UNITED FIRE GROUP INC

United Fire Group, Inc. Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Stockholders' Equity

(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 income taxes.

Consolidated Statements of Cash Flows

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share data unless otherwise noted)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Consolidated Financial Statements, which include the accounts of United Fire Group, Inc. and its subsidiaries (collectively, "UFG", the "Registrant", the "Company", "we", "us", or "our"), have been prepared on the basis of U.S. generally accepted accounting principles ("GAAP"). All significant intercompany transactions and balances have been eliminated.

We have investments in unconsolidated affiliates that are considered variable interest entities ("VIEs") as defined under GAAP. Our involvement with VIEs is primarily to invest in assets that allow us to gain exposure to a broadly diversified portfolio of asset classes. A VIE is an entity that does not have sufficient equity to finance its own activities without additional financial support, where investors lack certain characteristics of a controlling financial interest, or where the entity is structured with non-substantive voting rights. We assess our relationships with VIEs to evaluate if we are the primary beneficiary of the VIE. If we determine we are the primary beneficiary of a VIE, we consolidate the assets and liabilities of the VIE in our Consolidated Financial Statements.

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.

Segment Information

We operate asone operating segment. Our revenues are primarily derived from premiums earned for property and casualty insurance products issued to customers. For additional information, see Note 10, "Segment Information".

Premiums and Unearned Premiums

Written premiums are deferred and recorded as earned premium on a daily pro rata basis over the terms of the respective policies. Unearned premium reserves are established for the portion of written premiums applicable to the unexpired term of insurance policies in force. Premiums receivable are presented net of an estimated allowance for doubtful accounts, which is based on a periodic evaluation of the aging and collectability of amounts due from agents and policyholders. Credit risk is partially mitigated by the Company's ability to cancel the policy if the policyholder does not pay the premium.

Premiums are reported net of reinsurance ceded. Ceded premiums are charged to income over the applicable term of the various reinsurance contracts with third party reinsurers. Prepaid reinsurance premiums represent the unexpired portion of premiums ceded to reinsurers and are reported as ceded unearned premiums, an asset on the Consolidated Balance Sheet.

To establish losses and loss settlement expense reserves, we make estimates and assumptions about the future development of claims. Actual results could differ materially from those estimates, which are subjective, complex and inherently uncertain. When we establish and adjust reserves, we do so given our knowledge at the time of the circumstances and facts of known claims. To the extent that we have overestimated or underestimated our loss and loss settlement expense reserves, we adjust the reserves in the period in which such adjustment is determined.

Losses and loss settlement expenses are reported net of reinsurance ceded. The estimation of assumed and ceded reinsurance losses and loss settlement expense reserves is subject to the same factors as the estimation of losses and loss settlement expense reserves. In addition to those factors, which give rise to inherent uncertainties in establishing losses and loss settlement expense reserves, there exists a delay in our receipt of reported claims for assumed business due to the procedure of having claims first reported through one or more intermediary insurers or reinsurers.

Reserves for assumed reinsurance are established using methods and techniques identical to those used for direct lines of business. The additional delay inherent in assumed reinsurance reporting is considered in our reserving process and payment is not problematic. Assumed reinsurance, like every independent line of business, has unique reporting and payment patterns that are reviewed as part of the reserve estimation process.

Reinsurance Receivables

Amounts recoverable from reinsurers are estimated in a manner consistent with the associated claim liability. 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 1 bond recovery rates from 1983-2017. The allowance calculated 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. Refer to Note 4 "Reinsurance" for a discussion of our reinsurance.

Investments

Fixed Maturity Securities Available-for-Sale

Investments in fixed maturity securities includes bonds. Our investments in fixed maturities securities are designated as available-for-sale and recorded at fair value. Changes in unrealized investment gain (loss), with respect to available-for-sale fixed maturities are reported as a component of accumulated other comprehensive income, net of deferred income taxes. We recognize investment income on fixed maturities based on the effective interest method, which results in the recognition of a constant rate of return on the investment equal to the prevailing rate at the time of purchase or at the time of subsequent adjustments of book value. Interest income from these investments is reported in "Net investment income" in the accompanying Consolidated Statements of Income. Realized gains and losses on sales of our fixed maturity securities are determined on the first-in first-out cost basis and are reported within Net investment gains (losses) in the accompanying Consolidated Statements of Income. We record security transactions on a trade date basis.

Equity Securities

Investments in equity securities, which includes common stocks, are recorded at fair value with changes in value recorded as a component of income. Realized gains and losses on disposition of equity securities are computed using the specific identification method and are included in the computation of net income.

Mortgage Loans

Our investment in mortgage loans consists of commercial mortgage loans on real estate, which are reported at amortized cost, less allowance for expected credit losses. Commercial mortgage loans are continuously monitored by reviewing appraisals, operating statements, rent revenues, annual inspection reports, loan specific credit quality, property characteristics, market trends and other factors. For details on our policy around allowance for expected credit losses on mortgage loans, refer to Note 2 "Investments".

Commercial mortgage loans are rated for the purpose of quantifying the level of risk. Loans are placed on a watch list when the debt service coverage ratio falls below certain thresholds and the loan-to-value ratios exceeds certain thresholds. Loans on the watchlist are closely monitored for collateral deficiency or other credit events that may lead to a potential loss of principal or interest.

Interest on loans is recognized on an accrual basis at the applicable interest rate on the principal amount outstanding. Interest income, amortization of premiums and discounts, prepayment fees, and loan commitment fees are reported in Net investment income in the accompanying Consolidated Statements of Income.

Investments in Unconsolidated Affiliates

Other long-term investments consist primarily of our interests in limited liability partnerships that are recorded on the equity method of accounting. For investments subsequently measured using the equity method (primarily limited partnerships), adjustments to the carrying amount reflect our pro rata ownership percentage of the operating results as indicated by net asset value ("NAV") in the unconsolidated affiliates' financial statements. Distributions received from investments measured using the equity method are recorded as a decrease in the investment balance. Recognition of income and adjustments to the carrying amount can be delayed due to the availability of the related financial statements, which are obtained from the general partner or managing member generally on a one to three-month delay. For investments using the equity method, management inquires quarterly with the general partner or managing member to determine whether any credit or other market events have occurred since prior quarter financial statements to ensure any material events are properly included in current quarter valuation and investment income.

Short-term investments

Short-term investments consist of financial instruments with an original maturity of one year or less when purchased and include short-term fixed maturity securities and money market instruments, which are carried at fair value, and short-term loans, which are carried at amortized cost, which approximates fair value.

Interest and investment income

Dividends and interest income are recorded in Net investment income and recognized when earned. Income or losses upon call or prepayment of fixed maturity securities are recognized in Net investment income. Amortization of premiums and accretion of discounts on investments in fixed maturity securities are reflected in Net investment income over the contractual terms of the investments, and for callable investments at a premium, based on the earliest call date of the investments, in a manner that produces a constant effective yield.

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.

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 recognized loss or gain in the Consolidated Statements of Income. The Company determines if an allowance for credit losses is recorded based on a number of factors including the 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 available-for-sale fixed-maturity portfolio, see Note 2 "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 on the Consolidated Balance Sheets along with the asset value, as well as presented net and recorded through "Net investment gains (losses)" in the Consolidated Statements of Income. For more information on credit losses and the allowance for credit losses for our investment in mortgage loans see Note 2 "Investments."

