Years Ended December 31, % of Total
(In Thousands) 2017 2016 2015 2017 2016 2015
Iowa $ 40,773
$ 41,559
$ 47,616
32.5 % 30.1 % 32.6 %
Wisconsin 14,897
12,578
12,513
11.9
9.1
8.6
Minnesota 12,201
14,289
13,269
9.7
10.3
9.1
Illinois 10,872
12,481
16,128
8.7
9.0
11.0
Nebraska 10,197
10,351
9,334
8.1
7.5
6.4
All Other States 36,581
47,014
47,236
29.1
34.0
32.3
Direct Statutory Premiums Written $ 125,521
$ 138,272
$ 146,096
100.0 % 100.0 % 100.0 %

~~Competition~~

We encounter significant competition in all lines of our life and fixed annuity business from other life insurance companies and other providers of financial services. Since our products are marketed exclusively through independent life insurance agencies that typically represent more than one company, we face competition within our agencies. Competitors include companies that market their products through agents, as well as companies that sell directly to their customers. The exact number of competitors within the industry is not known.

To attract and maintain relationships with our independent life insurance agencies, we offer competitive commission rates and other sales incentives. Our life insurance business achieves a competitive advantage by offering products that are simple and straightforward, by providing outstanding customer service, by being accessible to our agents and customers, and by using technology in a variety of ways to assist our agents and improve the delivery of service to our policyholders.

~~OPERATING SEGMENTS~~

We have historically reported our operations in two business segments: property and casualty insurance and life insurance. On September 18, 2017, the Company signed a definitive agreement to sell its subsidiary, United Life Insurance Company, to Kuvare. As a result, our life insurance business, previously a separate segment, has been considered held for sale and reported as discontinued operations in the Consolidated Financial Statements. Subsequent to the announcement of this sale, our continuing operations are now reported as one business segment. All current and prior periods reflected in this Form 10-K have been presented as continuing and discontinued operations, unless otherwise noted. The sale is expected to close in the first half of 2018, subject to customary conditions, including regulatory approval.

For more information specific to continuing and discontinued operations, including products, pricing and seasonality of premiums written is incorporated by reference from, refer to Note 10 "Segment Information" and Note 17 "Discontinued Operations" contained in Part II, Item 8, "Financial Statements and Supplementary Data.

Additionally, for a detailed discussion of our operating results by continuing operations and discontinued operations, refer to the "Consolidated Results of Operations" section in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

REINSURANCE

Incorporated by reference from Note 4 "Reinsurance" contained in Part II, Item 8, "Financial Statements and Supplementary Data."

RESERVES

~~Continuing Operations -~~ Property and Casualty Insurance Business

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 primarily covers liability for damage to property of, or injury to, a person or entity other than the insured. 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 loss 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.

The determination of reserves (particularly those relating to liability lines of insurance that have relatively longer lag in claim reporting) requires significant work to reasonably project expected future claim reporting and payment patterns. If, during the course of our regular monitoring of reserves, we determine that coverages previously written are incurring higher than expected losses, we will take action that may include, among other things, increasing the related reserves. Any adjustments we make to reserves are reflected in operating results in the year in which we make those adjustments. We engage an independent actuary, Regnier Consulting Group, Inc. ("Regnier"), to render an opinion as to the reasonableness of our statutory reserves annually. The actuarial opinion is filed in those states where we are licensed.

On a quarterly basis, United Fire's internal actuary performs a detailed actuarial review of IBNR reserves. This review includes a comparison of results from the most recent analysis of reserves completed by both our internal and external actuaries. Senior management meets with our internal actuary to review, on a quarterly basis, the adequacy of carried reserves based on results from this actuarial analysis. There are two fundamental types or sources of IBNR reserves. We record IBNR reserves for "normal" types of claims and also specific IBNR reserves related to unique circumstances or events. A major hurricane is an example of an event that might necessitate establishing specific IBNR reserves because an analysis of existing historical data would not provide an appropriate estimate.

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

For a more detailed discussion of our loss reserves, refer to the "Critical Accounting Policies" section in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 5 "Reserves for Losses and Loss Settlement Expenses" contained in Part II, Item 8, "Financial Statements and Supplementary Data."

~~Discontinued Operations - Life Insurance Business~~

We calculate the policy reserves reported in our Consolidated Financial Statements in accordance with GAAP. For our fixed annuities and universal life policies, we establish a benefit reserve at the time of policy issuance in an amount equal to the deposits received. Subsequently, we adjust the benefit reserve for any additional deposits, interest credited and partial or complete withdrawals, as well as insurance and other expense charges. We base policy reserves for other life products on the projected contractual benefits and expenses and interest rates appropriate to those products. We base reserves for accident and health products, which are a minor portion of our reserves, on appropriate morbidity tables.

We determine reserves for statutory purposes based upon mortality rates and interest rates specified by Iowa state law. Our life insurance subsidiary's reserves meet or exceed the minimum statutory requirements. Griffith, Ballard & Company, an independent actuary, assists us in developing and analyzing our reserves on both a GAAP and statutory basis.

For further discussion of our life insurance reserves, refer to the "Critical Accounting Policies" section in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

INVESTMENTS

Incorporated by reference from Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," under the headings "Investments," "Market Risk" and "Critical Accounting Policies"; and Note 1 ~~"Significant~~"Summary of Significant Accounting Policies" under the headings "Investments," Note 2 "Summary of Investments," and Note 3 "Fair Value of Financial Instruments," contained in Part II, Item 8, "Financial Statements and Supplementary Data."

COMPLIANCE WITH GOVERNMENT REGULATION

The insurance industry is subject to comprehensive and detailed regulation and supervision. Each jurisdiction in which we operate has established supervisory agencies with broad administrative powers. While we are not aware of any currently proposed or recently enacted state or federal regulation that would have a material impact on our operations, we cannot predict the effect that future regulatory changes might have on us.

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State Regulation

We are subject to extensive regulation, primarily at the state level. The method, extent and substance of such regulation varies by state, but generally has its source in National Association of Insurance Commissioners ("NAIC") model laws and regulations that establish standards and requirements for conducting the business of insurance and that delegate regulatory authority to a state regulatory agency. Moreover, the NAIC Accreditation Program requires state regulatory agencies to meet baseline standards of solvency regulation, particularly with respect to regulation of multi-state insurers. In general, such regulation is intended for the protection of those who purchase or use our insurance products, and not our shareholders. These rules have a substantial effect on our business and relate to a wide variety of matters including: insurance company licensing and examination; the licensing of insurance agents and adjusters; price setting or premium rates; trade practices; approval of policy forms; claims practices; restrictions on transactions between our subsidiaries and their affiliates, including the payment of dividends; investments; underwriting standards; advertising and marketing practices; capital adequacy; and the collection, remittance and reporting of certain taxes, licenses and fees.

The state laws and regulations that have the most significant effect on our insurance operations and financial reporting are discussed below.

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Insurance Holding Company Regulation

We are regulated as an insurance holding company system in the states of domicile of our property and casualty insurance ~~companies and life insurance subsidiary:~~companies: Iowa (United Fire & Casualty ~~Company, United Life Insurance~~ Company, UFG Specialty Insurance Company and Addison Insurance Company), California (Financial Pacific Insurance Company), Louisiana (Lafayette Insurance Company), New Jersey (Mercer Insurance Company of New Jersey, Inc.), Pennsylvania (Mercer Insurance Company and Franklin Insurance Company) and Texas (United Fire & Indemnity Company and United Fire Lloyds). These regulations require that we annually furnish financial and other information about the operations of the individual companies within our holding company system. Generally, the insurance laws of these states provide that notice to the state insurance commissioner is required before finalizing any transaction affecting the ownership or control of an insurer and before finalizing certain material transactions between an insurer and any person or entity within its holding company system. In addition, some of those transactions cannot be finalized without the commissioner's prior approval.

Most states have now adopted the version of the Model Insurance Holding Company System Regulation Act and Regulation as amended by the NAIC in December 2010 (the "Amended Model Act") to introduce the concept of "enterprise risk" within an insurance company holding system. Enterprise risk is defined as any activity, circumstance, event or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or the liquidity of the insurer or its insurance holding company system as a whole. The Amended Model Act imposes more extensive informational requirements on us, including requiring us to prepare an annual enterprise risk report that identifies the material risks within our insurance company holding system that could pose enterprise risk to our licensed insurers. ~~Compliance with new reporting requirements under the Amended Model Act began for us in 2014 for the 2013 fiscal year.~~

Restrictions on Shareholder Dividends

As an insurance holding company with no independent operations or source of revenue, our capacity to pay dividends to our shareholders is based on the ability of our insurance company subsidiaries to pay dividends to us. The ability of our subsidiaries to pay dividends to us is regulated by the laws of their state of domicile. Under these laws, insurance companies must provide advance informational notice to the domicile state insurance regulatory authority prior to payment of any dividend or distribution to its shareholders. Prior approval from the state insurance regulatory authority must be obtained before payment of an "extraordinary dividend" as defined under the state's insurance code. The amount of ordinary dividends that may be paid to us is subject to certain limitations, the amounts of which change each year. In all cases, we may pay dividends only from our earned surplus. Refer to ~~the "Market Information" section of~~ Part II, Item 5, "Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity ~~Securities,"~~Securities" under the heading "Dividends" and Note 6 "Statutory Reporting, Capital Requirements and Dividends and Retained Earnings Restrictions," contained in Part II, Item 8, "Financial Statements and Supplementary Data" for additional information about the dividends we paid during ~~2017.~~2020.

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Price Regulation

Nearly all states have insurance laws requiring us to file rate schedules, policy or coverage forms, and other information with the state's regulatory authority. In certain states, rate schedules, policy forms, or both, must be approved prior to use. While insurance laws vary from state to state, their objectives are generally the same: an insurance rate cannot be excessive, inadequate or unfairly discriminatory. The speed with which we can change our rates in response to competition or in response to increasing costs depends, in part, on the willingness of state regulators to allow adequate rates for the business we write.

Investment Regulation

We are subject to various state regulations requiring investment portfolio diversification and limiting the concentration of investments we may maintain in certain asset categories. Failure to comply with these regulations leads to the treatment of nonconforming investments as ~~nonadmitted~~non-admitted assets for purposes of measuring statutory surplus. Further, in some instances, state regulations require us to sell certain nonconforming investments.

Exiting Geographic Markets; Canceling and ~~Nonrenewing~~Non-renewing Policies

Most states regulate our ability to exit a market. For example, states limit, to varying degrees, our ability to cancel and non-renew insurance policies. Some states prohibit us from withdrawing one or more types of insurance

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business from the state, except upon prior regulatory approval. Regulations that limit policy cancellation and non-renewal may restrict our ability to exit unprofitable markets.

Insurance Guaranty Associations

Each state has insurance guaranty association laws. Membership in a state's insurance guaranty association is generally mandatory for insurers wishing to do business in that state. Under these laws, associations may assess their members for certain obligations that insolvent insurance companies have incurred with regard to their policyholders and claimants.

Typically, states assess each solvent association member with an amount related to that member's proportionate share of business written by all association members within the state. Most state guaranty associations allow solvent insurers to recoup the assessments they are charged through future rate increases, surcharges or premium tax credits. However, there is no assurance that we will ultimately recover these assessments. We cannot predict the amount and timing of any future assessments or refunds under these laws.

Shared Market and Joint Underwriting Plans

State insurance regulations often require insurers to participate in assigned risk plans, reinsurance facilities and joint underwriting associations. These are mechanisms that generally provide applicants with various types of basic insurance coverage that may not otherwise be available to them through voluntary markets. Such mechanisms are most commonly instituted for automobile and workers' compensation insurance, but many states also mandate participation in Fair Access to Insurance Requirements ~~("FAIR")~~ Plans or Windstorm Plans, which provide basic property coverage. Participation is based upon the amount of a company's voluntary market share in a particular state for the classes of insurance involved. Policies written through these mechanisms may require different underwriting standards and may pose greater risk than those written through our voluntary application process.

Statutory Accounting Rules

For public reporting, insurance companies prepare financial statements in accordance with ~~GAAP.~~U.S. generally accepted accounting principles ("GAAP"). However, state laws require us to calculate and report certain data according to statutory accounting rules as defined in the NAIC Accounting Practices and Procedures Manual. While not a substitute for any GAAP measure of performance, statutory data frequently is used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies.

Insurance Reserves

State insurance laws require that insurance companies analyze the adequacy of their reserves annually. Our appointed actuaries must submit an opinion that our statutory reserves are adequate to meet policy claims-paying obligations and related expenses.

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Financial Solvency Ratios

The NAIC annually calculates 13 financial ratios to assist state insurance regulators in monitoring the financial condition of insurance companies. A "usual range" of results for each of these ratios is used by insurance regulators as a benchmark. Departure from the usual range on four or more of the ratios could lead to inquiries from individual state insurance departments as to certain aspects of a company's business. In addition to the financial ratios, states also require us to calculate a minimum capital requirement for each of our insurance companies based on individual company insurance risk factors. These "risk-based capital" results are used by state insurance regulators to identify companies that require regulatory attention or the initiation of regulatory action. At December 31, ~~2017,~~2020, all of our insurance companies had capital in excess of the required levels.

Federal Regulation

Although the federal government and its regulatory agencies generally do not directly regulate the business of insurance, federal initiatives and legislation often have an impact on our business. These initiatives and legislation include tort reform proposals, proposals addressing natural catastrophe exposures, terrorism risk mechanisms, federal financial services reforms, various tax proposals affecting insurance companies, and possible regulatory limitations, impositions and restrictions arising from the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), and the Patient Protection and Affordable Care Act.

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Various legislative and regulatory efforts to reform the tort liability system have impacted and will continue to impact our industry. Although there has been some tort reform with positive impact to the insurance industry, new causes of action and theories of damages continue to be proposed in state court actions or by federal or state legislatures that continue to expand liability for insurers and their policyholders. For example, some state legislatures have from time-to-time considered legislation addressing direct actions against insurers related to bad faith claims. As a result of this unpredictability in the law, insurance underwriting is expected to continue to be difficult in commercial lines, professional liability and other specialty coverages.

Dodd-Frank expanded the federal presence in insurance oversight and may increase regulatory requirements that are applicable to us. Dodd-Frank's requirements include streamlining the state-based regulation of reinsurance and non-admitted insurance (property or casualty insurance placed with insurers that are eligible to accept insurance, but are not licensed to write insurance in a particular state). Dodd-Frank also established the Federal Insurance Office within the U.S. Department of the Treasury that is authorized to, among other things, gather data and information to monitor aspects of the insurance industry, identify issues in the regulation of insurers about insurance matters, and preempt state insurance measures under certain circumstances.

Dodd-Frank also contains a number of provisions related to corporate governance and disclosure matters. In response to Dodd-Frank, the SEC has adopted or proposed rules regarding director independence, director and officer hedging activities, executive compensation clawback policies, compensation advisor independence, pay versus performance disclosures, internal pay equity disclosures, and shareholder proxy access. We continue to monitor developments under Dodd-Frank and their impact on us, insurers of similar size and the insurance industry as a whole.

The Patient Protection and Affordable Care Act and the related amendments in the Health Care and Education Reconciliation Act may increase our operating costs and underwriting losses. This landmark legislation continues to result in numerous changes within the health care industry that could create additional operating costs for us, particularly with respect to our workers' compensation products.

FINANCIAL STRENGTH AND ISSUER CREDIT RATING

Our financial strength, as measured by statutory accounting principles, is regularly reviewed by an independent rating agency that assigns a rating based upon criteria such as results of operations, capital resources and minimum policyholders' surplus requirements. An insurer's financial strength rating is one of the primary factors evaluated by those in the market to purchase insurance. A poor rating indicates that there is an increased likelihood that the insurer could become insolvent and therefore not able to fulfill its obligations under the insurance policies it issues. This rating can also affect an insurer's level of premium writings, the lines of business it can write and, for insurers like us that are also public registrants, the market value of its securities.

Our property and casualty insurers are rated by A.M. Best Company, Inc. ("A.M. Best") on a group basis. Our pooled property and casualty insurers have all received an "A" (Excellent) financial strength rating from A.M. Best. ~~Our life insurance subsidiary has received an "A-" (Excellent) financial strength rating from A.M. Best.~~ According to A.M. Best, companies rated "A" ~~and "A-"~~ have "an excellent ability to meet their ongoing obligations to policyholders." A.M. Best revised the outlooks to negative from stable in December 2020.

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A.M. Best also assigns issuer credit ratings based on a company's ability to repay its debts. All of our property and casualty insurers have received an issuer credit rating of "a" from A.M. Best. ~~Our life insurance subsidiary has received an issuer credit rating of "a-" from A.M. Best.~~ Beginning in 2012, our holding company parent was also rated by A.M. Best, receiving an issuer credit rating of "bbb."

HUMAN CAPITAL RESOURCES

Organization core values

Working together as one, we are always striving to deliver on our promises of employee success, policyholder protection, agent opportunity, shareholder value and community support. That is our mission. Its unified ideology guides every aspect of the way we conduct business at UFG.

Strategy for success

Our current strategic plan, “One UFG: Boldly Forward,” when combined with our mission, guides the day-to-day decision making of our employees, designed to create a sense of purpose and possibility at the Company within every employee. Ten performance-improving initiatives anchor the plan, each directly connected to how employees work together to help the organization grow and evolve in an ever-changing industry.

Diversity and inclusion

At UFG, we strive to promote a culture where all employees feel welcome to create their own personal and professional goals. Diversity, Equity and Inclusion ("DE&I") are intrinsic to UFG’s values. In 2020, leadership and advisory teams were chosen to design and implement initiatives to foster a diverse, equitable and inclusive environment—whether working from home or in the office.

2020

2019

2018

Employee data

Workforce data

Headcount

1,165

1,185

1,183

Average tenure in years

10.0

9.6

9.1

Percent of women in workforce

55.1%

56.7%

57.4%

Percent of minorities in workforce

12.4%

11.6%

10.8%

Voluntary turnover rate

8.4%

8.6%

12.2%

Human rights

Equal employment opportunity policy

Equitable pay statement

Human rights statement

Ethics

Anti-bribery & anti-corruption policy

Code of business conduct & ethics

Whistleblowing & non-retaliation policy

Fulfilling careers; health, safety and wellness; compensation and benefits; talent development

At UFG, health, wellness and education are core cultural values. Employee success is part of our mission. That is why we support continuing education for employees. Our investment in employee health and well-being is built on our foundation of helping people enhance their lives. UFG is dedicated to proactively promoting work-life balance for all employees that respects a variety of values and lifestyles. Employees are encouraged to meet with their managers to develop a flexible work schedule that suits their needs outside of work.

Our commitment to advancing the mental and physical health of our people includes:

•U Fit Wellness Center - located on-site at corporate headquarters. We are proud to have built our own state-of-the-art fitness center in 2017. We are also proud to have a full-time fitness and wellness coordinator on staff. The coordinator provides one-on-one coaching, customized wellness plans and group fitness and wellness classes for all skill levels.

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•Empowering employees to make healthy decisions:

◦Fitness classes - We offer a variety of group classes including barre, yoga, resistance training, cycling (spin), high-intensity interval training (HIIT), tabata, dance, kickboxing and boot camps. To mesh our passion for community with wellness, we’ve also held multiple physical activity fundraisers.

◦A wellness reward system - 84% of our employees are enrolled in our third-party wellness management program designed to cultivate good lifestyle habits. This program also provides monetary incentives based on physical activity and premium credits on health insurance when employees reach certain thresholds.

◦Wellness to-go - Our employees have engaged with our third-party virtual fitness program for more than 30,000 minutes in the past year. It provides on-demand classes, workout plans and fitness assessments anywhere, anytime. It’s also a great way for employees to take a workout class any time that works best for them.

Sustainability

As UFG continues to grow, we must recognize our impact on the environment. In addition to ensuring our facilities are operating responsibly, we believe our partnerships and coverages play a role in conservation and offsetting our footprint. As a whole, we look at what we can do to engage in both sustainable and responsible business practices.

UFG is honored to have been appointed the insurance provider for members of the state Iowa Land Improvement Contractors Association ("LICA") insurance program. This organization, which is known for its mission of professional conservation of soil and water, as well as best practices in the construction and protection of cities, farms, ranches and rural areas where we live and work, has worked with UFG to develop a program that is customized to this targeted group of insureds. Our program, in partnership with Prins Insurance, is specifically designed for LICA contractors and includes professional risk control services, safety group dividends based on the performance of the group, specialty pricing, and the broadened coverages needed when working to conserve our soil and water.

At the core of our business is the insurance coverage we provide. We offer a variety of basic and more advanced policies tailored for the needs of our insureds. Product innovation, especially as it relates to social responsibility, continues to play a big part in our goal to offer simple solutions for complex times.

UFG offers liability coverage for a covered job site pollution event. This coverage is also available through our business owners property endorsement with varying levels of protection.

UFG’s pollutant redefined endorsement broadens our commercial general liability policy, providing coverage for carbon monoxide poisoning due to faulty workmanship.

In addition to establishing a UFG Green Team dedicated to sustainability practices, the facilities team is active in reducing our environmental footprint. Here are a few ways they’re generating less impact:

•Use of low VOC paint, LED light fixtures and sustainable cleaning products.

•Partner with flooring vendors that manufacture products with low environmental impact.

•Utilize architectural wall systems instead of drywall.

•Use of electrostatic disinfection cleaning — a cutting-edge cleaning technique — to our corporate office. This technique greatly reduces the spread of viruses in high-traffic areas.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS ~~OF THE COMPANY~~

The following table sets forth information concerning the following executive officers:



Name			Age	Position
Randy A. Ramlo			5659	President and Chief Executive Officer
Michael T. Wilkins			5457	Executive Vice President and Chief Operating Officer
Dawn M. Jaffray			5154	~~Senior~~Executive Vice President and Chief Financial Officer
~~Barrie W. Ernst~~Robert F. Cataldo			6350	Vice President and Chief Investment and Strategy Officer
Neal R. Scharmer			6164	Vice President, General Counsel and Corporate Secretary
~~Michael J. Sheeley~~	57	~~Vice President and Chief Operating Officer, United Life Insurance Company~~

A brief description of the business experience of these officers follows:

Randy A. Ramlo became our President and Chief Executive Officer in May 2007. He previously served as our Chief Operating Officer from May 2006 until May 2007, as Executive Vice President from May 2004 until May 2007, and as Vice President, Fidelity and Surety, from November 2001 until May 2004. He also worked as an underwriting manager in our Great Lakes region. Mr. Ramlo began his employment with us as an underwriter in 1984.

Michael T. Wilkins became our Executive Vice President and Chief Operating Officer in May 2014. He served as our Executive Vice President, Corporate Administration, from May 2007 to May 2014. He was our Senior Vice President, Corporate Administration, from May 2004 until May 2007, our Vice President, Corporate Administration, from August 2002 until May 2004 and the resident Vice President in our Lincoln regional office from 1998 until 2002. Prior to 1998, Mr. Wilkins held various other positions within the Company since joining us in 1985.

Dawn M. Jaffray became our Senior Vice President and Chief Financial Officer in May 2015. In May 2019, Ms. Jaffray was promoted to Executive Vice President and Chief Financial Officer. Ms. Jaffray previously served as Chief Financial Officer of Soleil Advisory Group, a consulting firm specializing in operational consulting, mergers and acquisitions, investment and strategy from 2009 to 2015. Prior to her service with Soleil Advisory Group, Ms. Jaffray held numerous positions in insurance operations and mergers/acquisition activities, primarily in the role of principal financial officer. Ms. Jaffray's business experience has been focused in particular on insurance, finance and capital management.

~~Barrie W. Ernst is~~Robert F. Cataldo became our Vice President and Chief Investment ~~Officer. He~~and Strategy Officer of UFG in 2020, serving the company since 2011. Mr. Cataldo joined usUFG as a Senior Portfolio Manager in ~~August 2002. Previously, Mr. Ernst served as Senior~~2011. In 2015, he was promoted to Assistant Vice President ~~of SCI Financial Group in Cedar Rapids, Iowa, where he worked from 1980 to 2002. SCI Financial Group~~& Senior Portfolio Manager. In 2018, Robert was ~~a regional financial services firm providing brokerage, insurance~~named Vice President and ~~related services to its clients.~~Strategy Officer for UFG.

Neal R. Scharmer was appointed our Vice President and General Counsel in May 2001 and Corporate Secretary in May 2006. He joined us in 1995.

Michael J. Sheeley was appointed Vice President and Chief Operating Officer of United Life Insurance Company in March 2011. Prior to assuming leadership of United Life Insurance Company, Mr. Sheeley served us as personal lines underwriting manager from 1991 to 2011. He has also served in various capacities including commercial underwriting and claims since joining us in 1985.

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ITEM 1A. RISK FACTORS

We provide readers with the following discussion of risks and uncertainties relevant to our business. These are factors that we believe could cause our actual results to differ materially from our historic or anticipated results. We could also be adversely affected by other factors, in addition to those listed here. Additional information concerning factors that could cause actual results to differ materially from those contained in the forward-looking statements is set forth in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Risks Relating to Our Business

Our business, financial condition, results of operations and liquidity may continue to be negatively impacted by the coronavirus (COVID-19) pandemic.

On January 30, 2020, the World Health Organization declared a global emergency with respect to the COVID-19 outbreak. Several countries, including the United States, as well as several states within the United States, have initiated travel restrictions and other limitations that have impacted individuals and businesses worldwide. We are closely monitoring developments related to the COVID-19 pandemic to continually assess its impact on our business. The effects of the COVID-19 pandemic continue to evolve and have the potential to further materially impact our business, results of operations, financial condition, liquidity, capital position, the value of the investments we hold in our investment portfolio, premiums and demand for our products, and our ability to collect premiums on a timely basis or the requirement to return premiums to policyholders. The extent to which the COVID-19 pandemic continues to impact our business will depend on future developments, which are highly uncertain and cannot be predicted at this time, including the duration and severity of the COVID-19 pandemic and the extent of further resurgences, the availability, adoption and effectiveness of a vaccine, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extensions of time for restrictions that have been imposed to date, and numerous other uncertainties. Additionally, if established written contract policy exclusions of business interruption coverage for losses attributable to this COVID-19 pandemic are voided or changed through legislation, regulations or interpretations by the courts, such changes have the potential to materially increase claims, losses and legal expenses which will impact our business, financial condition, results of operations or liquidity. To the extent we experience adverse effects from the COVID-19 pandemic, it may also have the effect of heightening many of the other risks described in this report.

The occurrence, frequency and severity of catastrophe losses are unpredictable and may adversely affect our results of operations, liquidity and financial condition.

Our property and casualty insurance operations expose us to claims arising from catastrophic events affecting multiple policyholders. Such catastrophic events consist of various natural disasters, including, but not limited to, hurricanes, tornadoes, windstorms, hailstorms, fires and wildfires, earthquakes, severe winter weather, tropical storms, volcanic eruptions and man-made disasters such as terrorist acts (including biological, chemical or radiological events), explosions, infrastructure failures and results from political instability. We have exposure to tropical storms and hurricanes along the Gulf Coast, Eastern and Southeastern coasts of the United States. We have exposure to tornadoes, windstorms and hail storms throughout the United States. We have exposure to earthquakes along the West Coast and the New Madrid Fault area. Our automobile and inland marine business also exposes us to losses arising from floods and other perils.

Property damage resulting from catastrophes is the greatest risk of loss we face in the ordinary course of our business. We have exposure to catastrophe losses under both our commercial insurance policies and our personal insurance policies. The losses from catastrophic events are a function of both the extent of our exposure, the frequency and severity of the events themselves and the level of reinsurance assumed and ceded. For example, the losses experienced from a tornado will vary on whether the location of the tornado was in a highly populated or unpopulated area, the concentration of insureds in that area and the severity of the tornado. Increases in the value and geographic concentration of insured property and the effects of inflation could increase the severity of claims from a catastrophic event.

Long-term weather trends may be changing and new types of catastrophe losses may be developing due to climate change, which is a phenomenon that has been associated with extreme weather events linked to rising temperatures, including effects on global weather patterns, greenhouse gases, sea, land and air temperature, sea levels, rain and snow. While the emerging science regarding climate change and its connection to extreme weather events continues to be debated, in recent years there has been an increase in frequency and severity of tornadoes and hailstorms, and hurricanes are now impacting areas further inland than experienced in the recent past. Such changes in climate conditions could cause our underlying modeling data to be less accurate, limiting our ability to evaluate and manage our risk. Climate change adds to the unpredictability, frequency and severity of natural disasters and creates additional uncertainty as to future trends and exposures. We cannot predict the impact that changing climate conditions may have on our results of operations, nor can we predict how any legal, regulatory or social responses to concerns about climate change may impact our business.

In addition, as with catastrophe losses generally, it can take a long time for us to determine our ultimate losses associated with a particular catastrophic event. The inability to access portions of the impacted area, the complexity of the losses, legal and regulatory uncertainty and the nature of the information available for certain catastrophic events may affect our ability to

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estimate the claims and claim adjustment expense reserves. Such complex factors include, but are not limited to: determining the cause of the damage, evaluating general liability exposures, estimating additional living expenses, the impact of demand surge, infrastructure disruption, fraud, business interruption costs and reinsurance collectability.

The timing of a catastrophic occurrence at the end or near the end of a reporting period may also affect the information available to us when estimating claims and claim adjustment expense reserves for the reporting period. As our claims experience for a particular catastrophe develops, we may be required to adjust our reserves to reflect our revised estimates of the total cost of claims. However, because the occurrence and severity of catastrophes are inherently unpredictable and may vary significantly from year to year and region to region, historical results of operations may not be indicative of future results of operations.

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Catastrophes may reduce our net income, cause substantial volatility in our financial results for any fiscal quarter or year or otherwise adversely affect our financial condition, liquidity or results of operations. Catastrophes may also negatively affect our ability to write new business.

Following catastrophes there are also sometimes legislative, administrative and judicial decisions that seek to expand insurance coverage for claims beyond the original intent of the policies or seek to prevent the application of deductibles. Our ability to manage catastrophic exposure may be limited by public policy considerations, the political environment, changes in the general economic climate and/or social responsibilities.

Our reserves for property and casualty insurance losses and loss settlement expenses ~~and our life insurance reserves for future policy benefits~~ are based on estimates and may be inadequate, adversely impacting our financial results.

We maintain insurance reserves to cover our estimated ultimate unpaid liability for claim and claim adjustment expenses, including the estimated cost of the claims adjustment process, for reported and unreported claims and for future policy benefits. Our reserves may prove to be inadequate, which may result in future charges to earnings and/or a downgrade of our financial strength rating or the financial strength ratings of our insurance company subsidiaries.

Insurance reserves represent our best estimate at a given point in time. They are not an exact calculation of liability but instead are complex estimates, which are a product of actuarial expertise and projection techniques from a number of assumptions and expectations about future events, many of which are highly uncertain.

The process of estimating claims and claims adjustment expense reserves involves a high degree of judgment. These estimates are based on historical data and the impact of various factors such as:

(1) actuarial and statistical projections of the cost of settlement and administration of claims reflecting facts and circumstances then known;

(2) historical claims information and loss emergence patterns;

(3) assessments of currently available data;

(4) estimates of future trends in claims severity and frequency;

(5) judicial theories of liability;

(6) economic factors such as inflation;

(7) estimates and assumptions regarding social, judicial and legislative trends, and actions such as class action lawsuits and judicial interpretation of coverages or policy exclusions; and

(8) the level of insurance fraud.

Many of these factors are not quantifiable. The inherent uncertainties of estimating reserves are greater for certain types of liabilities, particularly those in which the various considerations affecting the type of claim are subject to change and in which long periods of time may elapse before a definitive determination of liability is made. Reserve estimates are continually refined in a regular and ongoing process as experience develops and further claims are reported and settled.

Along with other insurers, we use internal and external models in assessing our exposure to catastrophe losses that assume various conditions and probability scenarios; however, these models do not necessarily accurately predict future losses or accurately measure losses currently incurred. Models for catastrophes use historical information about various catastrophes and details about our in-force business. While we use this information in our pricing and risk managements, there are limitations with respect to their usefulness in predicting losses in any reporting period. Such limitations lead to questionable predictive capability and post-event measurements that have not been well understood or ~~proven~~proved to be sufficiently reliable. In addition, the models are not necessarily reflective of our state-specific policy language, demand surge for labor and materials or loss settlement expenses, all of which are subject to wide variation.

For our life insurance business, we calculate life insurance product reserves based on our assumptions, including estimated premiums we will receive over the assumed life of the policy, the timing of the event covered by the

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insurance policy and the amount of benefits or claims to be paid. The premiums that we charge and the liabilities that we hold for future policy benefits are based on assumptions reflecting a number of factors, including the amount of premiums that we will receive in the future, the rate of return on assets we purchase with premiums received, expected claims, mortality, morbidity, expenses and persistency, which is the measurement of the percentage of insurance policies remaining in force from year to year. However, due to the nature of the underlying risks and the high degree of uncertainty associated with the determination of the liabilities for unpaid policy benefits and claims, we cannot determine precisely the amounts we will ultimately pay to settle these liabilities. To the extent that actual experience is less favorable than our underlying assumptions, we could be required to increase our liabilities, which may harm our financial strength and reduce our profitability.

For example, if mortality rates are higher than our pricing assumptions, we will be required to make greater claims payments on our life insurance policies than we had projected. Our results of operations may also be adversely impacted by an increase in morbidity rates.

Actual loss and loss settlement expenses paid might exceed our reserves. If our loss reserves are insufficient, or if we believe our loss reserves are insufficient to cover our actual loss and loss settlement expenses, we will have to increase our loss reserves and incur charges to our earnings, which could indicate that premium levels were insufficient. As such, deviations from one or more of these assumptions could result in a material adverse impact on our Consolidated Financial Statements and our financial strength rating or the financial strength ratings of our insurance company subsidiaries could be downgraded.

For a detailed discussion of our reserving process and the factors we consider in estimating reserves, refer to the "Critical Accounting Policies" section in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

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Our geographic concentration ~~in both our property and casualty insurance and life insurance businesses~~ ties our performance to the business, economic and regulatory conditions of certain states.

The following states provided ~~49.0~~50.4 percent of the direct statutory premiums written for the property and casualty insurance businesses in ~~2017:~~2020: Texas ~~(16.7~~(18.1 percent), California ~~(11.6~~(11.9 percent), Iowa ~~(9.5~~(8.6 percent), Missouri ~~(6.1~~ (6.8 percent) and ~~Colorado (5.1~~New Jersey (5.0 percent). ~~The following states provided 70.9 percent of the direct statutory premiums written for the life insurance business in 2017: Iowa (32.5 percent),~~ ~~Wisconsin~~ ~~(11.9 percent), Minnesota (9.7 percent), Illinois (8.7 percent) and Nebraska (8.1 percent).~~

Our revenues and profitability are subject to the prevailing regulatory, legal, economic, political, demographic, competitive, weather and other conditions in the principal states in which we do business. With respect to regulatory conditions, the NAIC and state legislators continually reexamine existing laws and regulations, specifically focusing on modifications to holding company regulations, interpretations of existing laws and the development of new laws and regulations. In a time of financial uncertainty or a prolonged economic downturn, regulators may choose to adopt more restrictive insurance laws and regulations. Changes in regulatory or any other of these conditions could make it less attractive for us to do business in such states and would have a more pronounced effect on us compared to companies that are more geographically diversified. In addition, our exposure to severe losses from localized natural perils, such as hurricanes or hailstorms, is increased in those areas where we have written a significant amount of property insurance policies.

Unauthorized data access, cyber attacks and other security breaches could have an adverse impact on our business and reputation.

We rely on computer systems to conduct our business for our customer service, marketing and sales activities, customer relationship management and producing financial statements. Our business and operations rely on secure and efficient processing, storage and transmission of customer and Company data, including personally identifiable information. Our ability to effectively operate our business depends upon our ability, and the ability of certain third party vendors and business partners, to access our computer systems to perform necessary business functions, such as providing quotes and product pricing, billing and processing premiums, administering claims, and reporting our financial results.

We retain confidential information on our computer systems, including customer information and proprietary business information belonging to us and our policyholders. Our business and operations depend upon our ability to

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safeguard this personally identifiable information. Our systems may be vulnerable to unauthorized access and hackers, computer viruses, and other scenarios in which our data may be compromised.

Cyber attacks involving these systems, or those of our third party vendors, could be carried out remotely and from multiple sources and could interrupt, damage, or otherwise adversely affect the operations of these critical systems. Cyber attacks could result in the modification or theft of data, the distribution of false information, or the denial of service to users. Threats to data security can emerge from a variety of sources and change rapidly, resulting in the ongoing need to expend resources to secure our data in accordance with customer expectations and statutory and regulatory requirements.

Any compromise of the security of our data could expose us to liability and harm our reputation, which could affect our business and results of operations. We continually enhance our operating procedures and internal controls to effectively support our business and comply with our regulatory and financial reporting requirements, but there can be no assurances that we will be able to implement security measures adequate to prevent every security breach.

Although, to date, we do not believe we have experienced any material cyber attacks, the occurrence, scope and effect of any cyber attack may remain undetected for a period of time. We maintain cyber liability insurance coverage that provides both third-party liability and first-party insurance coverages; however, our insurance may be insufficient to cover all losses and expenses related to a cyber attack.

Federal and state policymakers have, and will likely continue to propose increased regulation of the protection of personally identifiable information and appropriate protocols after a related cybersecurity breach. The New York Department of Financial Services recently adopted a cyber protection and reporting regulation for financial services companies with which we are complying. The NAIC has created the Data Security Model Law ("DSML") based upon the New York regulation. Compliance with these regulations and efforts to address continually developing cybersecurity risks may result in a material adverse effect on our results of operations, liquidity, financial condition, and financial strength.

Conditions in the global capital markets and the economy generally may weaken materially and adversely affect our business and results of operations.

Our results of operations, financial position and liquidity are materially affected by conditions in the global capital markets and the economy generally, both in the U.S. and elsewhere around the world. As a result of such conditions, our policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. In addition, we may experience an elevated incidence of claims and lapses or surrenders of policies causing a change in our exposure.

Factors such as consumer spending, business investment, government spending, the volatility and strength of the capital markets, investor and consumer confidence and inflation levels all affect the business and economic environment and,

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ultimately, the amount and profitability of our business. In an economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment, negative investor sentiment and lower consumer spending, the demand for our insurance products could be adversely affected.

The effects of emerging claim and coverage issues and class action litigation on our business are uncertain.

We are subject to certain effects of emerging or potential claims and coverage issues that arise as industry practices and legal, judicial, social, economic and other environmental conditions change, including unexpected and unintended issues related to claims and coverage. These issues may adversely affect our business by either extending coverage beyond our underwriting intent or by increasing the number and/or size of claims, resulting in further increases in our reserves. The effects of these and other unforeseen emerging claim and coverage issues are extremely hard to predict. Examples of these issues include: (1) judicial expansion of policy coverage and the impact of new theories of liability; (2) an increase of plaintiffs targeting property and casualty insurers, including us, in purported class action litigation regarding claims handling and other practices; (3) medical developments that link health issues to particular causes, resulting in liability or workers' compensation (for example, cumulative trauma); (4) claims relating to unanticipated consequences of current or new technologies; (5) an increase in the variety, number and size of claims relating to liability losses, which often present complex coverage and damage valuation questions; (6) claims relating to potentially changing climate conditions, including higher frequency and severity of weather-related events; and (7) adverse changes in loss cost trends, including inflationary pressure in medical cost and auto and home repair costs.

We are subject to certain risks related to our investment portfolio that could negatively affect our profitability.

Investment income is an important component of our net income and overall profitability. We invest premiums received from policyholders and other available cash to generate investment income and capital appreciation, while also maintaining sufficient liquidity to pay covered claims, operating expenses and dividends. As discussed in detail below, general economic conditions, changes in financial markets, global events and many other factors beyond our control can adversely affect the value of our investments and the realization of investment income.

We primarily manage our investment portfolio internally under required statutory guidelines and investment guidelines approved by our Board of Directors and the boards of directors of our subsidiaries. Although these guidelines stress diversification and capital preservation, our investments are subject to a variety of risks ~~including:~~discussed as follows.

Credit Risk - The value of our investment in marketable securities is subject to impairment as a result of deterioration in the creditworthiness of the issuer. Such impairments could reduce our net investment income and result in realized investment losses. The vast majority of our investments ~~(98.1%~~(99.2% at December 31, ~~2017)~~2020) are made in investment-grade securities. Although we try to manage this risk by diversifying our portfolio and emphasizing credit quality, our investments are subject to losses as a result of a general downturn in the economy.

Interest Rate Risk - A significant portion of our investment portfolio ~~(88.5~~(85.0 percent at December 31, ~~2017)~~2020) consists of fixed income securities, primarily corporate and municipal bonds ~~(69.9~~(63.2 percent at December 31, ~~2017)~~2020). These securities are sensitive to changes in interest rates. An increase in interest rates typically reduces the fair value of fixed income securities, while a decline in interest rates reduces the investment

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income earned from future investments in fixed income securities. In recent periods, interest rates have been at or near historic lows. It is possible that this trend may continue for a prolonged period of time. We generally hold our fixed income securities to maturity, so our interest rate exposure does not usually result in realized losses. However, rising interest rates could result in a significant reduction of the book value of our fixed maturity investments. Low interest rates, and low investable yields, could adversely impact our net earnings as reinvested funds produce lower investment income.

~~Fluctuations~~in interest rates may cause increased surrenders and withdrawals from our life insurance and annuity products. In periods of rising interest rates, or if long-term interest rates rise dramatically within a very short time period, certain portions of our life insurance and annuities businesses may be exposed to disintermediation risk, which refers to the risk that surrenders and withdrawals of life insurance policies and annuity contracts, along with policy loans, may increase as policyholders seek to buy products with perceived higher rates of return. This may require us to liquidate assets in an unrealized loss position. Due to the long-term nature of the liabilities associated with certain portions of our life insurance business, sustained declines in long-term interest rates may subject us to reinvestment risks and increased hedging costs. In other situations, a sudden change in interest rates may result in an unexpected change in the duration of certain life insurance liabilities, creating asset and liability duration mismatches.

Interest rates are highly sensitive to many factors beyond our control including general economic conditions, changes in governmental regulations and monetary policy, and national and international political conditions.

Liquidity Risk - We seek to match the maturities of our investment portfolio with the estimated payment date of our loss and loss adjustment expense reserves to ensure strong liquidity and avoid having to liquidate securities to fund claims. Risk such as inadequate loss and loss adjustment reserves or unfavorable trends in litigation could potentially result in the need to sell investments to fund these liabilities. This could result in significant realized losses depending on the conditions of the general market, interest rates and credit profile of individual securities.

Further, our investment portfolio is subject to increased valuation uncertainties when investment markets are illiquid. The valuation of investments is more subjective when markets are illiquid, thereby increasing the risk that the estimated fair value (i.e., the carrying amount) of the portion of the investment portfolio that is carried at fair value as reflected in our financial statements is not reflective of prices at which actual transactions could occur.

Market Risk - Our investments are subject to risks inherent in the global financial system and capital markets. The value and risks of our investments may be adversely affected if the functioning of those markets is disrupted or otherwise affected by local, national or international events, such as: changes in regulation or tax policy; changes in legislation relating to bankruptcy

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or other proceedings; infrastructure failures; wars or terrorist attacks; the overall health of global economies; a significant change in inflation expectations; a significant devaluation of government or private sector credit and/or currency values; and other factors or events not specifically attributable to changes in interest rates, credit losses, and liquidity needs.

Credit Spread Risk - Our exposure to credit spreads primarily relates to market price variability and reinvestment risk associated with changes in credit spreads. Valuations may include assumptions or estimates that may have significant period-to-period changes from market volatility, which could have a material adverse effect on our results of operations or financial condition.

Our fixed maturity investment portfolio is invested substantially in state, municipal and political subdivision bonds. Our fixed maturity investment portfolio could be subject to default or impairment, in particular:

States and local governments have been operating under deficits or projected deficits which may have an impact on the valuation of our municipal bond portfolio.

There is a risk of widespread defaults which may increase if some issuers chose to voluntarily default instead of implementing fiscal measures such as increasing tax rates or reducing spending. Such risk may also increase if there are changes in legislation permitting states, municipalities and political subdivisions to

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file for bankruptcy protection where they were not permitted to before. Judicial interpretations in such bankruptcy proceedings may also adversely affect the collectability of principal and interest, and/or valuation of our bonds. Changes in tax laws impacting marginal tax rates, exemptions, deductions, credits and/or the preferred tax treatment of municipal obligations could also adversely affect the market value of municipal obligations. Since a large portion of our investment portfolio ~~(31.9~~(41.2 percent at December 31, ~~2017)~~2020) is invested in tax-exempt municipal obligations, any such changes in tax law could adversely affect the value of our investment portfolio.

We exercise prudence and significant judgment in analyzing and validating fair values, which are primarily provided by third parties, for securities in our investment portfolio, including those that are not regularly traded in active markets. We also exercise prudence and significant judgment in determining whether the impairment of particular investments is temporary or other-than-temporary. Due to the inherent uncertainties involved in these judgments, we may incur unrealized losses and subsequently conclude that other-than-temporary write downs of our investments are required.

Our success depends primarily on our ability to underwrite risks effectively and adequately price the risks we underwrite.

The results of our operations and our financial condition depend on our ability to underwrite and set premium rates accurately for a wide variety of determinable and indeterminable risks based on available information. Adequate rates are necessary to generate premiums sufficient to pay losses, loss settlement expenses and underwriting expenses and to earn a profit. To price our products accurately, we must collect and properly analyze a substantial amount of data; develop, test and apply appropriate pricing techniques; closely monitor and timely recognize changes in trends; and project both severity and frequency of losses with reasonable accuracy. We could underprice risks which would adversely affect our profit margins. Conversely, we could overprice risks which could reduce our sales volume and competitiveness. Our ability to undertake these efforts successfully, and to price our products accurately, is subject to a number of risks and uncertainties, including but not limited to:

(1) the availability of sufficient reliable data and our ability to properly analyze available data;

(2) market and competitive conditions;

(3) changes in medical care expenses and restoration costs;

(4) our selection and application of appropriate pricing techniques; and

(5) changes in the regulatory market, applicable legal liability standards and in the civil litigation system generally.

The cyclical nature of the property and casualty insurance industry may affect our financial performance.

The property and casualty insurance industry is cyclical in nature and has historically been characterized by soft markets (periods of relatively high levels of price competition, less restrictive underwriting standards and generally low premium rates) followed by hard markets (periods of capital shortages resulting in a lack of insurance availability, relatively low levels of price competition, more selective underwriting of risks and relatively high premium rates). During soft markets, we may lose business to competitors offering competitive insurance at lower prices. We may reduce our premiums or limit premium increases leading to a reduction in our profit margins and revenues. We expect these cycles to continue.

The demand for property and casualty insurance can also vary significantly, rising as the overall level of economic activity increases and falling as that activity decreases. Fluctuations in demand and competition could produce underwriting results that would have a negative impact on the results of our operations and financial condition.

~~The effects of emerging claim and coverage issues and class action litigation on our business are uncertain.~~

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~~increases in our reserves. The effects of these and other unforeseen emerging claim and coverage issues are extremely hard to predict. Examples of these issues include:~~

~~judicial expansion of policy coverage and the impact of new theories of liability;~~

~~an increase of plaintiffs targeting property and casualty insurers, including us, in purported class action litigation regarding claims handling and other practices;~~

~~medical developments that link health issues to particular causes, resulting in liability or workers' compensation (for example, cumulative trauma);~~

~~claims relating to unanticipated consequences of current or new technologies;~~

~~an increase in the variety, number and size of claims relating to liability losses, which often present complex coverage and damage valuation questions;~~

~~claims relating to potentially changing climate conditions, including higher frequency and severity of weather-related events; and~~

~~adverse changes in loss cost trends, including inflationary pressure in medical cost and auto and home repair costs.~~

A downgrade or a potential downgrade in our financial strength or issuer credit ratings could result in a loss of business and could have a material adverse effect on our financial condition and results of operations.

Ratings are an important factor in establishing the competitive position of insurance companies. Third-party rating agencies assess and rate the claims-paying ability, capital strength and creditworthiness of insurers and reinsurers based on criteria established by the agencies. A.M. Best rates our property and casualty insurance companies on a group basis. ~~Our life insurance subsidiary receives a separate rating.~~ Since 2012, A.M.

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Best has also given an issuer credit rating to our parent holding company. The table below shows the current ratings assigned to our companies by A.M. Best.


			Financial Strength Rating			Issuer Credit Rating		Rating Held Since
Pooled Property and Casualty Companies			A			a		1994

			~~Financial Strength Rating~~	~~Issuer Credit Rating~~	~~Rating Held Since~~
~~Property and Casualty Insurers~~	A	a	~~1994~~
~~Life Insurer~~	A-	a-	~~1998~~
United Fire Group, Inc.	N/A			bbb			2012

Financial strength and issuer credit ratings are used by policyholders, insurers, reinsurers and insurance and reinsurance intermediaries as an important means of assessing the financial strength, creditworthiness and quality of insurers and reinsurers. These ratings are not evaluations directed to potential purchasers of our common stock and are not recommendations to buy, sell or hold our common stock. These ratings are subject to change at any time and could be revised downward or revoked at the sole discretion of the rating agency. Downgrades in our financial strength ratings could adversely affect our ability to access the capital markets or could lead to increased borrowing costs in the future. Perceptions of the Company by investors, producers, other businesses and consumers could also be significantly impaired.

We believe that the ratings assigned by A.M. Best are an important factor in marketing our products. Our ability to retain our existing business and to attract new business in our insurance operations depends on our ratings by this agency. Our failure to maintain our ratings, or any other adverse development with respect to our ratings, could cause our current and future independent agents and policyholders to choose to transact their business with more highly rated competitors. If A.M. Best downgrades our ratings or publicly indicates that our ratings are under review, it is likely that we will not be able to compete as effectively with our competitors and our ability to sell insurance policies could decline, leading to a decrease in our premium revenue and earnings. For example, many of our agencies and policyholders have guidelines that require us to have an A.M. Best financial strength rating of "A-" or higher. A reduction of our A.M. Best ratings below "A-" would prevent us from issuing policies to a portion of our current policyholders or other potential policyholders with ratings requirements. ~~Additionally, a ratings downgrade could materially increase the number of surrenders for all or a portion of the net cash values by the owners of~~

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~~policies and contracts we have issued, and materially increase the number of withdrawals by policyholders of cash values from their policies.~~

A reduction in our issuer credit rating could limit our ability to access capital markets or significantly increase the cost to us of raising capital. The failure of our insurance company subsidiaries to maintain their current ratings could dissuade a lender or reinsurance company from conducting business with us. A ratings downgrade could also cause some of our existing liabilities to be subject to acceleration, additional collateral support, changes in terms, or creation of additional financial obligations. It might also increase our interest or reinsurance costs.

We are exposed to credit risk in certain areas of our operations.

In addition to exposure to credit risk related to our investment portfolio, we are exposed to credit risk in several other areas of our business operations, including from:

(1) our reinsurers, who are obligated to us under our reinsurance agreements. See the risk factor titled "Market conditions may affect our access to and the cost of reinsurance and our reinsurers may not pay losses in a timely manner, or at all," for a discussion of the credit risk associated with our reinsurance program;

(2) some of our independent agents, who collect premiums from policyholders on our behalf and are required to remit the collected premiums to us;

(3) some of our policyholders, which may be significant; and

(4) our surety insurance operations, where we guarantee to a third party that our bonded principal will satisfy certain performance obligations (for example, as in a construction contract) or certain financial obligations. If our policyholder defaults, we may suffer losses and be unable to be reimbursed by our policyholder.

