UNITED FIRE GROUP INC

Previous wording

Critical accounting policies are defined as those that are representative of significant judgments and uncertainties and that potentially may result in materially different results under different assumptions and conditions. We base our discussion and analysis of our consolidated financial condition and results of operations on the amounts reported in our Consolidated Financial Statements, which we have prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). As we prepare these Consolidated Financial Statements, we must make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates. Our critical accounting policies are more fully described in our Management's Discussion and Analysis of Financial Condition and Results of Operations presented in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 26, 2025. There have been no changes in our critical accounting policies from December 31, 2024.

Current wording

Critical accounting policies are defined as those that are representative of significant judgments and uncertainties and that may result in materially different results under different assumptions and conditions. We base our discussion and analysis of our consolidated financial condition and results of operations on the amounts reported in our Consolidated Financial Statements, which we have prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). As we prepare these Consolidated Financial Statements, we must make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates. Our critical accounting policies are more fully described in our Management's Discussion and Analysis of Financial Condition and Results of Operations presented in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 26, 2025. There have been no changes in our critical accounting policies from December 31, 2024.

Previous wording

Our business consists primarily of commercial lines property and casualty insurance, including surety bonds. In 2020, the Company announced its intent to withdraw as a direct writer of personal lines insurance, with the last exposures related to this business expected to lapse by 2025. As of June 30, 2025, minimal exposure from the direct personal lines of business remains.

Current wording

Our business consists primarily of commercial lines property and casualty insurance, including surety bonds. In 2020, the Company announced its intent to withdraw as a direct writer of personal lines insurance. As of September 30, 2025, no exposure to direct personal lines of business remain.

Previous wording

Our core commercial products support a wide variety of customers including small business owners and middle market businesses operating in industries such as construction, services, retail trade, financial and manufacturing, along with contract surety and commercial surety bonds offered through approximately 1,000 independent property and casualty agencies. We also provide specialty and surplus lines coverage written exclusively through wholesale brokers on an admitted and non-admitted basis. Additionally, the Company offers reinsurance coverage for property and casualty insurance through traditional treaty reinsurance channels. The Company assumes premium in Lloyd's of London syndicates through a Funds at Lloyd's subsidiary. The reinsurance operation supports primarily commercial lines of business but also assumes risk in professional, financial and personal lines of insurance. We also partner with Management General Agents ("MGAs") to offer delegated underwriting programs providing niche products including marine specialty, professional liability and earthquake coverages.

Current wording

Our core commercial products support a wide variety of customers including small business owners and middle market businesses operating in industries such as construction, services, retail trade, financial and manufacturing, along with contract surety and commercial surety bonds offered through approximately 1,000 independent property and casualty agencies. We also provide specialty and surplus lines coverage written exclusively through wholesale brokers on an admitted and non-admitted basis. The Company also participates as a member of Lloyd's of London syndicates through our insurance subsidiary, McIntyre Cedar Corporate Member LLP. Additionally, the Company offers reinsurance coverage for property and casualty insurance through traditional treaty reinsurance channels. The reinsurance operation supports primarily commercial lines of business but also assumes risk in professional, financial and personal lines of insurance. We also partner with Management General Agents ("MGAs") to offer delegated underwriting programs providing niche products including marine specialty, professional liability and earthquake coverages.

Previous wording

Personal lines direct business was discontinued in 2020 with only a minimal number of exposures still in force due to certain regulatory non-renewal limitations.

Current wording

Personal lines direct business was discontinued in 2020, and as of September 30, 2025 no exposure to direct personal lines of business remain.

Previous wording

For the six-month period ended June 30, 2025, approximately 48.2 percent of our property and casualty premiums were written in Texas, California, Iowa, Missouri, and New Jersey.

Current wording

For the nine-month period ended September 30, 2025, approximately 48.9 percent of our property and casualty premiums were written in Texas, California, Iowa, Missouri, and New Jersey.