Fair Value of Financial Instruments

The fair values of financial instruments presented in the Consolidated Financial Statements are estimates of the fair values at the balance sheet date using available market information and appropriate valuation methodologies. These estimates are subjective in nature and involve uncertainties and significant judgment in the interpretation of current market data. For more information on the fair value of financial instruments refer to Note 3 "Fair Value of Financial Instruments".

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. Cash includes cash on deposit supporting Lloyds business of $31,739.

Deferred Policy Acquisition Costs ("DAC")

DAC represents costs that are directly related to the successful acquisition of new and renewal insurance contracts and incremental direct costs of contract acquisition that are incurred in compensation to employees. Such costs primarily include commissions, premium taxes and certain underwriting and policy issuance costs.

Acquisition costs related to property and casualty business are deferred and amortized ratably over the period the related premiums are earned. Deferred acquisition costs are reviewed on a quarterly basis to determine if they are recoverable from remaining unearned premiums, and if not, are charged to expense.

To calculate the premium deficiency charge by line of business, we estimate an expected loss and loss settlement expense ratio which is based on our best estimate of future losses for each line of business. The premium deficiency calculation is aggregated by line of business in a manner consistent with how the policies are currently being marketed and managed. Expected losses and loss settlement expenses ratios are the only assumptions we utilize in our premium deficiency calculation. The Company does not consider anticipated investment income in determining if a premium deficiency exists. Adjustments, if necessary, are recorded as a reduction in the DAC asset and as other underwriting expenses in the current period results of operations.

Property, Equipment and Depreciation

Property and equipment used in operations, including certain costs incurred to develop computer software for internal use, is presented at cost less accumulated depreciation. We periodically review these assets for impairment whenever events or changes in business circumstances indicate that the carrying value of the underlying asset may not be recoverable. A loss would be recognized if the estimated fair value of the asset were less than its carrying value. Expenditures for maintenance and repairs on property and equipment are generally expensed as incurred. Depreciation is computed primarily by the straight-line method.

Intangible Assets

Our other intangible assets, which consist of agency relationships, trade names, and state insurance licenses are being amortized by the straight-line method over periods ranging fromtwo years to 15 years, with the exception of state insurance licenses, which are indefinite-lived and not amortized. In 2024, 2023 and 2022 we performed a qualitative impairment assessment of our indefinite lived intangible assets. For more information on intangible assets refer to Note 14 "Intangible Assets."

Long Term Debt

Debt instruments are carried at the principal amount borrowed, net of any issuance costs. Costs incurred in the issuance of debt are capitalized and amortized over the life of the non-cancellable period of the debt. Interest payments are included in Accrued expenses and other liabilities in the Consolidated Balance Sheets and as Interest expense in the Consolidated Statements of Income. For more information on long-term debt refer to Note 13 "Debt."

Income Taxes

We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities and expected benefits of utilizing net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We evaluate the likelihood of realizing the benefit of our deferred tax assets and may record a valuation allowance if, based on all available evidence, we determine that it is more likely than not that some portion of the tax benefit will not be realized. We adjust the valuation allowance if, based on our evaluation, there is a change in the amount of deferred income tax assets that are deemed more-likely-than-not to be realized. The impact on deferred taxes of changes in tax rates and laws, if any, is applied to the years during which temporary differences are expected to be settled and reflected in the financial statements in the period enacted. For more information on income taxes refer to Note 7 "Income Tax".

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 within Accrued expenses and other liabilities on the Consolidated Balance Sheets and as a lease right-of-use asset within Other assets on the Consolidated Balance Sheets. 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. The collateralized discount rate used to calculate the present value of future minimum lease payments is based, where appropriate, on current industry borrowing rates for financial companies with similar ratings. The Company excludes 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 the Company typically does not exercise options to purchase the underlying leased asset. As an accounting policy election, the Company has elected the practical expedient of not separating lease components from non-lease components to each major asset class. 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. For more information on leases refer to Note 12 "Lease Commitments."

Stock-Based Compensation

We currently havetwo equity compensation plans. One plan allows us to grant restricted and unrestricted stock, stock appreciation rights, incentive stock options, and non-qualified stock options to employees. The other plan allows us to grant restricted and non-qualified stock options to non-employee directors.

We utilize the Black-Scholes option pricing method to establish the fair value of non-qualified stock options granted under our equity compensation plans. Our determination of the fair value of stock options on the date of grant using this option-pricing model is affected by our stock price, as well as assumptions regarding a number of complex and subjective variables, which include the expected volatility in our stock price, the expected term of the award, the expected dividends to be paid over the term of the award and the expected risk-free interest rate. Any changes in these assumptions may materially affect the estimated fair value of the award. For our restricted and unrestricted stock awards, we utilize the fair value of our common stock on the date of grant to establish the fair value of the award. Refer to Note 9 "Stock-Based Compensation" for further discussion.

Comprehensive Income

We report comprehensive income (loss) in accordance with GAAP on the Consolidated Statements of Comprehensive Income. Comprehensive income includes all changes in stockholders' equity during a period except those resulting from investments by and dividends to stockholders. While total comprehensive income (loss) is largely driven by net income (loss) during the period, accumulated other comprehensive income or loss represents the cumulative balance of other comprehensive income, net of tax, as of the balance sheet date. Amounts reclassified to net income relate to the realized gains (losses) on investments and employee benefit costs which are included in

Net investment gains (losses) and Other underwriting expenses, respectively, on the Consolidated Statements of 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.

Beginning in early January 2025, there were a series of severe wildfires that impacted the Pacific Palisades neighborhood and Eaton Canyon area in Southern California. The Company's preliminary pre-tax estimate of catastrophe losses from these wildfires, including assessments from the California FAIR Plan, and net of estimated recoveries from reinsurance, is $7 million to $10 million. The catastrophe losses from these wildfires will be reflected in the Company's first quarter 2025 earnings.

Recently Issued Accounting Standards

Accounting Standards Adopted in 2024

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. Further, 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. See Note 10 "Segment Information" in the accompanying notes to the Consolidated Financial Statements for further details.

Pronouncements Not Yet Adopted

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.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This update requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Early adoption 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. INVESTMENTS

Fair Value of Investments

The table that follows is a reconciliation of the amortized cost to fair value of investments in available-for-sale fixed maturity securities, presented on a consolidated basis as of December 31, 2024 and 2023.

Maturities

The amortized cost and fair value of available-for-sale fixed maturity securities at December 31, 2024, by contractual maturity, are shown in the following table. 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.

Allowance for Current Expected Credit Loss

We regularly review available-for-sale securities for declines in fair value that we determine to be credit-related. For our fixed maturity securities, we generally consider the following in determining whether our unrealized losses are credit-related, and if so, the magnitude of the credit loss:

•The extent to which the fair value is less than the amortized cost basis;

•The reasons for the decline in value (credit event, currency or interest-rate related, including general credit spread widening);

•The financial condition of and near-term prospects of the issuer (including issuer's current credit rating and the probability of full recovery of principal based upon the issuer's financial strength);

•Current delinquencies and nonperforming assets of underlying collateral;

•Expected future default rates;

•Collateral value by vintage, geographic region, industry concentration or property type;

•Subordination levels or other credit enhancements as of the balance sheet date as compared to origination; and

•Contractual and regulatory cash obligations and the issuer's plans to meet such obligations.