To a large degree, the credit risk we face is a function of the economy; accordingly, we face a greater risk during periods of economic downturn. While we attempt to manage these risks through underwriting and investment guidelines, collateral requirements and other oversight mechanisms, our efforts may not be successful. For example, collateral obtained may subsequently have little or no value. As a result, our exposure to credit risk could materially and adversely affect our results of operation and financial condition.

We are subject to comprehensive laws and regulations, changes to which may have an adverse effect on our financial condition and results of operations.

Insurance is a highly regulated industry. We are subject to extensive supervision and regulation by the states in which we operate. As a public company, we are also subject to increased regulation at the federal level. Our ability to comply with these laws and regulations and obtain necessary and timely regulatory action is, and will continue to be, critical to our success and ability to earn profits.

Examples of regulations that pose particular risks to our ability to earn profits ~~include the following:~~are discussed as follows.

Required licensing. Our insurance company subsidiaries operate under licenses issued by various state insurance departments. If a regulatory authority were to revoke an existing license or deny or delay granting a new license, our ability to continue to sell insurance or to enter or offer new insurance products in that market would be substantially impaired.

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Regulation of insurance rates, fees and approval of policy forms. The insurance laws of most states in which we operate require insurance companies to file insurance premium rate schedules and policy forms for review and approval. When our loss ratio compares favorably to that of the industry, state regulatory authorities may resist or delay our efforts to raise premium rates, even if the property and casualty industry generally is not experiencing regulatory resistance to premium rate increases. If premium rate increases we deem necessary are not approved, we may not be able to respond to market developments and increased costs in that state. State regulatory authorities may even impose premium rate rollbacks or require us to pay premium refunds to policyholders, affecting our profitability. If insurance policy forms we seek to use are not approved by state insurance departments, our ability to offer new products and grow our business in that state could be substantially impaired.

Restrictions on cancellation, nonrenewal or withdrawal. Many states have laws and regulations restricting an insurance company's ability to cease or significantly reduce its sales of certain types of insurance in that

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state, except pursuant to a plan that is approved by the state insurance departments. These laws and regulations could limit our ability to exit or reduce our business in unprofitable markets or discontinue unprofitable products. For example, the State of Louisiana has a law prohibiting the nonrenewal of homeowners policies written for longer than three years except under certain circumstances, such as for nonpayment of premium or fraud committed by the insured. Additionally, our ability to adjust terms or increase pricing requires approval of regulatory authorities in certain states.

Risk-based capital and capital adequacy requirements. Our insurance company subsidiaries and affiliate are subject to risk-based capital requirements that require us to report our results of risk-based capital calculations to state insurance departments and the NAIC. These standards apply specified risk factors to various asset, premium and reserve components of statutory capital and surplus reported in our statutory basis of accounting financial statements. Any failure to meet applicable risk-based capital requirements or minimum statutory capital requirements could subject us or our subsidiaries and affiliate to further examination or corrective action by state regulators, including limitations on our writing of additional business, state supervision or liquidation.

Transactions between insurance companies and their affiliates. Transactions between us, our insurance company subsidiaries and our affiliates generally must be disclosed to, and in some cases approved by, state insurance departments. State insurance departments may refuse to approve or delay their approval of a transaction, which may impact our ability to innovate or operate efficiently.

Required participation in guaranty funds and assigned risk pools. Certain states have enacted laws that require a property and casualty insurer conducting business in that state to participate in assigned risk plans, reinsurance facilities, and joint underwriting associations where participating insurers are required to provide coverage for assigned risks. The number of risks assigned to us by these plans is based on our share of total premiums written in the voluntary insurance market for that state. Pricing is controlled by the plan, often restricting our ability to charge the premium rate we might otherwise charge. Wherever possible, we utilize a designated servicing carrier to fulfill our obligations under these plans. Designated servicing carriers charge us fees to issue policies, adjust and settle claims and handle administrative reporting on our behalf. In these markets, we may be compelled to underwrite significant amounts of business at lower than desired premium rates, possibly leading to an unacceptable return on equity. While these facilities are generally designed so that the ultimate cost is borne by policyholders, the exposure to assessments and our ability to recoup these assessments through adequate premium rate increases may not offset each other in our financial statements. Moreover, even if they do offset each other, they may not offset each other in our financial statements for the same fiscal period, due to the ultimate timing of the assessments and recoupments or premium rate increases. Additionally, certain states require insurers to participate in guaranty funds to bear a portion of the unfunded obligations of impaired or insolvent insurance companies. These state funds periodically assess losses against all insurance companies doing business in the state. Our operating results and financial condition could be adversely affected by any of these factors.

Restrictions on the amount, type, nature, quality and concentration of investments. The various states in which we are domiciled have certain restrictions on the amount, type, nature, quality and concentration of our investments. Generally speaking, these regulations require us to be conservative in the nature and quality of our investments and restrict our ability to invest in riskier, but often higher yield investments. These restrictions may make it more difficult for us to obtain our desired investment results.

~~State and federal tax laws.~~ Current federal income tax laws generally permit the tax-deferred accumulation of earnings on the premiums paid by the holders of annuities and life insurance products. Taxes, if any, are payable on income attributable to a distribution under the contract for the year in which the distribution is made. The U.S. Congress has, from time to time, considered legislation that would reduce or eliminate the benefit of such deferral of taxation on the accretion of value within life insurance and nonqualified annuity contracts. Enactment of this legislation, including a simplified "flat tax" income structure with an exemption from taxation for investment income, could result in fewer sales of our insurance, annuity and investment products.

~~The Tax Cuts and Jobs Act enacted on December 22, 2017 (the "Tax Act") may negatively impact parts of our business. In addition, we~~We benefit from certain tax items, including but not limited to, tax-exempt bond

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interest, dividends-received deductions, tax credits (such as foreign tax credits) and insurance reserve deductions. From time to time, the U.S. Congress, as well as foreign, state and local governments, considers legislation that could reduce or eliminate the benefits associated with these tax items. Recent federal tax reform may negatively impact our ability to take deductions that we made in the past. ~~We continue to evaluate the impact of recent tax reform. Also, recent changes in the federal estate tax laws could negatively affect the demand for the types of life insurance used in estate planning.~~

Terrorism Risk Insurance. ~~The Terrorism Risk Insurance Program Reauthorization Act of 2007 was signed into law on December 27, 2007. In January 2015,~~ The Terrorism Risk Insurance Program Reauthorization Act of 2015 ("TRIPRA") was signed into law. TRIPRA, ~~extends~~which extended the Terrorism Risk Insurance Program until December 31, ~~2020;~~2020, gradually ~~increases~~increased the coverage trigger for shared terrorism losses between the federal government and the insurance industry to $200 billion per year, ~~(up from $100 billion);~~ and gradually ~~increases~~increased the industry-wide retention to $37.5 billion per ~~year (up from $27.5 billion).~~year. For further information about TRIPRA and its effect on our operations, refer to the information in the ~~"Consolidated Results~~"Results of ~~Operations"~~Operations for the Years Ended December 31, 2020, 2019

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and 2018" section in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations.

Accounting standards. We prepare our consolidated financial statements in conformity with GAAP, which is periodically revised and/or expanded by recognized authoritative bodies, including the Financial Accounting Standards Board ("FASB"). These principles are subject to interpretation by the SEC and various other bodies formed to interpret and create appropriate accounting principles and guidance. Changes in GAAP and financial reporting requirements, or the interpretation of GAAP or those requirements, may have an impact on the content and presentation of our financial results and could have adverse consequences on our financial results, including lower reported results of operations and shareholders' equity and increased volatility and decreased comparability of our reported results with our historic results and with the results of other insurers. In addition, the required adoption of new accounting standards may result in significant incremental costs associated with initial implementation of and ongoing compliance with those standards. Additional information regarding recently proposed and adopted accounting standards and their potential impact on us is set forth in Note 1 “Summary of Significant Accounting Policies” to Part II, Item 8, “Financial Statements and Supplementary Data.”

Corporate Governance and Public Disclosure Regulation. Changing laws, regulations and standards relating to corporate governance and public disclosure, including Dodd-Frank, the Sarbanes-Oxley Act of 2002 and related SEC regulations, as well as the listing standards of the ~~NASDAQ Stock Market,~~Nasdaq stock market, have created and are continuing to create uncertainty for public companies. ~~While the federal government has not historically regulated the insurance business, in 2010 Dodd-Frank established a~~The Federal Insurance Office, established within the U.S. Department of the ~~Treasury. The Federal Insurance Office~~Treasury by Dodd Frank in 2010, has limited regulatory authority and is empowered to gather data and information regarding the insurance industry and insurers, monitor aspects of the insurance industry, identify issues with regulation of insurers that could contribute to a systemic crisis in the insurance industry or the overall financial system, coordinate federal policy on international insurance matters and preempt state insurance measures under certain circumstances. While certain details and much of the impact of Dodd-Frank ~~will not be known for some time,~~are still unknown, Dodd-Frank and other federal regulation adopted in the future may impose burdens on us, including impacting the ways we conduct our business, increasing compliance costs and duplicating state regulation. Additional regulation under these laws in the area of compensation disclosure, particularly regarding internal pay equity, officer and director hedging activities and compensation clawback policies is still expected.

~~U.S. Social Security Administration's Death Master File~~. Information Privacy Regulation. We ~~have received regulatory inquiries from certain state insurance regulators relating~~are required to ~~compliance with unclaimed property~~safeguard the personal information of our customers and applicants and are subject to an increasing number of laws and ~~the use of~~regulations regarding privacy and data ~~available on the U.S. Social Security Administration's Death Master File (or a similar database)~~security, as well as in our contractual commitments with service providers. We could be subject to ~~identify instances where benefits under life insurance policies, annuities~~governmental enforcement actions and ~~retained asset accounts are payable. It~~fines, penalties, litigation, or public statements against us by consumer advocacy groups if personal information is ~~possible that other jurisdictions~~not appropriately controlled. Strategic service providers may ~~pursue similar inquiries and that such inquiries may result in payments~~refuse to ~~beneficiaries, escheatment of funds deemed abandoned under state laws and changes~~continue to ~~procedures for the identification and escheatment of abandoned property.~~

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do business with us if we do not meet particular standards.

Compliance with these laws and regulations requires us to incur administrative costs that decrease our profits. These laws and regulations may also prevent or limit our ability to underwrite and price risks accurately, obtain timely premium rate increases necessary to cover increased costs, discontinue unprofitable relationships or exit unprofitable markets and otherwise continue to operate our business profitably. In addition, our failure to comply with these laws and regulations could result in actions by state or federal regulators, including the imposition of fines and penalties or, in an extreme case, revocation of our ability to do business in one or more states. Finally, we could face individual, group and class action lawsuits by our policyholders and others for alleged violations of certain state laws and regulations. Each of these regulatory risks could have a negative effect on our profitability.

Market conditions may affect our access to and the cost of reinsurance and our reinsurers may not pay losses in a timely manner, or at all.

As part of our overall risk and capacity management strategy, we purchase reinsurance for significant amounts of the risk that we and our insurance company subsidiaries and affiliates underwrite, by transferring (or ceding) part of the risk we have assumed to a reinsurance company in exchange for part of the premium we receive in connection with the risk. These reinsurance arrangements diversify our business and reduce our exposure to large losses or from hazards of an unusual nature. As of December 31, ~~2017,~~2020, we ceded premiums written of ~~$61.3~~$88.3 million to our reinsurers.

Although reinsurance makes the reinsurer liable to us to the extent the risk is transferred, it does not eliminate our liability to our policyholders because we remain liable as the direct insurer on all of the reinsured risks. As a result we are subject to credit risk relating to our ability to recover amounts due from our reinsurers.

Our ability to collect reinsurance recoverables may be subject to uncertainty. Our losses must meet the qualifying conditions of the reinsurance agreement. Our reinsurance agreements are subject to specified limits and we would not have reinsurance coverage to the extent that it exceeds those limits. We are also subject to the risk that reinsurers may dispute their obligations to pay our claims. Reinsurers must have the financial capacity and willingness to make payments under the terms of a reinsurance agreement or program. Reinsurers may dispute amounts we believe are due to us. Particularly, following a major catastrophic

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event, our inability to collect a material recovery from a reinsurer on a timely basis, or at all, could have a material adverse effect on our liquidity, operating results and financial condition.

Market conditions determine the availability and cost of the reinsurance protection we purchase, which affects the level of our business profitability, as well as the level and types of risk we retain. Although we purposely work with several reinsurance intermediaries and reinsurers, we may be unable to maintain our current reinsurance facilities or obtain other reinsurance facilities in adequate amounts and at favorable premium rates. Moreover, there may be a situation in which we have more than two catastrophic events within one policy year. Because our current catastrophe reinsurance program only allows for one automatic reinstatement at an additional reinstatement premium, we would be required to obtain a new catastrophe reinsurance policy to maintain our current level of catastrophe reinsurance coverage. Such coverage may be difficult to obtain, particularly if it is necessary to do so during hurricane season following the second catastrophe. If we are unable to renew our expiring facilities or to obtain new reinsurance facilities, either our net exposure to risk will increase or, if we are unwilling to bear an increase in net risk exposures, we will have to reduce the amount of risk we underwrite.

We face significant competitive pressures in our business that could cause demand for our products to fall or hinder our ability to introduce new products or services and keep pace with advances in technology, reducing our revenue and profitability.

The insurance industry is highly competitive and will likely remain that way for the foreseeable future. In our property and casualty insurance business ~~and in our life insurance business~~ we compete, and will continue to compete, with many major U.S. and non-U.S. insurers and smaller regional companies, as well as mutual companies, specialty insurance companies, underwriting agencies, and diversified financial services companies, including banks, mutual funds, broker-dealers and asset-managers. Except for regulatory considerations, there are few barriers to entry in the insurance market. National banks, with their large existing customer bases, may increasingly compete with insurers as a result of court rulings allowing national banks to sell annuity products in some circumstances, and as a result of new legislation removing restrictions on bank affiliations with insurers. These

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developments may increase competition, by increasing the number, size and financial strength of competitors who may be able to offer, due to economies of scale, more competitive pricing than we can.

Our competitors may attempt to increase their market share by lowering rates. In that case, we could experience reductions in our underwriting margins or sales of insurance policies. Losing business to competitors offering similar products at lower prices or who have a competitive advantage may adversely affect the results of our operations. Additionally, economic conditions may reduce the total volume of business available to us and our competitors.

We price our insurance products based on estimated profit margins, and we may not be able to react in a timely manner to reprice our insurance products to respond to changes in the market. Some of our competitors may be larger and have far greater financial, technology and marketing resources than we do. If new or existing competitors decide to target our policyholder base by offering similar or enhanced product offerings or technologies at lower prices than we are able to offer, our premium revenue and our profitability could decline.

Our products are marketed exclusively through independent insurance agencies, most of which represent more than one company. We face competition within each agency and competition to retain qualified independent agents. Our competitors include companies that market their products through agents, as well as companies that sell insurance directly to their customers. In personal insurance, the use of comparative rating technologies has impacted our business and may continue to impact the entire industry. This has resulted in an increase in the total level of quote activity but a lower percentage of quotes have resulted in new business from customers. There is also the potential for similar technology to be used to compare rates for small business.

The successful implementation of our business model depends on our ability to adapt to evolving technologies and industry standards and introduce new products and services. There is no guarantee we will be able to introduce new or improved products, or that our products will achieve market acceptance. We may also not be successful in using new technologies effectively or adapting our proprietary technology to evolving customer requirements, causing our products or services to become obsolete.

Technology may be increasingly playing a role in our ability to be competitive. Innovations such as telematics and other usage-based methods of determining premiums may impact product design and pricing and may be an increasingly important factor in our ability to be competitive. Our competitive position may also be impacted by our ability to institute technology that collects and analyzes a wide variety of data points to make underwriting or other decisions.

Our business depends on the uninterrupted operations of our facilities, systems and business functions.

Our business depends on our employees' or vendors' ability to perform necessary business functions, such as processing new and renewal policies, providing customer service, making claims payments, facilitating collections and cancellations and performing actuarial functions necessary for pricing and product development. We increasingly rely on technology and systems to accomplish these business functions in an efficient and uninterrupted fashion. Our inability to access our facilities or a failure of technology, telecommunications or other systems could significantly impair our ability to perform such functions on a timely

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basis or affect the accuracy of transactions. If sustained or repeated, such a business interruption or system failure could result in a deterioration of our ability to write and process new and renewal business, serve our agents and policyholders or perform other necessary business functions as discussed above.

If a natural disaster or a terrorist act occurs, our company and employees could be directly adversely affected, depending on the nature of the event. We have an emergency preparedness plan that consists of the information and procedures required to enable rapid recovery from an occurrence, such as natural disaster or business disruption, which could potentially disable us for an extended period of time. This plan was successfully tested during ~~2008 and~~ 2016 ~~both~~ by the Midwest flooding that affected our corporate headquarters in Cedar Rapids, Iowa, and by ~~Hurricane Ike in 2008 and~~ Hurricane Harvey in 2017 that affected our Gulf Coast regional office in Galveston, Texas. It was also tested, to a lesser extent, by Super Storm Sandy in 2012 that affected our East Coast regional office in Pennington, New Jersey.

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Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs, as well as our access to and the cost of capital.

Although capital market conditions have improved, our results of operations, financial condition, cash flows and statutory capital position could be materially adversely affected by continued volatility, uncertainty and disruptions in the capital and credit markets.

We maintain a level of cash and securities which, combined with expected cash inflows from investments and operations, is believed adequate to meet anticipated short-term and long-term benefit and expense payment obligations. However, withdrawal and surrender levels may differ from anticipated levels for a variety of reasons, such as changes in economic conditions or changes in our claims paying ability and financial strength ratings. In the event our current internal sources of liquidity do not satisfy our needs, we have entered into a $50 million revolving unsecured credit facility that we can access, which also allows the Company to increase the aggregate amount of the commitments thereunder by up to $100 million. The availability of ~~additional~~ financing will depend on a variety of factors such as market conditions, the general availability of credit, the volume of trading activities, the overall availability of credit to the financial services industry, our credit ratings and credit capacity as well as customers' or lenders' perception of our long- or short-term financial prospects. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us.

Disruptions, uncertainty or volatility in the capital and credit markets may limit our access to capital required to operate our business. Such market conditions may limit our ability to replace, in a timely manner, maturing liabilities; satisfy statutory capital requirements; and access the capital necessary to grow our business. As such, we may be forced to delay raising capital, issue shorter term securities than we prefer, utilize available internal resources or bear an unattractive cost of capital, which could decrease our profitability and significantly reduce our financial flexibility and liquidity.

We may experience difficulty in integrating future acquisitions to our operations.

The successful integration of any newly acquired businesses into our operations will require, among other things:

(1) the timely receipt of any required regulatory approvals;

(2) the retention and assimilation of their key management, sales and other personnel;

(3) the coordination of their lines of insurance products and services;

(4) the adaptation of their technology, information systems and other processes; and

(5) the retention and transition of their customers.

Unexpected difficulties in integrating any acquisition could result in increased expenses and the diversion of management time and resources. If we do not successfully integrate any acquired business into our operations, we may not realize the anticipated benefits of the acquisition, which could have a material adverse impact on our financial condition and results of operations. Further, any potential acquisitions may require significant capital outlays and, if we issue equity or convertible debt securities to pay for an acquisition, the issuance may be dilutive to our existing shareholders.

The exclusions and limitations in our policies may not be enforceable.

Many of the policies we issue include exclusions and other conditions that define and limit coverage, which exclusions and conditions are designed to manage our exposure to certain types of risks and expanding theories of legal liability. In addition, many of our policies limit the period during which a policyholder may bring a claim under the policy, which period in many cases is shorter than the statutory period under which these claims can be brought by our policyholders. While these exclusions and limitations help us assess and control our loss exposure, it is possible that a court or regulatory authority could nullify or void an exclusion or limitation, or legislation could be enacted which modifies or bars the use of these exclusions and limitations. This could result in higher than anticipated losses by extending coverage beyond the intent of our underwriting. In some instances, these changes may not become apparent until sometime after we have issued the insurance policies that are affected by these changes. As a result, the full extent of liability under our insurance contracts may not be known for many years after a policy is issued.

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~~Our internal controls are not fail-safe.~~

As a result of the inherent limitations in all control systems, no system of controls can provide absolute assurance that all control objectives have been or will be met, and that every instance of error or fraud has been or will be detected. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake.

The determination of the amount of impairments taken on our investments requires estimates and assumptions which are subject to differing interpretations and could materially impact our results of operations or financial position.

The determination of the amount of impairments varies by investment type and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised

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as conditions change and new information becomes available. There can be no assurance that our management has accurately assessed the level of impairments taken in our financial statements. Furthermore, additional impairments may need to be taken in the future. Historical trends may not be indicative of future impairments.

Additionally, our management considers a wide range of factors about the instrument issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the instrument and in assessing the prospects for recovery. Inherent in management's evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential.

Risks Relating to Our Common Stock

~~The ability of our subsidiaries to pay dividends may affect our liquidity and ability to meet our obligations.~~

As a holding company, we have no significant independent operations of our own. Our principal sources of funds are dividends and other payments received from our subsidiaries. We rely on those dividends for our liquidity and to meet our obligations to pay dividends to shareholders and make share repurchases. Dividends from those subsidiaries depend on their statutory surplus, earnings and regulatory restrictions.

State insurance laws limit the ability of insurance subsidiaries to pay dividends and require our insurance subsidiaries to maintain specified minimum levels of statutory capital and surplus. The actual ability to pay dividends may further be constrained by business and regulatory considerations, such as the impact of dividends on surplus, by our competitive position and by the amount of premiums that we can write. Ordinary dividend payments, or dividends that do not require prior approval by the insurance subsidiaries' domiciliary state insurance regulator are generally limited to amounts determined by a formula which varies by jurisdiction. Extraordinary dividends, on the other hand, require prior regulatory approval by the insurance subsidiaries' domiciliary state insurance regulator before they can be made.

In addition, competitive pressures generally require insurance companies to maintain insurance financial strength ratings. These restrictions and other regulatory requirements affect the ability of our insurance subsidiaries to make dividend payments to us. At times we may not be able to pay dividends on our common stock, or we may be required to seek prior approval from the applicable regulatory authority before we can pay any such dividends. In addition, the payment of dividends by us is within the discretion of our Board of Directors and will depend on numerous factors, including our financial condition, our capital requirements and other factors that our Board of Directors considers relevant.

~~The price of our common stock may be volatile.~~

The trading price of our common stock may fluctuate substantially due to a variety of factors, some of which are beyond our control and may not be related to our operating performance. These fluctuations could be significant and could cause a loss in the amount invested in our shares of common stock. Factors that could cause fluctuations include, but are not limited to, the following:

~~variations in our actual or anticipated operating results or changes in the expectations of financial market analysts with respect to our results;~~

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~~investor perceptions of the insurance industry in general and the Company in particular;~~

~~market conditions in the insurance industry and any significant volatility in the market;~~

~~major catastrophic events; and~~

~~departure of key personnel.~~

Certain provisions of our organizational documents, as well as applicable insurance laws, could impede an attempt to replace or remove our management or members of our Board of Directors, prevent the sale of the Company or prevent or frustrate any attempt by shareholders to change the direction of the Company, each of which could diminish the value of our common stock.

Our articles of incorporation and bylaws, as well as applicable laws governing corporations and insurance companies, contain provisions that could impede an attempt to replace or remove our management or prevent the sale of the Company that, in either case, shareholders might consider being in their best interests. ~~For example:~~

~~our~~Our Board of Directors is divided into three classes. At any annual meeting of our shareholders, our shareholders have the right to appoint approximately one-third of the directors on our Board of Directors. Consequently, it will take at least two annual shareholder meetings to effect a change in control of our Board of ~~Directors;~~Directors.

~~our~~Our articles of incorporation limit the rights of shareholders to call special shareholder ~~meetings;~~meetings.

~~our~~Our articles of incorporation set the minimum number of directors constituting the entire Board of Directors at nine and the maximum at 15, and they require approval of holders of 60.0 percent of all outstanding shares to amend these provisions. Within the range, the Board of Directors may increase by one each year the number of directors serving on the Board of ~~Directors;~~Directors.

~~our~~Our articles of incorporation require the affirmative vote of 60.0 percent of all outstanding shares to approve any plan of merger, consolidation, or sale or exchange of all, or substantially all, of our ~~assets;~~assets.

~~our~~Our Board of Directors may fill vacancies on the Board of ~~Directors;~~Directors.

~~our~~Our Board of Directors has the authority, without further approval of our shareholders, to issue shares of preferred stock having such rights, preferences and privileges as the Board of Directors may ~~determine;~~determine.

Section 490.1110 of the Iowa Business Corporation Act imposes restrictions on mergers and other business combinations between us and any holder of 10.0 percent or more of our common ~~stock; and~~stock.

Section 490.624A of the Iowa Business Corporation Act authorizes the terms and conditions of stock rights or options issued by us to include restrictions or conditions that preclude or limit the exercise, transfer, or receipt of such rights or options by a person, or group of persons, owning or offering to acquire a specified number or percentage of the outstanding common shares or other securities of the corporation.

Further, the insurance laws of Iowa and the states in which our insurance company subsidiaries are domiciled prohibit any person from acquiring direct or indirect control of us or our insurance company subsidiaries, generally defined as owning or having the power to vote 10.0 percent or more of our outstanding voting stock, without the prior written approval of state regulators.

These provisions of our articles of incorporation and bylaws, and these state laws governing corporations and insurance companies, may discourage potential acquisition proposals. These provisions and state laws may also delay, deter or prevent a change of control of the Company, in particular through unsolicited transactions that some or all of our shareholders might consider to be desirable. As a result, efforts by our shareholders to change the direction or the Company's management may be unsuccessful, and the existence of such provisions may adversely affect market prices for our common stock if they are viewed as discouraging takeover attempts.

~~If the satisfaction of the conditions precedent to the consummation of the sale~~

The ability of our ~~life insurance subsidiary are not met, including the receipt of regulatory approvals, it~~subsidiaries to pay dividends may ~~diminish the value~~affect our liquidity and ability to meet our obligations.

As a holding company, we have no significant independent operations of our ~~common stock~~

~~On September 18, 2017, we signed a definitive agreement~~own. Our principal sources of funds are dividends and other payments received from our subsidiaries. We rely on those dividends for our liquidity and to ~~sell~~meet our ~~subsidiary, United Life Insurance Company,~~obligations to ~~Kuvare. This agreement contains several conditions precedent that must be satisfied prior~~pay dividends to ~~closing, including~~

shareholders and make share repurchases. Dividends from those subsidiaries depend on their statutory surplus, earnings and regulatory restrictions.

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~~planning for~~In addition, competitive pressures generally require insurance companies to maintain insurance financial strength ratings. These restrictions and other regulatory requirements affect the ~~separation and migration~~ability of ~~information technology systems and business operations. Further, the Iowa Insurance Division must approve Kuvare's acquisition of United Life Insurance Company. Failure~~our insurance subsidiaries to ~~complete the transaction could adversely affect market prices for~~make dividend payments to us. At times we may not be able to pay dividends on our common ~~stock.~~stock, or we may be required to seek prior approval from the applicable regulatory authority before we can pay any such dividends. In addition, the payment of dividends by us is within the discretion of our Board of Directors and will depend on numerous factors, including our financial condition, our capital requirements and other factors that our Board of Directors considers relevant.

General Risk Factors

Our internal controls are not fail-safe.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our headquarters are located in Cedar Rapids, Iowa, where we own approximately ~~182,000~~269,000 square feet of office and building ~~space that is ready to occupy. We are in the process of constructing improvements to our Cedar Rapids facilities.~~space. In addition, we own and lease office and building space, including underwriting and claims offices, throughout the U.S. We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business.

ITEM 3. LEGAL PROCEEDINGS

In the normal course of its business, the Company is a party to a variety of legal proceedings. While the final outcome of these legal proceedings cannot be predicted with certainty, management believes all of the proceedings pending as of December 31, ~~2017~~2020 to be ordinary and routine and does not expect these legal proceedings to have a material adverse effect on the Company's financial position or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Shareholders

United Fire Group, Inc.'s common stock is traded on the NASDAQ stock market under the symbol "UFCS." On February ~~26, 2018,~~24, 2021, there ~~were 814~~were 710 holders of record of United Fire Group, Inc. common stock. The number of record holders does not reflect shareholders who beneficially own common stock in nominee or street name, but does include participants in our employee stock purchase plan.

Dividends

Our practice has been to pay quarterly cash dividends, which we have paid every quarter since March 1968.

As a holding company with no independent operations of its own, United Fire Group, Inc. relies on dividends received from its insurance company subsidiaries in order to pay dividends to its common shareholders. Dividends payable by our insurance subsidiaries are governed by the laws in the states in which they are domiciled. In all cases, these state laws permit the payment of dividends only from earned surplus arising from business operations. For example, under Iowa law, the maximum dividend or distribution that may be paid within a 12-month period without prior approval of the Iowa Insurance Commissioner is generally restricted to the greater of 10 percent of statutory surplus as of the preceding December 31, or net income of the preceding calendar year on a statutory basis, not greater than earned statutory surplus. Other states in which our insurance company subsidiaries are domiciled may impose similar restrictions on dividends and distributions. Based on these restrictions, atat December 31, ~~2017,~~2020, our insurance company subsidiary, United Fire & Casualty, is able to make a maximum of ~~$35.7~~$66.8 million in dividend payments without prior regulatory approval.

~~The table in the following section shows the quarterly cash dividends declared in 2017 and 2016.~~ Payments of any future dividends and the amounts of such dividends ~~however,~~ will depend upon factors such as net income, financial condition, capital requirements, and general business conditions. We will only pay dividends if declared by our Board of Directors out of legally available funds and there can be no assurance that we will continue to pay such dividends or the amount of such dividends.

Additional information about these restrictions is incorporated by reference from Note 6 "Statutory Reporting, Capital Requirements and Dividends and Retained Earnings Restrictions" contained in Part II, Item 8, "Financial Statements and Supplementary Data."

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~~Market Information~~

The following table sets forth the high and low trading price as reported on the NASDAQ stock market for our common stock for the calendar periods indicated, as well as the amount of cash dividends declared on our common stock.

Share Price
Cash Dividends
Declared per share
High Low
2017
Quarter Ended:
March 31 $ 49.93
$ 40.19
$ 0.25
June 30 45.80
41.38
0.28
September 30 46.83
38.98
0.28
December 31 49.74
44.10
0.28
Year-end closing share price: $45.58

2016
Quarter Ended:
March 31 $ 44.43
$ 35.16
$ 0.22
June 30 45.75
39.12
0.25
September 30 44.00
40.37
0.25
December 31 50.75
37.54
0.25
Year-end closing share price: $49.17

Issuer Purchases of Equity Securities

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

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The following table provides information with respect to purchases of shares of common stock made by or on our behalf or by any "affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Exchange Act, during the year ended December 31, ~~2017:~~2020:

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Period
Total
Number of
Shares Purchased ⁽¹⁾

Average Price
Paid per Share

Total Number of Shares
Purchased as a Part of
Publicly Announced
Plans or Programs

Maximum Number of
Shares that may yet be
Purchased Under the
Plans or Programs
1/1/17 - 1/31/17 —
$ —
—
2,938,471
2/1/17 - 2/28/17 12,000
41.85
12,000
2,926,471
3/1/17 - 3/31/17 122,981
42.66
122,981
2,803,490
4/1/17 - 4/30/17 140,821
42.50
140,821
2,662,669
5/1/17 - 5/31/17 200,624
42.78
200,624
2,462,045
6/1/17 - 6/30/17 20,182
42.94
20,182
2,441,863
7/1/17 - 7/31/17 4,904
43.00
4,904
2,436,959
8/1/17 - 8/31/17 127,387
42.41
127,387
2,309,572
9/1/17 - 9/30/17 73,000
40.92
73,000
2,236,572
10/1/17 - 10/31/17 —
—
—
2,236,572
11/1/17 - 11/30/17 —
—
—
2,236,572
12/1/17 - 12/31/17 —
—
—
2,236,572
Total 701,899
701,899


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as a Part of Publicly Announced Plans or Programs	Maximum Number of Shares that may yet be Purchased Under the Plans or Programs
1/1/20 - 1/31/20	—	$	—	—	1,857,444
2/1/20 - 2/28/20	30,248	40.93		30,248	1,827,196
3/1/20 - 3/31/20	40,219	37.38		40,219	1,786,977
4/1/20 - 4/30/20	—	—		—	1,786,977
5/1/20 - 5/31/20	—	—		—	1,786,977
6/1/20 - 6/30/20	—	—		—	1,786,977
7/1/20 - 7/31/20	—	—		—	1,786,977
8/1/20 - 8/31/20	—	—		—	1,786,977
9/1/20 - 9/30/20	—	—		—	1,786,977
10/1/20 - 10/31/20	—	—		—	1,786,977
11/1/20 - 11/30/20	—	—		—	1,786,977
12/1/20 - 12/31/20	—	—		—	1,786,977
Total	70,467			70,467

(1) Our share repurchase program was originally announced in August 2007. In August 2016, our Board of Directors authorized the repurchase of up to an additional 1,500,000 shares of common stock through the end of August 2018. This is in addition to the 1,528,886 shares of common stock remaining under its previous authorizations. In August 2018, our Board of Directors extended our share repurchase program through the end of August 2020. In August 2020, our Board of Directors extended our share repurchase program through the end of August 2022. As of December 31, ~~2017~~2020, we remained authorized to repurchase ~~2,236,572~~1,786,977 shares of common stock.

United Fire Group, Inc. Common Stock Performance Graph

The following graph compares the performance of an investment in United Fire Group Inc.'s common stock from December 31, ~~2012~~2015 through December 31, ~~2017,~~2020, with the Standard & Poor's 500 Index ("S&P 500 Index"), and the Standard & Poor's 600 Property and Casualty Index ("S&P 600 P&C Index"). The graph assumes $100 was invested on December 31, ~~2012~~2015 in our common stock and each of the below listed indices and that all dividends were reinvested on the date of payment ~~without~~without payment of any commissions. Dollar amounts in the graph are rounded to the nearest whole dollar. The performance shown in the graph represents past performance and should not be considered an indication of future performance.

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The following table shows the data used in the total return performance graph above.


	Period Ended													Period Ended
Index	12/31/12		12/31/13		12/31/14		12/31/15		12/31/16		12/31/17		Index	12/31/15		12/31/16		12/31/17		12/31/18		12/31/19		12/31/20
United Fire Group, Inc.	$	100.00	$	134.52	$	143.38	$	189.66	$	248.99	$	236.64	United Fire Group, Inc.	$	100.00	$	131.28	$	124.77	$	163.51	$	132.64	$	79.26
S&P 500 Index	100.00		132.39		150.51		152.59		170.84		208.14		S&P 500 Index	100.00		111.96		136.40		130.42		171.49		203.04
S&P 600 P&C Index	100.00		127.45		134.01		153.98		192.74		210.30		S&P 600 P&C Index	100.00		125.18		136.58		146.19		160.79		162.22

The foregoing performance graph is being ~~furnised~~furnished as part of this Annual Report on Form 10-K solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish our shareholders with such information, and therefore, shall not be deemed to be filed or incorporated by reference into any filings by the Company under the Securities Act or Exchange Act.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data derived from the Consolidated Financial Statements of United Fire Group, Inc. and its subsidiaries and affiliates. The data should be read in conjunction with Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Part II, Item 8, "Financial Statements and Supplementary Data."

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(In Thousands, Except Per Share Data)
As of and for the years Ended December 31	2020			2019			2018			2017			2016
Balance Sheet Data:
Total cash and investments - continuing operations	$	2,237,165		$	2,275,821		$	2,138,577		$	1,984,495		$	1,860,978
Total assets
Continuing operations	3,069,678			3,013,472			2,816,698			2,597,297			2,449,140
Assets held for sale	—			—			—			1,586,134			1,605,618
Total assets	3,069,678			3,013,472			2,816,698			4,183,431			4,054,758
Losses and loss settlement expenses	1,578,131			1,421,754			1,312,483			1,224,183			1,123,896
Unearned premiums - continuing operations	464,845			505,162			492,918			465,391			443,802
Total liabilities
Continuing operations	2,244,529			2,103,000			1,928,323			1,862,923			1,722,651
Liabilities held for sale	—			—			—			1,347,135			1,390,223
Total liabilities	2,244,529			2,103,000			1,928,323			3,210,058			3,112,874
Net unrealized investment gains (loss), after tax	83,070			47,279			(9,323)			214,865			133,892
Repurchase of United Fire Group, Inc. common stock	(2,741)			(11,700)			(5,404)			(29,784)			(3,746)
Total stockholders' equity	825,149			910,472			888,375			973,373			941,884
Book value per share	32.93			36.40			35.40			39.06			37.04
Income Statement Data from Continuing Operations:
Revenues
Net premiums earned	$	1,055,082		$	1,086,972		$	1,037,451		$	997,492		$	936,131
Investment income, net of investment expenses	39,670			60,414			52,894			51,190			55,284
Net realized investment gains (losses)	(32,395)			53,779			(20,179)			4,055			4,947
Other income	6,270			—			—			—			—
Revenues	1,068,627			1,201,165			1,070,166			1,052,737			996,362
Losses and loss settlement expenses	869,467			830,172			731,611			725,713			652,433
Amortization of deferred policy acquisition costs	210,252			216,699			206,232			207,746			202,892
Other underwriting expenses	143,332			137,415			141,473			103,628			83,540
Goodwill Impairment	15,091			—			—			—			—
Net income (loss)	(112,706)			14,820			2,255			44,870			49,918
Combined ratio(1)	115.9		%	109.0		%	104.0		%	104.0		%	100.3		%
Income Statement Data from Discontinued Operations:
Net premiums earned	$	—		$	—		$	13,003		$	61,368		$	87,270
Investment income	—			—			12,663			49,720			51,538
Revenues	—			—			24,755			115,713			140,585
Losses and loss settlement expenses	—			—			10,823			40,451			31,365
Increase in liability for future policy benefits	—			—			5,023			27,632			59,969
Other underwriting expenses	—			—			3,864			13,281			19,881
Interest on policyholders' accounts	—			—			4,499			18,525			20,079
Net income (loss)	—			—			(1,912)			6,153			786

Earnings Per Share Data:
Continuing operations:
Basic earnings (loss) per common share	$	(4.50)		$	0.59		$	0.09		$	1.79		$	1.94
Diluted earnings (loss) per common share	(4.50)			0.58			0.09			1.75			1.90
Discontinued operations:
Basic earnings (loss) per common share	—			—			(0.08)			0.24			0.03
Diluted earnings (loss) per common share	—			—			(0.07)			0.24			0.03

Other Supplemental Data:
Cash dividends declared per common share(2)	$	1.14		$	1.30		$	4.21		$	1.09		$	0.97

(1)The combined ratio is a commonly used financial measure of property and casualty underwriting performance. A combined ratio below 100.0 percent generally indicates a profitable book of business.

(2)On August 20, 2018, a special dividend of $3.00 per share was paid to shareholders.

(In Thousands, Except Per Share Data)
As of and for the years Ended December 31 2017 2016 2015 2014 2013
Balance Sheet Data:
Total cash and investments - continuing operations $ 1,984,495
$ 1,860,978
$ 1,737,161
$ 1,621,356
$ 1,521,534
Total assets
Continuing operations 2,597,297
2,449,140
2,280,674
2,127,623
1,995,069
Assets held for sale 1,586,134
1,605,618
1,609,702
1,729,066
1,725,603
Total assets 4,183,431
4,054,758
3,890,376
3,856,689
3,720,672
Losses and loss settlement expenses 1,224,183
1,123,896
1,003,895
969,437
960,651
Unearned premiums - continuing operations 465,391
443,802
414,971
378,635
340,387
Total liabilities
Continuing operations 1,862,923
1,722,651
1,606,869
1,540,416
1,435,222
Liabilities held for sale 1,347,135
1,390,223
1,404,610
1,498,858
1,502,617
Total liabilities 3,210,058
3,112,874
3,011,479
3,039,274
2,937,839
Net unrealized investment gains, after tax 214,865
133,892
128,369
149,623
116,601
Repurchase of United Fire Group, Inc. common stock (29,784 ) (3,746 ) (2,423 ) (12,942 ) (1,644 )
Total stockholders' equity 973,373
941,884
878,897
817,415
782,833
Book value per share 39.06
37.04
34.94
32.67
30.87
Income Statement Data from Continuing Operations:
Revenues
Net premiums earned $ 997,492
$ 936,131
$ 851,695
$ 766,939
$ 694,192
Investment income, net of investment expenses 51,190
55,284
46,559
44,236
46,332
Net realized investment gains 4,055
4,947
1,124
4,177
6,261
Other income (loss) —
—
(107 ) 911
88
Revenues 1,052,737
996,362
899,271
816,263
746,873
Losses and loss settlement expenses 725,713
652,433
520,087
509,811
437,354
Amortization of deferred policy acquisition costs 207,746
202,892
180,183
161,310
147,175
Other underwriting expenses 103,628
83,540
83,631
79,117
73,626
Net income 44,870
49,918
85,320
52,376
67,456
Combined ratio⁽¹⁾
104.0 % 100.3 % 92.0 % 97.8 % 94.8 %
Income Statement Data from Discontinued Operations:
Net premiums earned $ 61,368
$ 87,270
$ 79,195
$ 61,391
$ 60,654
Investment income 49,720
51,538
54,222
60,373
66,467
Revenues 115,713
140,585
135,647
125,631
130,169
Losses and loss settlement expenses 40,451
31,365
29,001
26,432
21,461
Increase in liability for future policy benefits 27,632
59,969
50,945
36,623
37,625
Other underwriting expenses 13,281
19,881
19,306
15,754
16,235
Interest on policyholders' accounts 18,525
20,079
23,680
30,245
35,163
Net income 6,153
786
3,806
6,761
8,684

Earnings Per Share Data:
Continuing operations:
Basic earnings per common share $ 1.79
$ 1.94
$ 3.41
$ 2.07
$ 2.67
Diluted earnings per common share 1.75
1.90
3.38
2.05
2.64
Discontinued operations:
Basic earnings per common share 0.24
0.03
0.15
0.27
0.34
Diluted earnings per common share 0.24
0.03
0.15
0.27
0.34

Other Supplemental Data:
Cash dividends declared per common share $ 1.09
$ 0.97
$ 0.86
$ 0.78
$ 0.69


~~(1)~~	~~The combined ratio is a commonly used financial measure of property and casualty underwriting performance. A combined ratio below 100.0 percent generally indicates a profitable book of business.~~

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ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and Results of Operation should be read in conjunction with Part II, Item 6, "Selected Financial Data" and Part II, Item 8, "Financial Statements and Supplementary Data." Amounts (except per share amounts) are presented in thousands, unless otherwise noted.

FORWARD-LOOKING STATEMENTS

It is important to note that our actual results could differ materially from those projected in any forward-looking statements in this Form 10-K. Please refer to "Forward-Looking Information" and Part I, Item 1A, "Risk Factors" of this report for information concerning factors that could cause actual results to differ materially from the forward-looking statements contained in this Form 10-K.

BUSINESS OVERVIEW

Originally founded in 1946 as United Fire & Casualty Company, United Fire Group, Inc. ~~("UFG", "United Fire", the "Registrant", the "Company", "we", "us", "our")~~ and its consolidated insurance company subsidiaries provide insurance protection for individuals and businesses through several regional companies. Our property and casualty insurance company subsidiaries are licensed in 4649 states plus the District of Columbia and are represented by approximately ~~1,200~~1,000 independent agencies. ~~Our life insurance subsidiary is licensed in~~ 37 ~~states and is represented by approximately~~ ~~1,600~~ ~~independent agencies.~~

Discontinued Operations

On September 18, 2017, the Company signed a definitive agreement to sell its subsidiary, United Life, ~~Insurance Company,~~ to ~~Kuvare.~~Kuvare and on March 30, 2018, the sale closed. As a result, our life insurance business, ~~has been~~previously a separate segment, was considered held for sale and ~~accounted for~~reported as discontinued operations in the Consolidated Financial ~~Statements of Cash Flows.~~Statements. All periods presented have been revised to show results from continuing and discontinued operations, unless otherwise noted. ~~The sale is expected to close in the first half of 2018, subject to customary conditions, including regulatory approval.~~ For more information, refer to Part II, Item 8, Note 17 "Discontinued Operations."

Reportable Segments

Prior to the announcement of the sale of our life insurance business, we have historically reported our operations in two business segments, each with a wide range of products:

•property and casualty insurance, which includes commercial lines insurance, personal lines insurance and assumed reinsurance; and

•life insurance, which includes deferred and immediate annuities, universal life products and traditional life (primarily single premium whole life) insurance products.

We ~~manage~~managed these businesses separately, as they generally do not share the same customer base, and each has different products, pricing, and expense structures.

Subsequent to the announcement of the sale of our life insurance business on September 19, 2017, we operate and report one business segment, which contains our continuing operations. Our life insurance business iswas considered held for sale and reported as discontinued operations throughout this Form 10-K, unless otherwise noted. For more information, refer to Part II, Item 8, Note ~~10.~~10 "Segment Information". and Note 17 "Discontinued Operations."

Pooling Arrangement

All of our property and casualty insurance subsidiaries are members of an intercompany reinsurance pooling arrangement. ~~On July 1, 2015, UFG Specialty Insurance Company entered the pooling arrangement.~~ The Company's

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pooling arrangement permits the participating companies to rely on the capacity of the entire pool's capital and surplus, rather than being limited to policy exposures of a size commensurate with each participant’s own surplus level.

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Geographic Concentration

Continuing Operations - Property and Casualty Insurance Business

For ~~2017, approximately 49.0~~2020, approximately 50.4 percent of our property and casualty ~~statutory direct~~ premiums ~~written~~ were written in Texas, California, Iowa, Missouri and ~~Colorado.~~New Jersey.

In 2020, 2019 and 2018 the direct statutory premiums written by our property and casualty insurance operations were distributed as follows:


	Years Ended December 31,						% of Total
(In Thousands)	2020		2019		2018		2020		2019		2018
Texas	$	192,841	$	205,420	$	193,953	18.1	%	18.0	%	17.4	%
California	127,168		129,850		124,473		11.9		11.4		11.2
Iowa	91,176		96,052		98,128		8.6		8.4		8.8
Missouri	72,527		73,735		70,646		6.8		6.4		6.4
New Jersey	53,406		51,539		52,037		5.0		4.5		4.7
Colorado	46,394		54,907		56,152		4.4		4.8		5.1
Louisiana	45,168		46,827		44,007		4.2		4.1		4.0
Illinois	39,562		40,443		40,431		3.7		3.5		3.6
Minnesota	39,501		47,890		49,491		3.7		4.2		4.4
All Other States	357,575		396,709		382,385		33.6		34.7		34.4
Direct Statutory Premiums Written	$	1,065,318	$	1,143,372	$	1,111,703	100.0	%	100.0	%	100.0	%

Discontinued Operations - Life Insurance Business

Our life insurance subsidiary marketed its products primarily in the Midwest, East Coast and West. In 2020, 2019 and 2018 the direct statutory premiums written by our life insurance operations were distributed as follows:


	Years Ended December 31,						% of Total
(In Thousands)	2020		2019		2018		2020		2019		2018
Iowa	$	—	$	—	$	9,951	—	%	—	%	31.3	%
Wisconsin	—		—		3,578		—		—		11.3
Illinois	—		—		3,227		—		—		10.2
Nebraska	—		—		2,572		—		—		8.1
Minnesota	—		—		2,003		—		—		6.3
All Other States	—		—		10,432		—		—		32.8
Direct Statutory Premiums Written	$	—	$	—	$	31,763	—	%	—	%	100.0	%

Sources of Revenue and Expense

We evaluate profit or loss based upon operating and investment results. Profit or loss described in the following sections of this Management's Discussion and Analysis is reported on a pre-tax basis. Our primary sources of revenue are premiums and investment income. Major categories of expenses include losses and loss settlement expenses, ~~future policy benefits,~~ underwriting and other operating ~~expenses and interest on policyholders' accounts.~~expenses.

Profit Factors

Our profitability is influenced by many factors, including price, competition, economic conditions, investment returns, interest rates, catastrophic events and other natural disasters, man-made disasters, state regulations, court decisions, and changes in the law. To manage these risks and uncertainties, we seek to achieve consistent profitability through strong agency relationships, exceptional customer service, fair and prompt claims handling,

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disciplined underwriting, superior loss control services, prudent management of our investments, appropriate matching of assets and liabilities, effective use of ceded reinsurance and effective and efficient use of technology.

COVID-19

The spread of the COVID-19 virus, beginning in mid-March 2020, caused significant financial market volatility, economic uncertainty and interruptions to normal business activities. The COVID-19 pandemic has had a profound impact on day-to-day life, financial markets and the economy in the United States. The Company, in response to the challenges presented by the COVID-19 pandemic, activated its pre-existing business continuity plans to respond to a pandemic in mid-March 2020. With the exception of our essential services employees, UFG has dispatched its staff to work remotely for the safety, health and well-being of our employees. We are fully operational, but have limited some non-essential travel. Our essential services employees are following recommended health and safety policies. We are and will continue to monitor the state and federal responses to the pandemic and, when appropriate, will adjust our operations in response. We have a return to workplace plan for our employees. The plan will be implemented at the appropriate time and in a way that is designed to ensure the health and safety of our employees.

The implementation of our business continuity plans did not have a material effect on our internal control environment. We believe our operational processes, internal controls over financial reporting and disclosures, and financial reporting systems are operating effectively in the present environment. Our business teams are working remotely and continue to support our customers, agents and claimants as they did when we were in the office.

Nearly all of the policies we have issued contain contract language that specifically excludes business interruption coverage for losses due to viruses such as the COVID-19 pandemic, but we continue to carefully scrutinize each claim and will afford coverage when appropriate. At this time, we expect the effect of the COVID-19 pandemic on claims currently under our coverages to be manageable, based on the information presently available. However, the effects of the COVID-19 pandemic continue to evolve and we cannot predict the extent to which our business, results of operations, financial condition or liquidity will ultimately be impacted. Additionally, if established written contract policy exclusions of business interruption coverage for losses attributable to the COVID-19 pandemic are voided or changed through legislation, regulations or interpretations by the courts, such changes have the potential to materially increase claims, losses and legal expenses which could impact our business, financial condition, results of operations and liquidity.

We anticipate that the larger impact on our financial condition and results of operations will likely result from developments in the economy as a whole and the effect on financial markets and the investments we hold in our investment portfolio, premiums and demand for our products, and our ability to collect premiums or any requirement to return premiums to policyholders. We believe our current liquidity position is sufficient to maintain our current operations and we have the ability to draw on our credit facility if needed. See "Credit Facilities" in Part II, Item 8, Note 14 "Debt" for more information. We implemented state-mandated and optional payment leniency programs for our policyholders, all of which have expired as of December 31, 2020. As of December 31, 2020, we did not see a significant impact to cash flows or allowance for doubtful accounts as a result of these programs. During the fourth quarter of 2020, management did not repurchase any shares of stock, and the share repurchase program has been suspended since mid-March 2020. Also, the Company maintained the payment of quarterly cash dividends during 2020, with fourth quarter of 2020 marking the 211th consecutive quarter of paying dividends since March 1968.