Previous wording

Underlying loss ratio represents the net loss ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The underlying combined ratio represents the combined ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The Company believes that the underlying loss ratio and underlying combined ratio are meaningful measures to understand the underlying trends in the core business in the current accident year, removing the volatility of catastrophes and prior period impacts. Management believes separate discussions on catastrophe losses and prior period reserve development are important to understanding how the Company is managing catastrophe risk and in identifying developments in longer-tailed business. Catastrophe losses is an operational measure that utilizes the designations of the Insurance Services Office ("ISO") and is reported with losses and loss adjustment expense amounts net of reinsurance recoverables, unless specified otherwise. In addition to ISO catastrophes, we also include as catastrophes those events ("non-ISO catastrophes"), which may include U.S. or international losses, that we believe are, or will be, material to our operations, either in amount or in number of claims made. Catastrophes are not predictable and are unique in terms of timing and financial impact. While management estimates catastrophe losses as incurred, due to the inherently unique nature of catastrophe losses, the impact in a reporting period is inclusive of catastrophes that occurred in the reporting period, as well as development on catastrophes that may have occurred in prior periods. Prior period reserve development is the increase (unfavorable) or decrease (favorable) in incurred loss and loss adjustment expense reserves at the valuation dates for losses which occurred in previous calendar years. This measure excludes development on catastrophe losses.

Current wording

Underlying loss ratio represents the net loss ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The underlying combined ratio represents the combined ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The Company believes that the underlying loss ratio and underlying combined ratio are meaningful measures to understand the underlying trends in the core business in the current accident year, removing the volatility of catastrophes and impact of prior period reserve development. Management believes separate discussions on catastrophe losses and prior period reserve development are important to understanding how the Company is managing catastrophe risk and in identifying developments in longer-tailed business. Catastrophe losses is an operational measure that utilizes the designations of the Insurance Services Office ("ISO") and is reported with losses and loss adjustment expense amounts net of reinsurance recoverables, unless specified otherwise. In addition to ISO catastrophes, we also include as catastrophes those events ("non-ISO catastrophes"), which may include U.S. or international losses, that we believe are, or will be, material to our operations, either in amount or in number of claims made. Catastrophes are not predictable and are unique in terms of timing and financial impact. While management estimates catastrophe losses as incurred, due to the inherently unique nature of catastrophe losses, the impact in a reporting period is inclusive of catastrophes that occurred in the reporting period, as well as development on catastrophes that may have occurred in prior periods. Prior period reserve development is the increase (unfavorable) or decrease (favorable) in incurred loss and loss adjustment expense reserves at the valuation dates for losses which occurred in previous calendar years. This measure excludes development on catastrophe losses.

Previous wording

The following table includes the consolidated results of our operations for the three- and six-month periods ended June 30, 2025 and 2024, with more detailed components and discussion in the sections that follow. Discussions of the components of net income are presented on a pre-tax basis, unless otherwise noted.

Current wording

The following table includes the consolidated results of our operations for the three- and nine-month periods ended September 30, 2025 and 2024, with more detailed components and discussion in the sections that follow. Discussions of the components of net income are presented on a pre-tax basis, unless otherwise noted.

Previous wording

Net written premium is the amount charged for insurance policy contracts issued and recognized on an annualized basis at the effective date of the policy. Net written premium is frequently used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies. Management believes net written premium is a meaningful measure for evaluating insurance company sales performance and geographical expansion efforts. Net written premium for an insurance company consists of direct written premium and assumed premiums, less ceded premiums. The following shows our written premium for the three- and six-month periods ended June 30, 2025 and 2024.

Current wording

Net written premium is the amount charged for insurance policy contracts issued and recognized on an annualized basis at the effective date of the policy. Net written premium is frequently used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies. Management believes net written premium is a meaningful measure for evaluating insurance company sales performance and geographical expansion efforts. Net written premium for an insurance company consists of direct written premium and assumed premiums, less ceded premiums. The following shows our written premium for the three- and nine-month periods ended September 30, 2025 and 2024.

Previous wording

Net earned premium is calculated on a pro-rata basis over the terms of the respective policies. Unearned premium reserves are established for the portion of written premium applicable to the unexpired terms of the insurance policies in force. The difference between net earned premium and net written premium is the change in unearned premium and the change in prepaid reinsurance premiums. Direct earned premium is recognized ratably over the life of a policy and differs from direct written premium, which is recognized on the effective date of the policy. The following shows our earned premium for the three- and six-month periods ended June 30, 2025 and 2024.