We recognize an allowance for current expected credit losses on fixed maturity securities in an unrealized loss position when it is determined. Using the factors discussed above, a component of the unrealized loss is related to credit. We recognize the expected credit losses in Net investment gains (losses) in the Consolidated Statements of Income, with an offset for the amount of non-credit impairments recognized in accumulated other comprehensive income. We do not measure a credit loss allowance on accrued investment income because we write-off accrued interest through Net investment income when collectability concerns arise.

We consider the following in determining whether write-offs of a security's amortized cost are necessary:

•We believe amounts related to securities have become uncollectible;

•We intend to sell a security; or

•It is more likely than not that we will be required to sell a security prior to recovery.

If we intend to sell a fixed maturity security or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis and the fair value of the security is below amortized cost, we will write down the security to current fair value, with a corresponding charge, net of any amount previously recognized as an allowance for expected credit loss, to Net investment gains (losses) in the Consolidated Statements of Income. If we do not intend to sell a fixed maturity security or it is more likely than not that we will not be required to sell a fixed maturity security before recovery of its amortized cost basis but believe amounts related to a security are uncollectible, an impairment is deemed to have occurred and the amortized cost is written down to the estimated recovery value with a corresponding charge, net of any amount previously recognized as an allowance for expected credit loss, to Net investment gains (losses) in the Consolidated Statements of Income. The remainder of unrealized loss is held in other comprehensive income in the Consolidated Statements of Stockholders' Equity.

The following table contains a rollforward of the allowance for credit losses for available-for-sale fixed maturity securities at December 31, 2024:

Unrealized Gain and Loss

Changes in unrealized gains and losses on available-for-sale fixed maturity securities do not affect net income and earnings per share but do impact comprehensive income, stockholders' equity and book value per share. A summary of changes in net unrealized investment gain (loss), net of taxes, for 2024, 2023 and 2022, is as follows:

The following tables summarize our fixed maturity securities that were in an unrealized loss position reported on a consolidated basis at December 31, 2024 and 2023. The securities are presented by the length of time they have been continuously in an unrealized loss position.

We believe that any unrealized losses on our available-for-sale fixed maturity securities at December 31, 2024 are temporary based upon our current analysis of the issuers of the securities that we hold and current market conditions. We invest in high quality assets to provide protection from future credit quality issues. 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 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.

Included in investments at December 31, 2024 and 2023, are securities on deposit with, or available to, various regulatory authorities as required by law and collateral for reinsurance agreements with fair values of $110,335 and $106,297 respectively.

Mortgage Loans

The mortgage loan portfolio consists entirely of commercial mortgage loans. The following tables present the carrying value of our commercial mortgage loans at December 31, 2024 and 2023:

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 contractual 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 December 31, 2024, all loan receivables were current, with no delinquencies. As of December 31, 2024, the Company had an allowance for mortgage loan losses of $45, summarized in the following rollforward:

Commercial mortgage loans carrying value excludes accrued interest of $157.

Net Investment Gains and Losses

Details of net investment gains (losses) reported on the accompanying Consolidated Statements of Income were as follows:

The proceeds and gross realized gains (losses) on the sale of available-for-sale fixed maturity securities for the years ended December 31, 2024, 2023 and 2022 are as follows:

Net Investment Income

Net investment income for the years ended December 31, 2024, 2023 and 2022, is comprised of the following:

(1)Represents the change in value of our interests in limited liability partnerships that are recorded on the equity method of accounting.

Funding Commitments

Pursuant to agreements related to our limited liability partnership investments, we are contractually committed through 2030 to make capital contributions upon request of the partnerships. The timing of these additional contributions is unknown and based upon the timing of when investments and agreements are executed or signed compared to when the actual commitments are funded or closed. Our remaining potential contractual obligationwas $23.1 million at December 31, 2024.

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). 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.

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. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. 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.

When a determination is made to classify an asset or liability within Level 3 of the fair value hierarchy, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. Because certain securities trade in less liquid or illiquid markets with limited or no pricing information, the determination of fair value for these securities is inherently more difficult. In addition to the unobservable inputs, Level 3 fair value investments may include observable components, which are components that are actively quoted or can be validated to market-based sources.

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

The Company receives updated pricing information from a third-party on a monthly basis to determine the fair value for the majority of our investments. The third party obtains pricing information from independent pricing services and brokers on a monthly basis and validates for reasonableness prior to use for reporting purposes. At least annually, we review the methodologies and assumptions used by our third-party and verify they are reasonable and representative of the fair value of the underlying securities held in the investment portfolio. In our opinion, the pricing information obtained as of December 31, 2024 and December 31, 2023 was reasonable.

We use quoted market prices when available 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 our third-party. Such inputs may reflect management's own assumptions about the assumptions a market participant would use in pricing the financial instrument. The most appropriate valuation methodology is selected based on the specific characteristics of the fixed maturity, equity security or short-term investment and we consistently apply the valuation methodology to measure the security's fair value.

The fair value of securities 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 the third-party valuation 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 use to value our securities include the following, 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 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.

Securities categorized as Level 3 include holdings in certain fixed maturity securities for which an active market does not currently exist. The fair value of our Level 3 securities is determined by unobservable inputs reflecting assumptions market participants would use, including assumptions about risk. 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 Company formed a rabbi trust in 2014 to fund obligations under the UF&C 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. The cash surrender value of the COLI policies is equal to the fair value measured using Level 2 inputs, based on the underlying assets of the COLI policies, and is included in the "Other assets" line in the Consolidated Balance Sheets.

For each of the twelve-month periods ended December 31, 2024 and 2023, the change in our available-for-sale securities categorized as Level 1 and Level 2 was 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.

The fair value of financial instruments that are not carried at fair value on a recurring basis in the financial statements at December 31, 2024 and December 31, 2023 are summarized below:

(1) As a member of Lloyd's, the Company participates in the Syndicate results which include the fair value of the investments. As of December 31, 2024, these investments are included in other long-term investments. The fair value of Lloyd's syndicate investments included in other long-term investments was $82.2 million as of December 31, 2024. Also included in our other long term investments on the Consolidated Balance Sheets is our interest in limited liability partnerships with a current fair value of $100.3 million at December 31, 2024.

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.

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.

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.

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.

The following tables summarize changes to the Company's financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the years ended December 31, 2024 and 2023, respectively. The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.

(1) Unrealized gains (losses) are recorded as a component of comprehensive income.

(1) Unrealized gains (losses) are recorded as a component of comprehensive income.

During the twelve-month period ended December 31, 2024 and 2023, there weretwo securities transferred out of Level 3 andone security transferred into Level 3, respectively.

NOTE 4. REINSURANCE

We account for premiums, written and earned, and losses and loss settlement expenses incurred net of reinsurance ceded. The ceding of insurance does not legally discharge us from primary liability under our policies, and we must pay the loss if the reinsurer fails to meet its obligation.

We also assume both property and casualty insurance from other insurance or reinsurance companies. We do not engage in any reinsurance transactions classified as finite risk reinsurance.

The effects of reinsurance on net written premiums, earned premiums and loss and loss settlement expenses are presented in the following table:

(1) See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" for definition of Net written premiums.