Stockholders' equity decreased to $825.1 million at December 31, 2020, from $910.5 million at December 31, 2019. This decrease was primarily attributed to a net loss of $112.7 million, shareholder dividends of $28.5 million and share repurchases of $2.7 million, partially offset by an increase in net unrealized investment gains on fixed maturity securities of $35.8 million, net of tax, during 2020 and a decrease in our pension and post-retirement liabilities of $17.9 million, net of tax.

We evaluate goodwill and other intangible assets for impairment at least on an annual basis or whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount of goodwill and other intangible assets may exceed their implied fair value. Goodwill is evaluated at the reporting unit level, for which we have one reporting unit level. Any impairment is charged to operations in the period that the impairment is

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identified. During the third quarter of 2020, we completed our annual quantitative analysis of goodwill. As a result of the quantitative analysis, we impaired the remaining balance of our goodwill of $15.1 million as of September 30, 2020 based on the following factors: (i) disruptions in the equity markets, specifically for property and casualty insurance companies, as a result of the COVID-19 pandemic and due to recent weather related catastrophes; (ii) recent elevated commercial auto loss ratios; and (iii) the fair value of our stock trading significantly below book value. The Company used a weighting of the income and market approaches to determine the fair value of the reporting unit.

As of December 31, 2020, we intend to keep all assets currently leased and honor the terms of the contracts. Also, we have four lease contracts where we are the lessor which we evaluated for impairment. As of December 31, 2020, all payments on these contracts had been received and we fully expect to receive all future payments on time. In the event that we receive any lease-related relief provided to mitigate the economic effects of the COVID-19 pandemic, we elect not to evaluate whether or not the relief represents a lease modification.

The decline in certain sectors of the equity markets in 2020 due to the COVID-19 pandemic did have a material impact on the fair value of our investments in equity securities and limited liability partnerships. The Company's investment philosophy, objectives, approach and program have not changed as a result of the COVID-19 pandemic. In 2020 the decrease in the fair value of equity securities from December 31, 2019 was $6.9 million.

The Company has a highly rated fixed maturity portfolio, with low credit risk. The Company recognized an unrealized gain of $35.8 million, net of tax, in 2020 on its available-for-sale fixed maturity portfolio.

MEASUREMENT OF RESULTS

Our consolidated financial statements are prepared on the basis of GAAP. We also prepare financial statements for each of our insurance company subsidiaries based on statutory accounting principles and file them with insurance regulatory authorities in the states where they do business.

Management evaluates our operations by monitoring key measures of growth and profitability. We believe that disclosure of certain non-GAAP financial measures enhances investor understanding of our financial performance. The following provides further explanation of the key measures management uses to evaluate our results:

Catastrophe losses is a commonly used non-GAAP financial measure which utilizes the designations of the Insurance Services Office ("ISO") and are reported with losses and loss settlement expense amounts net of reinsurance recoverables, unless specified otherwise. According to the ISO, a catastrophe loss is defined as a single unpredictable incident or series of closely related incidents that result in $25.0 million or more in U.S. industry-wide direct insured losses to property and that affect a significant number of insureds and insurers ("ISO catastrophe"). 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. Management, at times, may determine for comparison purposes of our financial results that it is more meaningful to exclude extraordinary catastrophe losses and resulting litigation. The frequency and severity of catastrophic losses we experience in any year affect our results of operations and financial position. In analyzing the underwriting performance of our property and casualty insurance business, we evaluate performance both including and excluding catastrophe losses. Portions of our catastrophe losses may be recoverable under our catastrophe reinsurance agreements. We include a discussion of the impact of catastrophes because we believe it is meaningful for investors to understand the variability in our periodic earnings.


	Years Ended December 31,							Years Ended December 31,
(In Thousands)	2017		2016		2015		(In Thousands)	2020		2019		2018
ISO catastrophes	$	66,421	$	57,932	$	25,380	ISO catastrophes	$	141,425	$	56,357	$	46,757
Non-ISO catastrophes ⁽¹⁾	7,618		3,299		6,933		Non-ISO catastrophes (1)	579		8,011		(64)
Total catastrophes	$	74,039	$	61,231	$	32,313	Total catastrophes	$	142,004	$	64,368	$	46,693

(1) Includes international assumed losses.

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RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, ~~2017, 2016~~2020, 2019 AND ~~2015~~2018

FINANCIAL HIGHLIGHTS


	Years Ended December 31,									% Change					Years Ended December 31,									% Change
										2017		2016												2020		2019
(In Thousands)	2017			2016			2015			vs. 2016		vs. 2015		(In Thousands)	2020			2019			2018			vs. 2019		vs. 2018
Revenues														Revenues
Net premiums earned	$	997,492		$	936,131		$	851,695		6.6	%	9.9	%	Net premiums earned	$	1,055,082		$	1,086,972		$	1,037,451		(2.9)	%	4.8	%
Investment income, net of investment expenses	51,190			55,284			46,559			(7.4	)	18.7		Investment income, net of investment expenses	39,670			60,414			52,894			(34.3)		14.2
Net realized investment gains	4,055			4,947			1,124			(18.0	)	340.1
Other income (loss)	—			—			(107		)	—		(100.0	)

Net realized investment gains (losses)														Net realized investment gains (losses)	(32,395)			53,779			(20,179)			NM		NM
Other income														Other income	6,270			—			—			NM		—
Total revenues	$	1,052,737		$	996,362		$	899,271		5.7	%	10.8	%	Total revenues	$	1,068,627		$	1,201,165		$	1,070,166		(11.0)	%	12.2	%

Benefits, losses and expenses														Benefits, losses and expenses
Losses and loss settlement expenses	$	725,713		$	652,433		$	520,087		11.2	%	25.4	%	Losses and loss settlement expenses	$	869,467		$	830,172		$	731,611		4.7	%	13.5	%
Amortization of deferred policy acquisition costs	207,746			202,892			180,183			2.4		12.6		Amortization of deferred policy acquisition costs	210,252			216,699			206,232			(3.0)		5.1
Other underwriting expenses	103,628			83,540			83,631			24.0		(0.1	)	Other underwriting expenses	143,332			137,415			141,473			4.3		(2.9)
Goodwill impairment														Goodwill impairment	15,091			—			—			NM		—
Total benefits, losses and expenses	$	1,037,087		$	938,865		$	783,901		10.5	%	19.8	%	Total benefits, losses and expenses	$	1,238,142		$	1,184,286		$	1,079,316		4.5	%	9.7	%

Income from continuing operations before income taxes	$	15,650		$	57,497		$	115,370		(72.8	)%	(50.2	)%
Income (loss) from continuing operations before income taxes														Income (loss) from continuing operations before income taxes	$	(169,515)		$	16,879		$	(9,150)		NM		NM
Federal income tax expense (benefit)	(29,220		)	8,379			30,050			NM		(72.1	)%	Federal income tax expense (benefit)	(56,809)			2,059			(11,405)			NM		(118.1)	%
Net income from continuing operations	$	44,870		$	49,118		$	85,320		(8.6	)%	(42.4	)%
Income from discontinued operations, net of tax	$	6,153		$	786		3,806			NM		(79.3	)%
Net income	$	51,023		$	49,904		$	89,126		2.2	%	(44.0	)%
Net income (loss) from continuing operations														Net income (loss) from continuing operations	$	(112,706)		$	14,820		$	2,255		NM		NM
Income (loss) from discontinued operations, net of tax														Income (loss) from discontinued operations, net of tax	—			—			(1,912)			NM		(100.0)	%
Gain on sale of discontinued operations, net of tax														Gain on sale of discontinued operations, net of tax	—			—			27,307			NM		(100.0)	%
Net income (loss)														Net income (loss)	$	(112,706)		$	14,820		$	27,650		NM		(46.4)	%

GAAP Ratios:														GAAP Ratios:
Net loss ratio (without catastrophes)	65.4		%	63.2		%	57.2		%	3.5	%	10.5	%	Net loss ratio (without catastrophes)	68.9		%	70.5		%	66.0		%	(2.3)	%	6.8	%
Catastrophes - effect on net loss ratio	7.4		%	6.5		%	3.8		%	13.8	%	71.1	%	Catastrophes - effect on net loss ratio	13.5		%	5.9		%	4.5		%	128.8	%	31.1	%
Net loss ratio⁽¹⁾	72.8		%	69.7		%	61.0		%	4.4	%	14.3	%	Net loss ratio(1)	82.4		%	76.4		%	70.5		%	7.9	%	8.4	%
Expense ratio⁽²⁾	31.2		%	30.6		%	31.0		%	2.0	%	(1.3	)%	Expense ratio(2)	33.5		%	32.6		%	33.5		%	2.8	%	(2.7)	%
Combined ratio⁽³⁾	104.0		%	100.3		%	92.0		%	3.7	%	9.0	%	Combined ratio(3)	115.9		%	109.0		%	104.0		%	6.3	%	4.8	%

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In 2017, the change in the loss ratio was primarily due to claims from a large contractor’s bankruptcy which occurred during the fourth quarter. In 2016, the change in the loss ratio was primarily due to salvage and subrogation received in the second quarter of 2016.

During 2017 the claims from the large contractor’s bankruptcy will, in aggregate, exceed our $1.5 million reinsurance retention level. During 2016 there was one claim that exceeded our $1.5 million reinsurance retention level. During 2015, there were two claims that exceeded our $1.5 million surety excess of loss reinsurance retention level.

Personal Lines

Our personal lines consist primarily of fire and allied lines (including homeowners) and automobile lines. ~~In 2017 our~~The net loss ratio deteriorated ~~16.7~~58.0 percentage points asin 2020 compared to ~~2016.~~2019. The ~~2017~~ deterioration is attributable to increased frequency and severity for personal automobile as well as an increase in the volume of claims from homeowners. In 2016, the net loss ratio deteriorated 5.0 percentage points as compared to 2015, primarily attributable to ~~an increase in claim frequency in~~ our personal ~~automobile~~fire and allied line of business due to an increase in catastrophe losses.

~~For~~ Also, net premiums earned decreased due to the renewal rights agreement for our personal lines business we ~~use~~entered into in May 2020, providing our independent insurance agents with the ~~CATography™ Underwriter tool, which gives us~~opportunity to transfer their personal lines policies to Nationwide Mutual Insurance Company beginning in the ability to determine whether the premium we charge for an exposure is adequate in areas where hurricanes and earthquakes occur. We have also implemented predictive analytics and data prefill for our personal automobile line. Data prefill is a data accessing methodology that allows for a more complete profilethird quarter of ~~our customers at the agent's point of sale during the quotation process.~~2020.

Assumed Reinsurance

Our assumed reinsurance is the business we choose to write by participating in programs insuring insurance companies. The net loss ratio deteriorated 32.0 percentage points in ~~2017 primarily due~~2020 compared to ~~expected claims from three hurricanes (Harvey, Irma, and Maria) as well as expected claims from California wildfires.~~2019. The ~~net loss ratio improved in 2016 due~~deterioration is attributable to ~~an increase in favorable reserve development on prior year claims and from a decrease in catastrophe losses assumed.~~

~~In 2017 and 2016, we renewed our participation in all of our assumed programs. In 2015, we renewed our participation in all of our assumed programs and added one new program to our portfolio.~~strengthening reserves for incurred but not reported claim events.

Other Underwriting Expenses

Our underwriting expense ratio, which is a percentage of other underwriting expenses over net premiums earned, was ~~31.2~~33.5 percent,, ~~30.6~~ 32.6 percent and ~~31.0~~33.5 percent for ~~2017, 2016,~~2020, 2019, and ~~2015,~~2018, respectively. The ~~underwriting~~increase in the expense ratio ~~increased~~ in ~~2017~~2020 as compared to 2019 was primarily due to ~~a deterioration~~our continued investment in technology, including our multi-year Oasis project, an upgrade to our technology platform designed to enhance core underwriting decisions, selection of risks and productivity. The decrease in the ~~profitability of the commercial~~expense ratio during in 2019 as compared to 2018 was primarily due to lower employee benefit accruals and ~~personal auto lines of business, which limits the amount of~~ expenses ~~which can be deferred into our deferred acquisition costs, partially offset~~caused by ~~a decrease in~~ post-retirement benefit ~~expenses.~~plan amendments made at the end of 2018.

~~The underwriting expense ratio improved in 2016 due to a decrease in post-retirement benefit costs and contingent commission expenses.~~

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Discontinued Operations Results


	Years Ended December 31,						% Change
							2020		2019
(In Thousands)	2020		2019		2018		vs. 2019		vs. 2018
Revenues

Net premiums earned	$	—	$	—	$	13,003	—	%	(100.0)	%
Investment income, net	—		—		12,663		—	%	(100.0)	%



Net realized investment gains (losses)	—		—		(1,057)		—	%	(100.0)	%
Other income	—		—		146		—	%	(100.0)	%
Total revenues	$	—	$	—	$	24,755	—	%	(100.0)	%

Benefits, Losses and Expenses
Losses and loss settlement expenses	$	—	$	—	$	10,823	—	%	(100.0)	%
Increase in liability for future policy benefits	—		—		5,023		—	%	(100.0)	%
Amortization of deferred policy acquisition costs	—		—		1,895		—	%	(100.0)	%
Other underwriting expenses	—		—		3,864		—	%	(100.0)	%
Interest on policyholders' accounts	—		—		4,499		—	%	(100.0)	%
Total benefits, losses and expenses	$	—	$	—	$	26,104	—	%	(100.0)	%

Income (loss) before income taxes	$	—	$	—	$	(1,349)	—	%	(100.0)	%

Years Ended December 31, % Change
2017 2016
(In Thousands) 2017 2016 2015 vs. 2016 vs. 2015
Revenues
Net premiums earned $ 61,368
$ 87,270
$ 79,195
(29.7 )% 10.2 %
Investment income, net 49,720
51,538
54,222
(3.5 )% (5.0 )%
Net realized investment gains (losses)
Other-than-temporary impairment charges —
—
(1,300 ) — % NM
All other net realized gains 4,008
1,156
3,022
246.7 % (61.7 )%
Net realized investment gains 4,008
1,156
1,722
246.7 % (32.9 )%
Other income 617
621
508
(0.6 )% 22.2 %
Total revenues $ 115,713
$ 140,585
$ 135,647
(17.7 )% 3.6 %

Benefits, Losses and Expenses
Losses and loss settlement expenses $ 40,451
$ 31,365
$ 29,001
29.0 % 8.2 %
Increase in liability for future policy benefits 27,632
59,969
50,945
(53.9 )% 17.7 %
Amortization of deferred policy acquisition costs 5,181
8,121
6,634
(36.2 )% 22.4 %
Other underwriting expenses 13,281
19,881
19,306
(33.2 )% 3.0 %
Interest on policyholders' accounts 18,525
20,079
23,680
(7.7 )% (15.2 )%
Total benefits, losses and expenses $ 105,070
$ 139,415
$ 129,566
(24.6 )% 7.6 %

Income before income taxes $ 10,643
$ 1,170
$ 6,081
NM
(80.8 )%

~~NM =Not meaningful~~

~~United Life underwrites all~~The sale of our ~~life insurance business. Our principal life insurance products are deferred~~discontinued operations closed on March 30, 2018, and immediate annuities, universal life products and traditional life (primarily single premium whole life insurance) products. We also underwrite and market other traditional products, including term life insurance and whole life insurance. Deferred and immediate annuities (55.9 percent), traditional life products (30.7 percent), universal life products (12.3 percent), and other life products (1.1 percent) comprisedtherefore income was only earned in the first quarter of 2018. For the year ended December 31, 2018, our ~~2017 life insurance premium revenues, as determined on the basis of statutory accounting principles. We do not write variable annuities or variable insurance products.~~

~~Income~~discontinued operations had a loss before income taxes from our discontinued operations totaled $10.6 million in 2017 compared to $1.2 million in 2016 and $6.1 million in 2015. The increase in income before income taxes from 2016 to 2017 was primarily due to a smaller increase in liability for future benefits and a decrease in underwriting expenses and offset by a decrease in net premiums earned and an increase in losses and loss settlement expenses. The decrease in underwriting expenses was due to two items. First, a decrease in non-deferrable commissions paid from lower sales of single premium whole life policies ("SPWL"). Second, due to strategic changes made at the beginning of 2017 to increase profitability of our life products through pricing changes and restructuring of our commissions. Also impacting the results, was an increase in death benefits paid compared to the same periods in the prior year.

The decrease in income before income taxes from 2015 to 2016 was primarily a result of a decrease in net investment income, an increase in losses and loss settlement expenses and an increase in the increase in liability for future policy benefits, all partially offset by an increase in net premiums earned from higher sales of SPWL policies and a decrease in interest on policyholders' accounts due to the continued net withdrawals of annuity products.$1.3 million.

Federal Income Taxes

We reported a federal income tax benefit on a consolidated basis of ~~$24.7~~$56.8 million or ~~94.1~~33.5 percent of ~~per-tax income~~pre-tax loss in ~~2017 and~~2020. In 2019, federal income tax expense ~~of $8.8~~on a consolidated basis was $2.1 million or ~~14.9~~12.2 percent of pre-tax income and ~~$32.3~~federal income tax benefit on a consolidated basis of $3.3 million or ~~26.6~~13.5 percent of pre-tax income in ~~2016~~2018.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss ("NOL") carryovers and ~~2015, respectively. Our effective federal~~carrybacks to offset 100 percent of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company has considered the implications of the CARES Act on its tax ~~rate varied from the statutory federal~~provision and has included an income tax ~~expense rate~~benefit of ~~35.0 percent in each year, due primarily to our portfolio~~$18.6 million as the result of ~~tax-exempt securities.~~this Act.

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~~In addition, in 2017 our~~Our effective tax rate was impacted by the The Tax Cuts and Jobs Act of 2017 (the "Tax Act"), which was enacted on December 22, 2017. The Tax Act significantly revised the U.S. corporate income tax laws including lowering the U.S. federal corporate tax rate from ~~35%~~35 percent to ~~21%~~21 percent effective January 1, 2018. Our effective federal tax rate varied from the statutory federal income tax expense rate in each year, due primarily to the impact of the provisions of the CARES Act.

In December 2017, the ~~Securities and Exchange Commission~~SEC staff issued Staff Accounting Bulletin No. 118, which addresses how a company recognizes provisional amounts when a company does not have the necessary information available, prepared or analyzed in reasonable detail to complete its accounting for the effect of the changes in the Tax Act. The measurement period ends when a company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. As of December 31, ~~2017~~2018 we ~~have not~~had completed accounting for the tax effects of enactment of the Tax Act, ~~however for certain items, we have~~and no adjustment was made ~~a reasonable estimate~~during the measurement period.

Table of the effects on our deferred tax balances. For other items where we could not make a reasonable estimate, we are still using existing accounting guidance and the provisions of the tax laws that were in place prior to the enactment. For the items where we were able to determine a reasonable estimate, we recognized a provisional amount in income tax expense from continuing operations of $21,884. The Company will continue to refine this estimated provisional adjustment as we gain a more thorough understanding of the tax law and the Company will take future guidance into consideration when it becomes available.Contents

As of December 31, 2017, we had a net operating loss ("NOL") carryforward of $1.6 million, which is due to our purchase of American Indemnity Financial Corporation in 1999. No NOLs will expire in 2017.

Due to our determination that we may not be able to fully realize the benefits of the ~~NOLs~~net operating loss ("NOL") acquired in the purchase of American Indemnity Financial Corporation in 1999, which are only available to offset the future taxable income of our property and casualty insurance operations and are further limited as to the amount that can be utilized in any given year, we have recorded a valuation allowance against these ~~NOLs that totaled $0.3 million at December 31, 2017.~~NOLs. Based on a yearly review, we determine whether the benefit of the NOLs can be realized, and, if so, the decrease in the valuation allowance is recorded as a reduction to current federal income tax expense. If NOLs expire during the year, the decrease in the valuation allowance is offset with a corresponding decrease to the deferred income tax asset. The valuation allowance was reduced by ~~$0.5~~$0.7 million in ~~2017~~2018 due to the realization of ~~$1.6~~$3.1 million in ~~NOLs.~~NOLs, therefore reducing the valuation allowance to zero. During 2018, the remaining NOL from the purchase of American Indemnity Financial Corporation was fully realized.

As of December 31, ~~2017,~~2020, we had ~~$6.0 million of~~no alternative minimum tax credit carryforwards.

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INVESTMENTS

Investment Environment

Domestic and global capital markets weathered truly unprecedented adversity in 2020. The year began with projections for steady GDP growth and expectations of continued strength in labor and housing markets. In response, risk investors were rewarded as financial assets priced higher into February. By late February, however, the global economy could no longer ignore the health and economic risks posed by the novel coronavirus, COVID-19.

The ~~markets~~ensuing sell-off was sharp. Over the past 30 years the S&P 500 Index has only produced double-digit negative weekly returns five times. Two of these weeks occurred during a four-week span from February through March of 2020. The week ended March 20, 2020 was the third worst weekly performance for the S&P 500 Index since its inception. Over the same period, the spread on investment grade corporate bonds more than tripled while interest rates plummeted. The selling became so widespread that even Treasuries began ~~2017~~to lose stability. The price on the 10-year note surged in late February as rates dropped 70 basis points. Less than 10 days later, prices collapsed as rates reversed course and surged 70 basis points. Rates dropped precipitously again and began to stabilize after historic and decisive action taken by the Federal Reserve ("The Fed"). The Fed entered the market boldly in mid-March, activating multiple funding facilities, some for the first time ever, and pledging to buy certain financial assets with ~~optimism as a new administration arrived~~no limit, including corporate and municipal debt in ~~Washington touting an aggressive agenda of~~either primary or secondary markets.

The Fed’s intervention, along with historic fiscal stimulus that included tax reform, regulatory rollbacks, and infrastructure spending. By the end of the year, the most significant tax reform of the last 30 years was signed into law, and the regulatory framework for American businesses was viewed as substantially more accommodative.

On the economic front, the U.S. expansion continued unabated and bullish sentiment drove market psychology despite heightened geopolitical uncertainty. There were two consecutive quarters of GDP growth above 3 percent, unemployment reached a multi-decade low, and growth in wages was steady. Financial markets responded to this favorable environment in kind. Risk outperformed for the year with emerging market ("EM") equities leading all asset class gains, followedprovided by developed market and U.S. stocks; each producing +20 percent total returns. In fixed income, sovereign debt underperformed as global yields generally moved higher. Credit produced solid returns in 2017, led by EM and U.S. corporates. The year’s gains did not come without risk. Equity valuations continued to stretch beyond long-term averages, even as forward earnings guidance did not always keep pace.

~~The U.S. Federal Reserve maintained its normalization policy by raising their Funds Rate 25 basis points three times throughout the year, which steadily flattened~~ the U.S. Treasury, ~~curve. Front-end~~proved powerful enough to restore confidence in the market. Risk asset prices stabilized and then retraced their March losses. The S&P 500 Index gained 11.7 percent in the fourth quarter to close the year up 16.3 percent. The UFG equity security portfolio, which is weighted more heavily in the financial sector, also partially recovered in the fourth quarter, recovering a portion of the losses recognized in the first three quarters of 2020. U.S. fixed income markets closed the year near all-time strength in nearly any dimension that can be measured. Treasury yields finished well inside of last year’s levels with short-term rates ~~increased 75~~anchored close to ~~90 basis points, while~~zero.

Overall, the ~~long-end fell 30 to 35 basis points. Investors worried over whether the shift in monetary policy may be too aggressive and a flatter curve~~current investment environment is ~~signaling recession. Geopolitically, a looming conflict in Southeast Asia, the impact of "Brexit" on trade relationships across Europe,~~challenging with the U.S. ~~administration’s stance~~equity market seeing stretched valuations only encountered a handful of times in history. Fixed income markets face a near zero-rate environment with no sign of relief on ~~trade negotiations and conflict~~the horizon. We believe the global economy is in the ~~Middle East all presented challenges. However,~~process of recovering from recession. While successful vaccine developments have given us a line of sight to what many are predicting to be a strong second half of 2021, the ~~global~~long-term economic damage caused by COVID-19 has yet to be fully understood. With an increase in debt during the pandemic, companies around the globe are relying on an imminent recovery so as to avoid an avalanche of defaults. Our investment ~~landscape~~program is ~~relatively strong~~defensive in ~~spite~~nature and designed to outperform during periods of these headwinds. Market fundamentals remain positive overall and the technical backdrop is supportive. In spite of this, a high degree of vigilance in investment management is prudent, as nearly all asset class valuations ended the year with lofty expectations for economic growth and performance.

market uncertainty.

Investment Philosophy

The Company's assets are invested to preserve capital and maximize after-tax returns while maintaining an appropriate balance of risk. The return on our portfolio is an important component of overall financial results, but

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quality and safety of principal is the highest priority of our investment program. Our general investment philosophy is to purchase financial instruments with the expectation that we will hold them to their maturity. However, active management of our ~~available-for-sale~~ portfolio is considered necessary to appropriately manage risk, achieve portfolio objectives and maximize investment income as market conditions change.

~~We work with~~Each of our insurance company subsidiaries ~~to develop~~develops an appropriate investment strategy that aligns with ~~their~~its business needs and supports United Fire's strategic plan and risk appetite. The portfolio is structured so as to be in compliance with state insurance laws that prescribe the quality, concentration and type of investments that may be made by insurance companies. ~~All but a small portion of our investment portfolio is managed internally.~~

Investment Portfolio

Our invested assets from continuing operations at December 31, ~~2017~~2020 totaled ~~$1.9~~$2.1 billion, compared to ~~$1.8~~$2.2 billion at December 31, ~~2016, an increase~~2019, a decrease of ~~$117.1~~$5.9 million. At December 31, ~~2017,~~2020, fixed maturity securities and equity securities comprised ~~82.2~~85.0 percent and ~~15.2~~9.6 percent of our investment portfolio, respectively. Because the primary purpose of the investment portfolio is to fund future claims payments, 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. Our overall investment strategy is to stay fully invested (i.e., minimize cash balances). If additional cash is needed we have an ability to borrow funds available under our revolving credit facility.

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Composition

We develop our investment strategies based on a number of factors, including estimated duration of reserve liabilities, short- and long-term liquidity needs, projected tax status, general economic conditions, expected rates of inflation and regulatory requirements. We administer our investment portfolio based on investment guidelines approved by management and the investment committee of our Board of Directors that comply with applicable statutory regulations.

The composition of our investment portfolio at December 31, ~~2017~~2020 is presented at carrying value in the following table:


	Continuing Operations				Discontinued Operations
	Property & Casualty Insurance				Life Insurance				Total
			Percent				Percent				Percent					Percent
(In Thousands)			of Total				of Total				of Total		(In Thousands)			of Total
Fixed maturities: ⁽¹⁾
Held-to-maturity	$	150	—	%	$	34	—	%	$	184	—	%
Fixed maturities:													Fixed maturities:

Available-for-sale	1,535,070		81.3		1,430,025		96.7		2,965,095		88.0		Available-for-sale	$	1,825,438	85.0
Trading securities	16,842		0.9		—		—		16,842		0.5
Equity securities:
Available-for-sale	280,913		14.9		23,653		1.6		304,566		9.0
Trading securities	6,431		0.3		—		—		6,431		0.2

Equity securities													Equity securities	206,685		9.6

Mortgage loans	—		—		3,435		0.2		3,435		0.1		Mortgage loans	47,614		2.2
Policy loans	—		—		5,815		0.4		5,815		0.2

Other long-term investments	49,352		2.6		16,437		1.1		65,789		2.0		Other long-term investments	69,305		3.2
Short-term investments	175		—		—		—		175		—		Short-term investments	175		—
Total	$	1,888,933	100.0	%	$	1,479,399	100.0	%	$	3,368,332	100.0	%	Total	$	2,149,217	100.0	%

~~(1) Available-for-sale and trading fixed maturities are carried at fair value. Held-to-maturity fixed maturities are carried at amortized cost.~~

At December 31, ~~2017,~~2020, we classified ~~$1.5~~$1.8 billion,, or ~~98.9~~100.0 percent,, of our ~~continuing operations~~ fixed maturities portfolio as available-for-sale, compared to ~~$1.5~~$1.7 billion,, or ~~99.0~~99.1 percent,, at December 31, ~~2016.~~2019. Available-for-sale fixed maturity securities are carried at fair value, with changes in fair value recognized as a component of accumulated other comprehensive income in stockholders' equity. We ~~classify our remaining~~record fixed ~~maturities as held-to-maturity or trading. We record held-to-maturity securities at amortized cost. We record~~maturity trading securities, primarily convertible redeemable preferred debt securities, and equity securities at fair value, with any changes in fair value recognized in earnings.

As of December 31, ~~2017~~2020 and ~~2016,~~2019, we did not have direct exposure to investments in subprime mortgages or other credit enhancement vehicles.

Credit Quality

The following table shows the composition of fixed maturity securities held in our available-for-sale ~~held-to-maturity~~ and trading security portfolios by credit rating ~~for both continuing and discontinued operations~~ at December 31, ~~2017~~2020 and ~~2016.~~2019. Information contained in the table is generally

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based upon the issue credit ratings

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provided by Moody's, unless the rating is unavailable, in which case we obtain it from Standard & Poor's.


(In Thousands)	December 31, 2017				December 31, 2016				(In Thousands)	December 31, 2020				December 31, 2019
Rating	Carrying Value		% of Total		Carrying Value		% of Total		Rating	Carrying Value		% of Total		Carrying Value		% of Total
AAA	$	885,000	29.7	%	$	782,329	26.9	%	AAA	$	817,142	44.8	%	$	721,446	41.6	%
AA	839,210		28.1		857,946		29.4		AA	639,011		35.0		664,238		38.3
A	616,787		20.7		651,696		22.4		A	182,011		10.0		179,553		10.3
Baa/BBB	585,968		19.6		554,475		19.0		Baa/BBB	172,078		9.4		157,350		9.1
Other/Not Rated	55,156		1.9		66,268		2.3		Other/Not Rated	15,196		0.8		12,276		0.7
	$	2,982,121	100.0	%	$	2,912,714	100.0	%		$	1,825,438	100.0	%	$	1,734,863	100.0	%

Duration

Our investment portfolio is invested primarily in fixed maturity securities whose fair value is susceptible to market risk, specifically interest rate changes. Duration is a measurement used to quantify our inherent interest rate risk and analyze our ability to match our invested assets to our reserve liabilities. If our invested assets and reserve liabilities have similar durations, then any change in interest rates will have an equal effect on these accounts. The primary purpose for matching invested assets and reserve liabilities is liquidity. With appropriate matching, our investments will mature when cash is needed, preventing the need to liquidate other assets prematurely. Mismatches in the duration of assets and liabilities can cause significant fluctuations in our results of operations.

~~Group~~

The weighted average effective duration of our portfolio of fixed maturity securities was ~~5.0~~3.4 years at December 31, ~~2017~~2020 compared to ~~5.2~~4.2 years at December 31, ~~2016.~~

~~Continuing Operations - Property and Casualty Insurance Business~~

~~The weighted average effective duration of our portfolio of fixed maturity securities was~~ ~~5.4~~ ~~years at December 31, 2017 compared to 5.4 years at December 31, 2016.~~2019.

The amortized cost and fair value of ~~held-to-maturity,~~ available-for-sale and trading fixed maturity securities at December 31, ~~2017,~~2020, 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.


(In Thousands)	Available-For-Sale
		Amortized		Fair
December 31, 2020		Cost		Value
Due in one year or less		$	32,214	$	32,467
Due after one year through five years		476,667		502,699
Due after five years through 10 years		400,277		431,271
Due after 10 years		475,442		515,226
Asset-backed securities		314		926
Mortgage-backed securities		20,305		20,577
Collateralized mortgage obligations		315,072		322,277
		$	1,720,291	$	1,825,443

(In Thousands) Held-To-Maturity Available-For-Sale Trading
Amortized Fair Amortized Fair Amortized Fair
December 31, 2017 Cost Value Cost Value Cost Value
Due in one year or less $ —
$ —
$ 37,899
$ 38,144
$ 2,225
$ 2,835
Due after one year through five years 150
150
204,494
208,353
9,055
10,547
Due after five years through 10 years —
—
394,107
402,799
1,302
1,156
Due after 10 years —
—
694,850
700,879
2,000
2,304
Asset-backed securities —
—
3,175
3,535
—
—
Mortgage-backed securities —
—
9,205
9,231
—
—
Collateralized mortgage obligations —
—
172,880
172,129
—
—
$ 150
$ 150
$ 1,516,610
$ 1,535,070
$ 14,582
$ 16,842

~~Discontinued Operations - Life InsuranceBusiness~~

~~The weighted average effective duration of our portfolio of fixed maturity securities at December 31, 2017 was~~ ~~4.6~~ ~~years compared to~~ ~~4.9~~ ~~years at December 31, 2016.~~

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The amortized cost and fair value of held-to-maturity, available-for-sale and trading fixed maturity securities at December 31, 2017, 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.

(In Thousands) Held-To-Maturity Available-For-Sale
Amortized Fair Amortized Fair
December 31, 2017 Cost Value Cost Value
Due in one year or less $ —
$ —
$ 59,551
$ 59,850
Due after one year through five years —
—
544,878
554,907
Due after five years through 10 years —
—
429,150
436,561
Due after 10 years —
—
81,803
83,208
Asset-backed securities —
—
1,107
1,101
Mortgage-backed securities 34
34
4,623
4,460
Collateralized mortgage obligations —
—
291,179
289,938
$ 34
$ 34
$ 1,412,291
$ 1,430,025

Investment Results

We invest the premiums received from our policyholders ~~and annuitants~~ in order to generate investment income, which is an important component of our revenues and profitability. The amount of investment income that we are able to generate is affected by many factors, some of which are beyond our control. Some of these factors are volatility in the financial markets, economic growth, inflation, changes in interest rates, world political conditions, terrorist attacks or threats of terrorism, adverse events affecting other companies in our industry or the industries in which we invest and other unpredictable national or world events. Net investment income ~~from continuing operations~~ decreased ~~7.4~~34.3 percent in ~~2017,~~2020, compared with the same period of ~~2016,~~2019 and was primarily due to ~~changes~~the change in the fair value of our investments in

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limited liability partnerships ~~specifically related to financial institutions partially offset by~~with an increase in ~~invested assets.~~the fourth quarter but a decrease for the full year 2020. The valuation of our investments in limited liability partnerships varies from period to period due to current equity market conditions. We expect to maintain our investment philosophy of purchasing quality investments rated investment grade or better.

~~We regularly monitor the difference between our cost basis and the estimated fair value of our investments. Our accounting policy~~An allowance for ~~impairment recognition requires other-than-temporary impairment charges to be recorded when we determine that it~~credit losses is more likely than not that we will be unable to collect all amounts due according to the contractual terms of the fixed maturity security or that the anticipated recovery in fair value of the equity security will not occur in a reasonable amount of time. Impairment charges on investments are recorded based on a number of factors including the ~~fair~~current economic conditions, management's expectations of future economic conditions and performance indicators, such as market value vs. amortized cost, investment spreads widening or contracting, rating actions, payment and default history. The following table contains a rollforward of the ~~investments~~allowance for credit losses for available-for-sale fixed maturity securities at the measurement date or based on the value calculated using a discounted cash flow model. Factors considered in evaluating whether a decline in value is other-than-temporary include: the length of time and the extent to which fair value has been less than cost; the financial condition and near-term prospects of the issuer; our intention to hold the investment; and the likelihood that we will be required to sell the investment.December 31, 2020:


Rollforward of allowance for credit losses for available-for-sale fixed maturity securities:
	As of
	December 31, 2020
Beginning balance, January 1, 2020	$	—
Additions to the allowance for credit losses for which credit losses were not previously recorded	5
Reductions for securities sold during the period (realized)	—
Writeoffs charged against the allowance	—
Recoveries of amounts previously written off	—
Ending balance, December 31, 2020	$	5

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. We believe that any unrealized losses on our available-for-sale fixed-maturity securities at December 31, ~~2017~~2020 are temporary based upon our current analysis of the issuers of the securities that we hold and current market conditions. It is possible that we could recognize impairment charges in future periods on securities that we own at December 31, 2017 if future events and information cause us to determine that a decline in value is other-than-temporary. However, we endeavor toWe invest in high quality assets to provide protection from future credit quality ~~issues~~issues. Non-credit related unrealized gains and ~~corresponding other-than-temporary impairment write-downs.~~

~~Table~~losses are recognized as a component of ~~Contents~~

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.

Net Investment Income

In ~~2017,~~2020, our investment income, net of investment expenses, decreased ~~$5.9~~$20.7 million to ~~$100.9~~$39.7 million as compared to ~~2016,~~2019, primarily due to the change in the fair value of our investments in limited liability partnerships, ~~specifically related~~a decrease in interest on fixed maturities and interest on cash and cash equivalents due to ~~financial institutions.~~declining interest rates.

In ~~2016,~~2019, our investment income for continuing operations, net of investment expenses, increased ~~$6.0~~$7.5 million to ~~$106.8~~$60.4 million as compared to ~~2015,~~2018, primarily due to an increase in the ~~change in~~ value of our investments in limited liability partnerships ~~specifically related~~resulting from the increase in the equity markets and an increase in invested assets in 2019 compared to ~~financial institutions.~~2018.

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The following table summarizes the components of net investment income:


(In Thousands) Years Ended December 31,	2020		2019		2018
Investment income from continuing operations:
Interest on fixed maturities	$	46,478	$	50,274	$	51,356
Dividends on equity securities	6,368		7,842		7,731
Income on other long-term investments
Interest	1,890		3,115		8,383
Change in value (1)	(9,633)		1,114		(10,116)
Interest on mortgage loans	1,949		1,595		412
Interest on short-term investments	107		522		606
Interest on cash and cash equivalents	763		2,681		1,875
Other	205		252		307
Total investment income from continuing operations	$	48,127	$	67,395	$	60,554
Less investment expenses	8,457		6,981		7,660
Net investment income from continuing operations	$	39,670	$	60,414	$	52,894
Net investment income from discontinued operations	—		—		12,663
Net investment income	$	39,670	$	60,414	$	65,557

(In Thousands)
Years Ended December 31,
2017 2016 2015
Investment income from continuing operations:
Interest on fixed maturities $ 44,784
$ 43,147
$ 41,859
Dividends on equity securities 7,108
6,448
6,421
Income on other long-term investments
Interest 6,870
1,200
1,200
Change in value ⁽¹⁾
(2,812 ) 10,178
2,313
Interest on short-term investments 120
47
3
Interest on cash and cash equivalents 1,125
352
234
Other 300
422
433
Total investment income from continuing operations $ 57,495
$ 61,794
$ 52,463
Less investment expenses 6,305
6,510
5,904
Net investment income from continuing operations $ 51,190
$ 55,284
$ 46,559
Net investment income from discontinued operations 49,720
51,538
54,222
Net investment income $ 100,910
$ 106,822
$ 100,781


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

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

In ~~2017, 77.9~~2020, 96.6 percentof our gross investment income from continuing operations originated from interest on fixed maturities, compared to ~~69.8~~74.6 percent and ~~79.8~~84.8 percent in ~~2016~~2019 and ~~2015,~~2018, respectively.

The following table details our annualized yield on average invested assets from continuing operations for 2020 and 2019, and both continuing ~~operations~~ and discontinued operations for ~~2017, 2016 and 2015,~~2018, which is based on our invested assets (including money market accounts) at the beginning and end of the year divided by net investment income:


(In Thousands)
Years ended December 31,	Average Invested Assets		Investment Income, Net		Annualized Yield on Average Invested Assets
2020	$	2,169,220	$	39,670	1.8	%
2019	2,120,916		60,414		2.8	%
2018	1,986,239		52,894		2.7	%

(In Thousands)

Years ended December 31,
Average
Invested Assets

Investment
Income, Net

Annualized Yield on
Average Invested Assets
2017 $ 3,333,809
$ 100,910
3.0 %
2016 3,223,014
106,822
3.3 %
2015 3,181,311
100,781
3.2 %

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Net Realized Investment Gains and Losses

The following table summarizes the components of our net realized investment gains or losses:


(In Thousands) Years Ended December 31,	2017		2016			2015			(In Thousands) Years Ended December 31,	2020		2019		2018
Net realized investment gains (losses) from continuing operations:									Net realized investment gains (losses) from continuing operations:
Net realized gains (losses):									Net realized gains (losses):
Fixed maturities:									Fixed maturities:
Available-for-sale	$	829	$	1,004		$	814		Available-for-sale	$	1,787	$	655	$	(254)
Allowance for credit losses									Allowance for credit losses	(5)		—		—
Trading securities									Trading securities
Change in fair value	924		189			(1,352		)	Change in fair value	(3,314)		1,351		(296)
Sales	244		931			1,381			Sales	2,950		1,993		1,226
Equity securities:
Available-for-sale	1,553		2,359			1,977
Trading securities
Equity securities									Equity securities

Change in fair value	332		301			(448		)	Change in fair value	(6,875)		51,231		(21,994)
Sales	57		(6		)	66			Sales	(26,906)		725		1,702
Other long-term investments	—		—			(1,314		)
Cash equivalents	—		169			—
Mortgage loans									Mortgage loans	(4)		(26)		(46)

Real Estate	116		—			$	—		Real Estate	(28)		(2,150)		$	(517)
Total net realized investment gains from continuing operations	$	4,055	$	4,947		$	1,124
Total net realized investment gains from discontinued operations	4,008		1,156			1,722
Total net realized investment gains	$	8,063	$	6,103		$	2,846
Total net realized investment gains (losses) from continuing operations									Total net realized investment gains (losses) from continuing operations	$	(32,395)	$	53,779	$	(20,179)
Total net realized investment gains (losses) from discontinued operations									Total net realized investment gains (losses) from discontinued operations	—		—		(1,057)
Total net realized investment gains (losses)									Total net realized investment gains (losses)	$	(32,395)	$	53,779	$	(21,236)

Net Unrealized Investment Gains and Losses

As of December 31, ~~2017,~~2020, net unrealized investment gains, after tax, totaled ~~$214.9~~$83.1 million compared to ~~$133.9~~unrealized gains of $47.3 million and ~~$128.4~~unrealized losses of $9.3 million as of December 31, ~~2016~~2019 and ~~2015,~~2018, respectively. The increase in net unrealized investment gains in ~~2017 is~~2020 was primarily the result of a decrease in interest rates, which positively impacted the valuation of our fixed maturity security portfolio during 2017 and an increase in the fair value of our equity security portfolio. Our net unrealized investment gains also increased due to the decrease in the tax rate from the Tax Act enactment.

~~The increase in unrealized gains in 2016 is~~ the result of an increase in the ~~fair value of the equity securities portfolio due to an increase in the financial markets, partially offset by a decline in the fair~~ value of the fixed maturity portfolio due to lower interest rates during 2020.

The increase in net unrealized investment gains in 2019 was primarily the result of an increase in the value of the fixed maturity portfolio due to lower interest rates during 2019. The decrease in net unrealized investment gains in 2018 was primarily the result of the cumulative change in accounting principles on recognizing the change in the value of equity securities in the income statement. The change in accounting principles required unrealized gains on equity securities of $191.2 million, after-tax, as of January 1, 2018, to be reclassified to retained earnings from accumulated other comprehensive income, both within shareholders equity. The remaining decrease is due to a decrease in the value of the fixed maturity portfolio due to rising interest rates.

The following table summarizes the change in our net unrealized investment gains (losses):


(In Thousands) Years Ended December 31,	2020		2019		2018
Changes in net unrealized investment gains (losses):
Available-for-sale fixed maturity securities	$	45,305	$	71,648	$	(57,475)

Deferred policy acquisition costs	—		—		7,274
Income tax effect	(9,514)		(15,046)		10,543
Cumulative change in accounting principles	—		—		(191,244)
Net unrealized investment depreciation of discontinued operations, sold	—		—		6,714
Total change in net unrealized investment gains (losses), net of tax	$	35,791	$	56,602	$	(224,188)

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(In Thousands)
Years Ended December 31,
2017 2016 2015
Changes in net unrealized investment gains (losses):
Available-for-sale fixed maturity securities $ 25,573
$ (21,271 ) $ (37,621 )
Equity securities 40,168
34,179
(6,459 )
Deferred policy acquisition costs 119
(4,410 ) 11,380
Income tax effect (21,545 ) (2,975 ) 11,446
Accumulated effect of change in enacted tax rate 36,658
—
—
Total change in net unrealized investment gains, net of tax $ 80,973
$ 5,523
$ (21,254 )

~~Market Risk~~MARKET RISK

Our Consolidated Balance Sheets include financial instruments whose fair values are subject to market risk. The active management of market risk is integral to our operations. Market risk is the potential for loss due to a decrease in the fair value of securities resulting from uncontrollable fluctuations, such as: interest rate risk, equity price risk,

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foreign exchange risk, credit risk, inflation, or geopolitical conditions. Our primary market risk exposures are: changes in interest rates, deterioration of credit quality in specific issuers, sectors or the economy as a whole, and an unforeseen decrease in the liquidity of securities we hold. We have no foreign exchange risk.

Interest Rate Risk

Interest rate risk is the price sensitivity of a fixed income maturity security or portfolio of securities to changes in level of interest rates. Generally, there is an inverse relationship between changes in interest rates and changes in the price of a fixed income/maturity security. Plainly stated, if interest rates go up (down), bond prices go down (up). A vast majority of our holdings are fixed income maturity and other interest rate sensitive securities that will decrease (increase) in value as interest rates increase (decrease). While it is generally our intent to hold our investments in fixed maturity securities to maturity, we have classified a majority of our fixed maturity portfolio as available-for-sale. Available-for-sale fixed income maturity securities are carried at fair value on the Consolidated Balance Sheets with unrealized gains or losses reported net of tax in Accumulated Other Comprehensive Income. A change in the prevailing interest rates generally translates into a change in the fair value of our fixed income/maturity securities, and by extension, our overall book value.

Market Risk and Duration

We analyze potential changes in the value of our investment portfolio due to the market risk factors noted above within the overall context of asset and liability management. A technique we use in the management of our investment portfolio is the calculation of duration. Our actuaries estimate the payout pattern of our reserve liabilities to determine their duration, which is the present value of the weighted average payments expressed in years. We then establish a target duration for our investment portfolio so that at any given time the estimated cash generated by the investment portfolio will closely match the estimated cash required for the payment of the related reserves. We structure the investment portfolio to meet the target duration to achieve the required cash flow, based on liquidity and market risk factors.

Duration relates primarily to life insurance business because the long-term nature of these reserve liabilities increases the importance of projecting estimated cash flows over an extended time frame. At December 31, 2017, the life insurance business had $611.9 million in deferred annuity liabilities for which investments in fixed maturity securities were specifically allocated.

The duration of the life insurance business's investment portfolio must take into consideration interest rate risk. This is accomplished through the use of sensitivity analysis, which measures the price sensitivity of the fixed maturities to changes in interest rates. The alternative valuations of the investment portfolio, given the various hypothetical interest rate changes utilized by the sensitivity analysis, allow management to revalue the potential cash flow from the investment portfolio under varying market interest rate scenarios. Duration can then be recalculated at the differing levels of projected cash flows.

Impact of Interest Rate Changes

The amounts set forth in the following table detail the impact of hypothetical interest rate changes on the fair value of fixed maturity securities held at December 31, ~~2017 for both continuing operations and discontinued operations.~~2020. The sensitivity analysis measures the change in fair values arising from immediate changes in selected interest rate scenarios. We employed hypothetical parallel shifts in the yield curve of plus or minus 100 and 200 basis points in the simulations. Additionally, based upon the yield curve shifts, we employ estimates of prepayment speeds for mortgage-related products and the likelihood of call or put options being exercised within the simulations. According to this analysis, at current levels of interest rates, the duration of the investments supporting the deferred annuity liabilities is 1.3 years longer than the projected duration of the liabilities. If interest rates increase by 100 or 200 basis points, the duration of the investments supporting the deferred annuity liabilities would be 1.9 years and 2.6 years longer, respectively, than the projected duration of the liabilities.

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The selection of a 100-basis-point and 200-basis-point increase or decrease in interest rates should not be construed as a prediction by our management of future market events, but rather as an illustration of the potential impact of an event.

December 31, 2017 -200 Basis -100 Basis +100 Basis + 200 Basis
(In Thousands) Points Points Base Points Points
HELD-TO-MATURITY
Fixed maturities
Bonds
Corporate bonds - financial services $ 164
$ 157
$ 150
$ 144
$ 138
Mortgage-backed securities 34
34
34
33
33
Total Held-to-Maturity Fixed Maturities $ 198
$ 191
$ 184
$ 177
$ 171
AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury $ 17,764
$ 17,319
$ 16,891
$ 16,478
$ 16,078
U.S. government agency 128,008
125,659
122,168
114,089
104,790
States, municipalities and political subdivisions
  General obligations:
     Midwest 120,617
115,198
109,696
103,281
96,647
     Northeast 53,374
50,984
48,641
45,959
43,036
     South 157,465
149,584
141,519
132,046
122,255
     West 126,775
119,874
113,011
105,319
97,498
   Special revenue:
     Midwest 178,089
168,570
158,744
147,044
135,317
     Northeast 92,227
86,044
79,760
72,772
65,925
     South 302,652
283,580
263,512
240,270
217,754
     West 180,577
169,676
158,307
145,118
132,239
Foreign bonds 55,232
53,973
52,753
51,565
50,410
Public utilities 228,371
218,485
209,144
200,243
191,794
Corporate bonds
Energy 101,889
98,388
95,053
91,806
88,685
Industrials 241,265
231,207
221,707
212,661
204,058
Consumer goods and services 202,563
194,188
186,257
178,652
171,380
Health care 81,510
78,382
75,408
72,562
69,844
Technology, media and telecommunications 163,508
155,992
148,979
142,403
136,246
Financial services 308,825
295,604
283,151
271,088
259,404
Mortgage backed securities 14,053
13,986
13,691
13,204
12,567
Collateralized mortgage obligations
Government national mortgage association 172,630
167,268
157,483
145,198
132,208
Federal home loan mortgage corporation 214,067
208,963
199,152
185,680
170,990
Federal national mortgage association 113,469
110,647
105,432
98,375
90,653
Asset-backed securities 4,813
4,718
4,636
4,560
4,489
Total Available-For-Sale Fixed Maturities $ 3,259,743
$ 3,118,289
$ 2,965,095
$ 2,790,373
$ 2,614,267
TRADING
Fixed maturities
Bonds
Corporate bonds
Industrials $ 2,352
$ 2,284
$ 2,220
$ 2,157
$ 2,096
Consumer goods and services 1,642
1,588
1,535
1,484
1,436
Health care 4,374
4,039
3,741
3,493
3,285
Financial services 5,670
5,618
5,566
5,407
5,222
Technology, media and telecommunications 1,264
1,242
1,221
1,201
1,180
Redeemable preferred stock 2,559
2,559
2,559
2,559
2,559
Total Trading Fixed Maturities $ 17,861
$ 17,330
$ 16,842
$ 16,301
$ 15,778
Total Fixed Maturity Securities $ 3,277,802
$ 3,135,810
$ 2,982,121
$ 2,806,851
$ 2,630,216

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December 31, 2020	-200 Basis		-100 Basis				+100 Basis		+ 200 Basis
(In Thousands)	Points		Points		Base		Points		Points









AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury	$	160,104	$	154,907	$	149,938	$	145,176	$	140,617
U.S. government agency	67,283		65,881		64,518		62,848		60,815
States, municipalities and political subdivisions
General obligations:
Midwest	86,254		84,076		81,980		79,949		77,515
Northeast	31,860		31,142		30,450		29,779		28,980
South	116,530		113,171		109,970		106,913		103,231
West	118,101		113,967		110,021		106,220		101,935
Special revenue:
Midwest	135,100		129,969		125,098		120,436		115,021
Northeast	67,178		64,041		61,076		58,251		54,975
South	247,779		236,949		226,706		216,790		205,165
West	151,929		145,491		139,399		133,572		126,357
Foreign bonds	31,382		30,500		29,602		28,707		27,850
Public utilities	91,622		87,431		83,502		79,802		76,299
Corporate bonds
Energy	27,749		26,507		25,336		24,227		23,172
Industrials	46,719		44,903		43,257		41,726		40,273
Consumer goods and services	54,210		52,338		50,567		48,883		47,278
Health care	8,329		7,941		7,576		7,230		6,902
Technology, media and telecommunications	47,761		44,503		41,636		39,092		36,817
Financial services	108,041		104,453		101,031		97,325		93,652
Mortgage backed securities	21,487		21,010		20,577		20,010		19,158
Collateralized mortgage obligations
Government national mortgage association	90,716		88,371		86,152		83,378		79,311
Federal home loan mortgage corporation	157,446		154,977		152,843		163,900		156,603
Federal national mortgage association	84,977		83,887		83,282		82,440		79,125
Asset-backed securities	926		926		926		926		926

Total Available-For-Sale Fixed Maturities	$	1,953,483	$	1,887,341	$	1,825,443	$	1,777,580	$	1,701,977














Total Fixed Maturity Securities	$	1,953,483	$	1,887,341	$	1,825,443	$	1,777,580	$	1,701,977

To the extent actual results differ from the assumptions utilized, our duration and interest rate measures could be significantly affected. As a result, these calculations may not fully capture the impact of nonparallel changes in the relationship between short-term and long-term interest rates.