Current wording

Net earned premium is calculated on a pro-rata basis over the terms of the respective policies. Unearned premium reserves are established for the portion of written premium applicable to the unexpired terms of the insurance policies in force. The difference between net earned premium and net written premium is the change in unearned premium and the change in prepaid reinsurance premiums. Direct earned premium is recognized ratably over the life of a policy and differs from direct written premium, which is recognized on the effective date of the policy. The following shows our earned premium for the three- and nine-month periods ended September 30, 2025 and 2024.

Previous wording

Direct premiums are the total policy premiums, net of cancellations, associated with policies issued and underwritten by the Company. Direct premiums increased $39.9 million and $80.6 million in the three- and six-month periods ended June 30, 2025, respectively, as compared to the same periods in 2024 primarily due to growth in our core commercial lines resulting from substantial new business production and increased retention.

Current wording

Direct premiums are the total policy premiums, net of cancellations, associated with policies issued and underwritten by the Company. Direct premiums increased $35.8 million and $116.4 million in the three- and nine-month periods ended September 30, 2025, respectively, as compared to the same periods in 2024 driven by growth in our core commercial lines resulting from substantial new business production, increased pricing and improved retention.

Previous wording

Assumed premiums are the total premiums associated with the insurance risk transferred to us by other insurance and reinsurance companies pursuant to reinsurance contracts. Assumed premiums decreased $3.5 million and $0.3 million in the three- and six-month periods ended June 30, 2025, respectively, as compared to the same periods in 2024 due to targeted management actions of exiting certain reinsurance programs.

Current wording

Assumed premiums are the total premiums associated with the insurance risk transferred to us by other insurance and reinsurance companies pursuant to reinsurance contracts. Assumed premiums decreased $5.1 million and $5.4 million in the three- and nine-month periods ended September 30, 2025, respectively, as compared to the same periods in 2024 due to targeted management actions of exiting certain reinsurance programs.

Previous wording

Ceded premiums are the portion of direct premiums that we cede to our reinsurers under our reinsurance contracts. Ceded premiums increased $9.1 million and $25.5 million in the three- and six-month periods ended June 30, 2025, respectively, compared to the same periods in 2024 due primarily to growth in the subject premium base and ceded reinsurance premium adjustments.

Current wording

Ceded premiums are the portion of direct premiums that we cede to reinsurers under our reinsurance contracts. Ceded premiums increased $2.4 million and $28.0 million in the three- and nine-month periods ended September 30, 2025, respectively, compared to the same periods in 2024 due primarily to growth in the subject premium base and ceded reinsurance premium adjustments.

Previous wording

Net investment income was $21.7 million for the second quarter of 2025, an increase of $3.6 million compared to the same period in 2024. The increase was primarily from our fixed income portfolio increase of $5.4 million due to portfolio management actions taken during the year ended December 31, 2024 and investing at higher interest rates, offset by lower income on cash and cash equivalents and other long-term investments.

Current wording

Net investment income was $26.0 million for the third quarter of 2025, an increase of $1.5 million compared to the same period in 2024. The increase was primarily from our fixed income portfolio increase of $3.2 million as a result of portfolio management actions and investing at higher rates and increased income on cash and cash equivalents, offset by lower income on other long-term investments.

Previous wording

Net investment income was $45.1 million for the six-month period ended June 30, 2025, an increase of $10.8 million compared to the same period in 2024. The increase was primarily from the fixed income portfolio increase of $11.3 million due to portfolio management actions taken during the year ended December 31, 2024, as described above, and other long-term investments, offset by lower income on cash and cash equivalents.

Current wording

Net investment income was $71.1 million for the nine-month period ended September 30, 2025, an increase of $12.3 million compared to the same period in 2024. The increase was primarily from the fixed income portfolio increase of $14.5 million as a result of portfolio management actions and investing at higher rates, offset by lower income on other long-term investments

Previous wording

Net investment losses were $1.0 million and $1.8 million for the three- and six-month periods ended June 30, 2025, respectively, as compared to net investment losses of $1.2 million and $2.4 million for the same periods in 2024. The primary reason for the change relates to portfolio management actions taken during the year ended December 31, 2024, as described above, and an increase in the allowance for credit losses related to mortgage loans.