We periodically monitor the financial condition of our reinsurers to confirm that they are financially stable. We believe all of our reinsurers are in an acceptable financial condition and there were no reinsurance balances at December 31, 2024 for which collection is at risk that would result in a material impact on our Consolidated Financial Statements. The amount of reinsurance recoverable on paid losses totaled $20,811 and $31,725 at December 31, 2024 and 2023, respectively.

The following table provides a roll forward of the allowance for credit losses in our reinsurance recoverable balance at December 31, 2024:

Ceded Reinsurance Programs and Retentions

We elect to cede parts of our business into various treaties, which allows us to increase our underwriting capacity, manage our risk profile, and protect us from a single large event, series of events, or a catastrophic event. The majority of our treaties are excess of loss, meaning we retain a portion of the loss prior to ceding to reinsurers. We place some treaties on a proportional basis, meaning we cede a portion of losses beginning with the first dollar of loss. Through each of our treaties, we cede a portion of each risk in exchange for a portion of the premium on those policies. Our treaties cover us from individual risk losses as well as a loss to more than one risk.

We generally work with reinsurance brokers to facilitate our reinsurance treaty procurement.

We have several programs that provide reinsurance coverage. The following tables provide a summary of our primary reinsurance programs. Retention amounts reflect the accumulated retentions and co-participation of all layers within a program. Reinsurance coverage limits the risk of loss that we retain by reinsuring direct risks in excess of our retention limits. New reinsurance programs beginning in 2024 include the property semi-automatic quota share. We also transitioned our Earthquake Delegate Underwriting Authority ("DUA") quota share into an excess of loss treaty. New reinsurance programs beginning in 2023 include our marine liability quota share and our specialty variable quota share. For 2022 we decided not to renew the all lines aggregate excess loss program. In its place we added the pillared occurrence program. Another new program for 2022 was the addition of the earthquake quota share program.

If we incur property catastrophe losses and loss settlement expenses that exceed the retention, our property catastrophe program provides one guaranteed reinstatement. In such an instance, we are required to pay the reinsurers a reinstatement premium equal to the full amount of the original premium, which will reinstate the full amount of reinsurance available under the property catastrophe program.

NOTE 5. 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 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 estimates 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. In addition to our internal process, we engage a third-party firm to provide an independent and unbiased assessment of our reserves to assist in establishing appropriate reserves.

On a quarterly basis, we perform a detailed review of IBNR reserves. 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.

We do not discount loss reserves based on the time value of money.

The following table provides an analysis of changes in our property and casualty losses and loss settlement expense reserves for 2024, 2023 and 2022 (net of reinsurance amounts):

Generally, we base case reserves for each claim on the estimated ultimate exposure for that claim. However, due to the uncertainty associated with the ultimate claim settlement values and additional claims not yet reported, 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 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. Therefore, such development cannot be used to project future reserve redundancies or deficiencies.

Our IBNR methodologies and assumptions are reviewed periodically for appropriateness and reasonability. Items reviewed and revised include development factors for paid and reported loss, paid development factors for allocated LAE, expected loss and LAE ratios, as well as selected frequency and severity trend factors.

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

Prior year development improved over 2023 with neutral development recorded in 2024 as favorable results in several lines were offset by increases in other liability reserves exposed to potential future uncertainty associated with social inflation influences prevalent across the industry. The adverse prior year development for the twelve-month period ended December 31, 2023 included a significant contribution to reserves in second quarter related to excess casualty exposures and other liability lines.

The significant drivers of the adverse reserve development in 2023 were the commercial other liability and commercial automobile lines of business. The adverse development in commercial other liability was primarily in our excess and surplus lines excess casualty book along with some adverse development in standard umbrella and construction defect due to increasing severity pressures. The increases on these longer tailed lines, especially in accident years 2016-2019, related to social and economic inflation. The commercial automobile line of business also experienced adverse development related to increasing severity largely in post-COVID-19 accident years. The remaining lines experienced small amounts of reserve development.

The significant drivers of the adverse reserve development in 2022 were commercial other liability and commercial fire and allied lines. This was offset partially by favorable development in commercial automobile, workers' compensation and fidelity and surety. Commercial other liability experienced adverse development as emerging claim experience and deeper data insights during 2022 pointed to an increase in loss exposure on these longer tailed businesses driven in part by social and economic inflation. Commercial fire and allied developed adversely driven by catastrophe losses and increased severity on non-catastrophe claims. The favorable development for commercial automobile was from both loss and LAE where reductions of reserves for unpaid liabilities were more than sufficient to offset actual paid loss and paid LAE reductions in reserves for IBNR claims also contributed favorable development in addition to LAE where reductions in reserves were more than sufficient to offset payments.

The following tables provide information about incurred and paid losses and loss settlement expense development as of December 31, 2024, net of reinsurance, as well as cumulative development, cumulative claim frequency and IBNR liabilities.

The cumulative number of reported claims, for calendar years 2024, 2023 and 2022, are counted for all lines of business on a per claimant per coverage basis and a single event may result in multiple claims due to the involvement of multiple individual claimants and/or multiple independent coverages. Claim counts for calendar years 2016 and prior are counted on a per claim and per coverage basis. Claim counts include open claims, claims that have been paid and closed, and reported claims that have been closed without the need for any payment.

The reconciliation of the net incurred and loss development tables to the liability for unpaid losses and loss settlement expenses in the consolidated statement of financial position is as follows:

The following is supplementary information about average historical claims duration as of December 31, 2024.

NOTE 6. STATUTORY REPORTING, CAPITAL REQUIREMENTS AND DIVIDENDS AND RETAINED EARNINGS RESTRICTIONS

Our insurance subsidiaries file statutory-basis financial statements with state insurance regulatory authorities prepared in accordance with Statutory Accounting Principles ("SAP") prescribed or permitted by such authorities, which may vary materially from GAAP. Prescribed SAP includes the Accounting Practices and Procedures Manual of the National Association of Insurance Commissioners ("NAIC") as well as state laws, regulations and administrative rules. Permitted SAP encompasses all accounting practices not so prescribed. The principal differences between SAP financial statements and financial statements prepared in accordance with GAAP in that policy acquisition costs are charged to expense as incurred, goodwill is amortized, and the values reported for investments, pension obligations and deferred taxes are established on a different basis. Accordingly, SAP operating results and SAP capital and surplus may differ substantially from amounts reported in the GAAP basis financial statements for comparable items.

No material permitted accounting practices were used to prepare our statutory-basis financial statements during the years ended December 31, 2024, 2023 and 2022.

We are directed by the state insurance departments' solvency regulations to calculate a required minimum level of statutory capital and surplus based on insurance risk factors. The risk-based capital results are used by the NAIC and state insurance departments to identify companies that merit regulatory attention or the initiation of regulatory action. Statutory capital and surplus in regards to policyholders at December 31, 2024, 2023 and 2022 and statutory net income (loss) for the years then ended are as follows:

UF&C and its property and casualty insurance subsidiaries had statutory capital and surplus in regards to policyholders in excess of their required levels at December 31, 2024.