Equity Price Risk

Equity price risk is the potential loss arising from changes in the fair value (i.e., market price) of equity securities held in our portfolio. Changes in the price of an equity security may be due to a change in the future earnings capacity or strategic outlook of the security issuer, and what investors are willing to pay for those future earnings and related strategy. The carrying values of our equity securities are based on quoted market prices, from an independent source, as of the balance sheet date. Market prices of equity securities, in general, are subject to fluctuations that could cause the amount to be realized upon the future sale of the securities to differ significantly from the current reported value. The fluctuations may result from perceived changes in the underlying economic characteristics of the security issuer, the relative price of alternative investments, general market conditions, and supply/demand factors related to a particular security.

Impact of Price Change

The following table details the effect on the fair value of our investments in equity securities for ~~both continuing and discontinued operations for~~ a positive and negative 10 percent price change at December 31, ~~2017:~~2020:

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(In Thousands)	-10%		Base		+10%		(In Thousands)	-10%		Base		+10%

Estimated fair value of equity securities	$	258,610	$	287,344	$	316,078	Estimated fair value of equity securities	$	186,017	$	206,685	$	227,354

Foreign Currency Exchange Rate Risk

Foreign currency exchange rate risk arises from the possibility that changes in foreign exchange rates will impact our transactions with foreign reinsurers relating to the settlement of amounts due to or from foreign reinsurers in the normal course of business. We consider this risk to be immaterial to our operations.

Credit Risk

Credit risk is the willingness and ability of a borrower to repay on time and in full any principal and interest due to the lender. Losses related to credit risk are realized through the income statement and have a direct impact on the earnings of UFG. Given the vast majority of our holdings are fixed income maturity securities, we view credit risk as our primary investment risk. Our internal Investment Department has developed and maintains a rigorous underwriting process to analyze and measure the expected frequency and severity of loss (i.e., credit quality) for government, agency, municipal, structured security, and corporate bond issuers. The objective is to maintain the appropriate balance of risk in our portfolio, consistent with our Investment Policy Statement and conservative investment style, and ensure the portfolio is compensated appropriately for the credit risk it holds. We do have within our municipal bond holdings a small number of securities whose ratings were enhanced by third-party insurance for the payment of principal and interest in the event of an issuer default. Of the insured municipal securities in our investment portfolio, ~~99.1~~99.5 percent and ~~98.9~~99.6 percent were rated "A" or above, and ~~93.7~~95.8 percent and ~~93.2~~95.6 percent were rated "AA" or above at December 31, ~~2017~~2020 and ~~2016,~~2019, respectively, without the benefit of insurance. Due to the underlying financial strength of the issuers of the securities, we believe that the loss of insurance would not have a material impact on our operations, financial position, or liquidity.

We have no direct exposure in any of the guarantors of our investments. Our largest indirect exposure with a single guarantor totaled ~~$20.0~~$9.7 million or ~~20.8~~21.0 percent of our insured municipal securities at December 31, ~~2017,~~2020, as compared to ~~$32.9~~$11.7 million or ~~19.1~~24.2 percent at December 31, ~~2016.~~2019. Our five largest indirect exposures to financial guarantors accounted for ~~66.6~~81.5 percent and ~~63.9~~81.2 percent of our insured municipal securities at December 31, ~~2017~~2020 and ~~2016,~~2019, respectively.

~~Table of Contents~~

LIQUIDITY AND CAPITAL RESOURCES

Liquidity measures our ability to generate sufficient cash flows to meet our short- and long-term cash obligations. Our cash inflows are primarily a result of the receipt of premiums, ~~annuity deposits,~~ 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, ~~policyholder benefits under life insurance contracts, annuity withdrawals,~~ the purchase of investments, operating expenses, dividends, pension plan contributions, and in recent years, common stock repurchases.

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

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

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Historically, we have generated substantial cash inflows from operations. It is our policy to invest the cash generated from operations in securities with maturities that, in the aggregate, correlate to the anticipated timing of payments for losses and loss settlement ~~expenses and future policyholder benefits of the underlying insurance policies, and annuity withdrawals.~~expenses. The majority of our assets are invested in available-for-sale fixed maturity securities.

The following table displays a summary of cash sources and uses in ~~2017, 2016~~2020, 2019 and ~~2015~~2018 from continuing and discontinued operations:


Cash Flow Summary	Years Ended December 31,									Cash Flow Summary	Years Ended December 31,
(In Thousands)	2017			2016			2015			(In Thousands)	2020		2019		2018
Cash provided by (used in)										Cash provided by (used in)
Operating activities	$	170,094		$	214,384		$	189,999		Operating activities	$	41,435	$	93,752	$	110,104
Investing activities	(61,985		)	(112,403		)	(36,286		)	Investing activities	(92,871)		4,501		(19,204)
Financing activities	(107,549		)	(97,577		)	(137,837		)	Financing activities	18,662		(41,985)		(115,188)
Net increase in cash and cash equivalents	$	560		$	4,404		$	15,876
Net increase (decrease) in cash and cash equivalents										Net increase (decrease) in cash and cash equivalents	$	(32,774)	$	56,268	$	(24,288)

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December 31, 2019
Type of Investment	Cost or Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Fair Value












AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury	$	69,300	$	203	$	12	$	69,491
U.S. government agency	97,962		2,344		104		100,202
States, municipalities and political subdivisions
General obligations:
Midwest	85,607		2,987		0		88,594
Northeast	30,120		1,150		0		31,270
South	111,688		3,515		0		115,203
West	105,569		4,748		0		110,317
Special revenue:
Midwest	133,717		6,175		0		139,892
Northeast	58,665		2,878		0		61,543
South	224,214		10,452		0		234,666
West	138,557		6,287		0		144,844
Foreign bonds	4,936		181		0		5,117
Public utilities	60,950		2,701		0		63,651
Corporate bonds
Energy	28,695		1,429		0		30,124
Industrials	52,249		1,766		0		54,015
Consumer goods and services	47,131		2,335		0		49,466
Health care	8,998		482		0		9,480
Technology, media and telecommunications	25,931		1,739		0		27,670
Financial services	96,613		3,870		230		100,253
Mortgage-backed securities	6,250		127		21		6,356
Collateralized mortgage obligations
Government national mortgage association	78,400		2,053		97		80,356
Federal home loan mortgage corporation	123,572		1,150		220		124,502
Federal national mortgage association	70,322		1,631		108		71,845
Asset-backed securities	314		436		0		750

Total Available-For-Sale Fixed Maturities	$	1,659,760	$	60,639	$	792	$	1,719,607

December 31, 2017
Type of Investment Cost or Amortized Cost Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value
HELD-TO-MATURITY
Fixed maturities
Bonds
Corporate bonds - financial services $ 150
$ —
$ —
$ 150
Mortgage-backed securities 34
—
—
34
Total Held-to-Maturity Fixed Maturities $ 184
$ —
$ —
$ 184
AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury $ 17,073
$ 4
$ 186
$ 16,891
U.S. government agency 121,574
1,311
717
122,168
States, municipalities and political subdivisions
  General obligations:
     Midwest 107,689
2,446
439
109,696
     Northeast 47,477
1,174
10
48,641
     South 139,870
2,462
813
141,519
     West 111,123
2,351
463
113,011
   Special revenue:
     Midwest 155,475
3,620
351
158,744
     Northeast 79,028
1,351
619
79,760
     South 260,145
5,218
1,851
263,512
     West 156,576
2,929
1,198
158,307
Foreign bonds 51,361
1,441
49
52,753
Public utilities 206,028
3,386
270
209,144
Corporate bonds
Energy 93,191
1,972
110
95,053
Industrials 218,067
3,881
241
221,707
Consumer goods and services 183,253
3,498
494
186,257
Health care 74,125
1,312
29
75,408
Technology, media and telecommunications 146,853
2,376
250
148,979
Financial services 277,824
5,769
442
283,151
Mortgage-backed securities 13,828
101
238
13,691
Collateralized mortgage obligations
Government national mortgage association 157,836
1,921
2,274
157,483
Federal home loan mortgage corporation 201,320
1,879
4,047
199,152
Federal national mortgage association 104,903
1,703
1,174
105,432
Asset-backed securities 4,282
362
8
4,636
Total Available-For-Sale Fixed Maturities $ 2,928,901
$ 52,467
$ 16,273
$ 2,965,095
Equity securities
Common stocks
Public utilities $ 6,394
$ 16,075
$ 30
$ 22,439
Energy 6,514
8,171
120
14,565
Industrials 13,117
53,522
120
66,519
Consumer goods and services 10,110
15,742
164
25,688
Health care 7,763
32,340
—
40,103
Technology, media and telecommunications 6,067
11,556
115
17,508
Financial services 11,529
104,985
67
116,447
Nonredeemable preferred stocks 992
305
—
1,297
Total Available-for-Sale Equity Securities $ 62,486
$ 242,696
$ 616
$ 304,566
Total Available-for-Sale Securities $ 2,991,387
$ 295,163
$ 16,889
$ 3,269,661

~~Table of Contents~~

December 31, 2016
Type of Investment Cost or Amortized Cost Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value
HELD-TO-MATURITY
Fixed maturities
Bonds
Corporate bonds - financial services $ 150
$ —
$ —
$ 150
Mortgage-backed securities 48
1
—
49
Total Held-to-Maturity Fixed Maturities $ 198
$ 1
$ —
$ 199
AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury $ 23,216
$ 87
$ 108
$ 23,195
U.S. government agency 76,692
1,445
540
77,597
States, municipalities and political subdivisions
   General obligations:
      Midwest 143,747
1,808
1,412
144,143
      Northeast 57,731
909
231
58,409
      South 129,475
1,249
2,355
128,369
      West 114,524
1,380
2,173
113,731
   Special revenue:
      Midwest 167,430
2,313
1,433
168,310
      Northeast 70,202
487
2,624
68,065
      South 244,225
1,753
6,791
239,187
      West 134,287
1,509
4,052
131,744
Foreign bonds 62,995
2,239
—
65,234
Public utilities 212,360
3,761
447
215,674
Corporate bonds
Energy 107,084
2,195
419
108,860
Industrials 225,526
5,359
982
229,903
Consumer goods and services 178,135
3,847
295
181,687
Health care 81,211
2,063
151
83,123
Technology, media and telecommunications 143,402
2,029
819
144,612
Financial services 269,981
5,328
1,358
273,951
Mortgage-backed securities 17,288
201
241
17,248
Collateralized mortgage obligations
Government national mortgage association 145,947
1,279
2,766
144,460
Federal home loan mortgage corporation 176,226
1,638
3,406
174,458
Federal national mortgage association 101,414
1,816
1,334
101,896
Asset-backed securities 4,407
145
282
4,270
Total Available-For-Sale Fixed Maturities $ 2,887,505
$ 44,840
$ 34,219
$ 2,898,126
Equity securities
Common stocks
Public utilities $ 6,394
$ 13,465
$ 188
$ 19,671
Energy 6,514
8,555
22
15,047
Industrials 13,252
38,715
173
51,794
Consumer goods and services 10,324
13,851
58
24,117
Health care 7,763
19,657
—
27,420
Technology, media and telecommunications 5,931
9,476
38
15,369
Financial services 17,289
98,728
67
115,950
Nonredeemable preferred stocks 1,037
11
—
1,048
Total Available-for-Sale Equity Securities $ 68,504
$ 202,458
$ 546
$ 270,416
Total Available-for-Sale Securities $ 2,956,009
$ 247,298
$ 34,765
$ 3,168,542

~~Table of Contents~~

The following table is a reconciliation of the amortized cost (cost for equity securities) to fair value of investments in held-to-maturity and available-for-sale fixed maturity and equity securities for continuing and discontinued operations by investment type at December 31, 2017 and 2016.

December 31, 2017
Type of Investment Cost or Amortized Cost Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value
HELD-TO-MATURITY
Fixed maturities:
Continuing operations $ 150
$ —
$ —
$ 150
Discontinued operations 34
—
—
34
Total Held-to-Maturity Fixed Maturities $ 184
$ —
$ —
184
AVAILABLE-FOR-SALE
Fixed maturities:
Continuing operations $ 1,516,610
$ 27,412
$ 8,952
$ 1,535,070
Discontinued operations 1,412,291
25,055
7,321
1,430,025
Total Available-for-Sale Fixed Maturities $ 2,928,901
$ 52,467
$ 16,273
$ 2,965,095
Equity securities:
Continuing operations $ 57,387
$ 224,065
$ 539
$ 280,913
Discontinued operations 5,099
18,631
77
23,653
Total Available-for-Sale Equity Securities $ 62,486
$ 242,696
$ 616
$ 304,566
Total Available-for-Sale Securities $ 2,991,387
$ 295,163
$ 16,889
$ 3,269,661

December 31, 2016
Type of Investment Cost or Amortized Cost Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value
HELD-TO-MATURITY
Fixed maturities:
Continuing operations $ 150
$ —
$ —
$ 150
Discontinued operations 48
1
—
49
Total Held-to-Maturity Fixed Maturities $ 198
$ 1
$ —
$ 199
AVAILABLE-FOR-SALE
Fixed maturities:
Continuing operations $ 1,458,235
$ 18,725
$ 23,674
$ 1,453,286
Discontinued operations 1,429,270
26,115
10,545
1,444,840
Total Available-for-Sale Fixed Maturities $ 2,887,505
$ 44,840
$ 34,219
$ 2,898,126
Equity securities:
Continuing operations $ 59,994
$ 186,692
$ 316
$ 246,370
Discontinued operations 8,510
15,766
230
24,046
Total Available-for-Sale Equity Securities $ 68,504
$ 202,458
$ 546
$ 270,416
Total Available-for-Sale Securities $ 2,956,009
$ 247,298
$ 34,765
$ 3,168,542

~~Table of Contents~~

Maturities

The amortized cost and fair value of ~~held-to-maturity,~~ available-for-sale ~~and trading~~ fixed maturity securities at December 31, ~~2017,~~2020, 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.

Maturities - Consolidated:
Held-To-Maturity Available-For-Sale Trading
December 31, 2017 Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
Due in one year or less $ —
$ —
$ 97,450
$ 97,994
$ 2,225
$ 2,835
Due after one year through five years 150
150
749,372
763,260
9,055
10,547
Due after five years through 10 years —
—
823,257
839,360
1,302
1,156
Due after 10 years —
—
776,653
784,087
2,000
2,304
Asset-backed securities —
—
4,282
4,636
—
—
Mortgage-backed securities 34
34
13,828
13,691
—
—
Collateralized mortgage obligations —
—
464,059
462,067
—
—
$ 184
$ 184
$ 2,928,901
$ 2,965,095
$ 14,582
$ 16,842

Maturities - Continuing Operations:
Held-To-Maturity Available-For-Sale Trading
December 31, 2017 Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
Due in one year or less $ —
$ —
$ 37,899
$ 38,144
$ 2,225
$ 2,835
Due after one year through five years 150
150
204,494
208,353
9,055
10,547
Due after five years through 10 years —
—
394,107
402,799
1,302
1,156
Due after 10 years —
—
694,850
700,879
2,000
2,304
Asset-backed securities —
—
3,175
3,535
—
—
Mortgage-backed securities —
—
9,205
9,231
—
—
Collateralized mortgage obligations —
—
172,880
172,129
—
—
$ 150
$ 150
$ 1,516,610
$ 1,535,070
$ 14,582
$ 16,842

Maturities - Discontinued Operations:
Held-To-Maturity Available-For-Sale Trading
December 31, 2017 Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
Due in one year or less $ —
$ —
$ 59,551
$ 59,850
$ —
$ —
Due after one year through five years —
—
544,878
554,907
—
—
Due after five years through 10 years —
—
429,150
436,561
—
—
Due after 10 years —
—
81,803
83,208
—
—
Asset-backed securities —
—
1,107
1,101
—
—
Mortgage-backed securities 34
34
4,623
4,460
—
—
Collateralized mortgage obligations —
—
291,179
289,938
—
—
$ 34
$ 34
$ 1,412,291
$ 1,430,025
$ —
$ —

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Maturities
	Available-For-Sale
December 31, 2020		Amortized Cost		Fair Value
Due in one year or less		$	32,214	$	32,467
Due after one year through five years		476,667		502,699
Due after five years through 10 years		400,277		431,271
Due after 10 years		475,442		515,226
Asset-backed securities		314		926
Mortgage-backed securities		20,305		20,577
Collateralized mortgage obligations		315,072		322,277
		$	1,720,291	$	1,825,443

Net Realized Investment Gains and Losses

Net realized gains (losses) on disposition of investments are computed using the specific identification method and are included in the computation of net income. A summary of net realized investment gains (losses) for ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, is as follows:


	2017		2016			2015				2020		2019		2018
Net realized investment gains (losses) from continuing operations									Net realized investment gains (losses) from continuing operations
Fixed maturities:									Fixed maturities:
Available-for-sale	$	829	$	1,004		$	814		Available-for-sale	$	1,787	$	655	$	(254)
Allowance for credit losses									Allowance for credit losses	(5)		0		0
Trading securities									Trading securities
Change in fair value	924		189			(1,352		)	Change in fair value	(3,314)		1,351		(296)
Sales	244		931			1,381			Sales	2,950		1,993		1,226
Equity securities:
Available-for-sale	1,553		2,359			1,977
Trading securities
Equity securities									Equity securities

Change in fair value	332		301			(448		)	Change in fair value	(6,875)		51,231		(21,994)
Sales	57		(6		)	66			Sales	(26,906)		725		1,702
Other long-term investments	—		—			(1,314		)
Other-than-temporary-impairment charges:
Fixed maturities	—		—			—
Cash equivalents	—		169			—
Real Estate	116		—			—
Total net realized investment gains from continuing operations	$	4,055	$	4,947		$	1,124
Total net realized investment gains from discontinued operations	4,008		1,156			1,722
Total net realized investment gains	$	8,063	$	6,103		$	2,846
Mortgage loans									Mortgage loans	(4)		(26)		(46)

Real estate									Real estate	(28)		(2,150)		(517)
Total net realized investment gains (losses) from continuing operations									Total net realized investment gains (losses) from continuing operations	$	(32,395)	$	53,779	$	(20,179)
Total net realized investment gains (losses) from discontinued operations									Total net realized investment gains (losses) from discontinued operations	0		0		(1,057)
Total net realized investment gains (losses)									Total net realized investment gains (losses)	$	(32,395)	$	53,779	$	(21,236)

The proceeds and gross realized gains (losses) on the sale of available-for-sale fixed maturity securities from continuing operations for ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, are as follows:


	2020		2019		2018
Proceeds from sales	$	50,744	$	41,760	$	132,250
Gross realized gains	1,400		302		140
Gross realized losses	(495)		(13)		(517)

2017 2016 2015
Proceeds from sales $ 7,404
$ 1,968
$ 478
Gross realized gains 1,046
920
451
Gross realized losses (20 ) —
—

~~The~~There were 0 proceeds and gross realized gains (losses) on the sale of available-for-sale fixed maturity securities from discontinued operations for ~~2017, 2016~~2020, 2019 and ~~2015, are as follows:~~2018.

2017 2016 2015
Proceeds from sales $ 7,315
$ 12,354
$ 11,066
Gross realized gains 1,264
65
683
Gross realized losses (78 ) (639 ) —

~~There were no sales of held-to-maturity securities in 2017, 2016 and 2015.~~

Our investment portfolio includes trading securities with embedded derivatives. These securities are primarily convertible securities which are recorded at fair value. Income or loss, including the change in the fair value of these trading securities, is recognized currently in earnings as a component of net realized investment gains and losses. Our portfolio of trading securities had a fair value of ~~$23,273~~$0 and ~~$20,034~~$15,256 at December 31, ~~2017~~2020 and ~~2016,~~2019, respectively.

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~~Net Investment Income~~

Net investment income for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, is comprised of the following:



Years Ended December 31,	2020		2019		2018
Investment income from continuing operations:
Interest on fixed maturities	$	46,478	$	50,274	$	51,356
Dividends on equity securities	6,368		7,842		7,731
Income on other long-term investments
Investment income	1,890		3,115		8,383
Change in value (1)	(9,633)		1,114		(10,116)
Interest on mortgage loans	1,949		1,595		412
Interest on short-term investments	107		522		606
Interest on cash and cash equivalents	763		2,681		1,875
Other	205		252		307
Total investment income from continuing operations	$	48,127	$	67,395	$	60,554
Less investment expenses	8,457		6,981		7,660
Net investment income from continuing operations	$	39,670	$	60,414	$	52,894
Net investment income from discontinued operations	$	0	$	0	$	12,663
Net investment income	$	39,670	$	60,414	$	65,557

Years Ended December 31, 2017 2016 2015
Investment income from continuing operations:
Interest on fixed maturities $ 44,784
$ 43,147
$ 41,859
Dividends on equity securities 7,108
6,448
6,421
Income on other long-term investments
Investment income 6,870
1,200
1,200
Change in value ⁽¹⁾
(2,812 ) 10,178
2,313
Interest on short-term investments 120
47
3
Interest on cash and cash equivalents 1,125
352
234
Other 300
422
433
Total investment income from continuing operations $ 57,495
$ 61,794
$ 52,463
Less investment expenses 6,305
6,510
5,904
Net investment income from continuing operations $ 51,190
$ 55,284
$ 46,559
Net investment income from discontinued operations $ 49,720
$ 51,538
$ 54,222
Net investment income $ 100,910
$ 106,822
$ 100,781
(1)Represents the change in value of our interests in limited liability partnerships that are recorded on the equity method of accounting.


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

Funding Commitment

~~At December 31, 2017, pursuant~~Pursuant to ~~an agreement~~agreements with our limited liability partnership investments, we are contractually committed through July 10, 2030 to make capital contributions ~~up to $2,175~~ upon request of the ~~partnerships through~~partnerships. Our remaining potential contractual obligation was $8,484 at December 31, ~~2023.~~2020.

In addition, the Company invested $25,000 in December 2019 in a limited liability partnership investment fund which is subject to a 3-year lockup with a 60 day minimum notice, with 4 possible repurchase dates per year, after the 3-year lockup period is met. The fair value of the investment at December 31, 2020 was $24,867 and there are no remaining capital contributions with this investment.

Credit Risk

An allowance for credit losses is recorded based on a number of factors including the current economic conditions, management's expectations of future economic conditions and performance indicators, such as market value vs. amortized cost, investment spreads widening or contracting, rating actions, payment and default history. The following table contains a rollforward of the allowance for credit losses for available-for-sale fixed maturity securities at December 31, 2020:


Rollforward of allowance for credit losses for available-for-sale fixed maturity securities:
	As of
	December 31, 2020
Beginning balance, January 1, 2020	$	0
Additions to the allowance for credit losses for which credit losses were not previously recorded	5
Reductions for securities sold during the period (realized)	0
Writeoffs charged against the allowance	0
Recoveries of amounts previously written off	0
Ending balance, December 31, 2020	$	5

Table of Contents

Unrealized Appreciation and Depreciation

A summary of changes in net unrealized investment appreciation for ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, is as follows for continuing operations and discontinued operations:

2017 2016 2015
Change in net unrealized investment appreciation
Available-for-sale fixed maturities $ 25,573

$ (21,271 ) $ (37,621 )
Available-for-sale equity securities 40,168
34,179
(6,459 )
Deferred policy acquisition costs 119
(4,410 ) 11,380
Income tax effect (21,545 ) (2,975 ) 11,446
Accumulated effect of change in enacted tax rate 36,658
—
—
Total change in net unrealized investment appreciation, net of tax $ 80,973
$ 5,523

$ (21,254 )

We continually monitor the difference between our cost basis and the estimated fair value of our investments. Our accounting policy for impairment recognition requires other-than-temporary impairment ("OTTI") charges to be recorded when we determine that it is more likely than not that we will be unable to collect all amounts due according to the contractual terms of the fixed maturity security or that the anticipated recovery in fair value of the equity security will not occur in a reasonable amount of time. Impairment charges on investments are recorded based on the fair value of the investments at the measurement date or based on the value calculated using a discounted cash flow model. Credit-related impairments on fixed maturity securities that we do not plan to sell, and for which we are not more likely than not to be required to sell, are recognized in net income. Any non-credit related impairment is recognized as a component of other comprehensive income. Factors considered in evaluating whether a decline in value is other-than-temporary include: the length of time and the extent to which fair value has been less than cost; the financial condition and near-term prospects of the issuer; our intention to hold the investment; and the likelihood that we will be required to sell the investment.

~~Table of Contents~~


	2020		2019		2018
Change in net unrealized investment appreciation
Available-for-sale fixed maturities	$	45,305	$	71,648	$	(57,475)

Deferred policy acquisition costs	0		0		7,274
Income tax effect	(9,514)		(15,046)		10,543
Cumulative change in accounting principles	0		0		(191,244)

Net unrealized investment depreciation of discontinued operations, sold	0		0		6,714
Total change in net unrealized investment appreciation (depreciation), net of tax	$	35,791	$	56,602	$	(224,188)

The ~~tables on the~~ following ~~pages~~tables summarize our fixed maturity ~~and equity~~ securities that were in an unrealized loss position reported on a consolidated basis at December 31, ~~2017~~2020 and ~~2016 for continuing operations and discontinued operations.~~2019. The securities are presented by the length of time they have been continuously in an unrealized loss position. ~~It is possible that we could recognize OTTI charges in future periods on securities held at December 31, 2017 if future events or information cause us to determine that~~Non-credit related unrealized losses are recognized as a ~~decline in fair value is other-than-temporary.~~

We have evaluated the near-term prospects of the issuers of our fixed maturity securities in relation to the severity and duration of the unrealized loss and determined that these losses did not warrant the recognition of an OTTI charge in 2017 or 2016. In 2015, we recognized a $1,300 credit loss OTTI on an energy sector fixed maturity security in our Consolidated Statements of Income and Comprehensive Income. This security was in our discontinued operations portfolio. All fixed maturity securities in the investment portfolio continue to pay the expected coupon payments under the contractual terms of the securities. We believe the unrealized depreciation in valuecomponent of other ~~securities in our fixed maturity portfolio is primarily attributable to changes in~~comprehensive income and represent other market movements that are not credit related, for example interest ~~rates and not the credit quality of the issuer.~~rate changes. We have no ~~intention~~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 to our cost basis or the securities mature.

~~We have evaluated the near-term prospects~~

Table of ~~the issuers of our equity securities in relation to the severity and duration of the~~Contents



December 31, 2020	Less than 12 months					12 months or longer					Total
Type of Investment	Number of Issues	Fair Value		Gross Unrealized Depreciation		Number of Issues	Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation







AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury	5	$	86,371	$	25	0	$	0	$	0	$	86,371	$	25












Foreign bonds	1	2,000		2		0	0		0		2,000		2

Corporate bonds




Technology, media and telecommunications	1	2,020		15		0	0		0		2,020		15
Financial services	1	2,995		5		1	3,000		7		5,995		12
Mortgage-backed securities	2	8,099		53		5	118		1		8,217		54
Collateralized mortgage obligations
Government national mortgage association	2	12,394		45		1	24		0		12,418		45
Federal home loan mortgage corporation	24	97,691		758		1	26		0		97,717		758
Federal national mortgage association	10	44,677		683		0	0		0		44,677		683


Total Available-for-Sale Fixed Maturities	46	$	256,247	$	1,586	8	$	3,168	$	8	$	259,415	$	1,594

The unrealized ~~loss and, unless otherwise noted, these losses do not warrant the recognition of an OTTI charge at December 31, 2017. There were no OTTI~~ losses on ~~equity securities recognized~~our investments in ~~2017, 2016 or 2015. Our largest unrealized loss greater than~~ ~~12 months~~ ~~on an individual equity security at December 31, 2017, 2016 and 2015 was $158, $188 and $225, respectively.~~available-for-sale fixed maturities were the result of interest rate movements. We have no ~~intention~~intent to sell, ~~any of~~and it is more likely than not that we will not be required to sell, these securities ~~prior to a recovery in value, but will continue to monitor~~until the fair value ~~reported for these~~recovers to at least equal our cost basis or the securities ~~as part of our overall process to evaluate investments for OTTI recognition.~~mature.



December 31, 2019	Less than 12 months					12 months or longer					Total
Type of Investment	Number of Issues	Fair Value		Gross Unrealized Depreciation		Number of Issues	Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation







AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury	0	$	0	$	0	2	$	4,733	$	12	$	4,733	$	12
U.S. government agency	3	13,846		104		0	0		0		13,846		104



















Corporate bonds - financial services	3	10,906		142		1	4,913		88		15,819		230
Mortgage-backed securities	0	0		0		13	1,585		21		1,585		21
Collateralized mortgage obligations
Government national mortgage association	2	8,444		38		5	3,053		59		11,497		97
Federal home loan mortgage corporation	12	50,829		183		3	4,844		37		55,673		220
Federal national mortgage association	4	23,515		90		3	1,102		18		24,617		108


Total Available-for-Sale Fixed Maturities	24	$	107,540	$	557	27	$	20,230	$	235	$	127,770	$	792

Table of Contents

December 31, 2017 Less than 12 months 12 months or longer Total
Type of Investment Number
of Issues Fair
Value Gross Unrealized
Depreciation Number
of Issues Fair
Value Gross Unrealized Depreciation Fair
Value Gross Unrealized Depreciation
AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury 5
$ 10,370
$ 67
2
$ 5,765
$ 119
$ 16,135
$ 186
U.S. government agency 11
64,842
390
5
19,372
327
84,214
717
States, municipalities and political subdivisions
   General obligations
      Midwest 2
2,177
8
3
19,729
431
21,906
439
      Northeast —
—
—
1
3,644
10
3,644
10
      South 3
7,959
32
11
29,545
781
37,504
813
      West 2
5,944
18
8
25,755
445
31,699
463
   Special revenue
      Midwest 2
3,486
15
7
19,130
336
22,616
351
      Northeast 1
4,471
37
11
28,476
582
32,947
619
      South 8
7,749
107
27
69,917
1,744
77,666
1,851
      West 3
5,424
16
22
56,753
1,182
62,177
1,198
Foreign bonds 1
857
49
—
—
—
857
49
Public utilities 8
19,186
79
5
8,446
191
27,632
270
Corporate bonds
Energy 1
2,236
13
1
1,606
97
3,842
110
Industrials 10
27,773
146
2
4,275
95
32,048
241
Consumer goods and services 14
32,781
248
3
6,813
246
39,594
494
Health care 4
9,947
29
—
—
—
9,947
29
Technology, media and telecommunications 12
35,319
122
3
10,413
128
45,732
250
Financial services 22
50,144
256
4
11,389
186
61,533
442
Mortgage-backed securities 10
2,458
18
10
6,641
220
9,099
238
Collateralized mortgage obligations
Government national mortgage association 20
49,764
629
17
46,969
1,645
96,733
2,274
Federal home loan mortgage corporation 11
37,543
577
20
75,679
3,470
113,222
4,047
Federal national mortgage association 11
31,958
342
11
20,123
832
52,081
1,174
Asset-backed securities 1
992
8
—
—
—
992
8
Total Available-for-Sale Fixed Maturities 162
$ 413,380
$ 3,206
173
$ 470,440
$ 13,067
$ 883,820
$ 16,273
Equity securities
Common stocks
Public utilities —
$ —
$ —
1
$ 278
$ 30
$ 278
$ 30
Energy 2
528
120
—
—
—
528
120
Industrials 1
99
13
5
193
107
292
120
Consumer goods and services —
—
—
2
151
164
151
164
Technology, media and telecommunications 2
466
95
1
4
20
470
115
Financial services 2
193
55
1
9
12
202
67
Total Available-for-Sale Equity Securities 7
$ 1,286
$ 283
10
$ 635
$ 333
�� $ 1,921
$ 616
Total Available-for-Sale Securities 169
$ 414,666
$ 3,489
183
$ 471,075
$ 13,400
$ 885,741
$ 16,889

~~Table of Contents~~

December 31, 2016 Less than 12 months 12 months or longer Total
Type of Investment Number
of Issues Fair
Value Gross Unrealized Depreciation Number
of Issues Fair
Value Gross Unrealized Depreciation Fair
Value Gross Unrealized Depreciation
AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury 9
$ 10,800
$ 108
—
$ —
$ —
$ 10,800
$ 108
U.S. government agency 10
36,593
540
—
—
—
36,593
540
States, municipalities and political subdivisions
   General obligations
      Midwest 27
40,545
1,412
—
—
—
40,545
1,412
      Northeast 9
9,874
231
—
—
—
9,874
231
      South 37
53,699
2,355
—
—
—
53,699
2,355
      West 30
55,265
2,173
—
—
—
55,265
2,173
   Special revenue
      Midwest 41
62,937
1,433
—
—
—
62,937
1,433
      Northeast 22
54,993
2,624
—
—
—
54,993
2,624
      South 79
152,979
6,791
—
—
—
152,979
6,791
      West 44
81,676
4,052
—
—
—
81,676
4,052
Public utilities 20
38,511
423
2
2,122
24
40,633
447
Corporate bonds
Energy 8
15,938
313
3
8,232
106
24,170
419
Industrials 24
42,854
596
3
5,641
386
48,495
982
Consumer goods and services 11
21,059
295
—
—
—
21,059
295
Health care 9
20,918
151
—
—
—
20,918
151
Technology, media and telecommunications 16
41,230
516
3
10,241
303
51,471
819
Financial services 37
75,286
1,358
—
—
—
75,286
1,358
Mortgage-backed securities 16
9,611
187
5
1,198
54
10,809
241
Collateralized mortgage obligations
Government national mortgage association 36
82,430
2,261
9
13,603
505
96,033
2,766
Federal home loan mortgage corporation 41
105,775
3,165
3
5,141
241
110,916
3,406
Federal national mortgage association 27
46,633
1,091
4
4,341
243
50,974
1,334
Asset-backed securities 1
971
29
1
2,559
253
3,530
282
Total Available-for-Sale Fixed Maturities 554
$ 1,060,577
$ 32,104
33
$ 53,078
$ 2,115
$ 1,113,655
$ 34,219
Equity securities
Common stocks
Public utilities —
$ —
$ —
3
$ 120
$ 188
$ 120
$ 188
Energy —
—
—
1
163
22
163
22
Industrials —
—
—
6
239
173
239
173
Consumer goods and services 3
282
55
2
15
3
297
58
Technology, media and telecommunications 7
26
5
8
33
33
59
38
Financial services 3
53
3
2
150
64
203
67
Total Available-for-Sale Equity Securities 13
$ 361
$ 63
22
$ 720
$ 483
$ 1,081
$ 546
Total Available-for-Sale Securities 567
$ 1,060,938
$ 32,167
55
$ 53,798
$ 2,598
$ 1,114,736
$ 34,765

~~Table of Contents~~

The following tables are a reconciliation for continuing and discontinued operations of our total fixed maturity and equity securities that were in an unrealized loss position at December 31, 2017 and December 31, 2016. The securities are presented by the length of time they have been continuously in an unrealized loss position:

~~Table of Contents~~

NOTE 3. FAIR VALUE OF FINANCIAL INSTRUMENTS

Current accounting guidance on fair value measurements includes the application of a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Our financial instruments that are recorded at fair value are categorized into a three-level hierarchy, which is based upon the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (i.e., Level 1) and the lowest priority to unobservable inputs (i.e., Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the financial instrument.

Financial instruments recorded at fair value are categorized in the fair value hierarchy as follows:

•Level 1: Valuations are based on unadjusted quoted prices in active markets for identical financial instruments that we have the ability to access.

•Level 2: Valuations are based on quoted prices for similar financial instruments, other than quoted prices included in Level 1, in markets that are not active or on inputs that are observable either directly or indirectly for the full term of the financial instrument.

•Level 3: Valuations are based on pricing or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement of the financial instrument. Such inputs may reflect management's own assumptions about the assumptions a market participant would use in pricing the financial instrument.

We review our fair value hierarchy categorizations on a quarterly basis at which time the classification of certain financial instruments may change if the input observations have changed. Transfers between levels, if any, are recorded as of the beginning of the reporting period.

To determine the fair value of the majority of our investments, we utilize prices obtained from independent, nationally recognized pricing services. We obtain one price for each security. When the pricing services cannot provide a determination of fair value for a specific security, we obtain non-binding price quotes from broker-dealers with whom we have had several years of experience and who have demonstrated knowledge of the subject security. We request and utilize one broker quote per security.

In order to determine the proper classification in the fair value hierarchy for each security where the price is obtained from an independent pricing service, we obtain and evaluate the vendors' pricing procedures and inputs used to price the security, which include unadjusted quoted market prices for identical securities, such as a New York Stock Exchange closing price, and quoted prices for identical securities in markets that are not active. For fixed maturity securities, an evaluation of interest rates and yield curves observable at commonly quoted intervals, volatility, prepayment speeds, credit risks and default rates may also be performed. We have determined that these processes and inputs result in fair values and classifications consistent with the applicable accounting guidance on fair value measurements.

When possible, we use quoted market prices to determine the fair value of fixed maturities, equity securities, trading securities and short-term investments. When quoted market prices do not exist, we base estimates of fair value on market information obtained from independent pricing services and brokers or on valuation techniques that are both unobservable and significant to the overall fair value measurement of the financial instrument. Such inputs may reflect management's own assumptions about the assumptions a market participant would use in pricing the financial instrument. Our valuation techniques are discussed in more detail throughout this section.

The mortgage loan portfolio consists entirely of commercial mortgage loans. The fair value of our mortgage loans is determined by modeling performed by usour 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 ~~loan's~~security's fair ~~value, which is a Level 3 fair value measurement.~~

value.

Table of Contents

The fair value of our policy loans is equivalent to carrying value, which is a reasonable estimate of fair value and is classified as Level 2. We do not make policy loans for amounts in excess of the cash surrender value of the related policy. In all instances, the policy loans are fully collateralized by the related liability for future policy benefits for traditional insurance policies or by the policyholders' account balance for non-traditional policies.

Our other long-term investments consist primarily of our interests in limited liability partnerships that are recorded on the equity method of accounting. The fair value of the partnerships is obtained from the fund managers, which is based on the fair value of the underlying investments held in the partnerships. In management's opinion, these values represent a reasonable estimate of fair value. We have not adjusted the net asset value provided by the fund managers.

For cash and cash equivalents and accrued investment income, carrying value is a reasonable estimate of fair value due to the short-term nature of these financial instruments.

The Company formed a rabbi trust in 2014 to fund obligations under the United Fire & Casualty Company Non-qualified Deferred Compensation Plan and United Fire Group Supplemental Executive Retirement and Deferral Plan (collectively the "Executive Retirement Plans"). 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 Plans. The COLI policies invest in mutual funds, which are priced daily by independent sources. As of December 31, ~~2017,~~2020, the cash surrender value of the COLI policies was ~~$4,029,~~$8,557, which is equal to the fair value measured using Level 2 inputs, based on the underlying assets of the COLI policies, and is included in other assets in the Consolidated Balance Sheets.

Policy reserves are developed and recorded for deferred annuities, which is an interest-sensitive product, and income annuities. The fair value of the reserve liability for these annuity products is based upon an estimate of the discounted pretax cash flows that are forecast for the underlying business, which is a Level 3 fair value measurement. We base the discount rate on the current U.S. Treasury spot yield curve, which is then risk-adjusted for nonperformance risk and, for interest-sensitive business and market risk factors. The risk-adjusted discount rate is developed using interest rates that are available in the market and representative of the risks applicable to the underlying business.

~~Table of Contents~~

A summary of the carrying value and estimated fair value of our financial instruments from ~~continuing operations~~ at December 31, ~~2017~~2020 and ~~2016~~2019 is as follows:


	December 31, 2020				December 31, 2019
	Fair Value		Carrying Value		Fair Value		Carrying Value
Assets
Investments
Fixed maturities:

Available-for-sale securities	$	1,825,443	$	1,825,438	$	1,719,607	$	1,719,607
Trading securities	0		0		15,256		15,256
Equity securities	206,685		206,685		299,203		299,203


Mortgage loans	48,932		47,614		43,992		42,448

Other long-term investments	69,305		69,305		78,410		78,410
Short-term investments	175		175		175		175
Cash and cash equivalents	87,948		87,948		120,722		120,722
Corporate-owned life insurance	8,557		8,557		6,777		6,777
Liabilities



Long term debt	50,000		50,000		0		0

December 31, 2017 December 31, 2016
Fair Value Carrying Value Fair Value Carrying Value
Assets
Investments
Fixed maturities:
Held-to-maturity securities $ 150
$ 150
$ 150
$ 150
Available-for-sale securities 1,535,070
1,535,070
1,453,286
1,453,286
Trading securities 16,842
16,842
14,390
14,390
Equity securities:
Available-for-sale securities 280,913
280,913
246,370
246,370
Trading securities 6,431
6,431
5,644
5,644
Other long-term investments 49,352
49,352
51,769
51,769
Short-term investments 175
175
175
175
Cash and cash equivalents 95,562
95,562
89,194
89,194
Corporate-owned life insurance 4,029
4,029
2,592
2,592

~~A summary of the carrying value and estimated fair value of our financial instruments from discontinued operations at December 31, 2017 and 2016 is as follows:~~

December 31, 2017 December 31, 2016
Fair Value Carrying Value Fair Value Carrying Value
Assets
Investments
Fixed maturities:
Held-to-maturity securities $ 34
$ 34
$ 49
$ 48
Available-for-sale securities 1,430,025
1,430,025
1,444,840
1,444,840
Equity securities:
Available-for-sale securities 23,653
23,653
24,046
24,046
Mortgage loans 3,594
3,435
3,895
3,706
Policy loans 5,815
5,815
5,366
5,366
Other long-term investments 16,437
16,437
15,870
15,870
Cash and cash equivalents 15,851
15,851
21,659
21,659
Liabilities
Policy reserves
Annuity (accumulations) ⁽¹⁾
$ 591,702
$ 611,866
$ 646,764
$ 666,711
Annuity (benefit payments) 147,038
93,560
144,283
95,129

~~100~~

Table of Contents

The following tables present the categorization for our financial instruments measured at fair value on a recurring basis. The ~~table~~tables include financial instruments ~~from both continuing and discontinued operations~~ at December 31, ~~2017~~2020 and ~~2016:~~2019:


			Fair Value Measurements
Description	December 31, 2020		Level 1		Level 2		Level 3
AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury	$	149,938	$	0	$	149,938	$	0
U.S. government agency	64,518		0		64,518		0
States, municipalities and political subdivisions
General obligations
Midwest	81,980		0		81,980		0
Northeast	30,450		0		30,450		0
South	109,970		0		109,970		0
West	110,021		0		110,021		0
Special revenue
Midwest	125,098		0		125,098		0
Northeast	61,076		0		61,076		0
South	226,706		0		226,706		0
West	139,399		0		139,399		0
Foreign bonds	29,602		0		29,602		0
Public utilities	83,502		0		83,502		0
Corporate bonds
Energy	25,336		0		25,336		0
Industrials	43,257		0		43,257		0
Consumer goods and services	50,567		0		50,567		0
Health care	7,576		0		7,576		0
Technology, media and telecommunications	41,636		0		41,636		0
Financial services	101,031		0		100,781		250
Mortgage-backed securities	20,577		0		20,577		0
Collateralized mortgage obligations
Government national mortgage association	86,152		0		86,152		0
Federal home loan mortgage corporation	152,843		0		152,843		0
Federal national mortgage association	83,282		0		83,282		0
Asset-backed securities	926		0		0		926

Total Available-For-Sale Fixed Maturities	$	1,825,443	$	0	$	1,824,267	$	1,176
































Equity securities
Public utilities	16,320		16,320		0		0
Energy	9,918		9,918		0		0
Industrials	36,556		36,556		0		0
Consumer goods and services	32,061		32,061		0		0
Health care	24,549		24,549		0		0
Technology, Media & Telecommunications	17,109		17,109		0		0
Financial Services	69,577		69,577		0		0

Fair Value Measurements
Description December 31, 2017 Level 1 Level 2 Level 3
AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury $ 16,891
$ —
$ 16,891
$ —
U.S. government agency 122,168
—
122,168
—
States, municipalities and political subdivisions
General obligations
   Midwest 109,696
—
109,696
—
   Northeast 48,641
—
48,641
—
   South 141,519
—
141,519
—
   West 113,011
—
113,011
—
Special revenue
   Midwest 158,744
—
158,744
—
   Northeast 79,760
—
79,760
—
   South 263,512
—
263,512
—
   West 158,307
—
158,307
—
Foreign bonds 52,753
—
52,753
—
Public utilities 209,144
—
209,144
—
Corporate bonds
Energy 95,053
—
95,053
—
Industrials 221,707
—
221,707
—
Consumer goods and services 186,257
—
185,589
668
Health care 75,408
—
75,408
—
Technology, media and telecommunications 148,979
—
148,979
—
Financial services 283,151
—
275,474
7,677
Mortgage-backed securities 13,691
—
13,691
—
Collateralized mortgage obligations
Government national mortgage association 157,483
—
157,483
—
Federal home loan mortgage corporation 199,152
—
199,152
—
Federal national mortgage association 105,432
—
105,432
—
Asset-backed securities 4,636
—
3,989
647
Total Available-For-Sale Fixed Maturities $ 2,965,095
$ —
$ 2,956,103
$ 8,992
Equity securities
Common stocks
Public utilities $ 22,439
$ 22,439
$ —
$ —
Energy 14,565
14,565
—
—
Industrials 66,519
66,517
2
—
Consumer goods and services 25,688
25,688
—
—
Health care 40,103
40,103
—
—
Technology, media and telecommunications 17,508
17,508
—
—
Financial services 116,447
116,447
—
—
Nonredeemable preferred stocks 1,297
415
—
882
Total Available-for-Sale Equity Securities $ 304,566
$ 303,682
$ 2
$ 882
Total Available-for-Sale Securities $ 3,269,661
$ 303,682
$ 2,956,105
$ 9,874
TRADING
Fixed maturities
Bonds
Corporate bonds
Industrials $ 2,220
$ —
$ 2,220
$ —

~~101~~

Table of Contents


Nonredeemable preferred stocks	595		0		0		595
Total Equity Securities	$	206,685	$	206,090	$	0	$	595
Short-Term Investments	$	175	$	175	$	0	$	0
Money Market Accounts	$	24,790	$	24,790	$	0	$	0
Corporate-Owned Life Insurance	$	8,557	$	8,557	0		$	0
Total Assets Measured at Fair Value	$	2,065,650	$	239,612	$	1,824,267	$	1,771

Consumer goods and services 1,535
—
1,535
—
Health care 3,741
—
3,741
—
Technology, media and telecommunications 1,221
—
1,221
—
Financial services 5,566
—
5,566
—
Redeemable preferred stocks 2,559
2,559
—
—
Equity securities
Public utilities 874
874
—
—
Energy 190
190
—
—
Industrials 989
989
—
—
Consumer goods and services 1,314
1,314
—
—
Health care 325
325
—
—
Financial Services 198
198
—
—
Nonredeemable preferred stocks 2,541
2,541
—
—
Total Trading Securities $ 23,273
$ 8,990
$ 14,283
$ —
Short-Term Investments $ 175
$ 175
$ —
$ —
Money Market Accounts $ 16,824
$ 16,824
$ —
$ —
Corporate-Owned Life Insurance $ 4,029
$ —
$ 4,029
$ —
Total Assets Measured at Fair Value $ 3,313,962
$ 329,671
$ 2,974,417
$ 9,874

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			Fair Value Measurements
Description	December 31, 2019		Level 1		Level 2		Level 3
AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury	$	69,491	$	0	$	69,491	$	0
U.S. government agency	100,202		0		100,202		0
States, municipalities and political subdivisions
General obligations
Midwest	88,594		0		88,594		0
Northeast	31,270		0		31,270		0
South	115,203		0		115,203		0
West	110,317		0		110,317		0
Special revenue
Midwest	139,892		0		139,892		0
Northeast	61,543		0		61,543		0
South	234,666		0		234,666		0
West	144,844		0		144,844		0
Foreign bonds	5,117		0		5,117		0
Public utilities	63,651		0		63,651		0
Corporate bonds
Energy	30,124		0		30,124		0
Industrials	54,015		0		54,015		0
Consumer goods and services	49,466		0		49,466		0
Health care	9,480		0		9,480		0
Technology, media and telecommunications	27,670		0		27,670		0
Financial services	100,253		0		100,003		250
Mortgage-backed securities	6,356		0		6,356		0
Collateralized mortgage obligations
Government national mortgage association	80,356		0		80,356		0
Federal home loan mortgage corporation	124,502		0		124,502		0
Federal national mortgage association	71,845		0		71,845		0
Asset-backed securities	750		0		0		750

Total Available-For-Sale Fixed Maturities	$	1,719,607	$	0	$	1,718,607	$	1,000












TRADING
Fixed maturities
Bonds





Corporate bonds


Consumer goods and services	$	2,276	$	0	$	2,276	$	0
Health care	4,701		0		4,701		0
Technology, media and telecommunications	1,732		0		1,732		0
Financial services	2,460		0		2,460		0



Redeemable preferred stocks	4,087		4,087		0		0









Total Trading Securities	$	15,256	$	4,087	$	11,169	$	0

Fair Value Measurements
Description December 31, 2016 Level 1 Level 2 Level 3
AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury $ 23,195
$ —
$ 23,195
$ —
U.S. government agency 77,597
—
77,597
—
States, municipalities and political subdivisions
General obligations
   Midwest 144,143
—
144,143
—
   Northeast 58,409
—
58,409
—
   South 128,369
—
128,369
—
   West 113,731
—
113,731
—
Special revenue
   Midwest 168,310
—
168,142
168
   Northeast 68,065
—
68,065
—
   South 239,187
—
239,187
—
   West 131,744
—
131,744
—
Foreign bonds 65,234
—
65,234
—
Public utilities 215,674
—
215,674
—
Corporate bonds
Energy 108,860
—
108,860
—
Industrials 229,903
—
229,903
—
Consumer goods and services 181,687
—
180,590
1,097
Health care 83,123
—
83,123
—
Technology, media and telecommunications 144,612
—
144,612
—
Financial services 273,951
—
265,154
8,797
Mortgage-backed securities 17,248
—
17,248
—
Collateralized mortgage obligations
Government national mortgage association 144,460
—
144,460
—
Federal home loan mortgage corporation 174,458
—
174,458
—
Federal national mortgage association 101,896
—
101,896
—
Asset-backed securities 4,270
—
3,821
449
Total Available-For-Sale Fixed Maturities $ 2,898,126
$ —
$ 2,887,615
$ 10,511
Equity securities
Common stocks
Public utilities $ 19,671
$ 19,671
$ —
$ —
Energy 15,047
15,047
—
—
Industrials 51,794
51,794
—
—
Consumer goods and services 24,117
24,117
—
—
Health care 27,420
27,420
—
—
Technology, media and telecommunications 15,369
15,369
—
—
Financial services 115,950
111,958
—
3,992
Nonredeemable preferred stocks 1,048
453
—
595
Total Available-for-Sale Equity Securities $ 270,416
$ 265,829
$ —
$ 4,587
Total Available-for-Sale Securities $ 3,168,542
$ 265,829
$ 2,887,615
$ 15,098
TRADING
Fixed maturities
Bonds
Corporate bonds
Industrials $ 3,919
$ —
$ 3,919
$ —
Consumer goods and services 127
—
127
—
Health care 3,410
—
3,410
—
Technology, media and telecommunications 787
—
787
—

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Financial services 4,842
—
4,842
—
Redeemable preferred stocks 1,305
1,305
—
—
Equity securities
Public utilities 613
613
—
—
Energy 286
286
—
—
Industrials 877
877
—
—
Consumer goods and services 1,202
1,202
—
—
Health care 339
339
—
—
Financial Services 206
206
—
—
Nonredeemable preferred stocks 2,121
2,121
—
—
Total Trading Securities $ 20,034
$ 6,949
$ 13,085
$ —
Short-Term Investments $ 175
$ 175
$ —
$ —
Money Market Accounts $ 16,802
$ 16,802
$ —
$ —
Corporate-Owned Life Insurance $ 2,592
$ —
$ 2,592
$ —
Total Assets Measured at Fair Value $ 3,208,145
$ 289,755
$ 2,903,292
$ 15,098

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The following tables are a reconciliation for both continuing and discontinued operations of the presentation of the categorization for our financial instruments measured at fair value on a recurring basis at December 31, 2017 and 2016:

December 31, 2017 Fair Value Measurements
Description Total Level 1 Level 2 Level 3
AVAILABLE-FOR-SALE
Fixed maturities:
Continuing operations $ 1,535,070
$ —
$ 1,534,323
$ 747
Discontinued operations 1,430,025
—
1,421,780
8,245
Total Available-for-Sale Fixed Maturities $ 2,965,095
$ —

$ 2,956,103

$ 8,992
Equity securities:

Continuing operations $ 280,913
$ 280,031
$ —
$ 882
Discontinued operations 23,653
23,651
2
—
Total Available-for-Sale Equity Securities $ 304,566
$ 303,682

$ 2

$ 882
Total Available-for-Sale Securities $ 3,269,661
$ 303,682

$ 2,956,105

$ 9,874
TRADING

Fixed maturities:

Continuing operations $ 16,842
$ 2,559
$ 14,283
$ —
Discontinued operations —
—
—
—
Equity securities:

Continuing operations 6,431
6,431
—
—
Discontinued operations —
—
—
—
Total Trading Securities $ 23,273
$ 8,990

$ 14,283

$ —
SHORT-TERM INVESTMENTS

Continuing operations $ 175
$ 175
$ —
$ —
Discontinued operations —
—
—
—
Short-Term Investments $ 175
$ 175

$ —

$ —
MONEY MARKET ACCOUNTS

Continuing operations $ 6,147
$ 6,147
$ —
$ —
Discontinued operations 10,677
10,677
—
—
Money Market Accounts $ 16,824
$ 16,824

$ —

$ —
CORPORATE-OWNED LIFE INSURANCE

Continuing operations $ 4,029
$ —
$ 4,029
$ —
Discontinued operations —
—
—
—
Corporate-Owned Life Insurance $ 4,029
$ —

$ 4,029

$ —
Total Assets Measured at Fair Value $ 3,313,962
$ 329,671

$ 2,974,417

$ 9,874

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December 31, 2016 Fair Value Measurements
Description Total Level 1 Level 2 Level 3
AVAILABLE-FOR-SALE
Fixed maturities:
Continuing operations $ 1,453,286
$ —
$ 1,452,737
$ 549
Discontinued operations 1,444,840
—
1,434,878
9,962
Total Available-for-Sale Fixed Maturities $ 2,898,126
$ —

$ 2,887,615

$ 10,511
Equity securities:

Continuing operations $ 246,370
$ 243,627
$ —
$ 2,743
Discontinued operations 24,046
22,202
—
1,844
Total Available-for-Sale Equity Securities $ 270,416
$ 265,829

$ —

$ 4,587
Total Available-for-Sale Securities $ 3,168,542
$ 265,829

$ 2,887,615

$ 15,098
TRADING

Fixed maturities:

Continuing operations $ 14,390
$ 1,305
$ 13,085
$ —
Discontinued operations —
—
—
—
Equity securities:

Continuing operations 5,644
5,644
—
—
Discontinued operations —
—
—
—
Total Trading Securities $ 20,034
$ 6,949

$ 13,085

$ —
SHORT-TERM INVESTMENTS

Continuing operations $ 175
$ 175
$ —
$ —
Discontinued operations —
—
—
—
Short-Term Investments $ 175
$ 175

$ —

$ —
MONEY MARKET ACCOUNTS

Continuing operations $ 4,810
$ 4,810
$ —
$ —
Discontinued operations 11,992
11,992
—
—
Money Market Accounts $ 16,802
$ 16,802

$ —

$ —
CORPORATE-OWNED LIFE INSURANCE

Continuing operations $ 2,592
$ —
$ 2,592
$ —
Discontinued operations —
—
—
—
Corporate-Owned Life Insurance $ 2,592
$ —

$ 2,592

$ —
Total Assets Measured at Fair Value $ 3,208,145
$ 289,755

$ 2,903,292

$ 15,098


Equity securities
Public utilities	$	16,295	$	16,295	$	0	$	0
Energy	14,639		14,639		0		0
Industrials	57,330		57,330		0		0
Consumer goods and services	29,935		29,935		0		0
Health care	27,285		27,285		0		0
Financial Services	19,265		19,265		0		0
Technology, media and telecommunications	127,780		127,780		0		0
Nonredeemable preferred stocks	6,674		6,079		0		595
Total Equity Securities	$	299,203	$	298,608	$	0	$	595
Short-Term Investments	$	175	$	175	$	0	$	0
Money Market Accounts	$	9,334	$	9,334	$	0	$	0
Corporate-Owned Life Insurance	$	6,777	$	0	$	6,777	$	0
Total Assets Measured at Fair Value	$	2,050,352	$	312,204	$	1,736,553	$	1,595

The fair value of securities that are categorized as Level 1 is based on quoted market prices that are readily and regularly available.