Current wording

Net investment losses were $0.4 million and $2.2 million for the three- and nine-month periods ended September 30, 2025, respectively, as compared to net investment losses of $1.7 million and $4.1 million for the same periods in 2024. The primary reason for the change relates to portfolio management actions taken during the year ended December 31, 2024 and an increase in the allowance for credit losses related to mortgage loans during the nine-month period ended September 30, 2025.

Previous wording

The following is a summary of losses and loss settlement expenses for the three- and six-month periods ended June 30, 2025 and 2024:

Current wording

The following is a summary of losses and loss settlement expenses for the three- and nine-month periods ended September 30, 2025 and 2024:

Previous wording

For the three-month period ended June 30, 2025, our loss and loss settlement expenses were $7.6 million, or 3.8%, lower than the same period in 2024, and our net loss ratio improved 8.6 points compared to the same period in 2024. This was driven by improvement in the underlying loss ratio, $5.0 million of non-catastrophe prior year improvement, and a catastrophe ratio below the five-year historical average. The underlying loss ratio improvement was driven by rate achievement and continued favorable frequency in most major lines.

Current wording

For the three-month period ended September 30, 2025, our loss and loss settlement expenses were $1.0 million, or 0.6%, higher than the same period in 2024, and our net loss ratio improved 5.0 points compared to the same period in 2024. This was driven by improvement in the underlying loss ratio and a catastrophe ratio below the five-year and 10-year historical averages. The underlying loss ratio improvement was driven by sustained lower frequency and earned rate achievement, as well as favorable large loss experience compared to historical levels.

Previous wording

For the six-month period ended June 30, 2025, our loss and loss settlement expenses were $2.5 million, or 0.6%, higher than the same period in 2024, and our net loss ratio improved 5.5 points compared to the same period in 2024. This was driven by improvement in the underlying loss ratio, $5.1 million of non-catastrophe prior year improvement, and a catastrophe ratio below the five-year historical average. The underlying loss ratio improvement was driven by rate achievement and continued favorable frequency in most major lines.

Current wording

For the nine-month period ended September 30, 2025, our loss and loss settlement expenses were $3.5 million, or 0.6%, higher than the same period in 2024, and our net loss ratio improved 5.3 points compared to the same period in 2024. This was driven by improvement in the underlying loss ratio, $5.1 million of favorable prior year reserve development on non-catastrophe losses, and a catastrophe ratio below the five-and ten-year historical averages. The underlying loss ratio improvement was driven by rate achievement and continued favorable frequency in most major lines.

Previous wording

The Company experienced favorable reserve development of $5.0 million and $5.1 million, excluding catastrophe losses, for prior accident years during the three- and six-month periods ended June 30, 2025, respectively, driven by reactions to better than expected loss adjustment expense payments. Adverse development in commercial other liability reflects the Company's continued response to increased loss settlements resulting from the impact of economic and social inflation, including increased litigation activity. This was offset by improvement in several other core commercial lines. Favorable development in fire and allied lines is driven by favorable emergence in recent accident years.

Current wording

The Company experienced favorable reserve development of $0.1 million and $5.1 million, excluding catastrophe losses, for prior accident years during the three- and nine-month periods ended September 30, 2025, respectively. The nine- month development was driven by better than expected loss adjustment expense payments. Adverse development in commercial other liability reflects the Company's continued response to increased loss settlements resulting from the impact of economic and social inflation, including increased litigation activity. This was offset by improvement in several other core commercial lines.

Previous wording

In the three- and six-month periods ended June 30, 2025, our pre-tax catastrophe losses were $17.4 million and $32.8 million, respectively, a decrease of $14.7 million and $12.1 million, respectively, compared to the same periods in 2024. Our catastrophe losses included 20 new events in the second quarter of 2025. Catastrophe losses in the three- and six-month periods ended June 30, 2025 added 5.5 and 5.3 points to the combined ratio, respectively, which is below our five-year historical average.