State laws and regulations generally limit the amount of funds that an insurance company may distribute to a parent as a dividend without commissioner approval. As a holding company with no independent operations of its own, United Fire Group, Inc. relies on dividends received from its insurance company subsidiaries in order to pay dividends to its common shareholders. Dividends payable by our insurance subsidiaries are governed by the laws in the states in which they are domiciled. 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 less any dividends paid in the previous 12 months, or net income of the preceding calendar year on a statutory basis less any dividends paid in the previous 12 months, not greater than earned statutory surplus. Other states in which our insurance company subsidiaries are domiciled may impose similar restrictions on dividends and distributions. Based on these restrictions, at December 31, 2024, our insurance company subsidiary, UF&C, is able to make a maximum of $40.7 million in dividend payments without prior regulatory approval. At December 31, 2024, we were in compliance with applicable state laws and regulations.

State insurance holding company laws and regulations generally require approval from the insurer's domicile state insurance commissioner for any material transaction. For property and casualty insurers, a material transaction is defined as any sale, loan, exchange, transfer or guarantee with an affiliate where the aggregate value of the transaction exceeds 25 percent of the insurer's policyholders' surplus or three percent of its admitted assets (measured at December 31 of the preceding year), whichever is less.

In 2024, 2023 and 2022, UF&C paid dividends to UFG totaling $22,800, $13,200 and $12,000, respectively.

NOTE 7. INCOME TAX

Income tax expense (benefit) is composed of the following:

A reconciliation of income tax expense (benefit) computed at the applicable federal tax rate of 21.0 percent in 2024, 2023 and 2022 to the amount recorded in the accompanying Consolidated Statements of Income is as follows:

We measure certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is 21.0 percent. The significant components of deferred tax assets and liabilities consist of the following at December 31, 2024 and 2023:

(1) Related to our acquisition of Mercer Insurance Group, Inc.

As of December 31, 2024 and 2023, the Company has recordedno valuation allowance as we believe it is more likely than not that all the deferred assets will be realized. Our determination was based on evidence of taxable income in the carryback and carryforward periods and our tax planning strategy of holding debt securities with unrealized losses to recovery.

In 2024, 2023, and 2022, we made cash payments for income taxes of $16,112, $1,348 and $21,548, respectively. We madeno interest payments in 2024, 2023 and 2022.

In 2024, 2023 and 2022 we received federal tax refunds of $0, $14,017 and $20,789, respectively, which resulted from the utilization of our net operating losses and net capital loss carryforwards and carrybacks. We haveno loss carryforwards andno tax credit carryforwards.

As of December 31, 2024, we hadno alternative minimum tax credit carryforwards.

We file a consolidated federal income tax return and file income tax returns in various state jurisdictions. The U.S. Federal income tax returns of the Company for years prior to 2018 are no longer subject to examination by the taxing authorities. The Company doesnot have any unrecognized tax benefits ("UTBs") at December 31, 2024 or December 31, 2023. In the event the Company has UTBs, interest and penalties related to uncertain tax positions would be recorded as part of income tax expense in the financial statements. The Company regularly assesses the likelihood of additional tax assessments by jurisdiction and, if necessary, adjusts its tax reserves based on new information or developments.

NOTE 8. EMPLOYEE BENEFITS

We offer various benefits to our employees including a non-contributory cash balance pension plan and an employee health and dental benefit plan.

In 2023, we offered an Early Retirement Package ("ERP") as a voluntary program for a select group of eligible employees to consider retiring earlier than planned. Employees that accepted the offering received a one-time separation package. At the same time, we announced a change to our paid time off ("PTO") policy to a discretionary time off policy as of December 31, 2023. As a result, the Company will no longer maintain an accrued liability on the balance sheet for PTO. The expense of the severance benefits offered with the ERP largely offset the benefit of the liability released with the change in time off policy in the financial statements. A partial plan curtailment was triggered during the period due to the reduction in active lives resulting from the ERP reduction in force, providing the benefit shown in the table for the Net Periodic Benefit Cost below.

Pension and Post-Retirement Benefit Plans

We offer a non-contributory cash balance pension plan in which all of our employees are eligible to participate after they have completedone year of service, attained 21 years of age and have met the hourly service requirements. Retirement benefits under our cash balance pension plan are based on the number of years of service and level of compensation. Our policy to fund the pension plan on a current basis to not less than the minimum amounts required by the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended, is designed to ensure that plan assets will be adequate to provide retirement benefits. We are not required to make a contribution to the pension plan in 2025.

As a result of the ERP offered in 2023, any retiree or terminated employees were offered the opportunity to take a lump sum distribution out of the plan post retirement. About 25% of retirees elected to take a lump sum payment, which in total was $17.8 million, and as a result, a settlement gain of $0.5 million was recorded in the fourth quarter of 2024.

We also offer health and dental benefit plans to all of our eligible employees that are self-funded. We previously offered a fully-funded (post-65) retiree health and dental plan (the "post-retirement benefit plan"). In January 2021, the Company changed the post-retirement benefit plan to a voluntary plan funded exclusively by participants, commencing at the start of 2023. As of December 31, 2024, the post-retirement benefit obligation was $0.

Investment Policies and Strategies

The investment objective of the plan is to seek the highest rate of return consistent with its asset mix. The plan seeks to ensure reasonable costs and places a high priority on benefit security and satisfying its benefit obligations. The plan's investment objectives include, but are not limited to: maximization of return within reasonable and prudent levels of risk; provision of returns comparable to returns for similar investment options; control administrative and management costs; provision of appropriate diversification within investment vehicles. The plan's investment strategy will utilize several different asset classes with varying risk/return characteristics. The returns of the asset classes are not expected to move in tandem, which will allow the plan to take part in different parts of the global economic cycle.

We have an internal retirement committee, which includes our Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Human Resources Officer, Chief Legal Officer, and Chief Claims Officer, all of whom periodically receive information on the value of the pension plan assets and their performance. Quarterly, the retirement committee meets to review and discuss the performance of the pension plan assets as well as the allocation of investments within the pension plan in accordance with the Investment Policy.

In 2023, the retirement committee changed the investment strategy to a liability driven investment ("LDI") approach to better match the timing of cash flows between payouts from the plan with cash flows from the asset portfolio, as well as hedge interest rate risk between assets and liabilities. Changing to this approach while the plan was overfunded was expected to reduce the likelihood of necessary contributions to the plan in the future.

The LDI investment strategy has shifted the allocation of pension plan assets from prior periods. The portfolio includes a hedge portfolio, targeting 80.0 percent of the pension plan asset balance, largely comprised of highly rated fixed maturity securities and designed to match the assets and liabilities and maintain a fully funded position while hedging interest rate, yield curve and credit spread risks. The remaining 20.0 percent target of the asset balance is return seeking, with the objective to account for liability growth and to maintain a healthy surplus position. The largest fund in the return seeking portfolio is the LargeCap S&P 500 Index Separate Account fund, comprising 67% of the return seeking portfolio and 13.3% of the overall portfolio. We have not identified any significant concentrations of risk as a result of the LDI investment strategy.