We use a market-based approach for valuing all of our Level 2 securities and ~~receive~~submit them primarily ~~from~~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 for pricing.~~provider. Both service providers use a market approach to find pricing of similar financial instruments. The market inputs our service providers normally seek to value our securities include the following, listed in approximate order of priority: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. The method and inputs for these securities classified as Level 2 are the same regardless of industry category, credit quality, duration, geographical concentration or economic characteristics. For our mortgage-backed

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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.

At least annually, we review the methodologies and assumptions used by our valuation service providers and verify that they are reasonable and representative of the fair value of the underlying securities held in the investment portfolio. We validate the prices obtained from independent pricing services and brokers prior to their use for reporting purposes by evaluating their reasonableness on a monthly basis. Our validation process includes a review for unusual fluctuations. Unusual fluctuations outside of our expectations are independently corroborated with additional third-party sources that use similar valuation techniques as discussed above. In addition, on a quarterly basis, we also ~~randomly select~~test all securities in the portfolio and independently corroborate the valuations obtained from our third-party valuation service providers. Quarterly, we also perform deep dive analysis of the pricing method used by our third-party valuation service provider by selecting a random sample of securities by asset class and reviewing methodologies. In our opinion, the pricing obtained at December 31, ~~2017~~2020 and ~~2016~~2019 was reasonable.

For the year ended December 31, ~~2017,~~2020, the change in our available-for-sale securities categorized as Level 1 and Level 2 is the result of investment purchases that were made using funds held in our money market accounts, disposals and the change in unrealized gains on both fixed maturities and equity securities. ~~During the twelve month period ended December 31, 2017, there were no securities transferred between Level 1 and Level 2.~~

Securities categorized as Level 3 include holdings in certain private placement fixed maturity and equity securities for which an active market does not currently exist. The fair value of our Level 3 private placement securities is determined by management relying on pricing received from our independent pricing services and brokers consistent with the process to estimate fair value for Level 2 securities. However, securities are categorized as Level 3 if these quotes cannot be corroborated by other market observable data due to the unobservable nature of the brokers’

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valuation processes. ~~If pricing cannot be obtained from these sources, which occurs on~~The following table provides a ~~limited basis, management will perform a discounted cash flow analysis, using an appropriate risk-adjusted discount rate, on the underlying security to estimate fair value.~~ quantitative information about our Level 3 securities at December 31, 2020.

Quantitative Information about Level 3 Fair Value Measurements

Fair Value at

Valuation Technique(s)

Unobservable inputs

Range of weighted average significant unobservable inputs

December 31, 2020

Corporate bonds - financial services

250

Fair value equals cost

Fixed Maturities asset-backed securities

926

Discounted cash flow

Probability of default

4% - 6%

Nonredeemable preferred stocks

595

Discounted cash flow

Multiplier

3x - 4x

During the twelve month period ended December 31, ~~2017,~~2020 and 2019, there were no securities transferred in or out of Level 3.

The following table provides a summary of the changes in fair value of our Level 3 securities ~~from both continuing and discontinued operations~~ for ~~2017:~~2020:

States, municipalities and political subdivisions Corporate bonds Asset-backed securities Equities Total
Balance at January 1, 2017 $ 168
$ 9,894
$ 449
$ 4,587
$ 15,098
Unrealized gains (losses) ⁽¹⁾
(8 ) (129 ) 198
287
348
Purchases —
100
—
145
245
Disposals (160 ) (1,520 ) —
(4,137 ) (5,817 )
Balance at December 31, 2017 $ —
$ 8,345
$ 647
$ 882
$ 9,874


	Corporate bonds		Asset-backed securities		Equities		Total
Balance at January 1, 2020	$	250	$	750	$	595	$	1,595

Unrealized gains (1)	0		176		0		176





Balance at December 31, 2020	$	250	$	926	$	595	$	1,771

(1) ~~Realized~~Unrealized gains ~~(losses) are recorded as a component of earnings, whereas unrealized gains (losses)~~ are recorded as a component of comprehensive income.

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The following table provides a summary of the changes in fair value of our Level 3 securities ~~from both continuing and discontinued operations~~ for ~~2016:~~2019:


																	Corporate bonds		Asset-backed securities		Equities		Total
Balance at January 1, 2019																Balance at January 1, 2019	$	250	$	666	$	595	$	1,511
	States, municipalities and political subdivisions			Corporate bonds			Asset-backed securities			Equities			Total
Balance at January 1, 2016	$	343		$	10,895		$	1,036		$	3,978		$	16,252
Realized gains (losses) ⁽¹⁾	—			—			—			—			—
Unrealized gains (losses) ⁽¹⁾	(15		)	134			(39		)	—			80			Unrealized gains (losses) (1)	0		84		0		84
Purchases	—			—			—			727			727			Purchases	100		0		0		100
Disposals	(160		)	(1,135		)	(548		)	(118		)	(1,961		)	Disposals	(100)		0		0		(100)
Balance at December 31, 2016	$	168		$	9,894		$	449		$	4,587		$	15,098

Balance at December 31, 2019																Balance at December 31, 2019	$	250	$	750	$	595	$	1,595

(1) ~~Realized gains (losses) are recorded as a component of earnings, whereas unrealized~~Unrealized gains (losses) are recorded as a component of comprehensive income.

The fixed maturities reported as disposals relate to the receipt of principal on calls or sinking fund bonds, in accordance with the indentures.

Commercial Mortgage Loans

The following tables present the carrying value of our commercial mortgage loans and additional information at December 31, 2020 and 2019:


Commercial Mortgage Loans
Loan-to-value	December 31, 2020		December 31, 2019

Less than 65%	$	30,361	34,024
65%-75%	17,329		8,496

Total amortized cost	$	47,690	$	42,520
Valuation allowance	(76)		(72)
Total mortgage loans	$	47,614	$	42,448

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Mortgage Loans by Region
	December 31, 2020				December 31, 2019
	Carrying Value		Percent of Total		Carrying Value		Percent of Total
East North Central	$	3,245	6.8	%	$	3,245	7.6	%
Southern Atlantic	9,752		20.5		7,026		16.5
East South Central	8,197		17.2		8,358		19.7
New England	6,588		13.8		6,588		15.5
Middle Atlantic	14,936		31.2		15,076		35.5
Mountain	2,227		4.7		2,227		5.2
Other	2,745		5.8		0		0
Total mortgage loans at amortized cost	$	47,690	100.0	%	$	42,520	100.0	%


Mortgage Loans by Property Type
	December 31, 2020				December 31, 2019
	Carrying Value		Percent of Total		Carrying Value		Percent of Total
Commercial
Multifamily	$	17,038	35.7	%	$	11,741	27.6	%
Office	11,861		24.9		11,848		27.9
Industrial	10,124		21.2		10,124		23.8
Retail	2,227		4.7		2,227		5.2
Mixed use/Other	6,440		13.5		6,580		15.5
Total mortgage loans at amortized cost	$	47,690	100.0	%	$	42,520	100.0	%


Amortized Cost Basis by Year of Origination and Credit Quality Indicator
	2020		2019		2018		Total
Commercial mortgage loans:
Risk Rating:
1-2 internal grade	$	5,537	$	8,393	$	18,676	$	32,606
3-4 internal grade	0		8,496		6,588		15,084
5 internal grade	0		0		0		0
6 internal grade	0		0		0		0
7 internal grade	0		0		0		0
Total commercial mortgage loans	$	5,537	$	16,889	$	25,264	$	47,690
Current-period write-offs	0		—		—		—
Current-period recoveries	0		—		—		—
Current-period net write-offs	$	0	$	—	$	—	$	—

Commercial mortgage loans carrying value excludes accrued interest of $168. As of December 31, 2020, all loan receivables were current, with no delinquencies. The commercial mortgage loans originate with an initial loan-to-value ratio to provide sufficient collateral to absorb losses should a loan be required to foreclose. Mortgage loans are evaluated on a quarterly basis for impairment on an individual basis through a monitoring process and review of key credit indicators, such as economic trends, delinquency rates, property valuations, occupancy and rental rates and loan-to-value ratios. A loan is considered impaired when the Company believes it will not collect the contractual principal and interest set forth in the contractual terms of the loan. An internal grade is assigned to each mortgage loan, with a grade of 1 being the highest and least likely for an impairment and the lowest rating of 7 being the most likely for an impairment. An allowance for mortgage loan losses is established on each loan recognizing a loss for

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amounts which we believe will not be collected according to the contractual terms of the respective loan agreement. As of December 31, 2020, the Company had an allowance for mortgage loan losses of $76, summarized in the following rollforward:


Rollforward of allowance for mortgage loan losses:
	As of
	December 31, 2020
Beginning balance, January 1, 2020	$	72
Current-period provision for expected credit losses	4
Write-off charged against the allowance, if any	0
Recoveries of amounts previously written off, if any	0
Ending balance of the allowance for mortgage loan losses, December 31, 2020	$	76

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NOTE 4. REINSURANCE

Continuing Operations - Property and Casualty Insurance Business

Ceded and Assumed Reinsurance

Reinsurance is a contract by which one insurer, called the reinsurer, agrees to cover, under certain defined circumstances, a portion of the losses incurred by a primary insurer if a claim is made under a policy issued by the primary insurer. Our property and casualty insurance companies follow the industry practice of reinsuring a portion of their exposure by ceding to reinsurers a portion of the premium received and a portion of the risk under the policies written. We purchase reinsurance to reduce the net liability on individual risks to predetermined limits and to protect us against catastrophic losses, such as a hurricane or tornado. We do not engage in any reinsurance transactions classified as finite risk reinsurance.

We account for premiums, written and earned, and losses incurred net of reinsurance ceded. The ceding of insurance does not legally discharge us from primary liability under our policies, and we must pay the loss if the reinsurer fails to meet its obligation. We periodically monitor the financial condition of our reinsurers to confirm that they are financially stable. We believe that all of our reinsurers are in an acceptable financial condition and there were no reinsurance balances at December 31, ~~2017~~2020 for which collection is at risk that would result in a material impact on our Consolidated Financial Statements. The amount of reinsurance recoverable on paid losses totaled ~~$2,859~~$28,887 and ~~$2,447~~$3,883 at December 31, ~~2017~~2020 and ~~2016,~~2019, respectively.

We also assume both property and casualty insurance from other insurance or reinsurance companies. Most of the business we have assumed is property insurance, with an emphasis on catastrophe coverage.

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Premiums and losses and loss settlement expenses related to our ceded and assumed business are as follows:



Years Ended December 31,	2020		2019		2018
Ceded Business
Ceded premiums written	$	88,339	$	74,511	$	66,800
Ceded premiums earned	84,924		72,023		63,487
Loss and loss settlement expenses ceded	185,653		28,447		22,317

Assumed Business
Assumed premiums written	$	34,371	$	27,869	$	16,761
Assumed premiums earned	33,679		25,412		16,957
Loss and loss settlement expenses assumed	29,141		14,813		(3,954)

Years Ended December 31, 2017 2016 2015
Ceded Business
Ceded premiums written $ 61,273
$ 57,988
$ 56,916
Ceded premiums earned 61,305
57,996
56,758
Loss and loss settlement expenses ceded 33,303
13,278
3,868

Assumed Business
Assumed premiums written $ 15,179
$ 16,834
$ 18,290
Assumed premiums earned 15,059
17,037
18,396
Loss and loss settlement expenses assumed 24,688
9,814
14,415

In ~~2017,~~2020, we renewed our participation in all of our assumed programs. Loss and loss settlement expenses ceded increased in ~~2017~~2020 as compared to ~~2016,~~2019, primarily due to the August Midwest derecho, the recovery of the all lines aggregate program and increase in severity of commercial property and workers' compensation losses.

In 2019 we added 2 additional assumed programs and did not renew 1 program from 2018. Loss and loss settlement expenses ceded increased in 2019 as compared to 2018, primarily due to an increase in severity of commercial auto losses, assumed reinsurance losses, extra contractual obligations and catastrophe losses.

In ~~2016,~~2018, we renewed our participation in all of our assumed programs. ~~Loss and loss settlement expenses ceded increased in 2016 as compared to 2015, primarily due to an increase in significant large losses and catastrophe losses.~~

In 2015, we renewed our participation in all of our assumed programs and added one new program to our portfolio. The new assumed program is for international catastrophes excluding the United States with the largest exposure to European wind perils.

Refer to Note 5 "Reserves for Losses and Loss Settlement Expenses" for an analysis of changes in our overall property and casualty insurance reserves.

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Reinsurance Programs and Retentions

We have several programs that provide reinsurance coverage. This reinsurance coverage limits the risk of loss that we retain by reinsuring direct risks in excess of our retention limits. The following table provides a summary of our primary reinsurance programs. Retention amounts reflect the accumulated retentions and co-participation of all layers within a program. For ~~2017,~~2020, there was an all lines annual aggregate excess of loss program with variable retention of ~~7.02~~6.37 percent of gross net earned premium with a minimum retention of $58.5 million and a maximum of $71.5 million. Our all lines aggregate recovery is also limited to $30.0 ~~million.~~million and 75.0 percent of the program was placed. For ~~2016,~~2020, the Company recovered the maximum of $22.5 million from the all lines annual aggregate excess of loss program. For 2019, there was an all lines annual aggregate excess of loss program with a variable retention of ~~7.73~~6.66 percent of gross net earned premium with a minimum retention of ~~$52.0~~$58.5 million and a maximum of ~~$65.0~~$71.5 million. Our all lines aggregate recovery is also limited to a maximum of $30.0 million. For ~~2015,~~2018, there was an all lines annual aggregate excess of loss program with a ~~$4,000~~variable retention of 6.78 percent of gross net earned premium with a minimum retention of $58.5 million and a maximum of $71.5 million. Our all lines aggregate recovery is also limited to a maximum of $30.0 million. For 2019 and 2018, the Company did not have any recoveries from the all lines annual ~~deductible on our multi-line core program (casualty excess and property excess).~~aggregate loss program.


	2020 Reinsurance Programs
Type of Reinsurance	Stated Retention		Limits		Coverage
Casualty excess of loss	$	2,500	$	60,000	100	%	of	$	57,500
Property excess of loss	2,500		25,000		100	%	of	$	22,500
Surety excess of loss	1,500		45,000		100	%	of	$	43,500
Property catastrophe, excess	20,000		250,000		100	%	of	$	230,000
Boiler and machinery	N/A		50,000		100	%	of	$	50,000


	2017 Reinsurance Programs										2019 Reinsurance Programs
Type of Reinsurance	Stated Retention		Limits		Coverage					Type of Reinsurance	Stated Retention		Limits		Coverage
Casualty excess of loss	$	2,500	$	60,000	100	%	of	$	57,500	Casualty excess of loss	$	2,500	$	60,000	100	%	of	$	57,500
Property excess of loss	2,500		25,000		100	%	of	$	22,500	Property excess of loss	2,500		25,000		100	%	of	$	22,500
Surety excess of loss	1,500		45,000		100	%	of	$	43,500	Surety excess of loss	1,500		45,000		100	%	of	$	43,500
Property catastrophe, excess	20,000		250,000		100	%	of	$	230,000	Property catastrophe, excess	20,000		250,000		100	%	of	$	230,000
Boiler and machinery	N/A		50,000		100	%	of	$	50,000	Boiler and machinery	N/A		50,000		100	%	of	$	50,000

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2016 Reinsurance Programs
Type of Reinsurance Stated Retention Limits Coverage
Casualty excess of loss $ 2,500
$ 40,000
100 % of $ 37,500
Property excess of loss 2,500
25,000
100 % of $ 22,500
Surety excess of loss 1,500
36,000
100 % of $ 34,500
Property catastrophe, excess 20,000
250,000
100 % of $ 230,000
Boiler and machinery N/A
50,000
100 % of $ 50,000


	2015 Reinsurance Programs										2018 Reinsurance Programs
Type of Reinsurance	Stated Retention		Limits		Coverage					Type of Reinsurance	Stated Retention		Limits		Coverage
Casualty excess of loss	$	2,000	$	40,000	100	%	of	$	38,000	Casualty excess of loss	$	2,500	$	60,000	100	%	of	$	57,500
Property excess of loss	2,000		25,000		100	%	of	$	23,000	Property excess of loss	2,500		25,000		100	%	of	$	22,500
Surety excess of loss	1,500		36,000		96	%	of	$	34,500	Surety excess of loss	1,500		45,000		100	%	of	$	43,500
Property catastrophe, excess	20,000		200,000		100	%	of	$	180,000	Property catastrophe, excess	20,000		250,000		100	%	of	$	230,000
Property catastrophe, excess	200,000		250,000		90.5	%	of	$	50,000
Boiler and machinery	N/A		50,000		100	%	of	$	50,000	Boiler and machinery	N/A		50,000		100	%	of	$	50,000

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

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Discontinued Operations - Life Insurance Business

~~Ceded Reinsurance~~

United Life purchases reinsurance to limit the dollar amount of any one risk of loss. Our retention on standard individual life cases is $300. Our accidental death benefit rider on an individual policy is reinsured at 100 percent, up to a maximum benefit of $250. Our group coverage, both life and accidental death and dismemberment, is reinsured at 50.0 percent. Catastrophe excess reinsurance coverage applies when three or more insureds die in a catastrophic accident. For catastrophe excess claims, we retain the first $1,000 of ultimate net loss and the reinsurer agrees to indemnify us for the excess up to a maximum of $5,000. We supplement this coverage when appropriate with "known concentration" coverage. Known concentration coverage is typically tied to a specific event and time period, with a threshold of a minimum number of lives involved in the event, minimum event deductible (stated retention limit) and a maximum payout.

Premiums and losses and loss settlement expenses related to our ceded business are as follows:



Years Ended December 31,	2017		2016		2015		Years Ended December 31,	2020		2019		2018
Ceded Business							Ceded Business
Ceded insurance in-force	$	1,014,794	$	1,023,197	$	1,165,868	Ceded insurance in-force	$	0	$	0	$	0
Ceded premiums earned	2,722		2,768		3,161		Ceded premiums earned	0		0		716
Loss and loss settlement expenses ceded	3,726		3,359		2,113		Loss and loss settlement expenses ceded	0		0		1,473

The ceding of insurance ~~does~~did not legally discharge United Life from primary liability under its policies. United Life must pay the loss if the reinsurer fails to meet its obligations. WeUnited Life periodically ~~monitor~~monitored the financial condition of ~~our~~their reinsurers to confirm that they ~~are~~were financially stable and ~~have~~had strong credit ratings. We believe that all of ~~our~~the reinsurers ~~are~~were in an acceptable financial condition. ~~Approximately 99 percent of ceded life insurance in force as of December 31, 2017 was ceded to five reinsurers.~~

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NOTE 5. RESERVES FOR LOSSES AND LOSS SETTLEMENT EXPENSES

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.

On a quarterly basis, United Fire's team of internal ~~actuary~~actuaries performs a detailed actuarial review of IBNR reserves. This review includes a comparison of results from the most recent analysis of reserves completed by both our internal and external actuaries. Senior management meets with our internal actuary to review, on a regular and quarterly basis, the adequacy of carried reserves based on results from this actuarial analysis. There are two fundamental types or sources of IBNR reserves. We record IBNR reserves for "normal" types of claims and also specific IBNR reserves related to unique circumstances or events. A major hurricane is an example of an event that might necessitate establishing specific IBNR reserves because an analysis of existing historical data would not provide an appropriate estimate.

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Our IBNR methodologies and assumptions are reviewed periodically, but changes are infrequent. ~~Between calendar year 2015 and 2016, in~~In response to an increase in ~~miles driven by commercial vehicles,~~severity of losses and an increase in distracted driving claims, we revised our commercial automobile ~~frequency and severity~~ assumptions, resulting in an increase to our carried loss IBNR. We also reviewed our methodology and assumptions in our product liability line, associated with our construction defects business, and ~~decreased our frequency and severity~~ assumptions due to improvement in development patterns related to the statute of limitations on accident years that have matured 13 to 15 years which haven't developed to the extent we initially expected. ~~These assumption changes resulted in a release of IBNR in 2016 and 2017 for our product liability line.~~ Besides the changes to our assumptions used for our commercial automobile line and product liability line, we continually review and revise items affecting our projections of required reserves for unpaid loss and loss adjustment expense ("LAE"). Items reviewed and revised include development factors for paid and reported loss, paid development factors for allocated LAE, and the ratios of paid unallocated LAE to paid loss.

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

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The following table provides an analysis of changes in our property and casualty losses and loss settlement expense reserves for ~~2017, 2016~~2020, 2019 and ~~2015~~2018 (net of reinsurance amounts):



Years Ended December 31,	2020		2019		2018
Gross liability for losses and loss settlement expenses at beginning of year	$	1,421,754	$	1,312,483	$	1,224,183
Ceded losses and loss settlement expenses	(68,536)		(57,094)		(59,871)
Net liability for losses and loss settlement expenses at beginning of year	$	1,353,218	$	1,255,389	$	1,164,312


Losses and loss settlement expenses incurred for claims occurring during
Current year	$	887,119	$	835,507	$	785,778
Prior years	(17,652)		(5,335)		(54,167)
Total incurred	$	869,467	$	830,172	$	731,611
Losses and loss settlement expense payments for claims occurring during
Current year	$	354,635	$	333,975	$	306,032
Prior years	421,762		398,368		334,502
Total paid	$	776,397	$	732,343	$	640,534
Net liability for losses and loss settlement expenses at end of year	$	1,446,288	$	1,353,218	$	1,255,389
Ceded loss and loss settlement expenses	131,843		68,536		57,094
Gross liability for losses and loss settlement expenses at end of year	$	1,578,131	$	1,421,754	$	1,312,483

Years Ended December 31, 2017 2016 2015
Gross liability for losses and loss settlement expenses
at beginning of year $ 1,123,896
$ 1,003,895
$ 969,437
Ceded losses and loss settlement expenses (59,794 ) (54,653 ) (63,757 )
Net liability for losses and loss settlement expenses
at beginning of year $ 1,064,102
$ 949,242
$ 905,680
Losses and loss settlement expenses incurred
for claims occurring during
   Current year $ 779,966
$ 683,662
$ 560,482
   Prior years (54,253 ) (31,229 ) (40,395 )
Total incurred $ 725,713
$ 652,433
$ 520,087
Losses and loss settlement expense payments
for claims occurring during
   Current year $ 311,972
$ 277,053
$ 225,022
   Prior years 313,531
260,520
251,503
Total paid $ 625,503
$ 537,573
$ 476,525
Net liability for losses and loss settlement expenses
at end of year $ 1,164,312
$ 1,064,102
$ 949,242
Ceded loss and loss settlement expenses 59,871
59,794
54,653
Gross liability for losses and loss settlement expenses
at end of year $ 1,224,183
$ 1,123,896
$ 1,003,895

There are a multitude of factors that can impact loss reserve development. Those factors include, but are not limited to: historical data, the potential impact of various loss reserve development factors and trends including historical loss experience, legislative enactments, judicial decisions, legal developments in imposition of damages, experience with alternative dispute resolution, results of our medical bill review process, the potential impact of salvage and subrogation and changes and trends in general economic conditions, including the effects of inflation. All of these factors influence our estimates of required reserves and for long tail lines these factors can change over the course of the settlement of the claim. However, there is no precise method for evaluating the specific ~~dollar~~monetary impact of any individual factor on the development of reserves.

The significant drivers of the favorable reserve development in 2017 were our commercial liability and workers compensation lines of business. Much of the favorable commercial liability development came from loss adjustment expense and is attributed to our continued litigation management efforts combined with some favorable development coming from decreases in reserves, which were more than sufficient to pay claims as they closed. Workers compensation favorable development was due to the combined effects of decreases in claim reserves along with favorable changes affecting loss adjustment expense. Our personal lines also contributed favorable development. The lines that experienced adverse development during the year, which partially offset the favorable development mentioned earlier, were assumed reinsurance and commercial automobile. The adverse development for assumed reinsurance is due to increases in prior year reserves for unpaid claims while the adverse development for commercial auto is due to paid losses which were greater than reductions in reported loss reserves and reserves for claims incurred but not reported. No other single line of business contributed a significant portion of the total development.

The significant drivers of the favorable reserve development in 2016 were our commercial liability and workers compensation lines of business. Much of the favorable commercial liability development came from loss adjustment expense and is attributed to our continued litigation management efforts. Workers compensation favorable development was due to the combined effects of decreases in claim reserves along with favorable changes affecting loss adjustment expense. Loss adjustment expense, closely tied to loss, generally decreases when loss decreases.

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Commercial property, commercial automobile and assumed reinsurance lines of business exhibited adverse development which provided a partial offset to the favorable development previously noted. The adverse development for all three lines is due to paid loss which was greater than reductions in reported loss reserves and reserves for claims incurred but not reported. No other single line of business contributed a significant portion of the total development.

The significant drivers of the favorable reserve development in 2015 were our long-tail liability lines, workers compensation, and automobile (physical damage) lines of business. The favorable development is attributable to reductions in reserves for reported claims as well as reductions in required reserves for IBNR claims combined with continued successful management of litigation expenses. These reserve decreases were more than sufficient to offset claim payments. The favorable development was partially offset by adverse development, the majority coming from three lines which included property, assumed reinsurance and commercial auto liability. No other single line of business contributed a significant portion of the total development.

Generally, we base reserves for each claim on the estimated ultimate exposure for that claim. We believe that it is appropriate and reasonable to establish a best estimate for reserves within a range of reasonable estimates, especially when we are reserving for claims for bodily injury, disabilities and similar claims, for which settlements and verdicts can vary widely. Our reserving philosophy may result in favorable reserve development in future years that will decrease losses and loss settlement expenses for prior year claims in the year of adjustment. We realize that this

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philosophy, coupled with what we believe to be aggressive and successful claims management and loss settlement practices, has resulted in year-to-year redundancies in reserves. We believe our approach produces recorded reserves that are reasonably consistent as to their relative position within a range of reasonable reserves from year-to-year. However, conditions and trends that have affected the reserve development for a given year do change. Therefore, such development cannot be used to project future reserve redundancies or deficiencies.

We are not aware of any significant contingent liabilities related to environmental issues. 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.

Reserve Development

The significant drivers of the favorable reserve development in 2020 were workers' compensation which had $25,428 favorable development followed by commercial fire and allied lines which had $10,655 favorable development, fidelity and surety with $2,068 favorable development and personal automobile with $1,851 favorable development. The favorable development for workers' compensation was primarily from reductions in reserves for reported claims which were more than sufficient to offset paid loss. Reductions in reserves for IBNR claims also contributed favorable development in addition to LAE where reductions in reserves more than sufficient to offset payments. Commercial fire and allied lines developed favorably because reductions in reserves for reported claims combined with reductions in reserves for IBNR claims were more than sufficient to offset paid loss. LAE also contributed favorable development with reductions in reserves more than sufficient to offset payments. Fidelity and surety loss developed favorably because a reduction in reserves for IBNR claims was more than sufficient to offset both paid loss and increases in reserves for reported claims. The personal automobile line of business developed favorably because reductions of reserves for reported claims combined with reductions of reserves for IBNR claims were more than sufficient to offset paid loss. LAE also contributed favorable development with reductions in reserves more than sufficient to offset payments. Much of the favorable development was offset by unfavorable development from three lines with the largest contribution coming from commercial liability with $12,845, reinsurance assumed with $5,972 and commercial automobile with $4,024. The commercial liability line of business experienced unfavorable development due to paid loss which was greater than reductions in reserves for unpaid loss. LAE developed favorably and partially offset the unfavorable loss development. The unfavorable development for reinsurance assumed was due to paid loss which was greater than reductions in reserves for unpaid loss. The commercial automobile line of business experienced unfavorable development because paid loss was greater than reductions in reserves for unpaid loss, but a portion of the unfavorable loss development was offset by favorable development from LAE where payments were more than offset by reductions of reserves for unpaid loss adjustment expense. On an all lines combined basis, favorable development is attributable to LAE which continues to benefit from additional litigation management efforts.

The significant drivers of the favorable reserve development in 2019 were our workers' compensation partially offset by unfavorable development primarily for commercial liability and commercial automobile. Workers' compensation favorable development was primarily from reserve reductions for both reported claims and loss IBNR which were more than sufficient to offset paid loss with additional favorable development coming from LAE, where the reduction in LAE reserves was more than sufficient to offset paid LAE. The other lines with relatively small contributions to development, either favorable or unfavorable, generally experienced favorable development for LAE. Commercial liability unfavorable development was primarily from paid loss which exceeded reserve reductions for both reported claims and loss IBNR; additional unfavorable development came from LAE where paid LAE exceeded reductions of LAE reserves. Commercial liability and commercial automobile continue to be adversely affected by reserve strengthening for both reported claims and loss IBNR in response to an increase in severity of claims. Commercial liability continues to receive umbrella claims which flow in from commercial automobile.

The significant drivers of the favorable reserve development in 2018 were our workers' compensation, reinsurance assumed, commercial automobile and fidelity and surety. During 2018 the only individual line with unfavorable development was commercial liability. Workers' compensation favorable development was primarily from reserve reductions for both reported claims and loss IBNR which were more than sufficient to offset paid loss with

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additional favorable development coming from LAE where the LAE IBNR reduction was more than sufficient to offset paid LAE which continues to benefit from additional litigation management efforts when compared to prior years. Reinsurance assumed favorable development is attributable reductions in reserves for both reported claims and loss IBNR as we reviewed our book of business and released excess reserves during 2018. Commercial automobile favorable development was driven by LAE where LAE IBNR reductions were more than sufficient to offset paid LAE. Fidelity and surety favorable development is attributable reductions in reserves for both reported claims and loss IBNR which were more than sufficient to offset paid loss. Commercial liability adverse development is attributable to reserve strengthening for both reported claims and loss IBNR primarily in response to an increase in umbrella auto related claims while LAE developed favorably with reductions of LAE IBNR more than sufficient to offset paid LAE.

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The following tables provide information about incurred and paid losses and loss settlement expense development as of December 31, ~~2017,~~2020, net of reinsurance, as well as cumulative development, cumulative claim frequency and IBNR liabilities. Claim data for Mercer Insurance Group, Inc., which was acquired on March 28, 2011, is presented retrospectively.

The cumulative number of reported claims, for calendar year ~~2017~~2020, 2019 and ~~2016,~~2018, are counted for all lines of business on a per claimant per coverage basis and a single event may result in multiple claims due to the involvement of multiple individual claimants and / or multiple independent coverages. Claim counts for calendar years ~~2015~~2016 and prior are counted on a per claim and per coverage basis. Claim counts include open claims, claims that have been paid and closed, and reported claims that have been closed without the need for any payment.


Line of business: Commercial other liability
	Incurred losses and allocated loss settlement expenses, net of reinsurance																				As of December 31, 2020
	For the years ended December 31,																				Total of incurred but not reported liabilities plus expected development on reported claims		Cumulative development	Cumulative number of reported claims
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(Unaudited)
2011	$	81,522	$	64,738	$	88,371	$	88,200	$	79,591	$	80,801	$	81,463	$	80,338	$	81,694	$	81,394	$	11,202	(128)	5,634
2012			100,389		96,158		94,195		91,980		92,537		91,346		89,731		91,571		89,900		12,862		(10,489)	5,841
2013					104,982		91,460		90,502		86,119		85,399		88,816		86,082		85,999		3,498		(18,983)	6,406
2014							118,928		117,958		106,486		97,809		102,487		105,507		107,417		4,907		(11,511)	6,570
2015									137,386		125,307		120,005		127,091		129,945		131,325		10,405		(6,061)	7,732
2016											139,144		130,041		136,275		142,397		140,784		15,698		1,640	8,882
2017													139,602		139,032		152,547		156,369		24,426		16,767	8,883
2018															163,059		172,894		176,496		34,486		13,437	8,590
2019																	149,173		169,344		46,518		20,171	7,537
2020																			171,013		83,792			4,478
																	Total		$	1,310,041

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Line of business: Commercial other liability
Incurred losses and allocated loss settlement expenses, net of reinsurance As of December 31, 2017
For the years ended December 31, Total of incurred but not reported liabilities plus expected development on reported claims Cumulative development Cumulative number of reported claims
Accident Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
(Unaudited)
2008 $ 79,455
$ 84,944
$ 81,963
$ 73,892
$ 63,231
$ 78,152
$ 75,178
$ 74,115
$ 74,915
$ 75,364
$ 12,636
(4,091 ) 6,734
2009 88,298
85,991
73,545
65,831
84,286
83,660
85,761
86,757
86,543
11,268
(1,755 ) 6,123
2010 88,987
69,533
65,299
82,865
78,564
77,948
78,291
78,498
14,468
(10,489 ) 5,174
2011 81,522
64,738
88,371
88,200
79,591
80,801
81,463
15,016
(59 ) 5,328
2012 100,389
96,158
94,195
91,980
92,537
91,346
18,407
(9,043 ) 5,540
2013 104,982
91,460
90,502
86,119
85,399
9,697
(19,583 ) 6,007
2014 118,928
117,958
106,486
97,809
13,583
(21,119 ) 6,109
2015 137,386
125,307
120,005
25,634
(17,381 ) 7,083
2016 139,144
130,041
35,760
(9,103 ) 7,512
2017 139,602
68,465

5,833
Total $ 986,070

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Line of business: Commercial other liability
	Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
	For the years ended December 31,
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(Unaudited)
2011	$	6,236	$	13,670	$	26,260	$	40,595	$	50,146	$	56,150	$	62,165	$	64,541	$	66,500	$	68,052
2012			6,875		24,620		39,948		55,316		64,574		69,800		71,773		73,819		74,644
2013					9,835		25,228		39,953		54,559		65,773		72,115		75,961		78,448
2014							10,207		29,679		50,211		70,363		83,109		93,060		96,509
2015									11,185		27,182		53,901		74,292		96,339		104,472
2016											13,782		38,184		63,526		88,885		102,757
2017													17,716		43,172		70,500		91,984
2018															16,200		44,772		79,168
2019																	18,221		46,986
2020																			17,011
																	Total		$	760,031
					All outstanding liabilities for unpaid losses and loss settlement expenses before 2011, net of reinsurance														35,801
					Liabilities for unpaid losses and loss settlement expenses, net of reinsurance														$	585,811

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Line of business: Commercial other liability
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year 2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
(Unaudited)
2008 $ 9,220
$ 24,096
$ 34,482
$ 42,545
$ 47,112
$ 50,143
$ 52,659
$ 55,843
$ 59,052
$ 60,698
2009 8,375
21,151
32,073
41,696
50,098
56,789
63,149
67,733
70,814
2010 7,103
15,230
24,577
35,043
51,336
56,761
60,116
62,070
2011 6,236
13,670
26,260
40,595
50,146
56,150
62,165
2012 6,875
24,620
39,948
55,316
64,574
69,800
2013 9,835
25,228
39,953
54,559
65,773
2014 10,207
29,679
50,211
70,363
2015 11,185
27,182
53,901
2016 13,782
38,184
2017 17,716
Total $ 571,484
All outstanding liabilities for unpaid losses and loss settlement expenses before 2008, net of reinsurance 29,167
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance $ 443,753

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Line of business: Commercial fire and allied
	Incurred losses and allocated loss settlement expenses, net of reinsurance																				As of December 31, 2020
	For the years ended December 31,																				Total of incurred but not reported liabilities plus expected development on reported claims		Cumulative development	Cumulative number of reported claims
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(Unaudited)
2011	$	148,220	$	142,330	$	117,082	$	120,492	$	119,820	$	120,219	$	121,434	$	121,319	$	121,749	$	121,982	$	285	(26,238)	16,079
2012			138,602		110,448		108,774		108,047		107,958		108,623		109,687		109,480		110,245		634		(28,357)	6,466
2013					91,521		88,550		91,498		92,212		93,826		93,858		92,988		92,855		61		1,334	6,662
2014							126,216		131,198		128,762		128,185		128,503		126,811		127,068		108		852	7,935
2015									103,177		108,293		110,633		108,235		105,218		104,646		144		1,469	7,579
2016											147,473		144,208		143,721		143,724		143,108		667		(4,365)	9,849
2017													155,139		160,240		160,946		161,693		1,536		6,554	13,445
2018															143,280		146,951		146,378		2,610		3,098	10,683
2019																	164,030		155,482		4,271		(8,548)	10,992
2020																			207,207		29,773			13,368
																	Total		$	1,370,664

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Line of business: Commercial fire and allied
Incurred losses and allocated loss settlement expenses, net of reinsurance As of December 31, 2017
For the years ended December 31, Total of incurred but not reported liabilities plus expected development on reported claims Cumulative development Cumulative number of reported claims
Accident Year 2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

(Unaudited)
2008 $ 157,303
$ 141,384
$ 138,602
$ 140,321
$ 134,821
$ 116,940
$ 118,115
$ 118,376
$ 118,329
$ 118,308
$ 44
(38,995 ) 21,101
2009 113,754
106,085
105,031
105,614
87,751
87,845
87,932
88,891
89,027
154
(24,727 ) 18,038
2010 113,139
106,152
108,246
83,836
83,932
83,767
83,981
84,213
229
(28,926 ) 16,671
2011 148,220
142,330
117,082
120,492
119,820
120,219
121,434
611
(26,786 ) 16,026
2012 138,602
110,448
108,774
108,047
107,958
108,623
970
(29,979 ) 6,408
2013 91,521
88,550
91,498
92,212
93,826
1,139
2,305
6,598
2014 126,216
131,198
128,762
128,185
1,397
1,969
7,827
2015 103,177
108,293
110,633
3,370
7,456
7,465
2016 147,473
144,208
3,597
(3,265 ) 9,496
2017 155,139
16,178
11,574
Total $ 1,153,596

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Line of business: Commercial fire and allied
	Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
	For the years ended December 31,
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(Unaudited)
2011	$	85,585	$	104,800	$	109,429	$	112,497	$	116,614	$	118,183	$	120,178	$	120,731	$	121,063	$	121,157
2012			71,008		94,380		100,078		103,197		105,250		106,521		106,740		107,992		108,123
2013					59,331		78,226		82,853		86,115		89,200		91,493		92,012		92,472
2014							84,456		113,663		116,750		122,370		123,697		125,745		126,307
2015									67,217		90,454		95,515		101,367		104,115		103,975
2016											92,895		125,962		132,429		137,909		139,353
2017													99,484		137,058		145,900		152,219
2018															92,770		123,559		133,703
2019																	100,980		136,084
2020																			128,704
																	Total		$	1,242,097
					All outstanding liabilities for unpaid losses and loss settlement expenses before 2011, net of reinsurance														723
					Liabilities for unpaid losses and loss settlement expenses, net of reinsurance														$	129,290

107

Line of business: Commercial fire and allied
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year 2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
(Unaudited)
2008 $ 80,005
$ 102,804
$ 107,480
$ 112,678
$ 115,804
$ 115,897
$ 117,553
$ 117,690
$ 118,003
$ 118,059
2009 53,219
72,181
77,732
82,809
86,930
87,544
87,721
88,037
88,159
2010 52,660
72,271
78,284
80,352
82,037
83,000
83,374
83,915
2011 85,585
104,800
109,429
112,497
116,614
118,183
120,178
2012 71,008
94,380
100,078
103,197
105,250
106,521
2013 59,331
78,226
82,853
86,115
89,200
2014 84,456
113,663
116,750
122,370
2015 67,217
90,454
95,515
2016 92,895
125,962
2017 99,484
Total $ 1,049,363
All outstanding liabilities for unpaid losses and loss settlement expenses before 2008, net of reinsurance 573
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance $ 104,806

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Line of business: Commercial automobile
	Incurred losses and allocated loss settlement expenses, net of reinsurance																				As of December 31, 2020
	For the years ended December 31,																				Total of incurred but not reported liabilities plus expected development on reported claims		Cumulative development	Cumulative number of reported claims
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(Unaudited)
2011	$	84,887	$	87,299	$	90,750	$	92,519	$	92,379	$	91,336	$	90,766	$	90,838	$	90,643	$	90,972	$	32	6,085	15,262
2012			100,039		90,848		94,755		95,321		96,594		96,389		96,305		96,059		96,176		0		(3,863)	14,365
2013					104,356		98,037		102,943		103,726		104,980		105,248		104,886		106,140		356		1,784	15,528
2014							107,723		106,076		113,720		118,869		120,385		121,077		120,599		457		12,876	17,320
2015									125,506		129,816		132,206		138,987		137,395		137,335		500		11,829	20,079
2016											174,018		175,357		174,337		175,657		173,823		1,449		(195)	27,288
2017													227,919		224,553		235,110		233,159		5,553		5,240	32,838
2018															236,629		245,173		253,045		14,134		16,416	34,380
2019																	279,229		291,139		38,451		11,910	34,393
2020																			243,360		71,185			22,331
																	Total		$	1,745,748

108

Line of business: Commercial automobile
Incurred losses and allocated loss settlement expenses, net of reinsurance As of December 31, 2017
For the years ended December 31, Total of incurred but not reported liabilities plus expected development on reported claims Cumulative development Cumulative number of reported claims
Accident Year 2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

(Unaudited)
2008 $ 80,461
$ 78,391
$ 76,051
$ 76,527
$ 75,070
$ 75,021
$ 73,506
$ 73,431
$ 73,463
$ 73,487
$ 12
(6,974 ) 18,114
2009 80,021
69,328
68,569
64,121
64,516
63,605
63,560
63,567
63,509
—
(16,512 ) 15,019
2010 75,781
68,068
65,860
67,015
67,563
67,296
68,086
67,910
17
(7,871 ) 16,245
2011 84,887
87,299
90,750
92,519
92,379
91,336
90,766
311
5,879
15,246
2012 100,039
90,848
94,755
95,321
96,594
96,389
488
(3,650 ) 14,353
2013 104,356
98,037
102,943
103,726
104,980
1,310
624
15,504
2014 107,723
106,076
113,720
118,869
3,634
11,146
17,222
2015 125,506
129,816
132,206
7,874
6,700
19,875
2016 174,018
175,357
21,439
1,339
26,662
2017 227,919
58,850
28,858
Total $ 1,151,392

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Line of business: Commercial automobile
	Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
	For the years ended December 31,
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(Unaudited)
2011	$	34,332	$	50,931	$	65,021	$	79,383	$	85,348	$	87,475	$	88,609	$	89,459	$	90,515	$	90,677
2012			39,247		57,201		71,469		82,944		90,292		93,179		94,747		94,983		96,176
2013					43,592		67,630		79,663		90,780		96,375		100,058		101,580		103,037
2014							45,704		68,033		87,590		99,922		109,682		113,751		116,843
2015									50,782		78,225		99,201		118,395		129,317		134,100
2016											66,013		103,528		128,157		148,224		164,341
2017													81,311		126,644		166,170		197,893
2018															81,572		138,092		187,405
2019																	91,919		153,244
2020																			67,660
																	Total		$	1,311,376
					All outstanding liabilities for unpaid losses and loss settlement expenses before 2011, net of reinsurance														(80)
					Liabilities for unpaid losses and loss settlement expenses, net of reinsurance														$	434,293

109

Line of business: Commercial automobile
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year 2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
(Unaudited)
2008 $ 30,527
$ 47,271
$ 58,926
$ 68,629
$ 70,459
$ 72,122
$ 72,984
$ 72,990
$ 73,018
$ 73,394
2009 27,674
44,867
53,451
58,087
61,398
62,732
63,495
63,503
63,508
2010 29,329
41,141
52,953
57,947
62,231
65,169
67,622
67,852
2011 34,332
50,931
65,021
79,383
85,348
87,475
88,609
2012 39,247
57,201
71,469
82,944
90,292
93,179
2013 43,592
67,630
79,663
90,780
96,375
2014 45,704
68,033
87,590
99,922
2015 50,782
78,225
99,201
2016 66,013
103,528
2017 81,311
Total $ 866,879
All outstanding liabilities for unpaid losses and loss settlement expenses before 2008, net of reinsurance 39
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance $ 284,552

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Line of business: Workers' compensation
	Incurred losses and allocated loss settlement expenses, net of reinsurance																				As of December 31, 2020
	For the years ended December 31,																				Total of incurred but not reported liabilities plus expected development on reported claims		Cumulative development	Cumulative number of reported claims
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(Unaudited)
2011	$	39,967	$	38,481	$	35,352	$	34,309	$	33,585	$	33,314	$	33,352	$	32,707	$	32,384	$	31,621	$	159	(8,346)	3,965
2012			48,848		46,279		42,158		38,423		38,553		39,015		39,182		39,063		38,290		229		(10,558)	3,992
2013					64,048		62,579		56,369		54,584		52,761		51,753		50,984		50,349		307		(13,699)	4,255
2014							64,051		60,729		58,284		56,630		54,636		53,023		52,889		699		(11,162)	4,801
2015									53,788		55,578		51,003		46,682		46,019		44,706		578		(9,082)	5,666
2016											70,419		66,575		61,648		55,168		53,964		815		(16,455)	7,927
2017													76,184		69,528		55,982		51,874		1,182		(24,310)	8,173
2018															71,972		67,883		59,192		1,802		(12,780)	7,947
2019																	52,136		49,189		2,335		(2,947)	7,113
2020																			45,365		4,289			3,909
																	Total		$	477,439