Current wording

In the three- and nine-month periods ended September 30, 2025, our pre-tax catastrophe losses were $4.3 million and $37.2 million, respectively, a decrease of $9.0 million and $21.1 million, respectively, compared to the same periods in 2024. Our catastrophe losses included 14 new events in the third quarter of 2025. Catastrophe losses in the three- and nine-month periods ended September 30, 2025 added 1.3 and 3.9 points to the combined ratio, respectively, which is below our five-year and 10-year historical averages.

Previous wording

(1) Amortization of deferred policy acquisition costs includes impact of changes in foreign currency exchange rates on the Lloyd's of London business.

Current wording

(1) Amortization of deferred policy acquisition costs includes impact of changes in foreign currency exchange rates on the Lloyd's of London business, which is included as a component of accumulated other comprehensive income (loss).

Previous wording

DAC is amortized over the period the related premiums are earned. Amortization increased for the three- and six-month periods ended June 30, 2025, primarily reflecting an increase in deferred underwriting costs aligned with our continued premium expansion.

Current wording

DAC is amortized over the period the related premiums are earned. Amortization increased for the three- and nine-month periods ended September 30, 2025, primarily reflecting an increase in deferred underwriting costs over the last year aligned with continued premium expansion.

Previous wording

The following tables display our net loss ratio for the three- and six-month periods ended June 30, 2025:

Current wording

The following tables display our net loss ratio for the three- and nine-month periods ended September 30, 2025:

Previous wording

The net loss ratio in our commercial lines of business was 61.9% for the second quarter of 2025, compared to 72.4% for the second quarter of 2024. This result was driven by improvement in the underlying loss ratio, favorable catastrophe experience, and favorable reserve development.

Current wording

The net loss ratio in our commercial lines of business was 56.7% for the third quarter of 2025, compared to 59.9% for the third quarter of 2024. This result was driven by improvement in the underlying loss ratio and favorable catastrophe experience.

Previous wording

The net loss ratio improved 12.2 and 9.1 points in the three- and six-month periods ended June 30, 2025, respectively, as compared to the same periods in 2024. For both the three- and six-month periods, the result was driven by stronger favorable prior year development in 2025 compared to 2024, coupled with a favorable catastrophe result.

Current wording

The net loss ratio improved 6.2 and 6.7 points in the three- and nine-month periods ended September 30, 2025, respectively, as compared to the same periods in 2024. For both the three- and nine-month periods, the result was driven by improvement in the underlying loss ratio and favorable prior year development in 2025 compared to 2024.

Previous wording

The net loss ratio improved 19.7 and 14.5 points in the three- and six-month periods ended June 30, 2025, respectively, as compared to the same periods in 2024. This was driven in part by consistent pricing increases throughout 2024 and continued favorable frequency trends associated with more restrictive underwriting guidelines and exposure appetite.

Current wording

The net loss ratio deteriorated 20.8 and improved 2.0 points in the three- and nine-month periods ended September 30, 2025, respectively, as compared to the same periods in 2024. The three-month result was driven by less favorable prior year development in 2025 compared to 2024 and the catastrophe ratio. The catastrophe ratio for the three-month period in 2025 was higher than 2024, with the 2024 ratio impacted by favorable emergence on prior period catastrophes. The nine-month result was driven in part by consistent pricing increases throughout 2024 and continued favorable frequency trends associated with more restrictive underwriting guidelines and exposure appetite.

Previous wording

The net loss ratio improved 11.5 and 3.4 points in the three- and six-month periods ended June 30, 2025, respectively, as compared to the same periods in 2024. When surety losses occur, our loss is determined by estimating the cost to complete the remaining work and to pay the contractor's unpaid bills, offset by contract funds due to the contractor, reinsurance, and the value of any collateral to which we may have access. The change in loss ratio was driven by an improved underlying loss ratio for both the three- and six-month periods. For the six-month period, the result was partially offset by less favorable prior year development in 2025 compared to 2024.

Current wording

The net loss ratio improved 4.0 and 3.6 points in the three- and nine-month periods ended September 30, 2025, respectively, as compared to the same periods in 2024. When surety losses occur, our loss is determined by estimating the cost to complete the remaining work and to pay the contractor's unpaid bills, offset by contract funds due to the contractor, reinsurance, and the value of any collateral to which we may have access. The change in loss ratio was driven by favorable prior year development in 2025 compared to 2024 on large losses from 2023 and 2022.