The investments held by the pension plan at December 31, 2024 include the following asset categories:

•Fixed maturity securities, which are income-oriented investments including low, medium, and high quality bond funds with short, intermediate, and/or long term durations;

•Equity securities, which may include various types of stock (foreign and domestic), such as large-cap, mid-cap, small-cap, with value, blend, and growth investment objectives;

•Alternatives/other investments, which include commingled trusts, insurance company separate accounts through a group annuity contract, and mutual funds;

•Pooled separate accounts, which includes seven separate funds, including three S&P index separate accounts, an international equity index separate account, a short-term income separate account, a liquid assets separate account, and a US property separate account;

•Cash and cash equivalents, which include money market funds, stable value, and guaranteed interest accounts.

As a result of the shift in investment strategy, we have reduced the number of external investment managers to one as of December 31, 2024.

The following is a summary of the pension plan's actual and target asset allocations at December 31, 2024 and 2023 by asset category:

Assets held in cash and cash equivalents enable the pension plan to mitigate market risk associated with other types of investments and allows the pension plan to maintain liquidity both for the purpose of making future benefit payments to participants and their beneficiaries and for future investment opportunities.

Valuation of Investments and Fair Value Measurement

Fair value measurement for the plan, including the application of the fair value hierarchy, is consistent with the methodology outlined in Part II, Item 8, Note 3 "Fair Value of Financial Instruments".

The following tables present the categorization of the pension plan's assets measured at fair value on a recurring basis at December 31, 2024 and 2023:

The fair value of the majority of the Plan's investments is determined based on prices obtained from the Plan's investment managers who obtain prices from independent pricing services. One price is obtained for each security, which is evaluated for reasonableness prior to its use for reporting purposes.

Fixed Maturity Securities ("LDI Portfolio")

The LDI portfolio is comprised of individual investments in cash equivalents, bonds and notes, and options and contracts.

Cash and cash equivalents within the portfolio consist of interest-bearing cash and money market funds. The fair value of money market funds approximates their cost basis due to their liquidity and short-term nature and are classified within Level 1 of the fair value hierarchy.

Bonds and notes consists of corporate bonds (domestic and foreign), private placement debt instruments, government bonds, and mortgage backed obligations. Valuation is determined by the fund administrator's investment managers primarily utilizing Intercontinental Exchange ("ICE") institutional bond pricing and ICE CMO pricing applications and models. For government bonds, evaluators may also utilize yield curves constructed from dealer contracts and live data sources. For CMOs, evaluators may apply a volatility-driven, multi-dimensional single cash flow stream model or option-adjusted spread model. For ABS and CMBS issuances, a single cash flow stream model is utilized. Input information is from market and dealer sources, integrated with credit information, observed market movements, and other sector news. Market sources generally includes public information about the issuer of the bond. Credit information pertains to information on how well the issuing company pays debts. Observed market movements relates to information about the issuer's publicly traded stock. Sector news includes other public information about corporations similar to the issuer. As the inputs utilized are either directly or indirectly observable, bonds and notes are classified within Level 2 of the fair value hierarchy.

Options and contracts consist of futures contracts which utilize pricing provided by issuers, investment managers, fund accountants, clients, and others. Default pricing may also be used if not provided. As there are significant unobservable inputs utilized for these holdings, they are classified within Level 3 of the fair value hierarchy.

Pooled Separate Accounts

The pension plan invests inseven pooled separate account funds: (1) Large Cap S&P 500 Index separate account; (2) Mid Cap S&P 400 Index separate account; (3) Small Cap S&P 600 Index separate account; (4) International Equity Index separate account; (5) Short-Term Income separate account; (6) Liquid Assets separate account; and (7) US Property separate account.

The Large Cap S&P 500 Index, MidCap S&P 400 Index, and SmallCap S&P 600 Index separate account funds are stated at fair value as provided by the fund administrator based on the fair value of the underlying holdings of the funds. These pooled separate accounts invest mainly in domestic stocks composing the S&P 500 Index, S&P MidCap 400 Index, and S&P SmallCap 600 Index, respectively, which have observable Level 1 quoted pricing inputs. The NAV of each fund is the basis for current transactions and the pooled separate accounts can be redeemed at NAV as of the measurement date. Most of the security prices were obtained from a pricing service, Interactive Data Corporation (IDC), for each fund. The fair value measurement for each fund is classified within Level 1 of the fair value hierarchy as the inputs reflect observable market data and quoted prices.

The International Equity Index separate account fund is stated at fair value as provided by the fund administrator based on the fair value of the underlying holdings of the fund. This pooled separate account invests in a single mutual fund (ticker PFIEX) with underlying holdings primary in non-US stocks. The fair value of the mutual fund is a publicly quoted pricing input used in determining the NAV of the pooled separate account. The NAV of the pooled separate account is not publicly quoted but is available to current investors. The fair value of the underlying mutual fund is based on third-party pricing vendors and utilizes observable market information. The NAV is the basis for current transactions and the pooled separate account can be redeemed at NAV as of the measurement date. The fair value measurement is classified within Level 1 of the fair value hierarchy as the underlying inputs reflect observable public market data from an active market.

The Short-Term Income separate account fund is stated at fair value as provided by the fund administrator based on the fair value of the underlying holdings of the fund. The fund invests in a single mutual fund (ticker PSHIX). The underlying investments of this mutual fund are primarily in high quality short-term bonds and other fixed-income securities that, at the time of purchase, are rated BBB- or higher by S&P Global or Baa3 or higher by Moody's. The fair value of the mutual fund is a publicly quoted pricing input used in determining the NAV of the pooled separate account. The NAV of the pooled separate account is not publicly quoted but is available to current investors. The fair value of the underlying mutual fund is based on third-party pricing vendors and utilizes observable market information. The NAV is the basis for current transactions and the pooled separate account can be redeemed at NAV as of the measurement date. The fair value measurement is classified within Level 1 of the fair value hierarchy as the underlying inputs reflect observable public market data from an active market.

Investments in the liquid assets separate account fund are stated at fair value as provided by the administrator of the fund based on the fair value of the underlying assets owned by the fund. This pooled separate account invests mainly in short term securities such as commercial paper. The majority of the underlying securities have observable Level 1 or Level 2 pricing inputs, including quoted prices for similar assets in active or non-active markets. Most of the security prices were obtained from a pricing service, IDC. The NAV is the basis for current transactions and the pooled separate account can be redeemed at NAV as of the measurement date. The fair value measurement is classified within Level 2 of the fair value hierarchy as the inputs reflect observable market data and quoted prices for similar assets, but in some instances, quoted prices are in markets that are not active.

The fair value of the investments in the U.S. property separate account fund is provided by the administrator of the fund based on the NAV of the fund. The NAV is based on the fair value of the underlying properties included in the fund as this pooled separate account invests mainly in commercial real estate and includes mortgage loans which are backed by the associated properties. The fair value of the underlying real estate is estimated using discounted cash flow valuation models that utilize public real estate market data inputs such as transaction prices, market rents and growth rates, vacancy levels, leasing absorption, loan-to-value ratios, market cap rates, market interest rates, and discount rates. In addition, each property is appraised annually by an independent appraiser. The NAV is the basis for current transactions and the pooled separate account can be redeemed at net asset value as of the measurement date. The fair value measurement is classified within Level 3 of the fair value hierarchy given the inputs reflect significant unobservable inputs. There are no restrictions as to the plan's ability to redeem its investment at the net asset value of the fund as of the reported date. The net asset value provided by the custodian has not been adjusted.

