UNITED FIRE GROUP INC

UNITED FIRE GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share amounts or as otherwise noted)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

United Fire Group, Inc. ("UFG," the "Registrant," the "Company," "we," "us," or "our") and its consolidated subsidiaries and affiliates are engaged in the business of writing property and casualty insurance through a network of independent agencies. Our insurance company subsidiaries are licensed as property and casualty insurers in 50 states and the District of Columbia.

Basis of Presentation

The financial information for interim periods presented in these Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and with the instructions to Form 10-Q and Regulation S-X promulgated by the SEC. Certain financial information that is included in our Annual Report on Form 10-K for the year ended December 31, 2024, including financial statement footnote disclosures, is not required by the rules and regulations of the SEC for interim financial reporting and has been condensed or omitted.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The financial statement categories that are most dependent on management estimates and assumptions include: investments; losses and loss settlement expenses; and pension benefit obligations.

Management believes the accompanying Consolidated Financial Statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. All significant intercompany transactions have been eliminated in consolidation. The results reported for the interim periods are not necessarily indicative of the results of operations that may be expected for the year. The Consolidated Financial Statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 26, 2025.

Updates to Summary of Significant Accounting Policies

Since our Annual Report on Form 10-K for the year ended December 31, 2024, we have had no changes to significant accounting policies, which have been followed in preparing the accompanying unaudited Consolidated Financial Statements.

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.

On July 10, 2025, the Company completed a private offering of $30 million aggregate principal of senior unsecured 9.0% Series B notes with a maturity date of May 31, 2039 ("Series B Notes"). The terms of the Series B Notes are identical to the senior unsecured notes issued on May 31, 2024, as described in Note 8 "Debt". Proceeds from the offering will be used to support anticipated growth and for general corporate purposes.

Recently Issued Accounting Standards

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. SUMMARY OF INVESTMENTS

Fair Value of Investments

A reconciliation of the amortized cost to fair value of investments in our available-for-sale fixed maturity portfolio, presented on a consolidated basis, as of June 30, 2025 and December 31, 2024, is provided below:

Maturities

The amortized cost and fair value of available-for-sale fixed maturity securities at June 30, 2025, 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 Credit Losses

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 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 credit loss 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 an allowance for credit losses 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 credit losses, 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 credit losses, 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.

As of June 30, 2025, we hadno allowance for credit losses for the available-for-sale fixed maturity securities portfolio.

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, during the reporting period is as follows:

(1) As a member of Lloyd's, the Company participates in the syndicate results which include unrealized gains and losses on investments. The change in net unrealized gains and losses on Lloyd's syndicate investments included above was $0.5 million as of June 30, 2025.

The following tables summarize our fixed maturity securities that were in anunrealized loss position at June 30, 2025 and December 31, 2024. 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 June 30, 2025 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.

Mortgage Loans

The mortgage loan portfolio consists entirely of commercial mortgage loans. We did not acquire new loans during the six months ended June 30, 2025 or the year ended December 31, 2024. The following tables present the carrying value of our commercial mortgage loans and additional information at June 30, 2025 and December 31, 2024:

Mortgage loans are evaluated on a quarterly basis for impairment on an individual basis through a monitoring process and review of key credit indicators, such as economic trends, delinquency rates, property valuations, occupancy and rental rates and loan-to-value ratios. A loan is considered impaired when the Company believes it will not collect the principal and interest set forth in the contractual terms of the loan. An internal grade is assigned to each mortgage loan, with a grade of 1 being the highest and least likely for an impairment and a grade of 7 being the lowest and 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. The table below shows mortgage loans by year of origination as of June 30, 2025.

As of June 30, 2025, the Company had a credit loss allowance of $1,147, summarized in the following rollforward:

The increase in the credit loss allowance relates to a mortgage loan collateralized by commercial office property with declining occupancy rates. There were no other material changes in the expected credit loss reserve for the six months ended June 30, 2025. The carrying value of commercial mortgage loans excludes accrued interest of $154.

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 are as follows:

Net Investment Income

Net investment income is comprised of the following:

Funding Commitment

Pursuant to agreements with our limited liability partnership investments, we are contractually committed through 2030 to make capital contributions upon the request of certain of the partnerships. Our remaining potential contractual obligation was $21.1 million at June 30, 2025.

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 June 30, 2025 and December 31, 2024:

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 June 30, 2025 and December 31, 2024 was reasonable.