Previous wording

The net loss ratio deteriorated 1.6 and 7.5 points in the three- and six-month periods ended June 30, 2025, respectively, as compared to the same periods in 2024. The change from 2024 was driven by the underlying loss ratio and less favorable prior year development. For the six-month period, 2025 saw some adverse prior year development compared to modest improvement in 2024.

Current wording

The net loss ratio improved 18.3 and 1.3 points in the three- and nine-month periods ended September 30, 2025, respectively, as compared to the same periods in 2024. The change from 2024 was driven by favorable catastrophe results in 2025 compared to 2024.

Previous wording

The expense ratio decreased 0.6 points and increased 1.2 points in the three- and six-month periods ended June 30, 2025, respectively, as compared to the same periods in 2024. The decrease in the second quarter of 2025, compared to the same period in 2024, was mainly driven by scale benefits of growth. The increase in the six-month period ended June 30, 2025, compared to the same period in 2024, was driven by non-recurring expenses associated with the final stages of development of a new policy administrative system in the first quarter and scale benefits of growth.

Current wording

The expense ratio decreased 1.3 points and increased 0.3 points in the three- and nine-month periods ended September 30, 2025, respectively, as compared to the same periods in 2024. The decrease in the third quarter of 2025, compared to the same period in 2024, was mainly driven by continued focus on disciplined expense management and business growth. The increase in the nine-month period ended September 30, 2025, compared to the same period in 2024, was driven by non-recurring expenses associated with the final stages of development of a new policy administrative system in the first quarter of 2025, offset by continued focus on disciplined expense management and business growth.

Previous wording

Our long term debt obligations are $50.0 million of private placement notes issued in December 2020 and $70.0 million of senior unsecured notes issued in May 2024. Interest expense increased in 2025 due to the issuance of the senior unsecured notes in May 2024. Refer to Note 8 "Debt" in Part I, Item 1 for more information on our long term debt.

Current wording

Our long term debt obligations include $50.0 million of private placement notes issued in December 2020 and $70.0 million and $30.0 million of senior unsecured notes issued in May 2024 and July 2025, respectively. Interest expense increased for the three- and nine-month periods ended September 30, 2025 due to the issuance of the senior unsecured notes. Refer to Note 8 "Debt" in Part I, Item 1 for more information on our long term debt.

Previous wording

The consolidated effective tax rate was 21.4 percent and 20.4 percent for the three- and six-month periods ended June 30, 2025, respectively. Our effective tax rate for the three- and six-month periods ended June 30, 2025 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.

Current wording

The consolidated effective tax rate was 19.5 percent and 19.9 percent for the three- and nine-month periods ended September 30, 2025, respectively. Our effective tax rate for the three- and nine-month periods ended September 30, 2025 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.

Previous wording

Adjusted operating income increased in the second quarter of 2025, primarily due to an increase in net earned premium of $27.2 million combined with the underlying loss ratio improvement of 1.3 points to 57.6%, catastrophe loss ratio improvement of 5.7 points to 5.5% and favorable prior year reserve development, excluding catastrophe losses, of 1.6 points. In addition, net investment income increased by $3.6 million, driven by portfolio repositioning in 2024. The underwriting expense ratio improved 0.6 points to 34.9%.

Current wording

Adjusted operating income increased in the third quarter of 2025, primarily due to an increase in net earned premium of $28.2 million combined with the underlying loss ratio improvement of 1.9 points to 56.0% and catastrophe loss ratio improvement of 3.1 points to 1.3%. In addition, net investment income increased by $1.5 million, driven by portfolio repositioning in 2024. The underwriting expense ratio improved 1.3 points to 34.6%.

Previous wording

Adjusted operating income increased in the six-month period ended June 30, 2025, compared to the same period in 2024, primarily due to an increase in net earned premium of $54.8 million combined with an underlying loss ratio improvement of 2.1 points to 57.0%, catastrophe loss ratio improvement of 2.6 points to 5.3% and favorable prior year reserve development, excluding catastrophe losses, of 0.8 points. In addition, net investment income increased by $10.8 million, driven by portfolio repositioning in 2024. The underwriting expense ratio increased 1.2 points to 36.4%.