Fixed Maturity and Equity Securities

Investments in equity securities are stated at fair value based upon quoted market prices reported on recognized securities exchanges on the last business day of the year. Purchases and sales of securities are recorded as of the trade date. As such, these securities are categorized as Level 1.

The fair value of fixed maturity securities categorized as Level 2 is determined by management based on fair value information reported in the custodial statements received from the plan's investment managers, which is derived from recent trading activity of the underlying security in the financial markets. 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.

United Life Annuity

The United Life group annuity contract, which is a deposit administration contract, is stated at contract value as determined by United Life. Under the group annuity contract, the plan's investment account is credited with compound interest on the average account balance for the year. The interest rate is equivalent to the ratio of net investment income to mean assets of United Life, net of investment expenses. As a result, the fair value amount shown is equal to the contract value and is classified as Level 3. This investment was liquidated during 2024 and is not held at period end.

Money Market Funds

Money market funds are highly liquid and short-term investments held with various financial institutions. Interest is earned on a daily basis. The fair value of these funds approximates their cost basis due to their liquidity and short-term nature.

The following tables provide a summary of the changes in fair value of the pension plan's Level 3 securities:

Estimates and Assumptions

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. The discount rate assumption uses a published discount yield curve ("Discount Yield Curve") and reflects the expected future benefit discounted cash flows to determine the present value of the plan benefit obligations as of December 31. The Discount Yield Curve uses pricing and yield information for high quality corporate bonds. We have reviewed the updated curve and materials provided by our external actuaries with regard to the assumptions used in the curve. We will continue to monitor this curve and intend to make changes as appropriate.

The Society of Actuaries ("SOA") is an actuarial organization that periodically reviews mortality data and publishes mortality tables and improvement scales. The mortality assumptions are based on the SOA's Pri-2012 white collar base rate mortality projected generationally using a published mortality improvement scale ("2024 MI"). The 2024 MI scale is based on latest mortality improvement release, the MIM-2021-v4 application tool issued by SOA in October 2023 with a few user-selected assumptions: 2030 as the ultimate year for age/cohort transition and long-term rate assumptions using sex-distinct and age based rated developed from the latest Social Security Trustee Reports. We have reviewed these updated tables and have updated the mortality assumptions based on this information and also based on research provided by our external actuaries. We will continue to monitor mortality assumptions and intend to make changes as appropriate to reflect additional research and our resulting best estimate of future mortality rates.

Assumptions Used to Determine Benefit Obligations

The following actuarial assumptions were used to determine the reported plan benefit obligations at December 31:

Rising interest rates resulted in an increase in the discount rates we use to value our respective plan's benefit obligations at December 31, 2024 compared to December 31, 2023.

Assumptions Used to Determine Net Periodic Benefit Cost

The following actuarial assumptions were used at January 1 to determine our reported net periodic benefit costs for the year ended December 31:

Benefit Obligation and Funded Status

The following table provides a reconciliation of benefit obligations, plan assets and funded status of our plans:

(1)For the pension plan, the benefit obligation is the projected benefit obligation. For the post-retirement benefit plan, the benefit obligation is the accumulated post-retirement benefit obligation.

(2)For end of year 2023 benefit obligation and fair value, an adjustment of 13 (thousand) was made reflecting an estimate provided to the current sole-custodian of the fund assets from a separate third-party managed custodian. The beginning of year 2024 balances were updated to reflect actual valuation as there is now only one custodian of fund assets.

Our accumulated pension benefit obligation was $180,324 and $209,867 at December 31, 2024 and 2023, respectively. Actuarial gain during 2024 was driven by actuarial assumption changes, primarily an increase in discount rate, and participant experience.

The following table displays the effect that the unrecognized prior service cost and unrecognized actuarial loss of our plans had on accumulated other comprehensive income ("AOCI"), as reported in the accompanying Consolidated Balance Sheets:

We anticipate amortization of the net actuarial losses for our pension plan in 2025 to be $15,635.

Net Periodic Benefit Cost

The components of the net periodic benefit cost for our pension and post-retirement benefit plans are as follows:

The expected long-term return on plan assets is determined using a calculated value. The expected long-term return on plan assets assumption was developed as a weighted average rate based on the target asset allocation of the plan and the Long-Term Capital Market Assumptions ("CMA") November 2023. The capital market assumptions were developed with a primary focus on forward-looking valuation models and market indicators. The key fundamental economic inputs for these models are future inflation, economic growth, and interest rate environment. Due to the long-term nature of the pension obligations, the investment horizon for the CMA is 20 years. In addition to forward-looking models, historical analysis of market data and trends was reflected, as well as the outlook of recognized economists, organizations and consensus CMA from other credible studies.

The Corridor Approach is used to amortize actuarial gains and losses. An allowable 10% corridor is utilized under this approach. The period of amortization of such gains and losses is the average future service of members expected to receive benefits. A portion of the prior service cost component of net periodic pension and postretirement benefit costs are capitalized and amortized straight-line as part of deferred acquisition costs and is included in Amortization of deferred policy acquisition costs within the Consolidated Statements of Income. The portion not related to the compensation and the other components of net periodic pension and postretirement benefit costs are included in Other underwriting expenses within the Consolidated Statements of Income.

Projected Benefit Payments

The following table summarizes the expected benefits to be paid from our plans over the next 10 years:

NOTE 9. STOCK-BASED COMPENSATION

Non-Qualified Employee Stock Award Plan

The United Fire Group, Inc. 2021 Stock Plan (the "Stock Plan") authorized the issuance of restricted and unrestricted stock awards, stock appreciation rights, incentive stock options, and non-qualified stock options for up to 4,050,000 shares of UFG common stock to employees. At December 31, 2024, there were 1,335,589 authorized shares rema ining available for future issuance. 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. Further, the Board of Directors, in its discretion, has delegated authority to grant a limited number of restricted stock units in situations where the Company is seeking to recruit or retain an individual.

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 our common stock on the date of the grant. Restricted stock awards fully vest after three years orfive years from the date of issuance, unless accelerated upon the approval of the Board of Directors, at which time UFG common stock will be issued to the awardee. All awards are generally granted free of charge to the eligible employees of UFG as designated by the Board of Directors. Forfeitures of awards under the plan are recognized as they occur.

The activity in the Stock Plan is displayed in the following table:

Non-Qualified Non-Employee Director Stock Option and Restricted Stock Plan

The United Fire Group, Inc. Non-Employee Director 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. The total number of shares available under the Director Stock Plan is 450,000 and the expiration date is December 31, 2029. At December 31, 2024, the Company had 71,410 authorized shares available for future issuance.

The Board of Directors has the authority to determine which non-employee directors receive awards, when options and restricted stock 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 and restricted stock (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 agreement or restricted stock agreement (subject to limits set forth in the plan). The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Director Stock Plan. Forfeitures of awards under the plan are recognized as they occur.

The activity in the Director Stock Plan is displayed in the following table:

Stock-Based Compensation Expense

In 2024, 2023 and 2022, the Company recognized stock-based compensation expense of $5,517, $3,246 and $2,827, respectively. Stock-based compensation expense is recognized over the vesting period of the stock options.

As of December 31, 2024, we had $8,592 in stock-based compensation expense that has yet to be recognized through our results of operations. We expect this compensation to be recognized in subsequent years according to the following table, 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.

