | $ | 33,043 |  |  | $ | 43,887 |  |  | $ | 45,605 |
Non-ISO catastrophes(1) | (14) |  |  | 57 |  |  | 1,072 |  |  | (841) |
Total catastrophes | $ | 32,157 |  |  | $ | 33,100 |  |  | $ | 44,959 |  |  | $ | 44,764 |

(1) This number includes international assumed losses.

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We evaluate our property catastrophe exposure by considering planned portfolio growth, market conditions, business needs, portfolio aggregation, and results of third-party vendor model output. As a result of the evaluation, we may limit our exposure in regions that are 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 regularly assess our concentration of risk exposures in natural catastrophe exposed areas and consider the impacts of climate change and the unpredictability of future trends in adjusting our geographic concentrations. We have strategies and underwriting standards to manage these exposures through individual risk selection, subject to regulatory constraints. We use third-party vendor catastrophe modeling and a risk concentration management tool to monitor and control our accumulation of potential losses in natural catastrophe exposed areas, such as the Gulf Coast and East Coast. We model several perils against our exposure profile to produce a view into portfolio aggregation and property catastrophe exposure. Our staff regularly performs portfolio analysis, creating and utilizing custom model output which is used to further expand our insights into our exposure profile. We use all of these evaluations when renewing our catastrophe reinsurance programs on an annual basis.
Our profitability is influenced by many factors, including price, competition, economic conditions, investment returns, interest rates, catastrophic events and other natural disasters, man-made disasters, state regulations, court decisions, and changes in the law. To manage these risks and uncertainties, we seek to achieve consistent profitability through strong agency relationships, exceptional customer service, fair and prompt claims handling, disciplined underwriting, superior loss control services, prudent management of our investments, appropriate matching of assets and liabilities, effective use of ceded reinsurance and effective and efficient use of technology.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have exposure to market risk arising from potential losses in our investment portfolio due to adverse changes in interest rates and market prices. However, we have the ability to hold fixed maturity investments to maturity. Our investment guidelines define the overall framework for managing our market and other investment risks, including accountability and controls. In addition, each of our subsidiaries has specific investment policies that delineate the investment limits and strategies that are appropriate given each entity's liquidity, surplus, product, and regulatory requirements. We respond to market risk by managing the character of investment purchases.
It is our philosophy that we do not utilize financial hedges or derivative financial instruments to manage risks, nor do we enter into any swap, forward or option contracts, but rather attempt to mitigate our exposure through active portfolio management. In addition, we place the majority of our investments in high-quality, liquid securities and limit the amount of credit exposure to any one issuer. At June 30, 2024, we did not have direct exposure to investments in sub-prime mortgages or other credit-enhancement exposures.
Our primary market risks are exposure to changes in interest rates and we have limited exposure to foreign currency exchange rates.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of the end of the period covered by this report, were designed and functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Changes in Internal Control Over Financial Reporting
Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated our internal control over financial reporting to determine whether any changes occurred during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on this evaluation, no such change in our internal control over financial reporting occurred during the fiscal quarter to which this report relates. We believe our operational processes, internal controls over financial reporting and disclosures, and financial reporting systems are operating effectively in the present environment.

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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the normal course of its business, the Company is a party to a variety of legal proceedings. While the final outcome of these legal proceedings cannot be predicted with certainty, management believes all of the proceedings pending as of June 30, 2024 to be ordinary and routine and does not expect these legal proceedings to have a material adverse effect on the Company's financial condition or results of operations.
ITEM 1A. RISK FACTORS
Our business is subject to a number of risks, including those identified in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024.
These risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also have a material effect on our business, results of operations, financial condition and/or liquidity.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Under our share repurchase program, first announced in August 2007, we may purchase UFG common stock from time to time on the open market or through privately negotiated transactions. 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.
The Board of Directors reauthorized the share repurchase program in November 2022 through August 2024. There are 1,719,326 shares of common stock remaining under this authorization. There were no purchases of shares of common stock made by or on our behalf or by any "affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Exchange Act, during the three-month period ended June 30, 2024.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
Securities Trading Plans of Officers and Directors
UFG has an Insider Trading Policy applicable to all individuals, including officers and directors of UFG, who have access to nonpublic information about UFG which limits the periods during which officers and directors are allowed to trade in Company securities. UFG's Insider Trading Policy permits trading plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c), referred to as "Rule 10b5-1 trading plans." Under UFG's Insider Trading Policy, enactment of a Rule 10b5-1 trading plan by an officer or director requires approval by UFG's Nominating & Governance Committee, the Chief Executive Officer, or the Chief Financial Officer. During the second quarter of 2024, none of UFG's directors or officers adopted or terminated Rule 10b5-1 trading plans and

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none of UFG's directors or officers adopted or terminated a non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408(c) of Regulation S-K).

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ITEM 6. EXHIBITS

Exhibit number |  | Exhibit description |  | Furnished herewith | Filed herewith
10.1 |  | Master Note Purchase Agreement, dated as of May 31, 2024, by and among the Company and the Purchasers* |  |  | X
31.1 |  | Certification of Kevin J. Leidwinger pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |  |  | X
31.2 |  | Certification of Eric J. Martin pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |  |  | X
32.1 |  | Certification of Kevin J. Leidwinger pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |  | X |
32.2 |  | Certification of Eric J. Martin pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |  | X |
101.1 |  | The following financial information from United Fire Group, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 formatted in Inline eXtensible Business Reporting Language (Inline XBRL): (i) Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023; (ii) Consolidated Statements of Income and Comprehensive Income (unaudited) for the three- and six- months ended June 3 0, 2024 and 2023; (iii) Consolidated Statement of Stockholders' Equity (unaudited) for the three- and six- months ended June 30, 2024 and 2023; (iv) Consolidated Statements of Cash Flows (unaudited) for the six-months ended June 3 0, 2024 and 2023; and (v) Notes to Unaudited Consolidated Financial Statements, tagged as a block of text. |  |  | X
104.1 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.1) |  |  | X

*Portions of this exhibit have been omitted pursuant to Item 601 of Regulation S-K

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

UNITED FIRE GROUP, INC. |  |
(Registrant) |  |
/s/ Kevin J. Leidwinger |  | /s/ Eric J. Martin
Kevin J. Leidwinger |  | Eric J. Martin
President, Chief Executive Officer, Director and Principal Executive Officer |  | Executive Vice President, Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer
August 7, 2024 |  | August 7, 2024
(Date) |  | (Date)

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