We use quoted market prices when available to determine the fair value of fixed maturities 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 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 this service provider are submitted to another third-party valuation service provider. Both service providers use a market approach to find pricing of similar financial instruments. The market inputs our service providers normally use to value our securities include the following: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. The method and inputs for these securities classified as Level 2 are the same regardless of industry category, credit quality, duration, geographical concentration or economic characteristics. For our mortgage-backed securities, collateralized mortgage obligations and asset-backed securities, our service providers use additional market inputs to value these securities, including the following: new issue data, periodic payment information, monthly payment information, collateral performance and real estate analysis from third parties. Our service providers prioritize inputs based on market conditions, and not all inputs listed are available for use in the valuation process for each security on any given day.

The 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 United Fire & Casualty Company Supplemental Executive Retirement and Deferral Plan (the "Executive Retirement Plan"). Within the rabbi trust, corporate-owned life insurance ("COLI") policies are utilized as an investment vehicle and source of funding for the Company's Executive Retirement Plan. The COLI policies invest in mutual funds, which are priced daily by independent sources. 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 the six-month period ended June 30, 2025, the change in our available-for-sale securities categorized as Level 1 and Level 2 was the result of investment purchases, disposals, and the change in unrealized gains.

For the six-month period ended June 30, 2025, we haveno Level 3 assets measured at fair value on a recurring basis.

The fair value of financial instruments that are not carried at fair value on a recurring basis in the financial statements at June 30, 2025 and December 31, 2024 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 $108.1 million as of June 30, 2025. 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 $97.3 million at June 30, 2025.

For cash and cash equivalents, 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.

NOTE 4. RESERVES FOR LOSSES AND LOSS SETTLEMENT EXPENSES

Property insurance indemnifies an insured with an interest in physical property for loss of, or damage to, such property or the loss of its income-producing abilities. Casualty insurance is primarily concerned with losses caused by injuries to persons and legal liability imposed on the insured for such injury or for damage to property of others. In most cases, casualty insurance also obligates the insurance company to provide a defense for the insured in litigation, arising out of events covered by the policy.

Liabilities for losses and loss settlement expenses reflect management's best estimates at a given point in time of what we expect to pay for claims that have been reported and those that have been incurred but not reported ("IBNR"), based on known facts, circumstances, and historical trends. Because property and casualty insurance reserves are estimates of the unpaid portions of incurred losses that have been reported to us, as well as losses that have been incurred but not reported, the establishment of appropriate reserves, including reserves for catastrophes, is 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 estimation 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 at June 30, 2025 and December 31, 2024 (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

The Company experienced $9.0 million and $11.9 million of favorable reserve development in net reserves for prior accident years for the three- and six-month periods ended June 30, 2025, respectively. The favorable reserve development for both the three- and six-month periods was driven in part by reductions in prior year reserves as catastrophe experience emerged better than expected. The Company experienced $5.0 million favorable non-catastrophe development in the second quarter driven by better than expected loss adjustment expense payments. Strengthening in other liability lines of business due to continued uncertainty in future loss cost trends related to economic and social inflation was offset by improvement in the fire and allied lines, automobile, workers' compensation, and surety lines of business.

NOTE 5. EMPLOYEE BENEFITS

Net Periodic Benefit Cost

The components of the net periodic benefit cost for our pension benefit plan are as follows:

A portion of the prior service cost component of net periodic pension benefit costs are capitalized and amortized on a straight-line basis as part of deferred acquisition costs and is included in the line "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 benefit costs are included in "Other underwriting expenses" within the Consolidated Statements of Income.

We previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024 that we are not required to make a contribution to the pension plan during 2025. See our 2024 Annual Report on Form 10-K, Item 8, Note 8 "Employee Benefits" for information on our retirement benefits.

NOTE 6. STOCK-BASED COMPENSATION

Non-Qualified Employee Stock Award Plan

At June 30, 2025, there were 950,245 authorized shares remaining available for future issuance pursuant to the United Fire Group, Inc. 2021 Stock and Incentive Plan (as amended, the "Stock Plan"). The activity in the Stock Plan is displayed in the following table:

Non-Qualified Non-Employee Director Stock Plan

At June 30, 2025, the Company had 37,210 authorized shares available for future issuance pursuant to the United Fire Group, Inc. Non-Employee Director Stock Plan (the "Director Stock Plan"). The activity in the Director Stock Plan is displayed in the following table:

Stock-Based Compensation Expense

For the three-month periods ended June 30, 2025 and 2024, the Company recognized stock-based compensation expense of $1,942 and $1,555, respectively.