110

Line of business: Workers' compensation
Incurred losses and allocated loss settlement expenses, net of reinsurance As of December 31, 2017
For the years ended December 31, Total of incurred but not reported liabilities plus expected development on reported claims Cumulative development Cumulative number of reported claims
Accident Year 2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

(Unaudited)
2008 $ 42,739
$ 42,301
$ 39,895
$ 41,278
$ 40,474
$ 40,010
$ 39,386
$ 39,680
$ 39,768
$ 38,664
$ 499
(4,075 ) 5,057
2009 43,560
39,009
36,294
36,837
36,823
36,158
36,014
35,026
35,012
489
(8,548 ) 4,264
2010 38,210
42,531
41,180
41,167
40,647
41,422
41,468
42,617
596
4,407
3,978
2011 39,967
38,481
35,352
34,309
33,585
33,314
33,352
747
(6,615 ) 3,930
2012 48,848
46,279
42,158
38,423
38,553
39,015
754
(9,833 ) 3,813
2013 64,048
62,579
56,369
54,584
52,761
975
(11,287 ) 4,173
2014 64,051
60,729
58,284
56,630
1,409
(7,421 ) 4,593
2015 53,788
55,578
51,003
1,753
(2,785 ) 5,311
2016 70,419
66,575
3,392
(3,844 ) 6,732
2017 76,184
7,317
5,460
Total $ 491,813

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Line of business: Workers' compensation
	Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
	For the years ended December 31,
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(Unaudited)
2011	$	10,322	$	21,678	$	26,033	$	27,497	$	28,247	$	29,022	$	29,453	$	29,700	$	29,890	$	30,573
2012			11,802		23,023		28,397		30,933		33,063		34,330		35,388		36,060		36,520
2013					14,136		30,209		38,023		42,941		45,078		47,071		47,572		48,093
2014							13,965		30,289		38,441		42,964		45,193		45,825		46,299
2015									12,063		27,304		35,229		38,424		39,305		40,034
2016											14,413		32,345		40,680		45,743		47,082
2017													14,647		31,309		38,083		41,672
2018															16,949		35,369		43,189
2019																	13,582		29,668
2020																			17,603
																	Total		$	380,733
					All outstanding liabilities for unpaid losses and loss settlement expenses before 2011, net of reinsurance														19,345
					Liabilities for unpaid losses and loss settlement expenses, net of reinsurance														$	116,050

111

Line of business: Workers' compensation
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year 2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
(Unaudited)
2008 $ 10,082
$ 21,227
$ 25,736
$ 30,123
$ 31,980
$ 33,770
$ 34,319
$ 34,862
$ 35,292
$ 36,010
2009 10,478
20,292
24,189
27,747
29,898
31,003
31,886
32,911
33,117
2010 11,821
22,606
28,765
31,887
33,119
34,143
35,052
38,973
2011 10,322
21,678
26,033
27,497
28,247
29,022
29,453
2012 11,802
23,023
28,397
30,933
33,063
34,330
2013 14,136
30,209
38,023
42,941
45,078
2014 13,965
30,289
38,441
42,964
2015 12,063
27,304
35,229
2016 14,413
32,345
2017 14,647
Total $ 342,146
All outstanding liabilities for unpaid losses and loss settlement expenses before 2008, net of reinsurance 18,973
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance $ 168,640

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Line of business: Personal
	Incurred losses and allocated loss settlement expenses, net of reinsurance																				As of December 31, 2020
	For the years ended December 31,																				Total of incurred but not reported liabilities plus expected development on reported claims		Cumulative development	Cumulative number of reported claims
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(Unaudited)
2011	$	50,014	$	48,534	$	47,090	$	47,035	$	46,968	$	47,013	$	46,733	$	46,761	$	46,752	$	46,751	$	0	(3,263)	14,848
2012			47,924		46,199		46,403		46,150		44,715		44,352		44,165		44,158		44,160		1		(3,764)	10,790
2013					39,232		38,525		37,262		37,086		36,729		36,661		36,486		36,467		1		(2,765)	9,250
2014							53,910		52,661		52,944		52,782		52,615		52,702		52,810		12		(1,100)	10,959
2015									42,848		41,088		40,336		40,368		40,220		40,194		22		(2,654)	9,548
2016											48,072		45,840		45,379		45,961		45,113		58		(2,959)	11,896
2017													60,330		59,342		58,695		58,544		119		(1,786)	14,691
2018															51,639		51,721		52,715		365		1,076	13,658
2019																	59,547		58,378		581		(1,169)	13,466
2020																			81,206		6,588			15,585
																	Total		$	516,338

112

Line of business: Personal
Incurred losses and allocated loss settlement expenses, net of reinsurance As of December 31, 2017
For the years ended December 31, Total of incurred but not reported liabilities plus expected development on reported claims Cumulative development Cumulative number of reported claims
Accident Year 2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

(Unaudited)
2008 $ 49,961
$ 44,686
$ 43,408
$ 43,672
$ 43,577
$ 43,535
$ 43,515
$ 43,482
$ 42,882
$ 42,881
$ —
(7,080 ) 15,821
2009 34,597
33,519
31,945
32,026
32,134
32,029
32,085
32,070
31,867
2
(2,730 ) 13,502
2010 36,686
34,347
33,928
33,865
33,403
33,413
33,432
33,213
29
(3,473 ) 13,325
2011 50,014
48,534
47,090
47,035
46,968
47,013
46,733
74
(3,281 ) 14,843
2012 47,924
46,199
46,403
46,150
44,715
44,352
108
(3,572 ) 10,769
2013 39,232
38,525
37,262
37,086
36,729
172
(2,503 ) 9,232
2014 53,910
52,661
52,944
52,782
236
(1,128 ) 10,899
2015 42,848
41,088
40,336
396
(2,512 ) 9,490
2016 �� 48,072
45,840
733
(2,232 ) 11,674
2017 60,330
3,310
13,049
Total $ 435,063

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Line of business: Personal
	Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
	For the years ended December 31,
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(Unaudited)
2011	$	36,489	$	43,801	$	45,306	$	45,949	$	46,487	$	46,573	$	46,575	$	46,650	$	46,752	$	46,751
2012			30,415		41,979		43,375		44,448		43,569		44,139		44,158		44,158		44,159
2013					25,505		32,788		34,297		35,306		36,155		36,323		36,397		36,466
2014							37,055		47,912		49,710		51,837		52,018		52,543		52,519
2015									29,551		37,431		39,027		39,428		39,865		40,029
2016											32,999		40,910		42,660		44,046		44,618
2017													42,135		53,111		55,982		57,169
2018															37,410		47,433		49,464
2019																	40,544		52,390
2020																			54,181
																	Total		$	477,746
					All outstanding liabilities for unpaid losses and loss settlement expenses before 2011, net of reinsurance														620
					Liabilities for unpaid losses and loss settlement expenses, net of reinsurance														$	39,210

113

Line of business: Personal
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year 2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
(Unaudited)
2008 $ 32,032
$ 40,114
$ 41,735
$ 42,414
$ 42,613
$ 42,627
$ 42,748
$ 42,748
$ 42,787
$ 42,881
2009 22,086
27,926
29,801
30,829
31,564
31,644
31,718
31,804
31,837
2010 24,499
29,867
31,340
32,076
32,771
32,997
33,165
33,158
2011 36,489
43,801
45,306
45,949
46,487
46,573
46,575
2012 30,415
41,979
43,375
44,448
43,569
44,139
2013 25,505
32,788
34,297
35,306
36,155
2014 37,055
47,912
49,710
51,837
2015 29,551
37,431
39,027
2016 32,999
40,910
2017 42,135
Total $ 408,654
All outstanding liabilities for unpaid losses and loss settlement expenses before 2008, net of reinsurance 1,326
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance $ 27,735

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


	December 31, 2020
Net outstanding liabilities for unpaid losses and allocated loss settlement expenses:
Commercial other liability	$	585,811
Commercial fire and allied	129,290
Commercial automobile	434,293
Commercial workers' compensation	116,050
Personal	39,210
All other lines	43,045
Net outstanding liabilities for unpaid losses and allocated loss settlement expenses	1,347,699
Net outstanding liabilities for unpaid unallocated loss settlement expenses	97,379
Fair value adjustment (purchase accounting adjustment for Mercer acquisition)	1,210
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance	1,446,288

Reinsurance recoverable on unpaid losses and allocated loss settlement expenses:
Commercial other liability	29,497
Commercial fire and allied	42,481
Commercial automobile	3,334
Commercial workers' compensation	47,130
Personal	8,867
All other lines	1,692
Reinsurance recoverable on unpaid losses and allocated loss settlement expenses	133,001

Reinsurance fair value amortization (purchase accounting adjustment for Mercer acquisition)	(1,158)
Total reinsurance recoverable on unpaid losses and loss settlement expenses	131,843
Total gross liability for unpaid losses and loss settlement expenses	$	1,578,131

114

December 31, 2017
Net outstanding liabilities for unpaid losses and allocated loss settlement expenses:
Commercial other liability $ 443,753
Commercial fire and allied 104,806
Commercial automobile 284,552
Commercial workers' compensation 168,640
Personal 27,735
All other lines 43,709
Net outstanding liabilities for unpaid losses and allocated loss settlement expenses 1,073,195
Net outstanding liabilities for unpaid unallocated loss settlement expenses 88,193
Fair value adjustment (purchase accounting adjustment for Mercer acquisition) 2,924
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance 1,164,312

Reinsurance recoverable on unpaid losses and allocated loss settlement expenses:
Commercial other liability 20,367
Commercial fire and allied 10,806
Commercial automobile 1,994
Commercial workers' compensation 26,799
Personal 26
All other lines 2,675
Reinsurance recoverable on unpaid losses and allocated loss settlement expenses 62,667
Reinsurance fair value amortization (purchase accounting adjustment for Mercer acquisition) (2,796 )
Total reinsurance recoverable on unpaid losses and loss settlement expenses 59,871
Total gross liability for unpaid losses and loss settlement expenses $ 1,224,183

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The following is supplementary information about average historical claims duration as of December 31, ~~2017.~~2020.


	Average annual percentage payout of incurred claims by age, net of reinsurance
	Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
	(Unaudited)
Commercial other liability	9.6	%	16.0	%	18.0	%	16.8	%	12.3	%	7.2	%	4.3	%	2.7	%	1.7	%	1.9	%
Commercial fire and allied	64.6	%	21.4	%	4.8	%	3.8	%	2.2	%	1.3	%	0.7	%	0.7	%	0.2	%	0.1	%
Commercial automobile	35.9	%	20.3	%	15.5	%	12.5	%	7.5	%	3.1	%	1.7	%	0.9	%	1.2	%	0.2	%
Commercial workers' compensation	29.5	%	32.4	%	14.8	%	7.6	%	3.5	%	2.5	%	1.5	%	1.2	%	0.9	%	2.2	%
Personal	71.3	%	19.7	%	3.8	%	2.4	%	0.7	%	0.7	%	0.1	%	0.1	%	0.1	%	0	%

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Average annual percentage payout of incurred claims by age, net of reinsurance
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
(Unaudited)
Commercial other liability 10.1 % 15.9 % 16.4 % 15.3 % 11.9 % 6.4 % 5.6 % 4.0 % 3.9 % 2.2 %
Commercial fire and allied 64.4 % 20.9 % 4.8 % 3.7 % 3.0 % 0.9 % 0.9 % 0.4 % 0.2 % — %
Commercial automobile 39.9 % 20.9 % 15.1 % 10.9 % 5.6 % 2.8 % 1.8 % 0.1 % — % 0.5 %
Commercial workers' compensation 26.1 % 29.0 % 13.6 % 8.1 % 4.3 % 3.2 % 1.8 % 4.5 % 0.8 % 1.9 %
Personal 71.9 % 19.1 % 4.0 % 2.5 % 1.1 % 0.5 % 0.3 % 0.1 % 0.1 % 0.2 %

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

Statutory capital and surplus in regards to policyholders at December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018 and statutory net income (loss) for the years then ended are as follows:


	Statutory Capital and Surplus		Statutory Net Income (Loss)
2020
Property and casualty business	$	671,599	$	(17,705)

2019
Property and casualty business	$	707,571	$	(22,393)

2018
Property and casualty business	$	774,257	$	219,065
Life, accident and health business(1)	0		3,548

Statutory Capital and Surplus Statutory Net Income (Loss)
2017
Property and casualty business $ 757,443
$ 19,687
Life, accident and health business 144,533
5,485
2016
Property and casualty business $ 770,908
$ 39,087
Life, accident and health business 139,806
(3,177 )
2015
Property and casualty business $ 722,404
$ 75,554
Life, accident and health business 138,855
(1,524 )
(1)The 2018 Life, accident and health business only includes results prior to the closing of the sale of United Life Insurance Company, which closed on March 30, 2018. Prior to the closing of the sale, United Fire & Casualty Company owned United Life Insurance Company, accordingly, the property and casualty statutory capital and surplus includes life, accident and health statutory capital and surplus, and therefore represents our total consolidated statutory capital and surplus.


~~(1)~~	Because United Fire & Casualty Company owns United Life Insurance Company, the property and casualty statutory capital and surplus includes life, accident and health statutory capital and surplus, and therefore represents our total consolidated statutory capital and surplus.

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

The Company executed a $50,000 surplus note private placement transaction on December 15, 2020 among UF&C and Federated Mutual and Federated Life. See additional details in Note 14 "Debt."

State laws and regulations generally limit the amount of funds that an insurance company may distribute to a parent as a dividend without Commissioner approval. As a holding company with no independent operations of its own, United Fire Group, Inc. relies on dividends received from its insurance company subsidiaries in order to pay dividends to its common shareholders. Dividends payable by our insurance subsidiaries are governed by the laws in the states in which they are domiciled. In all cases, these state laws permit the payment of dividends only from earned surplus arising from business operations. For example, under Iowa law, the maximum dividend or distribution that may be paid within a 12-month period without prior approval of the Iowa Insurance Commissioner is generally restricted to the greater of 10 percent of statutory surplus as of the preceding December 31, or net income of the preceding calendar year on a statutory basis, not greater than earned statutory surplus. Other states in which our insurance company subsidiaries are domiciled may impose similar restrictions on dividends and distributions. Based on these restrictions, at December 31, ~~2017,~~2020, our insurance company subsidiary, United Fire & Casualty, ~~Company,~~ is able to make a ~~maximum~~minimum of ~~$35,744~~$66.8 million in dividend payments without prior regulatory approval. At December 31, ~~2017~~,2020, we were in compliance with applicable state laws and regulations. These restrictions will not have a material impact in meeting our cash obligations. In addition, United Fire Group, Inc. maintains a credit agreement, as discussed in Part II, Note 14 "Credit Facility," which permits us to borrow up to an aggregate principal amount of $50,000 and allows the Company to increase the aggregate amount of the commitments thereunder by up to $100,000.

We paid dividends to our common shareholders of ~~$27,337, $24,591~~ $28,526, $32,662 and ~~$21,658~~$105,408 in ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively. Payments of any future dividends and the amounts of such dividends, however, will depend upon factors such as net income, financial condition, capital requirements, and general business conditions. We will only pay dividends if declared by our Board of Directors, out of funds legally available, and subject to any other restrictions that may be applicable to us.

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In ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, United Fire & Casualty Company received dividends from its wholly owned subsidiaries of ~~$13,300, $26,000~~$62,400, $6,300 and ~~$16,500,~~$8,500, respectively. In ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, United Fire & Casualty Company paid dividends

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to United Fire Group, Inc. totaling ~~$40,000,~~ ~~$24,000~~ $4,000, $57,000 and ~~$22,500,~~$105,000, respectively. These intercompany dividend payments are eliminated for reporting in our Consolidated Financial Statements.

A majority of our custodial assets are subject to a tri-party agreement between one of our subsidiary companies, United Life, the custodian, and the Iowa Insurance Commissioner. Under this agreement, as long as United Life maintains the minimum aggregate value of securities in the account (based on its legal reserve requirements), it is free to invest, withdraw or loan these funds or pay dividends using these funds without approval from the Commissioner. Investment of these funds is subject to the same limitations on asset class and credit quality imposed by the Commissioner on all insurance company invested assets. Investment income derived from these custodied funds is available for general corporate purposes and to satisfy corporate obligations without approval from the Commissioner.

At ~~December 31, 2017~~, United Life had net admitted assets, on a statutory basis, of $1,497,955, $215,488 in excess of its legal reserve requirement. Therefore, any restriction on funds deposited by United Life with the Iowa Insurance Commissioner would not materially affect its financial position or results of operations and its cash flows are sufficient to meet its operational requirements. Under the material transaction and dividend standards described above, United Life currently is not able to enter into an affiliate transaction and/or pay a dividend without approval from the Commissioner.

Our property and casualty ~~and life insurance~~ subsidiaries are required to prepare and file statutory-basis financial statements in conformity with the National Association of Insurance Commissioners ("NAIC") Accounting Practices and Procedures Manual, subject to any deviations prescribed or permitted by the applicable insurance commissioner and/or director. The accounting principles used to prepare these statutory-basis financial statements follow prescribed or permitted accounting practices that differ from GAAP. Prescribed statutory accounting principles include state laws, regulations and general administrative rules issued by the state of domicile, as well as a variety of publications and manuals of the NAIC. Permitted accounting practices encompass all accounting practices not prescribed, but allowed by the state of domicile. No material permitted accounting practices were used to prepare our statutory-basis financial statements during ~~2017, 2016~~2020, 2019 and ~~2015.~~2018. Statutory accounting principles primarily differ from GAAP in that policy acquisition and certain sales inducement costs are charged to expense as incurred, goodwill is amortized, life insurance reserves are established based on different actuarial assumptions and the values reported for investments, pension obligations and deferred taxes are established on a different basis.

We are directed by the state insurance departments' solvency regulations to calculate a required minimum level of statutory capital and surplus based on insurance risk factors. The risk-based capital results are used by the NAIC and state insurance departments to identify companies that merit regulatory attention or the initiation of regulatory action. ~~Both United Life and~~ United Fire & Casualty Company and its property and casualty insurance subsidiaries and affiliates had statutory capital and surplus in regards to policyholders well in excess of their required levels at December 31, ~~2017.~~2020.

NOTE 7. FEDERAL INCOME TAX

The Tax Act was enacted on December 22, 2017. The Tax Act significantly revised the U.S. corporate income tax laws including lowering the U.S. federal corporate tax rate from 35 percent to 21 percent, effective January 1, 2018.

In December 2017, the ~~Securities and Exchange Commission~~SEC staff issued Staff Accounting Bulletin No. 118, which addresses how a company recognizes provisional amounts when a company does not have the necessary information available, prepared or analyzed in reasonable detail to complete its accounting for the effect of the changes in the Tax Act. The measurement period ends when a company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. As of December 31, ~~2017~~2018 we ~~had not~~have completed accounting for the tax effects of enactment of the Tax Act ~~however~~and no adjustments were made during the measurement period.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100 percent of taxable income for ~~certain items, we have made a reasonable estimate~~taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the ~~effects on our deferred tax balances. For other items where we could not make~~five preceding taxable years to generate a ~~reasonable estimate, we are still using existing accounting guidance and~~refund of previously paid income taxes. The Company has considered the ~~provisions~~implications of the CARES Act on its tax ~~laws that were in~~provision and has included an income tax benefit of $18.6 million as the result of this Act.

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place prior to the enactment. For the items were we were able to determine a reasonable estimate, we recognized a provisional amount in income tax expense from continuing operations of $21,884. The Company will continue to refine this estimated provisional adjustment as we gain a more through understanding of the tax law and the Company will take future guidance into consideration when it becomes available.

Federal income tax expense (benefit) from both continuing and discontinued operations is composed of the following:



Years Ended December 31,	2020		2019		2018
Current	$	(46,861)	$	(7,843)	$	18,493
Deferred	(9,948)		9,902		(21,791)
Total	$	(56,809)	$	2,059	$	(3,298)

Years Ended December 31, 2017 2016 2015
Current $ 1,989
$ 3,239
$ 37,649
Deferred (26,719 ) 5,524
(5,324 )
Total $ (24,730 ) $ 8,763
$ 32,325

A reconciliation of income tax expense (benefit) computed at the applicable federal tax rate of ~~35.0~~21.0 percent in 2020, 2019 and 2018 to the amount recorded in the accompanying Consolidated Statements of Income and Comprehensive Income is as follows:



Years Ended December 31,	2020		2019		2018
Computed expected income tax expense (benefit)	$	(35,598)	$	3,544	$	5,114

The CARES Act	(18,562)		0		0
Tax-exempt municipal bond interest income	(3,669)		(3,961)		(4,235)
Nontaxable dividend income	(517)		(594)		(591)
Goodwill impairment	3,169		0		0
Valuation allowance reduction	0		0		(329)

Compensation	695		1,638		(497)
Reinsurance	0		998		0
Research and development credit	(2,045)		0		0
Other, net	(282)		434		(2,760)
Consolidated federal income tax expense (benefit)	$	(56,809)	$	2,059	$	(3,298)

Reconciliation of consolidated federal income tax expense (benefit) from:
Continuing operations	$	(56,809)	$	2,059	$	(11,405)
Gain on sale of discontinued operations	0		0		7,544
Discontinued operations	0		0		563
Consolidated federal income tax expense (benefit)	$	(56,809)	$	2,059	$	(3,298)

Years Ended December 31, 2017 2016 2015
Computed expected income tax expense $ 9,202
$ 20,533
$ 42,508
Impact of enactment of Tax Act (21,884 ) —
—
Tax-exempt municipal bond interest income (8,875 ) (8,330 ) (7,669 )
Nontaxable dividend income (1,540 ) (1,317 ) (1,337 )
Valuation allowance reduction (547 ) (547 ) (548 )
Other, net (1,086 ) (1,576 ) (629 )
Consolidated federal income tax expense (benefit) $ (24,730 ) $ 8,763
$ 32,325

Reconciliation of consolidated federal income tax expense (benefit) from:
Continuing operations $ (29,220 ) $ 8,379
$ 30,050
Discontinued operations 4,490
384
2,275
Consolidated federal income tax expense (benefit) $ (24,730 ) $ 8,763
$ 32,325

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We ~~remeasure~~measure certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which ~~under the new Tax Act~~ is 21.0 percent. ~~However, we are still analyzing certain aspects of the Tax Act which could impact our calculations and the measurement of our deferred tax balances.~~ The significant components of our net deferred tax liability ~~from both continuing and discontinued operations~~ at December 31, ~~2017~~2020 and ~~2016~~2019 are as follows:



December 31,	2017			2016			December 31,	2020		2019
Deferred tax liabilities							Deferred tax liabilities
Net unrealized appreciation on investment securities:							Net unrealized appreciation on investment securities:
Equity securities	$	50,839		$	70,640		Equity securities	$	33,096	$	48,652
All other securities	7,599			3,711			All other securities	22,082		12,568
Deferred policy acquisition costs	30,404			52,031			Deferred policy acquisition costs	18,289		19,801
Investments in partnerships	3,653			8,112			Investments in partnerships	964		2,156
Prepaid pension cost	3,416			4,449			Prepaid pension cost	4,553		4,441
Net bond discount accretion	666			1,134			Net bond discount accretion	383		357
Depreciation	593			854			Depreciation	4,187		1,908
Revaluation of investment basis⁽¹⁾	545			1,342			Revaluation of investment basis (1)	325		377
Identifiable intangible assets ⁽¹⁾	1,838			3,311			Identifiable intangible assets (1)	1,391		1,540
Capitalized Software							Capitalized Software	4,891		0
Other	1,934			2,831			Other	1,568		1,416
Gross deferred tax liability	$	101,487		$	148,415		Gross deferred tax liability	91,729		$	93,216
Deferred tax assets							Deferred tax assets
Financial statement reserves in excess of income tax reserves	$	17,036		$	29,174		Financial statement reserves in excess of income tax reserves	$	23,851	$	20,845
Unearned premium adjustment	19,389			30,697			Unearned premium adjustment	18,979		20,816
Net operating loss carryforwards	329			718			Net operating loss carryforwards	0		1,708
Underfunded benefit plan obligation	12,375			13,374			Underfunded benefit plan obligation	4,295		9,072
Post-retirement benefits other than pensions	11,942			20,221			Post-retirement benefits other than pensions	9,533		10,785
Other-than-temporary impairment of investments	2,313			4,658			Other-than-temporary impairment of investments	1,974		2,094
Contingent ceding commission accrual	317			2,769
Alternative minimum tax credit carryforward	6,011			1,194

Compensation expense related to stock options	3,289			4,578			Compensation expense related to stock options	2,307		2,394

Nonqualified deferred compensation							Nonqualified deferred compensation	2,066		1,623
Other	4,145			6,162			Other	3,795		3,293
Gross deferred tax asset	$	77,146		$	113,545
Valuation allowance	(329		)	(718		)

Deferred tax asset	$	76,817		$	112,827		Deferred tax asset	$	66,800	$	72,630
Net deferred tax liability	$	24,670		$	35,588		Net deferred tax liability	$	24,929	$	20,586

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

Due to our determination that we may not be able to fully realize the benefits of the net operating losses ("NOLs") acquired in the purchase of American Indemnity Financial Corporation in 1999, which are only available to offset the future taxable income of our property and casualty insurance operations and are further limited as to the amount that can be utilized in any given year, we have recorded a valuation allowance against these NOLs that totaled $329 and ~~$718~~, respectively, at December 31, 2017 and 2016. Based on a yearly review, we determine whether the benefit of the NOLs can be realized, and, if so, the decrease in the valuation allowance is recorded as a reduction to current federal income tax expense. If NOLs expire during the year, the decrease in the valuation allowance is offset with a corresponding decrease to the deferred income tax asset. The valuation allowance was reduced by $547 during 2017 due to the realization of $1,565 in NOLs, partially offset by a $158 adjustment related to the enactment of the Tax Act, for a net reduction of $389. The valuation allowance was reduced by $547 in 2016 due to the realization of $1,565 in NOLs. No portion of the NOLs expired in 2017 and $1,565 will expire in 2018. At December 31, 2017, we had $6,011 of alternative minimum tax credit carryforwards.

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NOTE 8. EMPLOYEE BENEFITS

We offer various benefits to our employees including a noncontributory defined benefit pension plan, an employee/retiree health and dental benefit ~~plan, a profit-sharing plan and an employee stock ownership~~ plan.

Pension and ~~Post-retirement~~Post-Retirement Benefit Plans

We offer a noncontributory defined benefit pension plan in which all of our employees are eligible to participate after they have completed one year of service, attained 21 years of age and have met the hourly service requirements. Retirement benefits under our pension plan are based on the number of years of service and level of compensation. Our policy to fund the pension plan on a current basis to not less than the minimum amounts required by the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended, is to assure that plan assets will be adequate to provide retirement benefits. We estimate that we will contribute approximately ~~$6,400~~$10,000 to the pension plan in ~~2018.~~2021.

In December 2020, the Company made the decision to amend the noncontributory defined benefit pension plan. The Company plans to amend the pension plan by discontinuing the noncontributory defined benefit pension plan and put in place a noncontributory cash balance pension plan effective July 1, 2021. All benefits under the noncontributory defined benefit pension plan will stop accruing on June 30, 2021.

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We also offer a health and dental benefit plan to all of our eligible employees and retirees that consists of ~~two~~2 programs: (1) the self-funded employee health and dental benefit plan and (2) the self-funded (pre-65) and fully-funded (post-65) retiree health and dental benefit plan (the "post-retirement benefit plan"). Effective January 1, 2017, there was a plan amendment, which included the following changes: eliminated the pre-65 retirement plan with a $500 hundred dollar deductible; for retirements after January 1, 2017, the retiree will pay 50 percent of the lower cost supplemental plan if they are 65 or older and 100 percent of the premium if less than 65; and removed spousal coverage after the death of the participant. The financial impact of the changes were reflected in accumulated other comprehensive income at December 31, 2016. Effective January 1, 2019, there was a plan amendment, which requires spouses to pay 100 percent of the medical, dental & vision premiums and the subsidy for the post-65 retirees, which is based off the lowest cost Medicare Supplement Plan (Plan 1). The financial impact of the changes were reflected in accumulated other comprehensive income at December 31, 2019.

Subsequent to the completion of the financial statements as of December 31, 2020, the Company made the decision to change the post-retirement benefit plan to a voluntary plan funded exclusively by participants, commencing at the start of 2023. The impact of this decision will be reflected in the financial statements subsequent to December 31, 2020. As of December 31, 2020, the post-retirement benefit obligation was $31,666. This benefit obligation, along with the unrecognized prior service costs, will be released into the Consolidated Statement of Income and Other Comprehensive Income over the next two years.

The post-retirement benefit plan provides health and dental benefits to our retirees (and covered dependents) who have met the service and participation requirements stipulated by the post-retirement benefit plan. The third party administrators for the post-retirement benefit plan are responsible for making medical and dental care benefit payments. Participants are required to submit claims for reimbursement or payment to the claims administrator within twelve months after the end of the calendar year in which the charges were incurred. An unfunded benefit obligation is reported for the post-retirement benefit plan in the accompanying Consolidated Balance Sheets.

Investment Policies and Strategies

Our investment policy and objective for the pension plan is to generate long-term capital growth and income by way of a diversified investment portfolio along with appropriate employer contributions, which will allow us to provide for the pension plan's benefit obligation.

The investments held by the pension plan at December 31, ~~2017~~2020 include the following asset categories:

•Fixed income securities, which may include bonds, and convertible securities;

•Equity securities, which may include various types of stock, such as large-cap, mid-cap, small-cap, and international stocks;

•Pooled separate accounts, which includes two separate funds, a core plus bond separate account and a real estate separate account;

•An arbitrage fund, which is a fund that takes advantage of price discrepancies, primarily equity securities, for the same asset in different markets;

•A group annuity contract that is administered by United Life, a former subsidiary of United Fire; and

•Cash and cash equivalents, which include money market funds.

We have an internal investment/retirement committee, which includes our Chief Executive Officer, Chief Investment Officer, and Chief Operating Officer, all of whom receive monthly information on the value of the pension plan

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assets and their performance. Quarterly, the committee meets to review and discuss the performance of the pension plan assets as well as the allocation of investments within the pension plan.

As of December 31, ~~2017,~~2020, we had ~~six~~6 external investment managers that are allowed to exercise investment discretion, subject to limitations, if any, established by the investment/retirement committee. We utilize multiple

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investment managers in order to maximize the pension plan's investment return while mitigating risk. None of our investment managers uses leverage in managing the pension plan. Annually, the investment/retirement committee meets with each investment manager to review the investment manager's goals, objectives and the performance of the assets they manage. The decision to establish or terminate a relationship with an investment manager is at the discretion of our investment/retirement committee.

We consider historical experience for comparable investments and the target allocations we have established for the various asset categories of the pension plan to determine the expected long-term rate of return, which is an assumption as to the average rate of earnings expected on the pension plan funds invested, or to be invested, by the pension plan, to provide for the settlement of benefits included in the projected pension benefit obligation. Investment securities, in general, are exposed to various risks, such as fluctuating interest rates, credit standing of the issuer of the security and overall market volatility. Annually, we perform an analysis of expected long-term rates of return based on the composition and allocation of our pension plan assets and recent economic conditions.

The following is a summary of the pension plan's actual and target asset allocations at December 31, ~~2017~~2020 and ~~2016~~2019 by asset category:


									Target														Target
Pension Plan Assets	2017		% of Total		2016		% of Total		Allocation					Pension Plan Assets	2020		% of Total		2019		% of Total		Allocation

Fixed maturity securities - corporate bonds	$	11,003	7.0	%	$	9,451	7.4	%	0	%	-	15	%	Fixed maturity securities - corporate bonds	$	21,718	8.7	%	$	13,250	6.7	%	0	%	-	15	%
Redeemable preferred stock	3,216		2.0		3,144		2.4		0	%	-	10	%	Redeemable preferred stock	3,534		1.4		2,929		1.5		0	%	-	10	%
Equity securities	87,603		55.6		69,770		54.3		50	%	-	70	%	Equity securities	149,413		60.0		117,117		58.7		50	%	-	70	%
Pooled separate accounts														Pooled separate accounts
Core plus bond separate account fund	17,948		11.4		10,401		8.1		0	%	-	40	%	Core plus bond separate account fund	26,266		10.6		20,505		10.3		0	%	-	40	%
U.S. property separate account fund	15,502		9.8		14,330		11.1		0	%	-	25	%	U.S. property separate account fund	22,269		9.0		22,114		11.1		0	%	-	25	%
Arbitrage fund	8,506		5.4		8,292		6.5		0	%	-	10	%	Arbitrage fund	9,873		4.0		9,245		4.6		0	%	-	10	%
United Life annuity	9,846		6.2		9,377		7.3		5	%	-	10	%	United Life annuity	11,398		4.6		10,855		5.4		0	%	-	10	%
Cash and cash equivalents	4,020		2.6		3,665		2.9		0	%	-	10	%	Cash and cash equivalents	4,264		1.7		3,451		1.7		0	%	-	10	%
Total plan assets	$	157,644	100.0	%	$	128,430	100.0	%						Total plan assets	$	248,735	100.0	%	$	199,466	100.0	%

The investment return expectations for the pension plan are used to develop the asset allocation based on the specific needs of the pension plan. Accordingly, equity securities comprise the largest portion of our pension plan assets, as they yield the highest rate of return. The United Life annuity, which is the fifth largest asset category and was originally written by our former life insurance subsidiary in 1976, provides a guaranteed rate of return. The interest rate on the group annuity contract is determined annually.

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

Valuation of Investments

Fixed Maturity and Equity Securities

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

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The fair value of fixed maturity securities categorized as Level 2 is determined by management based on fair value

information reported in the custodial statements received from Plan’s investment managers, which is derived from

recent trading activity of the underlying security in the financial markets. These securities represent various taxable bonds held by the pension plan. These securities categorized as Level 2 are valued in the same manner as described in ~~Part II, Item 8,~~ Note 3 "Fair Value of Financial Instruments" and have the same controls in place.

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Pooled Separate Accounts

The pension plan invests in two pooled separate account funds, a core plus bond separate account fund and a U.S. property separate account fund. Investments in the core plus bond separate account fund are stated at fair value as provided by the administrator of the fund based on the fair value of the underlying assets owned by the fund. The fair value measurement is classified within Level 2 of the fair value hierarchy. The fair value of the investments in the U.S. property separate account fund is provided by the administrator of the fund based on the net asset value of the fund. The net asset value is based on the fair value of the underlying properties included in the fund. The fair value of the underlying properties are based on property appraisals conducted by an independent third party. The fair value measurement is classified within Level 3 of the fair value hierarchy. We have not adjusted the net asset value provided by the custodian for either fund.

Arbitrage Fund

The fair value of the arbitrage fund is determined based on its net asset value, which is obtained from the custodian and determined monthly with issuances and redemptions of units of the fund made, based on the net asset value per unit as determined on the valuation date. We have not adjusted the net asset value provided by the custodian.

United Life Annuity

The United Life group annuity contract, which is a deposit administration contract, is stated at contract value as determined by United Life. Under the group annuity contract, the plan's investment account is credited with compound interest on the average account balance for the year. The interest rate is equivalent to the ratio of net investment income to mean assets of United Life, net of investment expenses.

Cash and Cash Equivalents

Cash and cash equivalents primarily consist of insured cash and money market funds held with various financial institutions. Interest is earned on a daily basis. The fair value of these funds approximates their cost basis due to their short-term nature.

Fair Value Measurement

The following tables present the categorization of the pension plan's assets measured at fair value on a recurring basis at December 31, ~~2017~~2020 and ~~2016:~~2019:


			Fair Value Measurements
Description	December 31, 2020		Level 1		Level 2		Level 3
Fixed maturity securities - corporate bonds	$	21,718	$	0	$	21,718	$	0
Redeemable preferred stock	3,534		3,534		0		0
Equity securities	149,413		149,413		0		0
Pooled separate accounts
Core plus bond separate account fund	26,266		0		26,266		0
U.S. property separate account fund	22,269		0		0		22,269
Arbitrage fund	9,873		0		9,873		0
Money market funds	4,260		4,260		0		0
Total assets measured at fair value	$	237,333	$	157,207	$	57,857	$	22,269

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Fair Value Measurements
Description December 31, 2017 Level 1 Level 2 Level 3
Fixed maturity securities - corporate bonds $ 11,003
$ —
$ 11,003
$ —
Redeemable preferred stock 3,216
3,216
—
—
Equity securities 87,603
87,603
—
—
Pooled separate accounts
Core plus bond separate account fund 17,948
—
17,948
—
U.S. property separate account fund 15,502
—
—
15,502
Arbitrage fund 8,506
—
8,506
—
Money market funds 4,011
4,011
—
—
Total assets measured at fair value $ 147,789
$ 94,830
$ 37,457
$ 15,502

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			Fair Value Measurements									Fair Value Measurements
Description	December 31, 2016		Level 1		Level 2		Level 3		Description	December 31, 2019		Level 1		Level 2		Level 3
Fixed maturity securities - corporate bonds	$	9,451	$	—	$	9,451	$	—	Fixed maturity securities - corporate bonds	$	13,250	$	0	$	13,250	$	0
Redeemable preferred stock	3,144		3,144		—		—		Redeemable preferred stock	2,929		2,929		0		0
Equity securities	69,770		69,770		—		—		Equity securities	117,117		117,117		0		0
Pooled separate accounts									Pooled separate accounts
Core plus bond separate account fund	10,401		—		10,401		—		Core plus bond separate account fund	20,505		0		20,505		0
U.S. property separate account fund	14,330		—		—		14,330		U.S. property separate account fund	22,114		0		0		22,114
Arbitrage fund	8,292		—		8,292		—		Arbitrage fund	9,245		0		9,245		0
Money market funds	3,659		3,659		—		—		Money market funds	3,448		3,448		0		0
Total assets measured at fair value	$	119,047	$	76,573	$	28,144	$	14,330	Total assets measured at fair value	$	188,608	$	123,494	$	43,000	$	22,114

There were no transfers of assets in or out of Level 1 or Level 2 during the period.

The fair value of investments categorized as Level 1 is based on quoted market prices that are readily and regularly available.

The fair value of fixed maturity securities categorized as Level 2 is determined by management based on fair value information reported in the custodial statements, which is derived from recent trading activity of the underlying security in the financial markets. These securities represent various taxable bonds held by the pension plan. These securities categorized as Level 2 are valued in the same manner as described in Part II, Item 8, Note 3 "Fair Value of Financial Instruments" and have the same controls in place.

The fair value of the arbitrage fund and bond and mortgage pooled separate account fund are categorized as Level 2 since there are no restrictions as to the pension plan's ability to redeem its investment at the net asset value of the fund as of the reporting date.

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


	U.S. property separate account fund
Balance at January 1, 2020	$	22,114

Unrealized gains	155





Balance at December 31, 2020	$	22,269

U.S. property separate account fund
Balance at January 1, 2017 $ 14,330
Unrealized gains 1,172
Balance at December 31, 2017 $ 15,502

U.S. property separate account fund
Balance at January 1, 2016 $ 11,252
Unrealized gains 1,078
Purchases 2,000
Balance at December 31, 2016 $ 14,330


	U.S. property separate account fund
Balance at January 1, 2019	$	20,841

Unrealized gains	1,273





Balance at December 31, 2019	$	22,114

Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires us to make various estimates and assumptions that affect the reporting of net periodic benefit cost, plan assets and plan obligations for each plan at the date of the financial statements. Actual results could differ from these estimates. One significant estimate relates to the calculation of the benefit obligation for each plan. We annually establish the discount rate, which is an estimate

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of the interest rate at which these benefits could be effectively settled, that is used to determine the present value of the respective plan's benefit obligations as of December 31. In estimating the discount rate, we look to rates of return on high-quality, fixed-income investments currently available and expected to be available during the period to maturity of the respective plan's benefit obligations.

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~~In October 2014, the~~

The Society of Actuaries ~~finalized a new~~("SOA") is an actuarial organization that periodically reviews mortality ~~table~~data and ~~a new~~publishes mortality tables and improvement ~~scale.~~scales. In October 2019, the SOA released the Pri-2012 mortality tables for private sector retirement plans in the United States. The mortality assumptions are based on the Pri-2012 white collar base rate mortality projected generationally using the Principal Mortality Improvement Scale ("Principal 2016-10"). The Principal 2016-10 scale is based on latest mortality improvement scale, ~~was further refined~~the MP-2020 model issued by the ~~Society of Actuaries in 2015, 2016~~SOA with a few user-selected assumptions: 10- year convergence period on age and ~~2017. These updated tables reflect improved life expectancies~~cohort and ~~an expectation that the trend will continue.~~long-term rate assumptions using sex-distinct and age based rated developed from Social Security Trustee Reports. We have reviewed these updated tables and have updated the mortality assumptions based on this information and also based on research provided by our external actuaries. We will continue to monitor mortality assumptions and make changes as appropriate to reflect additional research and our resulting best estimate of future mortality rates.

Assumptions Used to Determine Benefit Obligations

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


Weighted-average assumptions as of	Pension Benefits				Post-retirement Benefits
December 31,	2020		2019		2020		2019
Discount rate	2.58	%	3.32	%	2.58	%	3.32	%
Rate of compensation increase	2.75		3.00		N/A		N/A

Weighted-average assumptions as of Pension Benefits Post-retirement Benefits
December 31, 2017 2016 2017 2016
Discount rate 3.65 % 4.17 % 3.65 % 4.17 %
Rate of compensation increase 3.00
3.00
N/A
N/A

~~Decreasing~~Declining interest rates resulted in a decrease in the discount rates we use to value our respective plan's benefit obligations at December 31, ~~2017~~2020 compared to December 31, ~~2016.~~2019.

Assumptions Used to Determine Net Periodic Benefit Cost

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


Weighted-average assumptions as of	Pension Benefits						Post-retirement Benefits						Weighted-average assumptions as of	Pension Benefits						Post-retirement Benefits
January 1,	2017		2016		2015		2017		2016		2015		January 1,	2020		2019		2018		2020		2019		2018
Discount rate	4.17	%	4.21	%	3.86	%	4.17	%	4.21	%	3.86	%	Discount rate	3.32	%	4.18	%	3.65	%	3.32	%	4.18	%	3.65	%
Expected long-term rate of return on plan assets	7.50		7.50		7.50		N/A		N/A		N/A		Expected long-term rate of return on plan assets	6.70		6.70		6.70		N/A		N/A		N/A
Rate of compensation increase	3.00		3.00		3.00		N/A		N/A		N/A		Rate of compensation increase	3.00		3.00		3.00		N/A		N/A		N/A

Assumed Health Care Cost Trend Rates


	Health Care Benefits				Dental Claims
Years Ended December 31,	2020		2019		2020		2019
Health care cost trend rates assumed for next year	7.00	%	6.75	%	3.00	%	4.00	%
Rate to which the health care trend rate is assumed to decline (ultimate trend rate)	4.50	%	4.50	%	N/A		N/A
Year that the rate reaches the ultimate trend rate	2031		2030		N/A		N/A

Health Care Benefits Dental Claims
Years Ended December 31, 2017 2016 2017 2016
Health care cost trend rates assumed for next year 7.00 % 7.00 % 4.00 % 4.00 %
Rate to which the health care trend rate is assumed to decline (ultimate trend rate) 4.50 % 4.50 % N/A
N/A
Year that the rate reaches the ultimate trend rate 2026
2025
N/A
N/A

Assumed health care cost trend rates have a significant effect on the amounts reported for the post-retirement benefit plan. A 1.0 percent change in assumed health care cost trend rates would have the following effects:


	1% Increase		1% Decrease
Effect on the net periodic post-retirement health care benefit cost	$	643	$	(494)
Effect on the accumulated post-retirement benefit obligation	5,520		(4,451)

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1% Increase 1% Decrease
Effect on the net periodic post-retirement health care benefit cost $ 1,126
$ (883 )
Effect on the accumulated post-retirement benefit obligation 9,487
(7,698 )

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Benefit Obligation and Funded Status

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


	Pension Benefits				Post-retirement Benefits
Years Ended December 31,	2020		2019		2020		2019
Reconciliation of benefit obligation
Benefit obligation at beginning of year	$	252,374	$	202,156	$	31,001	$	30,973
Service cost	10,829		7,989		1,728		1,823
Interest cost	8,266		8,320		1,014		1,274
Actuarial loss (gain)	38,920		39,598		(1,084)		(1,806)
Adjustment for plan amendment	(32,175)		0		0		0
Benefit payments	(6,470)		(5,689)		(993)		(1,263)
Benefit obligation at end of year (1)	$	271,744	$	252,374	$	31,666	$	31,001
Reconciliation of fair value of plan assets
Fair value of plan assets at beginning of year	$	199,466	$	164,819	$	0	$	0
Actual return on plan assets	45,739		36,336		0		0
Employer contributions	10,000		4,000		993		1,263
Benefit payments	(6,470)		(5,689)		(993)		(1,263)
Fair value of plan assets at end of year	$	248,735	$	199,466	$	0	$	0
Funded status at end of year	$	(23,009)	$	(52,908)	$	(31,666)	$	(31,001)

Pension Benefits Post-retirement Benefits
Years Ended December 31, 2017 2016 2017 2016
Reconciliation of benefit obligation
Benefit obligation at beginning of year $ 171,876
$ 160,390
$ 46,785
$ 72,175
Service cost 6,857
6,490
2,021
3,728
Interest cost 7,060
6,654
1,927
3,015
Actuarial loss 26,963
2,215
6,326
1,468
Adjustment for plan amendment —
—
—
(32,289 )
Benefit payments (4,407 ) (3,873 ) (1,331 ) (1,312 )
Benefit obligation at end of year ⁽¹⁾
$ 208,349
$ 171,876
$ 55,728
$ 46,785
Reconciliation of fair value of plan assets
Fair value of plan assets at beginning of year $ 128,430
$ 106,600
$ —
$ —
Actual return on plan assets 22,225
9,320
—
—
Employer contributions 11,396
16,383
1,331
1,311
Benefit payments (4,407 ) (3,873 ) (1,331 ) (1,311 )
Fair value of plan assets at end of year $ 157,644
$ 128,430
$ —
$ —
Funded status at end of year $ (50,705 ) $ (43,446 ) $ (55,728 ) $ (46,785 )
(1)For the pension plan, the benefit obligation is the projected benefit obligation. For the post-retirement benefit plan, the benefit obligation is the accumulated post-retirement benefit obligation.


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

Our accumulated pension benefit obligation was ~~$184,436~~$271,515 and ~~$152,620~~$226,196 at December 31, ~~2017~~2020 and ~~2016,~~2019, respectively.

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


	Pension Benefits				Post-retirement Benefits
Years Ended December 31	2020		2019		2020		2019
Amounts recognized in AOCI
Unrecognized prior service cost	$	(32,175)	$	0	$	(20,863)	$	(28,947)
Unrecognized actuarial (gain) loss	66,864		64,059		6,627		8,086
Total amounts recognized in AOCI	$	34,689	$	64,059	$	(14,236)	$	(20,861)

Pension Benefits Post-retirement Benefits
Years Ended December 31 2017 2016 2017 2016
Amounts recognized in AOCI
Unrecognized prior service cost $ —
$ —
$ (26,880 ) $ (32,289 )
Unrecognized actuarial (gain) loss 60,571
49,745
25,235
20,756
Total amounts recognized in AOCI $ 60,571
$ 49,745
$ (1,645 ) $ (11,533 )

We anticipate amortization of the net actuarial losses for our pension plan in ~~2018~~2021 to be ~~$4,287~~.$3,995. We anticipate amortization of the net actuarial losses for our post-retirement benefit plan in ~~2018~~2021 to be ~~$2,355~~.$260

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Net Periodic Benefit Cost

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


	Pension Plan						Post-retirement Benefit Plan
Years Ended December 31,	2020		2019		2018		2020		2019		2018

Net periodic benefit cost
Service cost	$	10,829	$	7,989	$	8,701	$	1,728	$	1,823	$	2,998
Interest cost	8,266		8,320		7,500		1,014		1,274		2,009
Expected return on plan assets	(13,539)		(10,784)		(10,502)		0		0		0
Amortization of prior service cost	0		0		0		(8,084)		(8,684)		(5,409)
Amortization of net loss	3,914		3,603		4,287		375		894		2,355
Net periodic benefit cost	$	9,470	$	9,128	$	9,986	$	(4,967)	$	(4,693)	$	1,953

Pension Plan Post-retirement Benefit Plan
Years Ended December 31, 2017 2016 2015 2017 2016 2015

Net periodic benefit cost
Service cost $ 6,857
$ 6,490
$ 6,675
$ 2,021
$ 3,728
$ 5,220
Interest cost 7,060
6,654
5,999
1,927
3,015
2,856
Expected return on plan assets (9,650 ) (7,952 ) (7,800 ) —
—
—
Amortization of prior service cost —
—
—
(5,409 ) —
—
Amortization of net loss 3,562
3,968
4,546
1,846
1,518
2,920
Net periodic benefit cost $ 7,829
$ 9,160
$ 9,420
$ 385
$ 8,261
$ 10,996

A portion of the service cost component of net periodic pension and postretirement benefit costs are capitalized and amortized as part of deferred acquisition costs and is included in the income statement line titled "amortization of deferred policy acquisition costs." The portion not related to the compensation and the other components of net periodic pension and postretirement benefit costs are included in the income statement line titled "other underwriting expenses."

Projected Benefit Payments

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


														2021		2022		2023		2024		2025		2026 - 2030
Pension benefits													Pension benefits	$	7,330	$	7,920	$	8,860	$	9,850	$	10,970	$	67,280

	2018		2019		2020		2021		2022		2023 - 2027
Pension benefits	$	5,620	$	6,140	$	6,780	$	7,520	$	8,240	$	52,950
Post-retirement benefits	$	1,350	$	1,540	$	1,700	$	1,880	$	2,050	$	13,310	Post-retirement benefits	$	940	$	990	$	1,010	$	1,050	$	1,090	$	6,520

Profit-Sharing Plan ~~and Employee Stock Ownership Plan~~

We have a profit-sharing plan in which employees who meet service requirements are eligible to participate. The amount of our contribution is discretionary and is determined annually, but cannot exceed the amount deductible for federal income tax purposes. Our contribution to the profit-sharing plan for ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, was ~~$4,987,~~ ~~$2,904~~$4,637, $4,096, and ~~$7,706~~,$7,607, respectively.

Prior to October 31, 2015 we had an employee stock ownership plan (the "ESOP") for the benefit of eligible employees and their beneficiaries. In June 2015, the plan administrator decided to merge the ESOP into the United Fire Group, Inc. 401K Plan effective October 31, 2015. Participant ESOP account balances were transferred to each participant’s 401K Plan.

