UNITED FIRE GROUP INC

Liquidity measures our ability to generate sufficient cash flows to meet our short-term cash obligations and long-term cash obligations. Our cash inflows are primarily a result of the receipt of premiums, reinsurance recoveries, sales or maturities of investments, and investment income. Cash provided from these sources is used to fund the payment of losses and loss settlement expenses, the purchase of investments, operating expenses, dividends and interest payments and common stock repurchase, as well as pension plan contributions, as necessary. When considering our liquidity and cash flow, it is important to distinguish between the needs of our insurance subsidiaries and the needs of the holding company, United Fire Group, Inc. As an insurance holding company with no significant independent operations of our own, United Fire Group, Inc. derives its cash primarily from its insurance subsidiaries.

The sources of liquidity of the holding company are principally comprised of dividends from subsidiaries, existing surplus notes, investment income on holding company assets and the ability to raise long-term public financing under an SEC-filed registration statement or private placement offering. These sources of liquidity and cash flow support the general corporate needs of the holding company, interest and debt service, and investment in core businesses.

We monitor our capital adequacy to support our business on a regular basis. The future capital requirements of our business will depend on many factors, including our ability to write new business successfully and to establish premium rates and reserves at levels sufficient to cover losses. Our ability to underwrite is largely dependent upon the quality of our claims paying and financial strength ratings as evaluated by independent rating agencies. In particular, we require (1) sufficient capital to maintain our financial strength ratings, as issued by various rating agencies, at a level considered necessary by management to enable our insurance company subsidiaries to compete and (2) sufficient capital to enable our insurance company subsidiaries to meet the capital adequacy tests performed by regulatory agencies in the United States.

Cash outflows may be variable because of the uncertainty regarding settlement dates for losses. In addition, the timing and amount of individual catastrophe losses are inherently unpredictable and could increase our liquidity requirements. The timing and amount of reinsurance recoveries may be affected by reinsurer solvency and reinsurance coverage disputes.

The following table displays a summary of cash sources and uses in 2025, 2024 and 2023:

At December 31, 2025, our cash and cash equivalents included $44.8 million related to money market accounts, compared to $23.1 million at December 31, 2024.

Operating Activities

Net cash flows provided by operating activities totaled $269.7 million, $340.3 million and $171.7 million in 2025, 2024 and 2023, respectively. The primary cash inflows from operating activities include insurance premiums and net investment income. The primary cash outflows from operating activities are comprised of payment of losses and loss settlement expenses, taxes and operating expenses. Our cash flows from operating activities were sufficient to meet our liquidity needs for the years ended December 31, 2025, 2024 and 2023.

Investing Activities

Cash in excess of operating requirements is generally invested in fixed maturity securities. Fixed maturity securities provide regular interest payments and allow us to match the duration of our liabilities. For further discussion of our investments, including our philosophy and portfolio, see the Investment heading subcategory "Investment Portfolio" section contained in Part II, Item 7 of Management's Discussion and Analysis of Financial Condition and Results of Operations.

Sales of investments and proceeds from calls or maturities of fixed maturity securities also can provide liquidity. During the next five years, $420.2 million, or 18.8 percent of our fixed maturity security portfolio will mature.

Net cash flows used in investing activities totaled $326.0 million, $292.5 million and $149.9 million in 2025, 2024, and 2023, respectively. In 2025, we had cash inflows from scheduled and unscheduled investment maturities, redemptions, prepayments, and sales of investments that totaled $394.5 million compared to $680.0 million and $162.1 million for the same period in 2024 and 2023, respectively. Our cash outflows for investment purchases totaled $714.0 million in 2025, compared to $960.6 million and $301.1 million for the same period in 2024 and 2023, respectively.

Financing Activities

Net cash flows provided by financing activities totaled $11.6 million and $51.1 million for the years ended December 31, 2025 and 2024, respectively, due to the successful placement of $30.0 million and $70.0 million of senior unsecured notes in July 2025 and May 2024, respectively. Net cash flows used in financing activities totaled $16.5 million in 2023. The net cash flows used in financing activities are primarily the payment of cash dividends of $16.3 million, $16.2 million and $16.2 million in 2025, 2024 and 2023, respectively.