As of June 30, 2025, we had $13,447 in stock-based compensation expense that has yet to be recognized through our results of operations. We expect this compensation to be recognized over the remainder of 2025 and subsequent years according to the table below, except with respect to awards that are accelerated by the Board of Directors, in which case we will recognize any remaining compensation expense in the period in which the awards are accelerated.

NOTE 7. EARNINGS PER COMMON SHARE

The components of basic and diluted earnings per share were as follows for the three- and six-month periods ended June 30, 2025 and 2024:

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

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

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share gives effect to all dilutive common shares outstanding during the reporting period. The dilutive shares we consider in our diluted earnings per share calculation relate to our outstanding stock options, restricted stock awards, restricted stock unit awards, and performance stock unit awards.

We determine the dilutive effect of our outstanding stock options using the "treasury stock" method. Under this method, we assume the exercise of all of the outstanding stock options whose exercise price is less than the weighted-average market value of our common stock during the reporting period. This method also assumes that the proceeds from the hypothetical stock option exercises are used to repurchase shares of our common stock at the weighted-average market value of the stock during the reporting period. The net of the assumed stock options exercised and assumed common shares repurchased represents the number of dilutive common shares, which we add to the denominator of the earnings per share calculation.

NOTE 8. DEBT

Long Term Debt

December 2020 Private Placement

On December 15, 2020, United Fire & Casualty Company ("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 six-month period ended June 30, 2025, interest expense totaled $1,719. 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 (the "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 six-month period ended June 30, 2025, interest expense totaled $3,248.

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

•incurring or assuming additional indebtedness, including guarantees;

•incurring or assuming liens;

•engaging in mergers or consolidations;

•conveying, transferring, leasing or disposing of assets;

•making certain investments;

•entering into transactions with affiliates;

•declaring or making dividend payments or distributions or repurchasing capital stock or other equity interests;

•changing the nature of our business materially; and

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

As of June 30, 2025, 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 of UF&C. As of June 30, 2025, UF&C has FHLB Des Moines borrowing capacity up to $499.6 million if an immediate liquidity need would arise. UF&C hadno outstanding balance as of June 30, 2025 and December 31, 2024 related to these lines of credit.

NOTE 9. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the three-month period ended June 30, 2025:

The following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the six-month period ended June 30, 2025:

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

NOTE 10. 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 June 30, 2025, we have 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 June 30, 2025, the Company is the lessor forfive lease agreements related to office space and parking. The terms of the leases vary depending on the property and range fromtwo years toeight years, which may include options for renewal or to extend the lease terms. 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 for the three- and six-month periods ended June 30, 2025 and 2024:

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 11. REINSURANCE

The following table provides a roll-forward of the allowance for credit losses in our reinsurance recoverable balance at June 30, 2025:

For additional information, refer to Note 4 "Reinsurance" to the Consolidated Financial Statements of our 2024 Annual Report on Form 10-K.

NOTE 12. INCOME TAX

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

Our effective tax rate for the three- and six-month periods ended June 30, 2025 and 2024 is different than the federal statutory rate of 21 percent, due primarily to the net effect of tax-exempt municipal bond interest income, state income taxes and interest on a federal tax refund.

As of June 30, 2025 and 2024, the Company has recordedno valuation allowance as we believe it is more likely than not that all the deferred tax 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.

For each of the six-month periods ended June 30, 2025 and 2024, we made payments for income taxes totaling $16,200 and $9,612, respectively. For the six-month periods ended June 30, 2025 and 2024, we received a federal tax refund of $9,283 and $0, respectively. Interest on the federal tax refund of $1,392 was also received in the second quarter of 2025.

We file a consolidated federal income tax return. We also file income tax returns in various state jurisdictions. We are no longer subject to federal or state income tax examination for tax years 2018 and prior.

Enactment of the One Big Beautiful Bill Act of 2025

On July 4, 2025, the One Big Beautiful Bill Act of 2025 (the "Tax Act") was signed into law, which includes both tax and non-tax provisions. Changes in tax law are recorded in the period of enactment. The changes resulting from the tax provisions in the Tax Act are not expected to have a material impact on the Company's financial statements.

NOTE 13. SEGMENT INFORMATION

The Company operates asone operating segment. The Company's CODM is its Chief Executive Officer, 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. Refer to the Consolidated Financial Statements for financial information regarding the Company'sone operating segment.