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NOTE 9. STOCK-BASED COMPENSATION

Non-Qualified Employee Stock Award Plan

The United Fire Group, Inc. 2008 Stock Plan (the "2008 Stock Plan") authorized the issuance of restricted and unrestricted stock awards, stock appreciation rights, incentive stock options, and non-qualified stock options for up to 1,900,000 shares of United Fire common stock to employees. In May 2014, the Registrant's shareholders approved an additional 1,500,000 shares of United Fire common stock issuable at any time and from time to time pursuant to the 2008 Stock Plan, among other amendments, and renamed such plan as the United Fire Group, Inc. Stock Plan (as amended, the "Stock Plan"). At December 31, ~~2017,~~2020, there were ~~996,828~~700,680 authorized shares remaining available for future issuance. The Stock Plan is administered by the Board of Directors, which determines those employees who will receive awards, when awards will be granted, and the terms and conditions of the awards. The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Stock Plan. Pursuant to the Stock Plan, the Board of Directors may, at its sole discretion, grant awards to our employees who are in positions of substantial responsibility with United Fire.

Options granted pursuant to the Stock Plan are granted to buy shares of United Fire's common stock at the market value of the stock on the date of grant. ~~All outstanding option awards~~Options granted prior to March 2017 vest and are exercisable in installments of 20.0 percent of the number of shares covered by the option award each year from the grant date, unless the Board of Directors authorizes the acceleration of vesting. Options granted after March 2017 vest and are exercisable in installments of 33.3 percent of the number of shares covered by the option award each year from the grant date, unless the Board of Directors authorizes the acceleration of vesting. To the extent not exercised, vested option awards accumulate and are exercisable by the awardee, in whole or in part, in any subsequent year included in the option period, but not later than 10 years from the grant date. Restricted and unrestricted stock awards granted pursuant to the Stock Plan are granted at the market value of our common stock on the date of the grant. Restricted stock awards fully vest after 3 years or 5 years from the date of issuance, unless accelerated upon the approval of the Board of Directors, at which time United Fire common stock will be issued to the awardee. All awards are generally granted free of charge to the eligible employees of United Fire as designated by the Board of Directors.

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


Authorized Shares Available for Future Award Grants	Year Ended December 31, 2017		From Inception to December 31, 2017		Authorized Shares Available for Future Award Grants	Year Ended December 31, 2020	From Inception to December 31, 2020
Beginning balance	1,248,651		1,900,000		Beginning balance	834,910	1,900,000
Additional shares authorized	—		1,500,000		Additional shares authorized	0	1,500,000
Number of awards granted	(259,405	)	(2,871,971	)	Number of awards granted	(172,478)	(3,288,899)
Number of awards forfeited or expired	7,582		468,799		Number of awards forfeited or expired	38,248	589,579
Ending balance	996,828		996,828		Ending balance	700,680	700,680
Number of option awards exercised	136,827		1,085,895		Number of option awards exercised	30,900	1,474,089
Number of unrestricted stock awards granted	1,145		8,470		Number of unrestricted stock awards granted	0	10,090
Number of restricted stock awards vested	1,198		38,168		Number of restricted stock awards vested	63,600	164,378

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

The United Fire Group, Inc. Non-Employee Director Stock Plan (formerly known as the 2005 Non-Qualified ~~Non-Employee~~Non- Employee Director Stock Option and Restricted Stock ~~Plan~~Plan) (the "Director Stock Plan") authorizes the issuance of restricted stock awards and non-qualified stock options to purchase shares of ~~United Fire's~~UFG's common stock to non-employee directors. On May 20, 2020, the Company’s shareholders approved amendments to the Director Stock Plan, previously approved by the Company’s Board of Directors, to (i) increase the number of shares available for future awards under the Director Stock Plan from 300,000 to 450,000, (ii) extend the expiration date of the Director Stock Plan from December 31, 2020 to December 31, 2029, (iii) allow for the grant of awards of restricted stock units, and (iv) rename the Director Stock Plan as the "United Fire Group, Inc. Non-Employee Director Stock Plan." At December 31, ~~2017,~~2020, we had ~~61,813~~160,135 authorized shares available for future issuance.

The Board of Directors has the authority to determine which non-employee directors receive awards, when options and restricted stock shall be granted, the option price, the option expiration date, the date of grant, the vesting schedule of options or whether the options shall be immediately vested, the terms and conditions of options and

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restricted stock (other than those terms and conditions set forth in the plan) and the number of shares of common stock to be issued pursuant to an option agreement or restricted stock agreement (subject to limits set forth in the plan). The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Director Stock Plan.

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


Authorized Shares Available for Future Award Grants	Year Ended December 31, 2020	From Inception to December 31, 2020
Beginning balance	34,863	300,000
Additional authorization	150,000	150,000

Number of awards granted	(24,728)	(313,868)
Number of awards forfeited or expired	0	24,003
Ending balance	160,135	160,135
Number of option awards exercised	14,728	133,820
Number of restricted stock awards vested	14,300	98,491

Authorized Shares Available for Future Award Grants Year Ended December 31, 2017 From Inception to December 31, 2017
Beginning balance 74,771
300,000
Number of awards granted (12,958 ) (262,190 )
Number of awards forfeited or expired —
24,003
Ending balance 61,813
61,813
Number of option awards exercised 36,808
89,281
Number of restricted stock awards vested 22,716
54,272

Stock-Based Compensation Expense

In ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, we recognized stock-based compensation expense of ~~$4,808~~, ~~$3,696~~$4,991, $6,152 and ~~$2,510~~,$5,249, respectively. Stock-based compensation expense is recognized over the vesting period of the stock options.

As of December 31, ~~2017,~~2020, we had ~~$8,350~~$4,095 in stock-based compensation expense that has yet to be recognized through our results of operations. We expect this compensation to be recognized in subsequent years according to the following table, except with respect to awards that are accelerated by the Board of Directors, in which case we will recognize any remaining compensation expense in the period in which the awards are accelerated.


2018	$	4,028
2019	2,776
2020	1,116
2021	390		2021	$	2,624
2022	40		2022	1,107
2023			2023	269
2024			2024	83
2025			2025	12
Total	$	8,350	Total	$	4,095

Analysis of Award Activity

The analysis below details the option award activity for ~~2017~~2020 and the awards outstanding at December 31, ~~2017,~~2020, for both of our plans and ad hoc options, which were granted prior to the adoption of the other plans:


Options	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Life (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2020	829,714	$	35.39
Granted	110,470	44.08
Exercised	(45,628)	21.93
Cancelled/Forfeited	(1,300)	29.20

Outstanding at December 31, 2020	893,256	$	37.16	5.16	$	179
Exercisable at December 31, 2020	663,788	$	34.46	4.21	$	179

Options Shares Weighted-Average Exercise Price
Weighted-Average Remaining Life (in years)
Aggregate Intrinsic Value
Outstanding at January 1, 2017 1,120,677
$ 29.08

Granted 159,709
41.75

Exercised (173,635 ) 27.52

Forfeited or expired (5,700 ) 28.66

Outstanding at December 31, 2017 1,101,051
$ 31.16
6.52 $ 15,875
Exercisable at December 31, 2017 495,089
$ 26.77
3.22 $ 9,311

Intrinsic value is the difference between our share price on the last day of trading (i.e., December 31, ~~2017)~~2020) and the price of the options when granted and represents the value that would have been received by option holders had they exercised their options on that date. These values change based on the fair market value of our shares. The intrinsic value of options exercised totaled ~~$3,159,~~ ~~$4,339~~$299, $2,055 and ~~$1,546~~$5,850 in ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively.

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The analysis below details the award activity for the restricted stock and restricted stock unit awards outstanding at December 31, ~~2017:~~2020:


Restricted stock awards	Shares	Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2020	246,750	$	43.31
Granted	101,130	37.87
Vested	(77,900)	39.93
Forfeited	(52,097)	41.40
Non-vested at December 31, 2020	217,883	$	42.45

Restricted stock awards Shares Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2017 182,086
$ 34.08
Granted 111,509
41.94
Vested (23,914 ) 36.77
Forfeited (1,882 ) 40.27
Non-vested at December 31, 2017 267,799
$ 37.07

In ~~2017, 2016~~2020, 2019 and ~~2015~~2018 we recognized ~~$2,987,~~ $3,734, $~~1,766~~4,659 and ~~$924~~,$3,877, respectively, in compensation expense related to the restricted stock and restricted stock unit awards. At December 31, ~~2017,~~2020, we had ~~$5,107~~ $3,074 in compensation expense that has yet to be recognized through our results of operations related to the restricted stock and restricted stock unit awards. The intrinsic value of the non-vested restricted stock and restricted stock unit awards outstanding ~~totaled~~ ~~$2,279~~, ~~$2,747~~totaled $5,469 and ~~$1,520~~$10,165 at December 31, ~~2017, 2016~~2020 and ~~2015,~~2019, respectively.

Assumptions

The weighted-average grant-date fair value of the options granted under our plans has been estimated using the Black-Scholes option pricing model with the following weighted-average assumptions:


December 31,	2020			2019			2018
Risk-free interest rate	1.4		%	2.57		%	2.79		%
Expected volatility	22.26		%	26.40		%	21.79		%
Expected option life (in years)	7			7			7
Expected dividends (in dollars)	$	1.32		$	1.24		$	1.12
Weighted-average grant-date fair value of options granted during the year (in dollars)	$	6.96		$	12.97		$	8.90

December 31, 2017 2016 2015
Risk-free interest rate 2.23 % 1.53 % 1.94 %
Expected volatility 27.58 % 25.44 % 21.92 %
Expected option life (in years)
7
7
7
Expected dividends (in dollars)
$ 1.00
$ 0.88
$ 0.80
Weighted-average grant-date fair value of options granted during the year (in dollars)
$ 9.93
$ 8.42
$ 4.98

The following table summarizes information regarding the stock options outstanding and exercisable at December 31, ~~2017:~~2020:


				Options Outstanding				Options Exercisable
Range of Exercise Prices				Number Outstanding (in shares)	Weighted-Average Remaining Contractual Life (in years)	Weighted-Average Exercise Price		Number Exercisable (in shares)	Weighted-Average Exercise Price
$	20.40	-	29.02	92,415	2.14	$	23.81	87,070	$	23.63
29.03		-	29.37	182,462	3.93	29.12		182,462	29.12
29.38		-	40.61	239,097	4.04	35.47		210,663	34.87
40.62		-	44.88	210,260	6.08	42.87		158,190	42.86
44.89		-	54.26	169,022	8.56	48.44		25,403	54.11

$	20.40	-	54.26	893,256	5.16	$	37.16	663,788	$	34.46

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Options Outstanding Options Exercisable
Range of Exercise Prices
Number Outstanding (in shares)
Weighted-Average Remaining Contractual Life (in years)
Weighted-Average Exercise Price
Number Exercisable (in shares)
Weighted-Average Exercise Price
$ 15.01
- 21.00 100,805
3.23 $ 20.24
100,805
$ 20.24
21.01
- 28.00 159,478
4.52 23.38
127,077
23.23
28.01
- 35.00 508,630
6.42 29.49
235,833
29.74
35.01
- 43.00 332,138
8.63 40.77
31,374
39.84
$ 15.01
- 43.00 1,101,051
6.52 $ 31.16
495,089
$ 26.77

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NOTE 10. SEGMENT INFORMATION

On September 19, 2017, the Company announced that it had agreed to sell its subsidiary, United Life, ~~Insurance Company,~~ to Kuvare. The sale closed on March 30, 2018. As a result, our life insurance business ~~has been~~was considered held for sale and reported as discontinued operations in the Consolidated Financial Statements and all comparable prior periods have been presented to conform to the current year presentation. ~~The sale is expected to close in the first half of 2018, subject~~

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~~to customary conditions, including regulatory approval.~~ For more information, refer to Note ~~17.~~17 "Discontinued Operations."

Prior to the announcement to sell ~~our subsidiary,~~ United Life, ~~Insurance Company,~~ we had ~~two~~2 reportable business segments in our operations: property and casualty insurance and life insurance. The property and casualty insurance business has ~~six~~6 domestic locations from which it conducts its business. The life insurance business ~~operates~~operated from our home office. Because all of our insurance is sold domestically, we have no revenues allocable to foreign operations.

After the announcement of the sale of United Life, our ~~life insurance business, the Company has a single reportable segment,~~continuing operations, the property and casualty insurance business, ~~which includes all continuing operations.~~is reported as 1 reportable segment. The property and casualty insurance business profit or loss is consistent with consolidated reporting as disclosed on the Consolidated Statements of Income and Comprehensive Income. We analyze the property and casualty insurance business results based on profitability (i.e., loss ratios), expenses and return on equity. The Company's property and casualty insurance business was determined using a management approach to make decisions on operating matters, including allocating resources, assessing performance, determining which products to market and sell, determining distribution networks with insurance agents and monitoring the regulatory environment. The property and casualty insurance business products have similar economic characteristics and use a similar marketing and distribution strategy with our independent agents. The property and casualty insurance business geographic concentration did not change after the announcement of the sale of the life insurance business. We will continue to evaluate our ~~segment~~continuing operations on the basis of both statutory accounting principles prescribed or permitted by our states of domicile and GAAP.

The accounting policies of our businesses are the same as those described in Note 1 "Summary of Significant Accounting Policies" to our Consolidated Financial Statements. We analyze results based on profitability (i.e., loss ratios), expenses and return on equity.

Property and Casualty Insurance Business

We write both commercial and personal lines of property and casualty insurance. We focus on our commercial lines, which represented ~~92.9%~~94.2 percent of our property and casualty insurance premiums earned for ~~2017.~~2020. Our personal lines represented ~~7.1%~~5.8 percent of our property and casualty insurance premiums earned for ~~2017.~~2020.

~~Products~~Commercial Lines Business

Our primary commercial policies are tailored business packages that include the following coverages: fire and allied lines, other liability, automobile, workers' compensation and surety.

Personal Lines Business

Our personal lines consist primarily of automobile and fire and allied lines coverage, including homeowners.

In May 2020, the Company entered into a renewal rights agreement for our personal lines business, providing our

independent insurance agents with the opportunity to transfer their personal lines policies to Nationwide Mutual

Insurance Company beginning in the third quarter of 2020, subject to the receipt of applicable regulatory approvals.

As part of this agreement, Nationwide will offer contracts to all of our personal lines agents across the country, with

the exception of agents in Louisiana and Florida. We are continuing to evaluate our strategic plan for the personal

lines business in Louisiana and Florida.

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Pricing

Pricing levels for our property and casualty insurance products are influenced by many factors, including an estimation of expected losses, the expenses of producing, issuing and servicing business and managing claims, the time value of money associated with such loss and expense cash flows, and a reasonable allowance for profit. We have a disciplined approach to underwriting and risk management that emphasizes profitable growth rather than premium volume or market share. Our insurance company subsidiaries are subject to state laws and regulations regarding rate and policy form approvals. The applicable state laws and regulations establish standards in certain lines of business to ensure that rates are not excessive, inadequate, unfairly discriminatory, or used to engage in unfair price competition. Our ability to increase rates and the relative timing of the process are dependent upon each respective state's requirements, as well as the competitive market environment.

Seasonality

Our property and casualty insurance business experiences some seasonality with regard to premiums written, which are generally highest in January and July and lowest during the fourth quarter. Although we experience some seasonality in our premiums written, premiums are earned ratably over the period of coverage. Losses and loss settlement expenses incurred tend to remain consistent throughout the year, with the exception of catastrophe losses

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which generally are highest in the second and third quarters. Catastrophes inherently are unpredictable and can occur at any time during the year from man-made or natural disaster events that include, but are not limited to, hail, tornadoes, hurricanes and windstorms.

Premiums Earned

The following table sets forth our net premiums earned:



Years Ended December 31,	2017		2016		2015		Years Ended December 31,	2020		2019		2018
Continuing Operations - Property and casualty insurance business							Continuing Operations - Property and casualty insurance business
Net premiums earned							Net premiums earned
Other liability	$	306,480	$	289,982	$	261,303	Other liability	$	316,098	$	318,412	$	311,931
Fire and allied lines	270,716		265,221		246,450		Fire and allied lines	277,515		285,205		276,193
Automobile	277,511		239,216		210,090		Automobile	324,420		345,637		313,521
Workers' compensation	104,166		103,605		95,672		Workers' compensation	75,953		87,376		95,203
Fidelity and surety	24,981		22,507		21,362		Fidelity and surety	28,001		25,539		24,437
Reinsurance assumed	10,650		12,765		13,639		Reinsurance assumed	30,417		21,861		13,228
Other	2,988		2,835		3,179		Other	2,678		2,942		2,938
Total net premiums earned from continuing operations	$	997,492	$	936,131	$	851,695	Total net premiums earned from continuing operations	$	1,055,082	$	1,086,972	$	1,037,451
Discontinued Operations - Life insurance business							Discontinued Operations - Life insurance business
Net premiums earned							Net premiums earned
Ordinary life (excluding universal life)	$	35,388	$	63,668	$	53,114	Ordinary life (excluding universal life)	$	0	$	0	$	7,068
Universal life policy fees	13,145		11,577		12,834		Universal life policy fees	0		0		3,363
Immediate annuities with life contingencies	11,691		10,533		12,223		Immediate annuities with life contingencies	0		0		2,515
Accident and health	1,096		1,434		1,425		Accident and health	0		0		45
Other	48		58		388		Other	0		0		12
Total net premiums earned from discontinued operations	$	61,368	$	87,270	$	79,984	Total net premiums earned from discontinued operations	$	0	$	0	$	13,003

Total revenue includes sales to external customers and intercompany sales that are eliminated to arrive at the total revenues as reported in the accompanying Consolidated Statements of Income and Comprehensive Income. We account for intercompany sales on the same basis as sales to external customers.

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NOTE 11. QUARTERLY SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)

The following table sets forth our selected unaudited quarterly financial ~~information from continuing operations:~~information:


(In Thousands Except Share Data)
Quarters	First		Second		Third		Fourth		Total
Year Ended December 31, 2020
Total revenues	$	177,805	$	297,803	$	282,121	$	310,898	$	1,068,627
Income (loss) before income taxes	(104,999)		4,236		(55,228)		(13,524)		(169,515)
Net income (loss)	$	(72,534)	$	5,960	$	(37,241)	$	(8,891)	$	(112,706)
Basic earnings (loss) per share (1)	$	(2.90)	$	0.24	$	(1.49)	$	(0.36)	$	(4.50)
Diluted earnings (loss) per share (1)	(2.90)		0.24		(1.49)		(0.36)		(4.50)
Year Ended December 31, 2019
Total revenues	$	305,539	$	304,197	$	298,055	$	293,374	$	1,201,165
Income (loss) before income taxes	54,677		(4,571)		(4,528)		(28,699)		16,879
Net income (loss)	$	44,521	$	(4,196)	$	(2,342)	$	(23,163)	$	14,820
Basic earnings (loss) per share (1)	$	1.77	$	(0.17)	$	(0.09)	$	(0.93)	$	0.59
Diluted earnings (loss) per share (1)	1.74		(0.17)		(0.09)		(0.93)		0.58

(1)The sum of the quarterly reported amounts may not equal the full year, as each is computed independently.

(In Thousands Except Share Data)
Quarters First Second Third Fourth Total
Year Ended December 31, 2017
Total revenues $ 251,278
$ 258,487
$ 269,617
$ 273,355
$ 1,052,737
Income (loss) before income taxes 23,006
(4,331 ) (32,394 ) 29,369
15,650
Net income (loss) $ 18,584
$ 109
$ (19,082 ) $ 45,259
$ 44,870
Basic earnings per share ⁽¹⁾
$ 0.73
$ —
$ (0.77 ) $ 1.81
$ 1.79
Diluted earnings per share ⁽¹⁾
0.72
—
(0.77 ) 1.78
1.75
Year Ended December 31, 2016
Total revenues $ 231,334
$ 244,866
$ 255,625
$ 264,537
$ 996,362
Income before income taxes 28,165
1,372
14,035
13,925
57,497
Net income $ 22,020
$ 3,435
$ 11,628
$ 12,035
$ 49,118
Basic earnings per share ⁽¹⁾
$ 0.87
$ 0.13
$ 0.46
$ 0.46
$ 1.94
Diluted earnings per share ⁽¹⁾
0.86
0.13
0.45
0.46
1.90


~~(1)~~	~~The sum of the quarterly reported amounts may not equal the full year, as each is computed independently.~~

~~The following table sets forth our selected unaudited quarterly financial information from discontinued operations:~~

(In Thousands Except Share Data)
Quarters First Second Third Fourth Total
Year Ended December 31, 2017
Total revenues $ 31,781
$ 28,492
$ 27,054
$ 28,386
$ 115,713
Income before income taxes 2,083
4,386
1,880
2,294
10,643
Net income $ 1,352
$ 2,849
$ 1,218
$ 734
$ 6,153
Basic earnings per share ⁽¹⁾
$ 0.05
$ 0.11
$ 0.05
$ 0.03
$ 0.24
Diluted earnings per share ⁽¹⁾
0.05
0.11
0.05
0.03
0.24
Year Ended December 31, 2016
Total revenues $ 34,351
$ 34,907
$ 33,869
$ 37,458
$ 140,585
Income (loss) before income taxes 609
(508 ) 1,140
(71 ) 1,170
Net income (loss) $ 407
$ (321 ) $ 740
$ (40 ) $ 786
Basic earnings per share ⁽¹⁾
$ 0.02
$ (0.01 ) $ 0.03
$ —
$ 0.03
Diluted earnings per share ⁽¹⁾
0.02
(0.01 ) 0.03
—
0.03


~~(1)~~	~~The sum of the quarterly reported amounts may not equal the full year, as each is computed independently.~~

NOTE 12. EARNINGS PER COMMON SHARE

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

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

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exercised and assumed common shares repurchased represents the number of dilutive common shares, which we add to the denominator of the earnings per share calculation.

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The components of basic and diluted earnings per share were as follows:


	Years Ended December 31,
	2020				2019				2018
(In Thousands Except Share and Per Share Data)	Basic		Diluted		Basic		Diluted		Basic		Diluted
Net income (loss) from continuing operations	$	(112,706)	$	(112,706)	$	14,820	$	14,820	$	2,255	$	2,255
Weighted-average common shares outstanding	25,027,358		25,027,358		25,138,039		25,138,039		25,006,211		25,006,211
Add dilutive effect of restricted stock awards	—		0		—		232,450		—		273,544
Add dilutive effect of stock options	—		0		—		212,038		—		343,057
Weighted-average common shares	25,027,358		25,027,358		25,138,039		25,582,527		25,006,211		25,622,812
Earnings (loss) per common share from continuing operations	$	(4.50)	$	(4.50)	$	0.59	$	0.58	$	0.09	$	0.09
Earnings (loss) per common share from discontinued operations	0		0		0		0		(0.08)		(0.07)
Gain on sale of discontinued operations, net of taxes	$	0	$	0	$	0	$	0	$	1.10	$	1.07
Earnings (loss) per common share	$	(4.50)	$	(4.50)	$	0.59	$	0.58	$	1.11	$	1.08
Awards excluded from diluted calculation(1)	—		618,379		—		63,897		—		2,681

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

Years Ended December 31,
2017 2016 2015
(In Thousands Except Share and Per Share Data) Basic Diluted Basic Diluted Basic Diluted
Net income from continuing operations $ 44,870
$ 44,870
$ 49,118
$ 49,118
$ 85,320
$ 85,320
Weighted-average common shares outstanding 25,103,720
25,103,720
25,335,706
25,335,706
25,047,405
25,047,405
Add dilutive effect of restricted stock awards —
250,530
—
155,059
—
122,840
Add dilutive effect of stock options —
286,354
—
313,913
—
65,751
Weighted-average common shares 25,103,720
25,640,604
25,335,706
25,804,678
25,047,405
25,235,996
Earnings per common share from continuing operations $ 1.79
$ 1.75
$ 1.94
$ 1.90
$ 3.41
$ 3.38
Earnings per common share from discontinued operations 0.24
0.24
0.03
0.03
0.15
0.15
Earnings per common share $ 2.03
$ 1.99
$ 1.97
$ 1.93
$ 3.56
$ 3.53
Awards excluded from diluted calculation⁽¹⁾
—
—
—
—
—
343,390


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

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NOTE 13. LEASE COMMITMENTS

~~At December 31, 2017, we were obligated under noncancelable~~

The Company determines if a contract contains a lease at inception of the contract by reviewing the facts and circumstances of the contract to determine if a lease is present. The Company has operating ~~lease agreements for~~leases relating to office space, vehicles, computer equipment, and office ~~equipment. Most~~equipment, which are recorded as a lease obligation liability disclosed in the "Accrued expenses and other liabilities" line on the Consolidated Balance Sheets and as a lease right-of-use asset disclosed in the "Other assets" line on the Consolidated Balance Sheets. The lease right-of-use asset represents the Company's right to use each underlying asset for the lease term and the lease obligation liability represents the Company's obligation over the lease term. As an accounting policy election, we have elected the practical expedient on not separating lease components from non-lease components to each major asset class.

The Company's lease obligation is recorded at the present value of the lease payments based on the term of the applied lease. The Company has elected to categorize its leases into four categories based on length of lease terms and applies an incremental borrowing rate of interest as of the effective date of adoption or the lease effective date equivalent to a collateralized rate with similar terms. The four categories are as follows: less than three years, three to five years, five to ten years and greater than ten years. The collateralized discount rate used to calculate the present value of future minimum lease payments is based, where appropriate, on the Company's incremental borrowing rate of its credit facility, described in Note 14 "Debt". For leases that existed prior to the adoption of the new accounting guidance on January 1, 2019 or those with terms not similar to the credit facility, the Company has elected to use the remaining lease term based on the four categories noted above as of the date of initial application to measure its incremental borrowing rate. In this case, the incremental borrowing rate is a collateralized rate based on current industry borrowing rates for similar companies with similar ratings.

Lease terms and options vary in the Company's operating leases dependent upon the underlying leased asset. We exclude options to extend or terminate a lease from our recognition as part of our right-of-use assets and lease liabilities until those options are known and/or executed, as we typically do not exercise options to purchase the underlying leased asset. As of December 31, 2020, we have leases with remaining terms of 1 year to 6 years, some of which may include no options for renewal and others with options ~~purchase options or both. These provisions may be exercised by us upon~~to extend the ~~expiration~~lease terms from 6 months to 5 years.

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Table of ~~the related lease agreements. Rental expense under~~Contents

The components of our operating lease agreements was $7,197, $6,908 and $6,256 for 2017, 2016 and 2015, respectively. Our most significant lease commitment is for mainframe computer equipment. This lease was signed in November 2016 and has a term of 5 years. The monthly lease payments for this lease are $154.

~~At December 31, 2017, our future minimum rental payments~~leases were as follows:


	As of December 31, 2020		As of December 31, 2019

Components of lease expense:
Operating lease expense	$	7,611	$	7,655

Less sublease income	292		493
Net lease expense	7,319		7,162
Cash flows information related to leases:
Operating cash outflow from operating leases	7,053		7,249

2018 $ 6,435
2019 6,027
2020 5,529
2021 3,173
2022 643
Thereafter 718
Total $ 22,525


Balance sheet information for operating leases:	As of December 31, 2020			As of December 31, 2019

Operating lease right-of-use assets (Other assets on Consolidated Balance Sheets)	$	18,619		$	15,410
Operating lease liabilities (Accrued expenses and other liabilities on Consolidated Balance Sheets)	19,244			15,851
Right-of-use assets obtained in exchange for new operating lease liabilities	7,264			651

Weighted average remaining lease term	4.36 years			2.75 years
Weighted average discount rate	3.72		%	4.74		%


Maturities of lease liabilities:	As of December 31, 2020		As of December 31, 2019
2021	$	6,889	$	7,517
2022	4,610		5,311
2023	3,627		2,417
2024	1,763		1,318
2025	1,270		259
Thereafter	2,460		39
Total lease payments	20,619		16,861
Less imputed interest	(1,375)		(1,010)
Lease liability	$	19,244	$	15,851

NOTE 14. ~~CREDIT FACILITY~~DEBT

Long Term Debt

The Company executed a private placement debt transaction on December 15, 2020 between UF&C, and Federated Mutual and Federated Life.

UFG sold an aggregate $50,000 of notes due 2040 to the Note Purchasers. One note with a principal amount of $35,000 was issued to Federated Mutual and one note with a principal amount of $15,000 was issued to Federated Life subject to the terms of their respective notes. The Company incurred $24 in debt issuance costs associated with this debt transaction in 2020.

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Interest payments under the surplus notes will be paid quarterly on March 15, June 15, September 15 and December 15 of each year (each such date, an "Interest Payment Date"). The interest rate will equal the rate that corresponds to the A.M. Best Co. (or its successor’s) financial strength rating for members of the United Fire & Casualty Pooled Group as of the applicable Interest Payment Date, as set forth in the table below. As of December 31, 2020, interest expense totaled $133. Payment of interest is subject to approval by the Iowa Insurance Division.


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

Credit Facilities

On March 31, 2020, UF&C a wholly owned subsidiary of the Company, entered into a credit agreement (the "Credit Agreement") with Wells Fargo Bank, National Association ("Wells Fargo"), as administrative agent (the "Administrative Agent"), issuing lender, swing-line lender and lender, and the other lenders from time to time party thereto (collectively with Wells Fargo, the "Lenders"), providing for a $50,000 revolving credit facility, which includes a $20,000 letter of credit sub-facility and a $5,000 swing-line loan for working capital and other general corporate purposes. The Credit Agreement is provided by the Lenders on an unsecured basis, and the UF&C has the option to increase the Credit Agreement by $100,000 if agreed to by the Lenders providing such incremental facility.

The Credit Agreement includes customary events of default, including default in payments of principals, default in payment of other indebtedness, change of control and voluntary and involuntary insolvency proceedings, the occurrence of which would allow the Lenders to accelerate payment of all amounts outstanding thereunder and terminate any further commitments to lend.

The entry into the Credit Agreement was completed as part of the Company’s regular course of financial planning and was not initiated as a result of market conditions resulting from the COVID-19 pandemic.

Prior to February 2, ~~2016,~~2020, the Company had a credit agreement (the "Previous Credit Agreement") which it entered into on February 2, 2016. The Company, as borrower, entered into athe Previous Credit Agreement ~~(the "Credit Agreement") by and among the Company,~~ with the lenders from time to time party thereto and KeyBank National Association ("Key Bank"), as administrative agent, swingline lender and letter of credit issuer. The Previous Credit Agreement ~~provides~~provided for a $50,000 ~~four-year~~four-year unsecured revolving credit facility that ~~includes~~included a $20,000 letter of credit subfacility and a swingline subfacility in the amount up to $5,000. The Previous Credit Agreement ~~allows~~allowed the Company to increase the aggregate amount of the commitments thereunder by up to ~~$100,000, provided that no event of default has occurred and is continuing and certain other conditions are satisfied.~~$100,000.

~~The Credit Agreement is available for the Company's general corporate purposes, including liquidity, acquisitions and working capital. All unpaid principal and accrued interest under~~

There was 0 outstanding balance on either the Credit Agreement ~~is due and payable in full at maturity on February 2, 2020. Based on~~or the ~~type of loan, advances under the~~Previous Credit Agreement ~~would bear interest on either the London interbank offered rate ("LIBOR")~~at December 31, 2020 or ~~a base rate plus, in each case, a calculated margin amount.~~

The unused commitments under the Credit Agreement will be subject to a commitment fee that will be calculated at a per annum rate. The applicable margins for borrowings under the Credit Agreement and the commitment fee thereunder will be determined by reference to a pricing grid based on the Company’s issuer credit rating by A.M. Best Company, Inc.

The Credit Agreement contains customary representations, conditions to borrowing, covenants and events of default, including certain covenants that limit or restrict, subject to certain exceptions, the ability of the Company and its subsidiaries to sell or transfer assets, enter into a merger or consolidate with another company, create liens, impose restrictions on subsidiary dividends, enter into sale-leaseback transactions, make investments or acquisitions, enter into certain reinsurance agreements, pay dividends during any period of default, enter into transactions with affiliates, change the nature of its business, or incur indebtedness. The Credit Agreement also includes financial covenants that require the Company to (i) maintain a minimum consolidated net worth, (ii) maintain a minimum consolidated statutory surplus and (iii) not exceed a 0.35 to 1.0 debt to total capitalization ratio.2019, respectively. As of December 31, ~~2017~~2020, we were in compliance with ~~all~~two of three financial covenants of the Credit Agreement.

~~There was no outstanding balance~~ We have received a waiver from the Lenders on the ~~Credit Agreement at December 31, 2017 or 2016.~~third financial covenant. We have the ability to draw on our credit facility if needed. We did ~~not~~0t incur any interest expense related to the Credit Agreement in ~~2017, 2016~~2020 or under our ~~prior credit facility~~Previous Credit Agreement in ~~2015.~~

2019 and 2018.

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NOTE 15. INTANGIBLE ASSETS

The carrying value of our goodwill was 0 at December 31, 2020 and $15,091 at ~~both~~ December 31, ~~2017 and 2016,~~2019, respectively. ~~The~~During the third quarter of 2020, we completed our annual quantitative analysis of goodwill. As a result of the quantitative analysis, we impaired the remaining balance of our goodwill ~~is fully allocated to our~~of $15,091 as of September 30, 2020 based on the following factors: (i) disruptions in the equity markets, specifically for property and casualty insurance ~~business.~~companies, as a result of the COVID-19 pandemic and due to recent weather related catastrophes; (ii) recent elevated commercial auto loss ratios; and (iii) the fair value of our stock trading significantly below book value. The Company used a weighting of the income and market approaches to determine the fair value of the reporting unit.

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


	Year Ended December 31,							Year Ended December 31,
	2017			2016				2020		2019
Agency relationships	$	10,338		$	10,338		Agency relationships	$	10,338	$	10,338
Accumulated amortization - agency relationships	(5,566		)	(4,929		)	Accumulated amortization - agency relationships	(7,307)		(6,731)
	$	4,772		$	5,409			$	3,031	$	3,607

Software	$	3,260		$	3,260		Software	$	3,260	$	3,260
Accumulated amortization - software	(3,260		)	(3,260		)	Accumulated amortization - software	(3,260)		(3,260)
	$	—		$	—			$	0	$	0

Trade names	$	1,978		$	1,978		Trade names	$	1,978	$	1,978
Accumulated amortization - trade names	(890		)	(758		)	Accumulated amortization - trade names	(1,286)		(1,154)
	$	1,088		$	1,220			$	692	$	824

Favorable contract	$	286		$	286		Favorable contract	$	286	$	286
Accumulated amortization - favorable contract	(286		)	(286		)	Accumulated amortization - favorable contract	(286)		(286)
	$	—		$	—			$	0	$	0

State insurance licenses ⁽¹⁾	$	3,020		$	3,020		State insurance licenses (1)	$	3,020	$	3,020

Net intangible assets	$	8,880		$	9,649		Net intangible assets	$	6,743	$	7,451

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

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


		Useful Life
Agency relationships		~~Useful Life~~Fifteen years
~~Agency relationships~~Software		~~Fifteen~~Two years
~~Software~~Trade names		~~Two~~Fifteen years
~~Trade names~~		~~Fifteen years~~
Favorable contract	Two years

Our estimated aggregate amortization expense for each of the next five years is as follows:



2021	$	709
2022	709
2023	709
2024	709
2025	709

136

2018 $ 719
2019 709
2020 709
2021 709
2022 709

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NOTE 16. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the years ended December 31, ~~2017~~, ~~2016~~2020, 2019 and ~~2015~~:2018:


			Liability for
	Net unrealized		underfunded
	appreciation		employee
	on investments		benefit costs		Total
Balance as of January 1, 2018	$	214,865	$	(46,551)	$	168,314
Cumulative effect of change in accounting principle	(191,244)		0		(191,244)
Change in accumulated other comprehensive income before reclassifications	(33,564)		20,155		(13,409)
Reclassification adjustments from accumulated other comprehensive income	620		5,247		5,867
Balance as of December 31, 2018	$	(9,323)	$	(21,149)	$	(30,472)
Change in accumulated other comprehensive income before reclassifications	55,399		(16,530)		38,869
Reclassification adjustments from accumulated other comprehensive income	1,203		3,552		4,755
Balance as of December 31, 2019	$	47,279	$	(34,127)	$	13,152
Change in accumulated other comprehensive income before reclassifications	37,173		14,580		51,753
Reclassification adjustments from accumulated other comprehensive income	(1,382)		3,388		2,006
Balance as of December 31, 2020	$	83,070	$	(16,159)	$	66,911

137

Liability for
Net unrealized underfunded
appreciation employee
on investments benefit costs Total
Balance as of January 1, 2015 $ 149,623
$ (58,450 ) $ 91,173
Change in accumulated other comprehensive income before reclassifications (18,321 ) 5,664
(12,657 )
Reclassification adjustments from accumulated other comprehensive income (2,933 ) 4,854
1,921
Balance as of December 31, 2015 $ 128,369
$ (47,932 ) $ 80,437
Change in accumulated other comprehensive income before reclassifications 8,461
19,529
27,990
Reclassification adjustments from accumulated other comprehensive income (2,938 ) 3,566
628
Balance as of December 31, 2016 $ 133,892
$ (24,837 ) $ 109,055
Change in accumulated other comprehensive income before reclassifications 48,467
(19,878 ) 28,589
Reclassification adjustments from accumulated other comprehensive income (4,152 ) 3,514
(638 )
Accumulated effect of change in enacted tax rate 36,658
(5,350 ) 31,308
Balance as of December 31, 2017 $ 214,865
$ (46,551 ) $ 168,314

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NOTE 17. DISCONTINUED OPERATIONS

On September 18, 2017, we signed a definitive agreement to sell our subsidiary, United Life Insurance Company, to Kuvare for $280,000 in cash, ~~subject to specified adjustments~~less a $21 adjustment as set forth in the definitive ~~agreement. As~~agreement, for a ~~result, our~~net amount of $279,979. The sale closed on March 30, 2018 and we reported an after-tax gain on the sale of discontinued operations of $27,307. The life insurance business (previously reported as a separate segment) ~~has been~~was considered held for sale and reported as discontinued operations and its financial position, results of operations and cash flows ~~are~~were reported separately ~~reported~~ for all periods presented, as applicable, unless otherwise noted. ~~The sale is expected~~

UFG agreed to ~~close in the first half of 2018, subject to customary conditions, including regulatory approval.~~

~~Subsequent to the close of the sale in the first half of 2018, UFG will~~ provide services to Kuvare through a transition services agreement ("TSA"). The TSA ~~will be put in place to ensure a seamless transfer of the business between UFG and Kuvare. The TSA includes,~~included, among other ~~services,~~considerations, accounting management, human resources, legal and information technology services, from the closing date for up to 24 months.

The ~~assets and liabilities associated with discontinued operations prior to the closing~~TSA ended as scheduled on March 30, 2020. The Company received a total of $1,019 as part of the ~~sale have been presented separately in our Consolidated Balance Sheets. The major assets and liability categories were as follows as of the dates indicated:~~

TSA.

Discontinued Operations
Balance Sheets
December 31,
(In Thousands, Except Share Data) 2017 2016

Assets
Investments
Fixed maturities
Held-to-maturity, at amortized cost (fair value $34 in 2017 and $49 in 2016) $ 34
$ 48
Available-for-sale, at fair value (amortized cost $1,412,291 in 2017 and $1,429,270 in 2016) 1,430,025
1,444,840
Equity Securities available-for-sale, at fair value (cost $5,099 in 2017 and $8,510 in 2016) 23,653
24,046
Mortgage loans 3,435
3,706
Policy loans 5,815
5,366
Other long-term investments 16,437
15,870
1,479,399
1,493,876
Cash and cash equivalents 15,851
21,659
Deferred policy acquisition costs 71,151
70,750
Other assets 19,733
19,333
Total assets held for sale $ 1,586,134
$ 1,605,618
Liabilities
Future policy benefits and losses

$ 1,320,401
$ 1,350,503
Deferred income taxes 18,716
27,739
Accrued expenses and other liabilities 8,018
11,981
Total liabilities held for sale $ 1,347,135
$ 1,390,223

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Summary operating results of discontinued operations were as follows for the periods indicated:


Discontinued Operations	Discontinued Operations							Discontinued Operations
Statements of Income	Statements of Income							Statements of Income
	For the Years Ended December 31,								For the Years Ended December 31,
(In Thousands, Except Share Data)	2017		2016		2015			(In Thousands, Except Share Data)	2020		2019		2018

Revenues								Revenues
Net premiums earned	$	61,368	$	87,270	$	79,195		Net premiums earned	$	0	$	0	$	13,003
Investment income, net of investment expenses	49,720		51,538		54,222			Investment income, net of investment expenses	0		0		12,663
Net realized investment gains (losses)
Other-than-temporary impairment charges	—		—		(1,300		)
Net realized investment gains	4,008		1,156		3,022
Total net realized investment gains	4,008		1,156		1,722

Total net realized investment gains (losses)								Total net realized investment gains (losses)	0		0		(1,057)
Other income	617		621		508			Other income	0		0		146
Total revenues	$	115,713	$	140,585	$	135,647		Total revenues	$	0	$	0	$	24,755

Benefits, Losses and Expenses								Benefits, Losses and Expenses
Losses and loss settlement expenses	$	40,451	$	31,365	$	29,001		Losses and loss settlement expenses	$	0	$	0	$	10,823
Increase in liability for future policy benefits	27,632		59,969		50,945			Increase in liability for future policy benefits	0		0		5,023
Amortization of deferred policy acquisition costs	5,181		8,121		6,634			Amortization of deferred policy acquisition costs	0		0		1,895
Other underwriting expenses	13,281		19,881		19,306			Other underwriting expenses	0		0		3,864
Interest on policyholders’ accounts	18,525		20,079		23,680			Interest on policyholders’ accounts	0		0		4,499
Total benefits, losses and expenses	$	105,070	$	139,415	$	129,566		Total benefits, losses and expenses	$	0	$	0	$	26,104

Income from discontinued operations before income taxes	$	10,643	$	1,170	$	6,081
Income (loss) from discontinued operations before income taxes								Income (loss) from discontinued operations before income taxes	$	0	$	0	$	(1,349)
Federal income tax expense	4,490		384		2,275			Federal income tax expense	0		0		563
Net income from discontinued operations	$	6,153	$	786	$	3,806
Earnings per common share from discontinued operations:
Net income (loss) from discontinued operations								Net income (loss) from discontinued operations	$	0	$	0	$	(1,912)
Earnings (loss) per common share from discontinued operations:								Earnings (loss) per common share from discontinued operations:
Basic	$	0.24	$	0.03	$	0.15		Basic	$	0	$	0	$	(0.08)
Diluted	0.24		0.03		0.15			Diluted	0		0		(0.07)

The Company's Consolidated Statement of Cash Flows presents operating, investing and financing cash flows of the discontinued operations separately. The Company's cash management and financial management of both continued and discontinued operations is consolidated as a centralized corporate function in our Finance Department.

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

United Fire Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of United Fire Group, Inc. (the Company) as of December 31, ~~2017~~2020 and ~~2016,~~2019, and the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, ~~2017,~~2020, and the related notes and financial statement schedules listed in the Index at Item 15(a)(2) (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, ~~2017~~2020 and ~~2016,~~2019, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2017,~~2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, ~~2017,~~2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February ~~28, 2018~~26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the account or disclosure to which they relates.

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						Valuation of reserves for property and casualty loss and loss settlement expenses
Description of the Matter						At December 31, 2020, the Company’s reserves for losses and loss settlement expenses was $1.6 billion, of which $260.4 million related to Incurred But Not Reported (IBNR) reserves. As described in Note 5 to the consolidated financial statements, liabilities for losses and loss settlement expenses reflect management's best estimates at a given point in time of what is expected to be paid for claims that have been reported and those that have been incurred but not reported, based on known facts, circumstances, and historical trends. There is significant uncertainty and subjectivity inherent in determining management’s best estimates of the ultimate cost of losses, which is used to determine IBNR reserves. Auditing management’s estimate of IBNR reserves was complex due to the highly judgmental nature of management’s selection of methods and assumptions used to develop those estimates. In particular, the estimates are sensitive to assumptions and the weighting of methodologies that are used to project the ultimate cost of losses.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the reserving process, including, among others, the review and approval processes that management has in place for the methods and assumptions used in estimating the reserves and the reasonableness of the actuarially determined reserves. To test the estimated IBNR reserves we, including our actuarial specialists, performed audit procedures that included, among others, evaluating management’s selection and weighting of actuarial methods and assumptions by comparing to those used in prior periods and those used in the industry. We compared management’s best estimate of reserves to our independently calculated range of reasonable reserve estimates and assessed the development of prior year reserves. We also evaluated the results of the reserve analysis prepared by management’s independent third-party actuary for comparison to management’s best estimate.

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						Goodwill - Quantitative Impairment Assessment
Description of the Matter						As described in Note 15 to the consolidated financial statements, the Company performed a quantitative impairment analysis on its one reporting unit and recognized an impairment charge of $15.1 million for the year ended December 31, 2020. Management tests goodwill for impairment annually, during the third quarter, or more frequently if events or changes in circumstances indicate that goodwill might be impaired. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company used a weighting of the income and market approaches to determine the fair value of the reporting unit. Auditing management's quantitative goodwill impairment test involved a high degree of auditor judgment due to the significant estimation required to determine the fair value of the reporting unit. In particular, the fair value estimate was sensitive to significant assumptions, such as forecasted revenues and loss and loss settlement expenses, discount rate, and terminal growth rate which are used in the income approach and comparable publicly traded companies and estimated valuation multiples which are used in the market approach.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the quantitative goodwill impairment analysis, including, among others, the controls over management's review of the valuation model and the significant assumptions used. To test the estimated fair value of the reporting unit, we, with the support of our valuation specialists, performed audit procedures that included, among others, assessing methodologies, the weighting of those methodologies, and testing the significant assumptions discussed above. We tested the significant assumptions by comparing them to current and forecasted industry and economic trends, historical results, analyst reports, forecasted peer company information obtained from publicly available sources and developing an independent range of estimates and comparing that to the calculations performed by management. We also evaluated management’s selection of market multiples by comparing them to publicly available data on comparable public companies.

/s/ Ernst & Young LLP

Ernst & Young LLP

We have served as the Company’s auditor since 2002.

Des Moines, Iowa

February ~~28, 2018~~

26, 2021

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of the end of the period covered by this report, were designed and functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of United Fire Group, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. United Fire Group, Inc.'s internal control over financial reporting is a process designed under the supervision of its Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its Consolidated Financial Statements for external purposes in accordance with U.S. generally accepted accounting principles.

As of December 31, ~~2017,~~2020, United Fire Group, Inc.'s management assessed the effectiveness of United Fire Group Inc.'s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in "Internal Control — Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the assessment, United Fire Group, Inc.'s management determined that effective internal control over financial reporting was maintained as of December 31, ~~2017,~~2020, based on those criteria.

Ernst & Young LLP, the independent registered public accounting firm that audited the Consolidated Financial Statements of United Fire Group, Inc. included in this Annual Report on Form 10-K, has audited the effectiveness of internal control over financial reporting as of December 31, ~~2017.~~2020. Their attestation report, which expresses an unqualified opinion on the effectiveness of United Fire Group, Inc.'s internal control over financial reporting as of December 31, ~~2017,~~2020, is included in this Item under the heading "Report of Independent Registered Public Accounting Firm."

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

United Fire Group, Inc.

Opinion on Internal Control over Financial Reporting

We have audited United Fire Group, Inc.’s (the Company) internal control over financial reporting as of December 31, ~~2017,~~2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2017,~~2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the ~~2017~~ consolidated ~~financial~~balance sheets of United Fire Group, Inc. as of December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2020 of the Company and our report dated February ~~28, 2018~~26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

~~The~~The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Annual Report. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



			/s/ Ernst & Young LLP
			Ernst & Young LLP

Des Moines, Iowa
February ~~28, 2018~~26, 2021

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CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

~~There~~Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated our internal control over financial reporting to determine whether any changes occurred during the fiscal year to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. This evaluation included a review of the implementation of our business continuity plans related to the COVID-19 pandemic. We believe our operational processes, internal controls over financial reporting and disclosures, and financial reporting systems are operating effectively in the present environment. Our business teams are working remotely and continue to support our customers, agents and claimants as they did when we were in the office.

Based on our evaluation, there have been no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15 and 15d-15) that occurred during the fiscal quarter ended December 31, ~~2017,~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION

None.

PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 regarding the Company’s executive officers is included in '""Information About Our Executive ~~Officers of the Company"~~Officers" under Part I, Item 1 of this report.

The information required by this Item regarding our directors and corporate governance matters is included under the captions "Board of Directors," subheading "Corporate Governance" and "Proposal One-Election of Directors," in our definitive ~~Proxy Statement~~proxy statement for our annual meeting of shareholders to be ~~held~~held on May ~~16, 2018~~19, 2021 (the ~~"2018~~"2021 Proxy Statement") and is incorporated herein by reference.

The information ~~required by this Item~~ regarding our Code of Ethics is included under the caption "Board of Directors," subheading "Corporate Governance," subpart "Code of Ethics" in our ~~2018~~2021 Proxy Statement and is incorporated herein by reference.

The information required by this Item regarding compliance with Section 16(a) of the Exchange Act is included under the caption ~~"Section~~"Delinquent Section 16(a) ~~Beneficial Ownership Reporting Compliance"~~Reports" in our ~~2018~~2021 Proxy Statement and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required under this Item regarding our executive compensation and our Compensation Committee Report is included under the caption "Executive Compensation" ~~and the subheadings "Report of the Compensation Committee" and "Pay Ratio Disclosure"~~ in our ~~2018~~2021 Proxy Statement and is incorporated herein by reference. The information required by this Item regarding Compensation Committee interlocks and insider participation is included under the caption "Board of Directors," subheading "Committees of the Board," subheading "Compensation Committee," subpart "Compensation Committee Interlocks and Insider Participation" in our ~~2018~~2021 Proxy Statement and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

The information required under this Item is included under the captions "Security Ownership of Certain Beneficial Owners," "Security Ownership of Management" and ~~"Securities Authorized for Issuance under Equity~~"Equity Compensation ~~Plans"~~Plan Information" in our ~~2018~~2021 Proxy Statement and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required under this Item is included under the captions "Board of Directors" and "Transactions with Related Persons" in our ~~2018~~2021 Proxy Statement and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required under this Item is included under the caption "Proposal Two - Ratification of the Audit Committee's Appointment of Independent Registered Public Accounting Firm," subheading "Information About Our Independent Registered Public Accounting Firm" in our ~~2018~~2021 Proxy Statement and is incorporated herein by reference.

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PART IV.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

We have filed the following documents as part of this Annual Report on Form 10-K:



			Page
(a) 1. Financial Statements
Consolidated Balance Sheets at December 31, ~~2017~~20 20 and ~~2016~~201 9			7468
Consolidated Statements of Income and Comprehensive Income for the three years ended December 31, ~~2017~~20 20			7569
Consolidated Statements of Stockholders' Equity for the three years ended December 31, ~~2017~~20 20			7670
Consolidated Statements of Cash Flows for the three years ended December 31, ~~2017~~20 20			7771
Notes to Consolidated Financial Statements			7973

(a) 2. Financial Statement Schedules required to be filed by Item 8 of this Form:
Schedule I. Summary of Investments — Other than Investments in Related Parties			~~159~~151
Schedule II. Condensed Financial Statements of Parent Company			~~161~~152
Schedule III: Supplementary Insurance Information			~~164~~155
Schedule IV: Reinsurance			~~165~~156
Schedule V: Valuation and Qualifying Accounts			~~166~~157
Schedule VI: Supplemental Information Concerning Property and Casualty Insurance Operations			~~167~~158
All other schedules have been omitted as not required, not applicable, not deemed material or because the information is included in the Consolidated Financial Statements.