Current wording

Adjusted operating income increased in the nine-month period ended September 30, 2025, compared to the same period in 2024, primarily due to an increase in net earned premium of $83.0 million combined with an underlying loss ratio improvement of 2.0 points to 56.7%, catastrophe loss ratio improvement of 2.8 points to 3.9% and favorable prior year reserve development, excluding catastrophe losses, of 0.5 points. In addition, net investment income increased by $12.3 million, driven by portfolio repositioning in 2024. The underwriting expense ratio increased 0.3 points to 35.8%.

Previous wording

Our invested assets totaled $2.2 billion at June 30, 2025, compared to $2.1 billion at December 31, 2024, an increase of $107 million. We utilize a conservative investment philosophy, investing in a diversified portfolio of high-quality, intermediate-term taxable corporate bonds, taxable U.S. government and government agency bonds and tax-exempt U.S. municipal bonds. The composition of our investment portfolio at June 30, 2025 is presented at carrying value in the following table:

Current wording

Our invested assets totaled $2.3 billion at September 30, 2025, compared to $2.1 billion at December 31, 2024, an increase of $178 million. We utilize a conservative investment philosophy, investing in a diversified portfolio of high-quality, intermediate-term taxable corporate bonds, taxable U.S. government and government agency bonds and tax-exempt U.S. municipal bonds. The composition of our investment portfolio at September 30, 2025 is presented at carrying value in the following table:

Previous wording

(2) As a member of Lloyd's, the Company participates in the Syndicate results which include the fair value of the investments. Starting in the fourth quarter of 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.

Current wording

(2) 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 $116.6 million as of September 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 September 30, 2025.

Previous wording

The weighted average effective duration of our portfolio of fixed maturity securities was 4.12 years at June 30, 2025 compared to 4.22 years at December 31, 2024. Refer to Note 2 "Investments" in Part I, Item 1 for more information on maturities.

Current wording

The weighted average effective duration of our portfolio of fixed maturity securities was 4.29 years at September 30, 2025 compared to 4.22 years at December 31, 2024. Refer to Note 2 "Investments" in Part I, Item 1 for more information on maturities.

Previous wording

As of June 30, 2025, net unrealized investment losses, after tax, totaled $44.7 million compared to net unrealized losses, after tax, of $72.2 million as of December 31, 2024. The net unrealized investment loss position improved from December 31, 2024 due to the decrease in bond market interest rates during the second quarter of 2025.

Current wording

As of September 30, 2025, net unrealized investment losses, after tax, totaled $28.5 million compared to net unrealized losses, after tax, of $72.2 million as of December 31, 2024. The net unrealized investment loss position improved from December 31, 2024 due to the decrease in bond market interest rates during the nine-month period ended September 30, 2025.

Previous wording

At June 30, 2025, our fixed maturity watch list included five fixed maturity securities in an unrealized loss position with an amortized cost of $13.2 million, no allowance for credit losses, unrealized losses of $0.7 million and a fair value of $12.5 million.

Current wording

At September 30, 2025, our fixed maturity watch list included five fixed maturity securities in an unrealized loss position with an amortized cost of $13.2 million, no allowance for credit losses, unrealized losses of $0.6 million and a fair value of $12.5 million.

Previous wording

The following table displays a consolidated summary of cash sources and uses for the six-month periods ended June 30, 2025 and 2024:

Current wording

The following table displays a consolidated summary of cash sources and uses for the nine-month periods ended September 30, 2025 and 2024:

Previous wording

Our cash flows were sufficient to meet our liquidity needs for the six-month periods ended June 30, 2025 and 2024 and we anticipate they will be sufficient to meet our future liquidity needs. We also have the ability to draw on our credit facility if needed.

Current wording

Our cash flows were sufficient to meet our liquidity needs for the nine-month periods ended September 30, 2025 and 2024 and we anticipate they will be sufficient to meet our future liquidity needs. We also have the ability to draw on our credit facility if needed.