Contractual Obligations and Commitments

As of December 31, 2025, our required annual payments relating to contractual and other obligations were as follows:

Loss and Loss Settlement Expense Reserves

The amounts presented are estimates of the dollar amounts and time periods in which we expect to pay out our gross loss and loss settlement expense reserves. Because the timing of future payments may vary from the stated contractual obligation, these amounts are estimates based upon historical payment patterns and may not represent actual future payments. Refer to "Critical Accounting Estimates — Losses and Loss Settlement Expenses" in this section for further discussion.

Long term debt

Our long term debt obligations are $50.0 million of private placement notes issued in December 2020, $70.0 million of senior unsecured notes issued in May 2024 and $30.0 million of senior unsecured notes issued in July 2025. For further discussion of our long term debt, refer to Part II, Item 8, Note 13 "Debt."

Operating Leases

Our operating lease obligations are for the rental of office space, vehicles, computer equipment and office equipment. For further discussion of our operating leases, refer to Part II, Item 8, Note 12 "Lease Commitments."

Profit-Sharing Commissions

We offer our agents a profit-sharing plan as an incentive for them to place high-quality property and casualty insurance business with us. Based on business produced by the agencies in 2025, property and casualty agencies expect to receive profit-sharing payments of $30.3 million in 2026.

Funding Commitments

Pursuant to agreements with our limited liability partnership investments, we are contractually committed through 2030 to make capital contributions upon request of the partnerships. 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 $15.9 million at December 31, 2025.

Guaranty Fund Assessments

The Company is subject to guaranty fund and other assessments by the states in which it writes business. At December 31, 2025 the accrued liability for guaranty fund assessments was $0 and the premium tax benefit asset was $1.9 million. Guaranty fund assets are typically realized over the next five to 10 years. No discount is applied to the liability for assessments.

Legal Proceedings

The Company is a party to various claims and litigation incidental to its business, which, based on the facts and circumstances currently known, are not material to the Company's results of operations or financial position as of December 31, 2025.

Commitments for Capital Expenditures

Dividends

Dividends paid to shareholders totaled $16.3 million, $16.2 million and $16.2 million in 2025, 2024 and 2023, respectively. Payment of any future dividends and the amounts of such dividends depends upon factors such as net income, financial condition, capital requirements, and general business conditions. We will only pay dividends if declared by our Board of Directors out of legally available funds.

As an insurance holding company with no significant 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, 2025 UF&C is able to make a maximum of $50.6 million in dividend payments without prior regulatory approval. These restrictions are not expected to have a material impact in meeting our cash obligations.

Share Repurchases

Under our share repurchase program, we may purchase our common stock on the open market or through privately negotiated transactions. The amount and timing of any purchases will be at our discretion and will depend upon a number of factors, including the share price, economic and general market conditions, and corporate and regulatory requirements. Our share repurchase program may be modified or discontinued at any time. The Board of Directors reauthorized the share repurchase program in August 2024 and extended the program through August 2026.

The Company did not repurchase any shares of our common stock during the years ended December 31, 2025, 2024 and 2023. At December 31, 2025, we remain authorized to purchase up to one million shares of our common stock.

Credit Facilities

In December 2023, the Company became a member of the Federal Home Loan Bank of Des Moines ("FHLB Des Moines"). Membership allows access to loans or advances. As of December 31, 2025, there were no advances outstanding under the FHLB Des Moines agreement. Refer to Note 13 "Debt" in Part II, Item 8 for further information regarding the agreement with FHLB Des Moines.

Stockholders' Equity

Stockholders' equity increased 20.4 percent to $941.2 million at December 31, 2025, from $781.5 million at December 31, 2024. The increase is primarily attributed to net income of $118.2 million and a decrease in net unrealized losses on fixed maturity securities, net of tax, of $47.0 million, partially offset with shareholder dividends of $16.3 million. As of December 31, 2025, the book value per share of our common stock was $36.88, compared to $30.80 at December 31, 2024.