Analysis of Award Activity

The analysis below details the option award activity for 2024 and the awards outstanding at December 31, 2024, for both of our plans and ad hoc options, which were granted prior to the adoption of the other plans:

Intrinsic value is the difference between our share price on the last day of trading (i.e., December 31, 2024) and the price of the options when granted and represents the value that would have been received by option holders had they exercised their options on that date. These values change based on the fair market value of our shares. The intrinsic value of options exercised totaled $28, $18 and $261 in 2024, 2023 and 2022, respectively.

The analysis below details the award activity for the restricted stock and restricted stock unit awards outstanding at December 31, 2024:

In 2024, 2023 and 2022 we recognized $4,992, $2,637 and $2,048, respectively, in compensation expense related to the restricted stock and restricted stock unit awards. At December 31, 2024, we had $8,157 in compensation expense that has yet to be recognized through our results of operations related to the restricted stock and restricted stock unit awards. The intrinsic value of the non-vested restricted stock and restricted stock unit awards outstanding totaled $16,931 and $5,864 at December 31, 2024 and 2023, respectively.

Assumptions

The weighted-average grant-date fair value of the options granted under our plans has been estimated using the Black-Scholes option pricing model with the following weighted-average assumptions. There wereno option grants during 2024.

The following table summarizes information regarding the stock options outstanding and exercisable at December 31, 2024:

NOTE 10. SEGMENT INFORMATION

The Company operates asone operating segment. The Company's CODM is its CEO, who reviews financial information presented on a consolidated basis. The CODM uses consolidated net income to assess financial performance and allocate resources. This financial metric is used by the CODM to make key operating decisions, such as determination of which products to market and sell; determination of distribution networks with insurance agents; and allocation of budgets between sales and marketing, technology, and general and administrative expenses.

See the Consolidated Financial Statements for financial information regarding the Company's operating segment.

Revenues from external customers, with the exception of Lloyd's, are fully attributed to the Company's country of domicile. Lloyd's syndicate business is concluded in the United Kingdom as part of Lloyd's insurance market. Risks can be attributed to the United Kingdom or be globally underwritten using Lloyd's licenses in different countries. As a result, it is impracticable for the Company to accurately report specific geographic concentration of global revenues for Lloyd's business.

All long-lived assets are attributed to the Company's country of domicile.

The Company does not have revenue from transactions with a single customer amounting to 10 percent or more of its revenues.

NOTE 11. EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted earnings per share:

(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 have been anti-dilutive.

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 and restricted stock 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.

Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our net loss for the year ended December 31, 2023, we were required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share, as the inclusion of 282,515 restricted shares would have been antidilutive to the calculation. If we had not incurred a net loss for the year ended December 31, 2023, diluted weighted-average common shares would have been 25,531,784.

NOTE 12. LEASE COMMITMENTS

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. As of December 31, 2024, the Company has leases with remaining terms ofone year tosix years, some of which may include no options for renewal and others with options to extend the lease terms fromsix months tofive years.

As of December 31, 2024, the Company is the lessor forfive lease agreements related to office space and parking. This is a decrease ofone lease agreement from the year ended December 31, 2023 as the Company allowed the lease term to expire. The terms of the leases vary depending on the property and range fromtwo years tonine years, which may include options for renewal or to extend lease terms or no options for renewal. Lessor income and sublease income are included in net income in the statement of comprehensive income.

The components of our operating leases were as follows:

The following table provides supplemental information regarding our operating leases:

The maturities of our lease liabilities:

The maturities of our lease receivables:

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.

NOTE 13. DEBT

Long Term Debt

December 2020 Private Placement

On December 15, 2020, UF&C issued $50 million of notes due 2040 ("UF&C Notes") at par value. The UF&C Notes are senior, unsecured unsubordinated obligations of UF&C and are fully and unconditionally guaranteed on an unsecured, unsubordinated basis by each of UF&C's subsidiaries. The UF&C Notes mature on December 15, 2040. The UF&C Notes may be redeemed by UF&C, in whole or in part, at par, at any time following the tenth (10th) anniversary of the issuance date, but subject to the payment restrictions, including the prior approval of the Iowa Insurance Commissioner.

Interest payments 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 UF&C Pooled Group as of the applicable Interest Payment Date, as set forth in the table below. For the twelve-month period ended December 31, 2024, interest expense totaled $3,438. Payment of interest is subject to approval by the Iowa Insurance Division.

May 2024 Private Placement

On May 31, 2024, the Company issued $70,000 aggregate principal of its 9% senior unsecured notes due 2039 ("UFG Notes") at par value. The UFG Notes mature on May 31, 2039. The UFG Notes may be redeemed by the Company, in whole or in part, at par, at any time following the tenth (10th) anniversary of the issuance date. Prior to the tenth (10th) anniversary, the UFG Notes may not be redeemed except for a change in control offer or upon an event of default.

Interest payments will be paid quarterly on February 28, May 31, August 31 and November 30 of each year. Costs incurred in the issuance of debt of $3,050 were capitalized and will be 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. For the twelve-month period ended December 31, 2024, interest expense totaled $3,784.

The Company is required to maintain a rating for each series of the UFG Notes from a rating agency. The UFG Notes also require and impose certain operating and financial restrictions, including financial covenants, on the Company including:

•incur or assume additional indebtedness, including guarantees;

•incur or assume liens;

•engage in mergers or consolidations;

•convey, transfer, lease or dispose of assets;

•make certain investments

•enter into transactions with affiliates;

•declare or make dividend payments or distributions or repurchase capital stock or other equity interests;

•change the nature of our business materially; and

•make changes in accounting treatment or reporting practices that affect the calculation of financial covenants, or change our fiscal year.

As of December 31, 2024, we were in compliance with all covenants.

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 UF&C) as agreed by UF&C and FHLB Des Moines in connection with any such loans or advances.

Membership in FHLB Des Moines provides UF&C 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, UF&C has an aggregate borrowing capacity of up to 20.0 percent of total assets. As of December 31, 2024, UF&C has FHLB Des Moines borrowing capacity up to $463,492 if an immediate liquidity need would arise. UF&C hadno outstanding balance as of December 31, 2024 and 2023 related to these lines of credit.

NOTE 14. INTANGIBLE ASSETS

Our major classes of intangible assets are presented in the following table:

(1) The intangible asset for licenses has an indefinite life and therefore is not amortized.

The estimated useful lives assigned to our major classes of amortizable intangible assets are as follows:

Aggregate amortization expense for intangible assets totaled $709 for each of the years ended December 31, 2024 2023, and 2022. Our estimated aggregate amortization expense for each of the next five years is as follows:

There have beenno impairment losses recorded relating to intangible assets for the years ended December 31, 2024 and 2023. There is no expected significant residual value relating to our intangible assets.

NOTE 15. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the years ended December 31, 2024, 2023 and 2022:

Income tax effects are released from accumulated other comprehensive income (loss) for unrealized gains or losses when the gains or losses are realized.

NOTE 16. PROPERTY AND EQUIPMENT

The following table is a summary of the components of the property and equipment that are reported in the accompanying Consolidated Financial Statements.

Depreciation is computed primarily by the straight-line method over the following estimated useful lives:

Depreciation expense totaled $10,086, $9,799 and $6,961 for 2024, 2023 and 2022, respectively.