147

~~155~~

Table of Contents

(a) 3. Exhibit Index:

Incorporated by reference

Exhibit number

Exhibit description

Filed herewith

Form

Period ended

Exhibit

Filing date

2.1†

Stock Purchase Agreement, dated as of September 18, 2017, between United Fire & Casualty Company and Kuvare US Holdings, Inc., including the exhibits attached thereto (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K, Filed on September 19, 2017).

8-K

2.1

9/19/2017

3.1

Articles of Incorporation of United Fire Group, Inc.

S-4

Annex II

5/25/2011

3.2

Articles of Amendment to Articles of Incorporation of United Fire Group, Inc.

8-K/A

3.1

5/26/2015

3.3

Bylaws of United Fire Group, Inc.

S-4

Annex III

5/25/2011

4.1

Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

10-K

12/31/19

4.1

2/28/2020

10.1

United Fire & Casualty Company Employee Stock Purchase Plan, Amended and Restated as of November 16, 2017

10-K

12/31/2007

10.2

2/28/2008

10.2

United Fire & Casualty Company Non-Employee Director Stock Plan

8-K

10.1

5/22/2020

10.3

United Fire Group, Inc. Amended and Restated Annual Incentive Plan

10-K

12/31/2011

10.4

3/15/2012

10.4

United Fire & Casualty Company Non-qualified Deferred Compensation Plan

10-Q

9/30/2007

10.3

10/25/2007

10.5

United Fire Group, Inc. Stock Plan, amended as of February 21, 2014 (amending and restating the United Fire & Casualty Company 2008 Stock Plan) (the "Stock Plan")

DEF14A

App A

4/8/2014

10.6

Form of Non-qualified Stock Option Agreement pursuant to the United Fire & Casualty Company, Inc. Nonqualified Employee Stock Option Plan

10-K

12/31/2007

10.7

2/27/2008

10.7

Form of Stock Option Issued Pursuant to the 2005 Non-Qualified Non-Employee Director Stock Option and Restricted Stock Plan

10-K

12/31/2007

10.8

2/27/2008

10.8

Form of Stock Award Agreement Under the Stock Plan

8-K

99.2

5/22/2008

10.9

Form of Non-Qualified Stock Option Agreement for the Purchase of Stock under the Stock Plan

8-K

99.3

5/22/2008

10.10

Form of Incentive Stock Option Agreement for the Purchase of Stock under the Stock Plan

8-K

99.4

5/22/2008

10.11

Amendment to Non-qualified Stock Option Agreements for John A. Rife pursuant to the Stock Plan

8-K/A

99.1

2/24/2009

10.12

Form of United Fire Group, Inc. Restricted Stock Agreement Under the 2005 Non-Qualified Non-Employee Director Stock Option Plan

10-K

12/31/2011

10.14

3/15/2012

10.13

Form of United Fire Group, Inc. Restricted Stock Agreement Under the 2005 Non-Qualified Non-Employee Director Stock Option Plan

10-Q

6/30/2016

10.1

8/3/2016

10.14

United Fire Group, Inc. Plan for Allocation of Equity Compensation to Management Team

10-K

12/31/2011

10.15

3/15/2012

148

Table of Contents

Incorporated by reference
Exhibit number Exhibit description Filed herewith Form Period ending Exhibit Filing date
2.1†

Stock Purchase Agreement, dated as of September 18, 2017, between United Fire & Casualty Company and Kuvare US Holdings, Inc., including the exhibits attached thereto (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K, Filed on September 19, 2017).
8-K 2.1
9/19/2017
3.1

Articles of Incorporation of United Fire Group, Inc.
S-4 Annex II
5/25/2011
3.2

Articles of Amendment to Articles of Incorporation of United Fire Group, Inc.
8-KA 3.1
5/26/2015
3.3

Bylaws of United Fire Group, Inc.
S-4 Annex III
5/25/2011
10.1

Employee Stock Purchase Plan
10-K 12/31/2007 10.2
2/27/2008
10.2
*
2005 Non-Qualified Non-Employee Director Stock Option and Restricted Stock Plan (as amended)
DEF14A Exhibit A
4/18/2011
10.4
*
United Fire Group, Inc. Amended and Restated Annual Incentive Plan
10-K 12/31/2011 10.4
3/15/2012
10.5
*
Non-qualified Deferred Compensation Plan
10-Q 9/30/2007 10.3
10/25/2007
10.6
*
United Fire Group, Inc. Stock Plan, amended as of February 21, 2014 (amending and restating the United Fire & Casualty Company 2008 Stock Plan) (the "Stock Plan")
DEF14A App A
4/8/2014
10.7
*
Form of Non-Qualified Employee Stock Option Agreement under the Stock Plan
10-K 12/31/2007 10.7
2/27/2008
10.8
*
Form of Option Issued Pursuant to the 2005 Non-Qualified Non-Employee Director Stock Option and Restricted Stock Plan
10-K 12/31/2007 10.8
2/27/2008
10.9
*
Form of Stock Award Agreement Under the Stock Plan
8-K 99.2
5/22/2008
10.10
*
Form of Non-Qualified Stock Option Agreement for the Purchase of Stock under the Stock Plan
8-K 99.3
5/22/2008
10.11
*
Form of Incentive Stock Option Agreement for the Purchase of Stock under the Stock Plan
8-K 99.4
5/22/2008
10.12
*
Amendment to Non-Qualified Stock Option Agreements for John A. Rife
8-K/A 99.1
2/24/2009
10.13
*
Form of Restricted Stock Agreement Under the 2005 Non-Qualified Non-Employee Director Stock Option and Restricted Stock Plan
10-K 12/31/2011 10.14
3/15/2012
10.14
*
Form Restricted Stock Agreement Under the 2005 Non-Qualified Non-Employee Director Stock Option Plan (as amended)
10-Q 6/30/2016 10.1
8/3/2016
10.14
*
United Fire Group, Inc. Plan for Allocation of Equity Compensation to Management Team
10-K 12/31/2011 10.15
3/15/2012
10.15
*
Deferred Compensation Plan for United Fire Group, Inc. Non-Employee Directors
8-K 10.1
11/19/2012
(a) 3. Exhibit Index (continued):

Incorporated by reference

Exhibit number

Exhibit description

Filed herewith

Form

Period ended

Exhibit

Filing date

10.15

Deferred Compensation Plan for United Fire Group, Inc. Non-Employee Directors

8-K

10.1

11/19/2012

10.16

Executive Nonqualified Excess Plan

8-K

10.1

5/22/2014

10.17

Executive Nonqualified "Excess Plan" Adoption Agreement

8-K

10.2

5/22/2014

10.18

United Fire & Casualty Company Rabbi Directed Trust Agreement

8-K

10.3

5/22/2014

10.19

Form of United Fire Group, Inc. Change in Control Severance Agreement

8-K

10.4

5/22/2014

10.20

Amendment Number One to United Fire & Casualty Company Nonqualified Deferred Compensation Plan

8-K

10.5

5/22/2014

10.21

Form of Non-Qualified Employee Stock Option Agreement for Purchase of Stock Under the United Fire Group, Inc. 2008 Stock Plan

10-Q

6/30/14

10.7

8/5/2014

10.22

Form of Stock Award Agreement under the United Fire Group, Inc. Stock Plan

10-Q

6/30/14

10.8

8/5/2014

10.23

Form of Stock Award Agreement ( Restricted Stock Units-Performance Units) Under the Stock Plan

10-Q

3/31/17

10.1

5/3/2017

10.24

Credit Agreement dated as of March 31, 2020, by and among United Fire & Casualty Company, as borrower, the lenders referred to therein and Wells Fargo Bank National Association, as administrative agent and swingline lender and issuing lender and Wells Fargo Securities, LLC as sole bookrunner.

8-K

10.1

4/2/2020

10.25

Form of Stock Award Agreement (Restricted Stock Units) under the United Fire, Group, Inc. Non-Employee Director Stock Plan

10-Q

6/30/2020

10.1

8/5/2020

Subsidiaries of the Registrant

23.1

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

23.2

Consent of Regnier Consulting Group, Inc., Independent Actuary

149

Table of Contents

(a) 3. Exhibit Index (continued):

Incorporated by reference

Exhibit number

Exhibit description

Filed herewith

Form

Period ended

Exhibit

Filing date

31.1

Certification of Randy A. Ramlo Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Dawn M. Jaffray Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Randy A. Ramlo Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Dawn M. Jaffray Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.1

104.1

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.1)

*Indicates a management contract or compensatory plan or arrangement.

† The schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The registrant agrees to furnish a copy of all omitted schedules to the ~~Securities and Exchange Commission~~SEC upon its request.

Certain instruments defining the rights of holders of long-term debt securities of the Company are omitted pursuant to Item 601(b)(4)(iii) of

Regulation S-K. The Company hereby undertakes to furnish to the SEC, upon request, copies of any such instruments.

150

~~156~~

Table of Contents

~~(a) 3. Exhibit Index (continued):~~

Incorporated by reference
Exhibit number Exhibit description Filed herewith Form Period ending Exhibit Filing date
10.16
*
United Fire Group, Inc. Executive Nonqualified Excess Plan
8-K 10.1
5/22/2014
10.17
*
United Fire & Casualty Company Executive Nonqualified Excess Plan Adoption Agreement
8-K 10.2
5/22/2014
10.18
*
United Fire & Casualty Company Rabbi Directed Trust Agreement
8-K 10.3
5/22/2014
10.19
*
Form of United Fire Group, Inc. Change in Control Severance Agreement
8-K 10.4
5/22/2014
10.20
*
Amendment Number One to United Fire & Casualty Company Nonqualified Deferred Compensation Plan
8-K 10.5
5/22/2014
10.21
*
Form of Non-Qualified Employee Stock Option Agreement under the Stock Plan, Defined as 2008 Plan, as Amended
10-Q 6/30/14 10.7
8/5/2014
10.22
*
Form of Stock Award Agreement under the United Fire Group, Inc. Stock Plan
10-Q 6/30/14 10.8
8/5/2014
10.23
*
Form of Stock Award Agreement ( Restricted Stock Units-Performance Units) Under the Stock Plan
10-Q 3/31/17 10.1
5/3/2017
10.24

Credit Agreement dated as of February 2, 2016, by and among United Fire Group, Inc., as borrower, the lenders from time to time party thereto, and KeyBank National Association, as administrative agent, swingline lender and letter of credit issuer.
8-K 10.1
2/5/2016
11

Statement Re Computation of Per Share Earnings. All information required by Exhibit 11 is presented within Note 12 of the Notes to Consolidated Financial Statements
X

12

Statement Re Computation of Ratios
X
21

Subsidiaries of the Registrant
X

23.1

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
X

23.2

Consent of Griffith, Ballard & Company, Independent Actuary
X

23.3

Consent of Regnier Consulting Group, Inc., Independent Actuary
X

*Indicates a management contract or compensatory plan or arrangement.

~~157~~

~~Table of Contents~~

~~(a) 3. Exhibit Index (continued):~~

~~Incorporated by reference~~

~~Exhibit number~~

~~Exhibit description~~

~~Filed herewith~~

~~Form~~

~~Period ending~~

~~Exhibit~~

~~Filing date~~

~~31.1~~

~~Certification of Randy A. Ramlo Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

~~31.2~~

~~Certification of Dawn M. Jaffray Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

~~32.1~~

~~Certification of Randy A. Ramlo Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

~~32.2~~

~~Certification of Dawn M. Jaffray Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

~~101.1~~

The following financial information from United Fire Group, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2017 formatted in XBRL: (i) Consolidated Balance Sheets at December 31, 2017 and 2016; (ii) Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2017, 2016 and 2015; (iii) Consolidated Statement of Stockholders' Equity for the years ended December 31, 2017, 2016 and 2015; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015; and (v) Notes to Consolidated Financial Statements.

~~158~~

~~Table of Contents~~

Schedule I. Summary of Investments — Other than Investments in Related Parties

~~Continuing Operations:~~


December 31, 2020	(In thousands)
	Cost or Amortized Cost				Amounts at Which Shown in Balance Sheet
Type of Investment			Fair Value
Fixed maturities
Bonds
United States Government and government agencies and authorities	$	209,983	$	214,456	$	214,456
States, municipalities and political subdivisions	824,545		884,700		884,700
Foreign governments	27,799		29,602		29,602
Public utilities	76,114		83,502		83,502
All other bonds	581,850		613,183		613,178
Redeemable preferred stock	0		0		0
Total fixed maturities	$	1,720,291	$	1,825,443	$	1,825,438
Equity securities
Common stocks
Public utilities	$	3,760	$	16,320	$	16,320
Banks, trusts and insurance companies	7,853		69,577		69,577
Industrial, miscellaneous and all other	36,877		120,193		120,193

Nonredeemable preferred stocks	595		595		595
Total equity securities	$	49,085	$	206,685	$	206,685
Mortgage loans on real estate	$	47,690	$	48,932	$	47,614

Other long-term investments	73,820		69,305		69,305
Short-term investments	175		175		175
Total investments	$	1,891,061	$	2,150,540	$	2,149,217

151

December 31, 2017 (In thousands)
Cost or Amortized Cost Amounts at Which Shown in Balance Sheet
Type of Investment Fair Value
Fixed maturities
Bonds
United States Government and government agencies and authorities $ 94,941
$ 95,353
$ 95,353
States, municipalities and political subdivisions 1,019,420
1,034,827
1,034,827
Foreign governments 10,865
11,130
11,130
Public utilities 43,064
43,692
43,692
All other bonds 360,657
364,501
364,501
Redeemable preferred stock 2,395
2,559
2,559
Total fixed maturities $ 1,531,342
$ 1,552,062
$ 1,552,062
Equity securities
Common stocks
Public utilities $ 4,661
$ 16,060
$ 16,060
Banks, trusts and insurance companies 11,266
113,487
113,487
Industrial, miscellaneous and all other 44,077
153,959
153,959
Nonredeemable preferred stocks 3,271
3,838
3,838
Total equity securities $ 63,275
$ 287,344
$ 287,344
Other long-term investments 35,432
49,352
49,352
Short-term investments 175
175
175
Total investments $ 1,630,224
$ 1,888,933
$ 1,888,933

~~159~~

Table of Contents

~~Discontinued Operations:~~

December 31, 2017 (In thousands)
Cost or Amortized Cost Amounts at Which Shown in Balance Sheet
Type of Investment Fair Value
Fixed maturities
Bonds
United States Government and government agencies and authorities $ 43,706
$ 43,706
$ 43,706
States, municipalities and political subdivisions 37,963
38,363
38,363
Foreign governments 40,496
41,623
41,623
Public utilities 162,964
165,452
165,452
All other bonds 1,127,196
1,140,915
1,140,915
Total fixed maturities $ 1,412,325
$ 1,430,059
$ 1,430,059
Equity securities
Common stocks
Public utilities $ 2,544
$ 7,253
$ 7,253
Banks, trusts and insurance companies 467
3,158
3,158
Industrial, miscellaneous and all other 2,088
13,242
13,242
Total equity securities $ 5,099
$ 23,653
$ 23,653
Mortgage loans on real estate $ 3,435
$ 3,594
$ 3,435
Policy loans 5,815
5,815
5,815
Other long-term investments 14,077
16,437
16,437
Total investments $ 1,440,751
$ 1,479,558
$ 1,479,399

~~160~~

~~Table of Contents~~

Schedule II. Condensed Financial Statements of Parent Company

United Fire Group, Inc. (parent company only)

Condensed Balance Sheets


	December 31,
(In thousands, except share data)	2020		2019

Assets
Fixed maturities

Available-for-sale, at fair value (amortized cost $150 in 2020 and $150 in 2019)	$	150	$	150
Investment in subsidiary	818,581		880,485
Cash and cash equivalents	6,504		29,878

Other assets	15		3
Total assets	$	825,250	$	910,516

Liabilities and stockholders' equity
Liabilities	$	101	$	44

Stockholders' equity
Common stock, $0.001 par value, authorized 75,000,000 shares 25,055,479 and 25,015,963 issued and outstanding in 2020 and 2019, respectively	$	25	$	25
Additional paid-in capital	202,359		200,179
Retained earnings	555,854		697,116
Accumulated other comprehensive income, net of tax	66,911		13,152
Total stockholders' equity	$	825,149	$	910,472

Total liabilities and stockholders' equity	$	825,250	$	910,516

December 31,
(In thousands, except share data) 2017 2016

Assets
Fixed maturities, held-to-maturity, at amortized cost (fair value $150 in 2017 and $150 in 2016) $ 150
$ 150
Investment in subsidiary 967,590
925,887
Cash and cash equivalents 4,537
14,325
Federal income tax receivable 1,095
1,521
Accrued investment income 1
1
Total assets $ 973,373
$ 941,884

Liabilities and stockholders' equity
Liabilities $ —
$ —

Stockholders' equity
Common stock, $0.001 par value, authorized 75,000,000 shares; 24,916,806 and 25,429,769 issued and outstanding in 2017 and 2016, respectively $ 25
$ 25
Additional paid-in capital 196,334
216,482
Retained earnings 608,700
616,322
Accumulated other comprehensive income, net of tax 168,314
109,055
Total stockholders' equity $ 973,373
$ 941,884

Total liabilities and stockholders' equity $ 973,373
$ 941,884

This condensed financial information should be read in conjunction with the Consolidated Financial Statements and Notes included in Part II, Item 8 of this Annual Report on Form 10-K.

152

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Table of Contents

Schedule II. Condensed Financial Statements of Parent Company (continued)

United Fire Group, Inc. (parent company only)

Condensed Statements of Income and Comprehensive Income


	For the Years Ended December 31,
(In thousands)	2020		2019		2018

Revenues
Investment income	$	141	$	295	$	396
Total revenues	141		295		396

Expenses
Other operating expenses	$	10	$	86	$	95
Total expenses	10		86		95

Income before income taxes and equity in net income of subsidiary	131		209		301
Federal income tax expense (benefit)	68		44		(1,165)
Net income before equity in net income (loss) of subsidiary	$	63	$	165	$	1,466
Equity in net income (loss) of subsidiary	(112,769)		14,655		26,184
Net income (loss)	$	(112,706)	$	14,820	$	27,650

Other comprehensive income (loss)
Change in unrealized appreciation on investments held by subsidiary	$	47,054	$	70,127	$	(50,985)
Change in liability for underfunded employee benefit plans of subsidiary	18,456		(20,924)		25,513
Other comprehensive income (loss), before tax and reclassification adjustments	$	65,510	$	49,203	$	(25,472)
Income tax effect	(13,757)		(10,334)		5,349
Other comprehensive income (loss), after tax, before reclassification adjustments	$	51,753	$	38,869	$	(20,123)
Reclassification adjustment for net realized gains of the subsidiary included in income	(1,750)		1,521		784
Reclassification adjustment for employee benefit costs of the subsidiary included in expense	4,289		4,497		6,642
Total reclassification adjustments, before tax	$	2,539	$	6,018	$	7,426
Income tax effect	(534)		(1,263)		(1,559)
Total reclassification adjustments, after tax	$	2,005	$	4,755	$	5,867

Comprehensive income (loss)	$	(58,948)	$	58,444	$	13,394

For the Years Ended December 31,
(In thousands) 2017 2016 2015

Revenues
Investment income $ 133
$ 66
$ 25
Total revenues 133
66
25

Expenses
Other operating expenses $ 103
$ 73
$ 116
Total expenses 103
73
116

Income (loss) before income taxes and equity in net income of subsidiary 30
(7 ) (91 )
Federal income tax benefit (1,060 ) (3 ) (42 )
Net income (loss) before equity in net income of subsidiary $ 1,090
$ (4 ) $ (49 )
Equity in net income of subsidiary 49,933
49,908
89,175
Net income $ 51,023
$ 49,904
$ 89,126

Other comprehensive income (loss)
Change in unrealized appreciation on investments held by subsidiary $ 72,251
$ 13,017
$ (28,185 )
Change in liability for underfunded employee benefit plans of subsidiary (26,122 ) 30,045
8,714
Other comprehensive income (loss), before tax and reclassification adjustments $ 46,129
$ 43,062
$ (19,471 )
Income tax effect (17,540 ) (15,072 ) 6,814
Other comprehensive income (loss), after tax, before reclassification adjustments $ 28,589
$ 27,990
$ (12,657 )
Reclassification adjustment for net realized gains of the subsidiary included in income (6,390 ) (4,520 ) (4,513 )
Reclassification adjustment for employee benefit costs of the subsidiary included in expense 5,408
5,486
7,468
Total reclassification adjustments, before tax $ (982 ) $ 966
$ 2,955
Income tax effect 344
(338 ) (1,034 )
Total reclassification adjustments, after tax $ (638 ) $ 628
$ 1,921

Comprehensive income $ 78,974
$ 78,522
$ 78,390

United Fire Group, Inc. and its subsidiaries file a consolidated federal income tax return. The federal income tax provision represents an allocation under its tax allocation agreements.

This condensed financial information should be read in conjunction with the Consolidated Financial Statements and Notes included in Part II, Item 8 of this Annual Report on Form 10-K.

153

~~162~~

Table of Contents

Schedule II. Condensed Financial Statements of Parent Company (continued)

United Fire Group, Inc. (parent company only)

Condensed Statements of Cash Flows


	For the Years Ended December 31,
(In thousands)	2020		2019		2018

Cash flows from operating activities
Net income (loss)	$	(112,706)	$	14,820	$	27,650
Adjustments to reconcile net income to net cash provided by operating activities
Equity in net income of subsidiary	112,769		(14,655)		(26,184)
Dividends received from subsidiary	4,000		57,000		105,000
Other, net	3,907		5,512		1,824
Total adjustments	$	120,676	$	47,857	$	80,640
Net cash provided by operating activities	$	7,970	$	62,677	$	108,290

Cash flows from investing activities


Net cash used in investing activities	$	0	$	0	$	0

Cash flows from financing activities
Payment of cash dividends	$	(28,532)	$	(32,662)	$	(105,408)
Repurchase of common stock	(2,741)		(11,700)		(5,404)
Issuance of common stock	(71)		2,377		7,171

Net cash used in financing activities	$	(31,344)	$	(41,985)	$	(103,641)

Net change in cash and cash equivalents	$	(23,374)	$	20,692	$	4,649
Cash and cash equivalents at beginning of period	29,878		9,186		4,537
Cash and cash equivalents at end of year	$	6,504	$	29,878	$	9,186

For the Years Ended December 31,
(In thousands) 2017 2016 2015

Cash flows from operating activities
Net income $ 51,023
$ 49,904
$ 89,126
Adjustments to reconcile net income to net cash provided by operating activities
Equity in net income of subsidiary (49,933 ) (49,908 ) (89,175 )
Dividends received from subsidiary 40,000
24,000
22,500
Other, net 1,415
2,995
1,269
Total adjustments $ (8,518 ) $ (22,913 ) $ (65,406 )
Net cash provided by operating activities $ 42,505
$ 26,991
$ 23,720

Cash flows from investing activities
Proceeds from maturity of held-to-maturity investments $ 150
$ —
$ —
Purchase of held-to-maturity investments (150 ) —
—
Net cash used in investing activities $ —
$ —
$ —

Cash flows from financing activities
Payment of cash dividends $ (27,337 ) $ (24,591 ) $ (21,658 )
Repurchase of common stock (29,784 ) (3,746 ) (2,423 )
Issuance of common stock 4,828
9,922
5,496
Tax impact from issuance of common stock —
(816 ) (833 )
Net cash used in financing activities $ (52,293 ) $ (19,231 ) $ (19,418 )

Net change in cash and cash equivalents $ (9,788 ) $ 7,760
$ 4,302
Cash and cash equivalents at beginning of period 14,325
6,565
2,263
Cash and cash equivalents at end of year $ 4,537
$ 14,325
$ 6,565

This condensed financial information should be read in conjunction with the Consolidated Financial Statements and Notes included in Part II, Item 8 of this Form 10-K.

154

~~163~~

Table of Contents

Schedule III. Supplementary Insurance Information


(In thousands)	Deferred Policy Acquisition Costs		Future Policy Benefits, Losses, Claims and Loss Expenses		Unearned Premiums		Earned Premium Revenue		Investment Income, Net		Benefits, Claims, Losses and Settlement Expenses		Amortization of Deferred Policy Acquisition Costs		Other Underwriting Expenses		Interest on Policyholders' Accounts		Premiums Written (2)
Year Ended December 31, 2020
Continuing Operations	$	87,094	$	1,578,131	$	464,845	$	1,055,082	$	39,670	$	869,467	$	210,252	$	143,332	$	0	$	1,011,350
Discontinued Operations(1)	0		0		0		0		0		0		0		0		0		0
Total	$	87,094	$	1,578,131	$	464,845	$	1,055,082	$	39,670	$	869,467	$	210,252	$	143,332	$	0	$	1,011,350
Year Ended December 31, 2019
Continuing Operations	$	94,292	$	1,421,754	$	505,162	$	1,086,972	$	60,414	$	830,172	$	216,199	$	137,415	$	0	$	1,096,730
Discontinued Operations(1)	0		0		0		0		0		0		0		0		0		0
Total	$	94,292	$	1,421,754	$	505,162	$	1,086,972	$	60,414	$	830,172	$	216,199	$	137,415	$	0	$	1,096,730
Year Ended December 31, 2018
Continuing Operations	$	92,796	$	1,312,483	$	492,918	$	1,037,451	$	52,894	$	731,611	$	206,232	$	141,473	$	0	$	1,061,664
Discontinued Operations(1)	0		0		0		13,003		12,663		15,846		1,895		3,864		4,499		0
Total	$	92,796	$	1,312,483	$	492,918	$	1,050,454	$	65,557	$	747,457	$	208,127	$	145,337	$	4,499	$	1,061,664

(1)Annuity deposits are included in future policy benefits, losses, claims and loss expenses.

(2)Pursuant to Regulation S-X, premiums written does not apply to life insurance companies.

155

(In thousands) Deferred Policy Acquisition Costs Future Policy Benefits, Losses, Claims and Loss Expenses Unearned Premiums Earned Premium Revenue Investment Income, Net Benefits, Claims, Losses and Settlement Expenses Amortization of Deferred Policy Acquisition Costs Other Underwriting Expenses Interest on Policyholders' Accounts
Premiums Written ⁽²⁾
Year Ended December 31, 2017
Continuing Operations $ 88,102
$ 1,224,183
$ 465,391
$ 997,492
$ 51,190
$ 725,713
$ 207,746
$ 103,628
$ —
$ 1,019,113
Discontinued Operations⁽¹⁾
71,151
1,320,401
67
61,368
49,720
68,083
5,181
13,281
18,525
—
Total $ 159,253
$ 2,544,584
$ 465,458
$ 1,058,860
$ 100,910
$ 793,796
$ 212,927
$ 116,909
$ 18,525
$ 1,019,113
Year Ended December 31, 2016
Continuing Operations $ 93,362
$ 1,123,896
$ 443,802
$ 936,131
$ 55,284
$ 652,433
$ 202,892
$ 83,540
$ —
$ 964,970
Discontinued Operations⁽¹⁾
70,750
1,350,503
71
87,270
51,538
91,334
8,121
19,881
20,079
—
Total $ 164,112
$ 2,474,399
$ 443,873
$ 1,023,401
$ 106,822
$ 743,767
$ 211,013
$ 103,421
$ 20,079
$ 964,970
Year Ended December 31, 2015
Continuing Operations $ 90,547
$ 1,003,895
$ 414,971
$ 851,695
$ 46,559
$ 520,087
$ 180,183
$ 83,631
$ —
$ 887,874
Discontinued Operations⁽¹⁾
77,717
1,372,358
86
79,195
54,222
79,946
6,634
19,306
23,680
—
Total $ 168,264
$ 2,376,253
$ 415,057
$ 930,890
$ 100,781
$ 600,033
$ 186,817
$ 102,937
$ 23,680
$ 887,874


~~(1)~~	~~Annuity deposits are included in future policy benefits, losses, claims and loss expenses.~~


~~(2)~~	~~Pursuant to Regulation S-X, premiums written does not apply to life insurance companies.~~

~~164~~

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Schedule IV. Reinsurance


(In thousands)	Gross Amount		Ceded to Other Companies		Assumed From Other Companies		Net Amount		Percentage of Amount Assumed to Net Earned
Year Ended December 31, 2020

Premiums earned
Property and casualty insurance	$	1,106,327	$	84,924	$	33,679	$	1,055,082	3.19	%


Year Ended December 31, 2019

Premiums earned
Property and casualty insurance	$	1,133,583	$	72,023	$	25,412	$	1,086,972	2.34	%


Year Ended December 31, 2018

Premiums earned
Property and casualty insurance	$	1,083,981	$	63,487	$	16,957	$	1,037,451	1.63	%

156

(In thousands) Gross Amount Ceded to Other Companies Assumed From Other Companies Net Amount Percentage of Amount Assumed to Net Earned
Year Ended December 31, 2017

Life insurance in force $ 5,309,508
$ 1,014,794
$ —
$ 4,294,714

Premiums earned
Continuing Operations - Property and casualty insurance $ 1,043,738
$ 61,305
$ 15,059
$ 997,492
1.51 %
Discontinued Operations - Life, accident and health insurance 64,090
2,722
—
61,368
— %
Total $ 1,107,828
$ 64,027
$ 15,059
$ 1,058,860
1.42 %
Year Ended December 31, 2016
Life insurance in force $ 5,314,548
$ 1,023,197
$ —
$ 4,291,351

Premiums earned
Continuing Operations - Property and casualty insurance $ 977,090
$ 57,996
$ 17,037
$ 936,131
1.82 %
Discontinued Operations - Life, accident and health insurance 90,038
2,768
—
87,270
— %
Total $ 1,067,128
$ 60,764
$ 17,037
$ 1,023,401
1.66 %
Year Ended December 31, 2015
Life insurance in force $ 5,491,932
$ 1,165,868
$ —
$ 4,326,064

Premiums earned
Continuing Operations - Property and casualty insurance $ 890,057
$ 56,758
$ 18,396
$ 851,695
2.16 %
Discontinued Operations - Life, accident and health insurance 82,356
3,161
—
79,195
— %
Total $ 972,413
$ 59,919
$ 18,396
$ 930,890
1.98 %

~~165~~

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Schedule V. Valuation And Qualifying Accounts


(In thousands)	Balance at beginning of period		Charged to costs and expenses		Deductions		Balance at end of period
Description
Allowance for bad debts
Year Ended December 31, 2020	$	1,239	$	0	$	552	$	687
Year Ended December 31, 2019	785		454		0		1,239
Year Ended December 31, 2018	1,255		0		470		785

Deferred tax asset valuation allowance (1)
Year Ended December 31, 2020	$	0	$	0	$	0	$	0
Year Ended December 31, 2019	0		0		0		0
Year Ended December 31, 2018	329		0		329		0

(1)Recorded in connection with the purchase of American Indemnity Financial Corporation in 1999.

157

(In thousands) Balance at beginning of period Charged to costs and expenses Deductions Balance at end of period
Description
Allowance for bad debts
Year Ended December 31, 2017 $ 1,255
$ —
$ —
$ 1,255
Year Ended December 31, 2016 867
388
—
1,255
Year Ended December 31, 2015 618
249
—
867

Deferred tax asset valuation allowance ⁽¹⁾

Year Ended December 31, 2017 $ 718
$ —
$ 389
$ 329
Year Ended December 31, 2016 1,265
—
547
718
Year Ended December 31, 2015 1,813
—
548
1,265


~~(1)~~	~~Recorded in connection with the purchase of American Indemnity Financial Corporation in 1999.~~

~~166~~

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Schedule VI. Supplemental Information Concerning Property and Casualty Insurance Operations


(In thousands)
Affiliation with Registrant: United Fire & Casualty Company and consolidated property and casualty subsidiaries													Claims and Claim Adjustment Expenses Incurred Related to:				Amortization of Deferred Policy Acquisition Costs
			Reserves for Unpaid Claims and Claim Adjustment Expenses						Net Realized Investment Gains (Losses)
	Deferred Policy Acquisition Costs										Net Investment Income								Paid Claims and Claim Adjustment Expenses
					Unearned Premiums		Earned Premiums						Current Year		Prior Years						Premiums Written
2020	$	87,094	$	1,578,131	$	464,845	$	1,055,082	$	(32,395)	$	39,670	$	887,119	$	(17,652)	$	210,252	$	776,397	$	1,011,350
2019	$	94,292	$	1,421,754	$	505,162	$	1,086,972	$	53,779	$	60,414	$	835,507	$	(5,335)	$	216,699	$	732,343	$	1,096,730
2018	$	92,796	$	1,312,483	$	492,928	$	1,037,451	$	(20,179)	$	52,894	$	785,778	$	(54,167)	$	206,232	$	640,534	$	1,061,664

158

(In thousands)
Affiliation with Registrant: United Fire & Casualty Company and consolidated property and casualty subsidiaries Claims and Claim Adjustment Expenses Incurred Related to:
Amortization of Deferred Policy Acquisition Costs ⁽¹⁾

Reserves for Unpaid Claims and Claim Adjustment Expenses Net Realized Investment Gains
Deferred Policy Acquisition Costs Net Investment Income Paid Claims and Claim Adjustment Expenses
Unearned Premiums Earned Premiums Current Year Prior Years Premiums Written
2017 $ 88,102
$ 1,224,183
$ 465,391
$ 997,492
$ 4,055
$ 51,190
$ (779,966 ) $ (54,253 ) $ 207,746
$ 625,503
$ 1,019,113
2016 $ 93,362
$ 1,123,896
$ 443,802
$ 936,131
$ 4,947
$ 55,284
$ 683,662
$ (31,229 ) $ 202,892
$ 537,573
$ 964,970
2015 $ 90,547
$ 1,003,895
$ 414,971
$ 851,695
$ 1,124
$ 46,559
$ 560,482
$ (40,395 ) $ 180,183
$ 476,525
$ 887,874

~~167~~

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ITEM 16. FORM 10-K SUMMARY

None.

159

~~168~~

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

UNITED FIRE GROUP, INC.



By:			/s/ Randy A. Ramlo
			Randy A. Ramlo, Chief Executive Officer, Director and Principal Executive Officer

Date:			2/~~28/2018~~26/2021

By:			/s/ Dawn M. Jaffray
			Dawn M. Jaffray, ~~Senior~~Executive Vice President, Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer

Date:			2/~~28/2018~~26/2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

160

Table of Contents

/s/ Jack B. Evans

/s/ John Paul E. Besong

Jack B. Evans, Chairman and Director

John Paul E. Besong, Director

Date

2/~~28/2018~~26/2021

Date

2/~~28/2018~~26/2021

/s/ Scott L. Carlton

By:

/s/ Brenda K. Clancy

Scott L. Carlton, Director

Brenda K. Clancy, Director

Date

2/~~28/2018~~26/2021

Date

2/~~28/2018~~26/2021

/s/ Christopher R. Drahozal

~~/s/ Sarah Fisher Gardial~~

~~Christopher R. Drahozal, Director~~

~~Sarah Fisher Gardial, Director~~

~~Date~~

~~2/28/2018~~

~~Date~~

~~2/28/2018~~

/s/ Dawn M. Jaffray

~~/s/ George D. Milligan~~

Christopher R. Drahozal, Director

Dawn M. Jaffray, ~~Senior~~Executive Vice President, Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer

Date

2/26/2021

Date

2/26/2021

/s/ Lura McBride

/s/ George D. Milligan

Lura McBride, Director

George D. Milligan, Director

Date

2/~~28/2018~~26/2021

Date

2/~~28/2018~~26/2021

/s/ James W. Noyce

/s/ Mary K. Quass

James W. Noyce, Vice Chairman and Director

Mary K. Quass, Director

Date

2/~~28/2018~~26/2021

Date

2/~~28/2018~~26/2021

/s/ Randy A. Ramlo

/s/ Kyle D. Skogman

Randy A. Ramlo, Chief Executive Officer, Director and Principal Executive Officer

Kyle D. Skogman, Director

Date

2/~~28/2018~~26/2021

Date

2/~~28/2018~~26/2021

/s/ Susan E. Voss

Susan E. Voss, Director

Date

2/~~28/2018~~26/2021

~~169~~161



Iowa						45-2302834
(State or other jurisdiction of incorporation or organization)						(I.R.S Employer Identification No.)



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



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


		Page

		~~Page~~

Forward-Looking Information	1
PART I:

Item 1. Business		3

Item 1A. Risk Factors		12

Item 1B. Unresolved Staff Comments		2724

Item 2. Properties		2724

Item 3. Legal Proceedings		2724

Item 4. Mine Safety Disclosures		2724

PART II:

Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities		2825

Item 6. Selected Financial Data		3127

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations		3329

Item 7A. Quantitative and Qualitative Disclosures About Market Risk		7367

Item 8. Financial Statements and Supplementary Data		7468

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		~~150~~142

Item 9A. Controls and Procedures		~~150~~142

Item 9B. Other Information		~~154~~146

PART III:

Item 10. Directors, Executive Officers and Corporate Governance		~~154~~146

Item 11. Executive Compensation		~~154~~146

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		~~154~~146

Item 13. Certain Relationships and Related Transactions, and Director Independence		~~154~~146

Item 14. Principal Accountant Fees and Services		~~154~~146

PART IV:

Item 15. Exhibits and Financial Statement Schedules		~~155~~147

Item 16. Form 10-K Summary		~~168~~159

Signatures		~~169~~160

~~Exhibit 12~~
~~Exhibit 21~~
~~Exhibit 23.1~~
~~Exhibit 23.2~~
~~Exhibit 23.3~~
~~Exhibit 31.1~~
~~Exhibit 31.2~~
~~Exhibit 32.1~~
~~Exhibit 32.2~~


Name of Reinsurer			A.M. Best		S&P Rating
Everest Reinsurance Company(2)			A+		A+
General Reinsurance Corporation(2)			A++		AA+
Hannover Rueckversicherung AG (1) (2)			A+		AA-
Lloyd's			A		A+
Munich Re(2)			A+		A-
Odyssey Re(2)			A		A-
Partner Re(1)(2)			A+		A+
QBE Reinsurance Corporation(1)			A		A+


~~Name of Reinsurer~~			~~A.M. Best~~	~~S&P Rating~~
~~Arch~~ SCOR Reinsurance Company(1)(2)	A+			A+
~~Aspen Insurance UK Limited~~	A	A
~~Everst Re~~	A+	A+
~~FM Global~~	A+	~~N/A~~
~~General Reinsurance Corporation~~	~~A++~~	AAAA-
~~Hannover Rueckversicherung AG~~^{Toa Re(1) (2)}			A+A		~~AA-~~A+
~~Lloyd's~~			A	A+
~~Munich Re~~	A+	~~AA-~~
~~Odyssey Re~~	A	A-
~~Partner Re~~⁽¹⁾⁽²⁾	A	A+
~~QBE Reinsurance Corporation~~ ⁽¹⁾	A	A+
~~R&V Versicherung AG~~⁽²⁾	~~N/A~~	~~AA-~~
~~Renaissance Re~~	A+	~~AA-~~
~~SCOR Reinsurance Company~~⁽¹⁾⁽²⁾	A+	~~AA-~~
~~Toa Re~~	A	A+
~~Tokio Millennium Re Ltd~~	~~A++~~	A+
~~Transatlantic Re~~	A+	A+


◦	~~A stable workforce, with an average duration of employment of approximately 10.1 years, allows our agents to work with the same, highly-experienced personnel each day.~~


◦	~~Our organization is relatively flat, allowing our agents to be close to the highest levels of management and ensuring that our agents will receive answers quickly to their questions.~~



	Share Price				Cash Dividends Declared per share
	High		Low
2017
Quarter Ended:
March 31	$	49.93	$	40.19	$	0.25
June 30	45.80		41.38		0.28
September 30	46.83		38.98		0.28
December 31	49.74		44.10		0.28
Year-end closing share price: $45.58

2016
Quarter Ended:
March 31	$	44.43	$	35.16	$	0.22
June 30	45.75		39.12		0.25
September 30	44.00		40.37		0.25
December 31	50.75		37.54		0.25
Year-end closing share price: $49.17



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as a Part of Publicly Announced Plans or Programs	Maximum Number of Shares that may yet be Purchased Under the Plans or Programs
1/1/17 - 1/31/17	—	$	—	—	2,938,471
2/1/17 - 2/28/17	12,000	41.85		12,000	2,926,471
3/1/17 - 3/31/17	122,981	42.66		122,981	2,803,490
4/1/17 - 4/30/17	140,821	42.50		140,821	2,662,669
5/1/17 - 5/31/17	200,624	42.78		200,624	2,462,045
6/1/17 - 6/30/17	20,182	42.94		20,182	2,441,863
7/1/17 - 7/31/17	4,904	43.00		4,904	2,436,959
8/1/17 - 8/31/17	127,387	42.41		127,387	2,309,572
9/1/17 - 9/30/17	73,000	40.92		73,000	2,236,572
10/1/17 - 10/31/17	—	—		—	2,236,572
11/1/17 - 11/30/17	—	—		—	2,236,572
12/1/17 - 12/31/17	—	—		—	2,236,572
Total	701,899			701,899


Transatlantic Re(1)			~~Primary reinsurers participating in the property and casualty excess of loss programs.~~A+			A+



(In Thousands)	Payments Due By Period
Contractual Obligations	Total		Less Than One Year		One to Three Years		Three to Five Years		More Than Five Years
Future policy benefit reserves ⁽¹⁾	$	2,000,494	$	197,373	$	347,405	$	268,946	$	1,186,770
Loss and loss settlement expense reserves	1,224,183		438,067		409,041		158,571		218,504
Operating leases	22,525		6,435		11,555		3,817		718
Profit-sharing commissions	15,100		15,100		—		—		—
Pension plan contributions	6,400		6,400		—		—		—
Total	$	3,268,702	$	663,375	$	768,001	$	431,334	$	1,405,992


~~(1)~~	This projection of our obligation for future policy benefits considers only actual future cash outflows. The future policy benefit reserves presented on the Discontinued Operations Balance Sheets in Item 8. Note 17 "Discontinued Operations" is the net present value of the benefits to be paid, less the net present value of future net premiums.


Sensitivity Analysis — Impact of Changes in Projected Loss and Loss Settlement Expense Ratios
(In Thousands)	-10%		-5%		Base		+5%		+10%
Premium deficiency charge estimated	$	—	$	—	$	1,453	$	8,235	$	16,530



Sensitivity Analysis — Impact of changes in assumptions on DAC asset (In Thousands)
Changes in assumptions	-10%			+10%
Mortality experience	$	3,169		$	(3,516	)
Policy lapse experience	1,437			(1,371		)
Changes in assumptions	-1%			+1%
Interest rate spread	$	(1,684	)	$	1,613


(In Thousands)	Case Basis		IBNR		Loss Settlement Expense		Total Reserves		(In Thousands)	Case Basis		IBNR		Loss Settlement Expense		Total Reserves
Commercial lines									Commercial lines
Fire and allied lines	$	87,659	$	14,385	$	24,637	$	126,681	Fire and allied lines	$	128,979	$	20,736	$	32,751	$	182,466
Other liability	219,195		100,141		177,767		497,103		Other liability	342,899		117,530		191,834		652,263
Automobile	191,898		57,629		62,591		312,118		Automobile	304,962		85,745		82,734		473,441
Workers' compensation	174,076		7,600		29,593		211,269		Workers' compensation	145,132		4,000		24,425		173,557
Fidelity and surety	5,022		2,520		172		7,714		Fidelity and surety	2,788		2,520		108		5,416
Miscellaneous	312		680		240		1,232		Miscellaneous	289		553		105		947
Total commercial lines	$	678,162	$	182,955	$	295,000	$	1,156,117	Total commercial lines	$	925,049	$	231,084	$	331,957	$	1,488,090
Personal lines									Personal lines
Automobile	$	12,561	$	911	$	2,138	$	15,610	Automobile	$	12,631	$	1,095	$	2,146	$	15,872
Fire and allied lines	9,312		1,725		2,566		13,603		Fire and allied lines	23,232		5,071		3,056		31,359
Miscellaneous	651		129		271		1,051		Miscellaneous	3,166		270		820		4,256
Total personal lines	$	22,524	$	2,765	$	4,975	$	30,264	Total personal lines	$	39,029	$	6,436	$	6,022	$	51,487
Reinsurance assumed	22,536		15,105		161		37,802		Reinsurance assumed	15,504		22,920		130		38,554
Total	$	723,222	$	200,825	$	300,136	$	1,224,183	Total	$	979,582	$	260,440	$	338,109	$	1,578,131


(In Thousands)
Change in level of net case-basis reserve development	5%		10%
Impact on reported net case-basis reserves	$	43,118	$	86,236


(In Thousands)
Change in claim frequency and claim severity assumptions	5%		10%
Impact due to change in IBNR reserving assumptions	$	12,874	$	25,748


(In Thousands)					(In Thousands)
Change in LAE paid to losses paid ratio	1%		2%		Change in LAE paid to losses paid ratio	1%		2%
Impact due to change in LAE reserving assumptions	$	2,958	$	5,916	Impact due to change in LAE reserving assumptions	$	3,264	$	6,529


(In Thousands)
Hypothetical Reserve Development Volatility Levels	-10%		-5%		+5%		+10%
Impact on loss and loss settlement expenses
Other liability	$	(65,226)	$	(32,613)	$	32,613	$	65,226
Workers' compensation	(17,356)		(8,678)		8,678		17,356
Automobile	(48,931)		(24,466)		24,466		48,931

Hypothetical Reserve Development Volatility Levels	-5%		-3%		+3%		+5%
Impact on loss and loss settlement expenses
All other lines	$	(13,150)	$	(7,890)	$	7,890	$	13,150



~~Assumption~~	~~Determination Methodology~~	~~Potential One-Time Effect on DAC Asset, Net of Unearned Revenue Liabilities~~
~~Mortality Experience~~	~~Based on our mortality experience with consideration given to industry experience and trends~~	~~A 10.0% increase in expected mortality experience for all future years would result in a reduction in DAC and an increase in current period amortization expense of $3.2 million.~~
~~Surrender Rates~~	~~Based on our policy surrender experience with consideration given to industry experience and trends~~	~~A 10.0% increase in expected surrender rates for all future years would result in a reduction in DAC and an increase in current period amortization expense of $1.4 million.~~
~~Interest Spreads~~	~~Based on our expected future investment returns and expected future crediting rates applied to policyholder account balances; future crediting rates include constraints imposed by policy guarantees~~	~~A 10-basis-point reduction in future interest rate spreads would result in a reduction in DAC and an increase in current period amortization expense of $1.7 million.~~
~~Maintenance Expenses~~	~~Based on our experience using an internal expense allocation methodology~~	~~A 10.0% increase in future maintenance expenses would result in a reduction in DAC and an increase in current period amortization expense of $0.5 million.~~

United Fire Group, Inc. Consolidated Balance Sheets

	December 31,
(In Thousands, Except Share Data)	2017		2016

Assets
Investments
Fixed maturities
Held-to-maturity, at amortized cost (fair value $150 in 2017 and $150 in 2016)	$	150	$	150
Available-for-sale, at fair value (amortized cost $1,516,610 in 2017 and $1,458,235 in 2016)	1,535,070		1,453,286
Trading securities, at fair value (amortized cost $14,582 in 2017 and $13,054 in 2016)	16,842		14,390
Equity securities
Available-for-sale, at fair value (cost $57,387 in 2017 and $59,994 in 2016)	280,913		246,370
Trading securities, at fair value (cost $5,888 in 2017 and $5,434 in 2016)	6,431		5,644
Other long-term investments	49,352		51,769
Short-term investments	175		175
	1,888,933		1,771,784
Cash and cash equivalents	95,562		89,194
Accrued investment income	13,841		13,617
Premiums receivable (net of allowance for doubtful accounts of $1,255 in 2017 and $1,255 in 2016)	328,513		306,202
Deferred policy acquisition costs	88,102		93,362
Property and equipment (primarily land and buildings, at cost, less accumulated depreciation of $51,603 in 2017 and $50,925 in 2016)	68,992		55,524
Reinsurance receivables and recoverables	63,194		62,707
Prepaid reinsurance premiums	3,749		3,782
Income taxes receivable	6,031		14,285
Goodwill and net intangible assets	23,971		24,740
Other assets	16,409		13,943
Assets held for sale	1,586,134		1,605,618
Total assets	$	4,183,431	$	4,054,758
Liabilities and stockholders' equity
Liabilities
Losses and loss settlement expenses	$	1,224,183	$	1,123,896
Unearned premiums	465,391		443,802
Accrued expenses and other liabilities	167,396		147,104
Deferred income taxes	5,953		7,849
Liabilities held for sale	1,347,135		1,390,223
Total liabilities	$	3,210,058	$	3,112,874
Stockholders' equity
Common stock, $0.001 par value; authorized 75,000,000 shares; 24,916,806 and 25,429,769 shares issued and outstanding in 2017 and 2016, respectively	$	25	$	25
Additional paid-in capital	196,334		216,482
Retained earnings	608,700		616,322
Accumulated other comprehensive income, net of tax	168,314		109,055
Total stockholders' equity	$	973,373	$	941,884
Total liabilities and stockholders' equity	$	4,183,431	$	4,054,758


	Common Stock
(In Thousands, Except Share Data)	Shares outstanding	Common stock		Additional paid-in capital		Retaining earnings		Accumulated other comprehensive income		Total

Balance, January 1, 2018	24,916,806	$	25	$	196,334	$	608,700	$	168,314	$	973,373
Net income	—	—		—		27,650		—		27,650
Shares repurchased	(120,372)	—		(5,404)		—		—		(5,404)
Stock based compensation	300,974	—		7,171		—		—		7,171
Dividends on common stock ($4.21 per share)	—	—		—		(105,408)		—		(105,408)
Change in net unrealized investment appreciation(1)	—	—		—		—		(32,944)		(32,944)
Net unrealized investment depreciation of discontinued operations, sold						(6,714)				(6,714)
Change in liability for underfunded employee benefit plans(2)	—	—		—		—		25,402		25,402
Cumulative effect of change in accounting principle	—	—		—		191,244		(191,244)		0
Compensation expense and related tax benefit for stock-based award grants	—	—		5,249		—		—		5,249
Balance, January 1, 2019	25,097,408	$	25	$	203,350	$	715,472	$	(30,472)	$	888,375
Net income	—	$	—	$	—	$	14,820	$	—	$	14,820
Shares repurchased	(258,756)	—		(11,700)		—		—		(11,700)
Stock based compensation	177,311	—		2,377		—		—		2,377
Dividends on common stock ($1.30 per share)	—	—				(32,662)		—		(32,662)
Change in net unrealized investment appreciation(1)	—	—		—		—		56,602		56,602

Change in liability for underfunded employee benefit plans(2)	—	—		—		—		(12,978)		(12,978)
Cumulative effect of change in accounting principle	—	—		—		(514)		—		(514)
Compensation expense and related tax benefit for stock-based award grants	—	—		6,152		—		—		6,152
Balance, January 1, 2020	25,015,963	$	25	$	200,179	$	697,116	$	13,152	$	910,472
Net loss	—	$	—	$	—	$	(112,706)	$	—	$	(112,706)
Shares repurchased	(70,467)	—		(2,741)		—		—		(2,741)
Stock based compensation	109,983	—		(71)		—		—		(71)
Dividends on common stock ($1.14 per share)	—	—		—		(28,526)		—		(28,526)
Change in net unrealized investment appreciation(1)	—	—		—		—		35,791		35,791
Change in liability for underfunded employee benefit plans(2)	—	—		—		—		17,968		17,968
Cumulative effect of change in accounting principle	—	—		—		(30)		—		(30)
Compensation expense and related tax benefit for stock-based award grants	—	—		4,992		—		—		4,992
Balance, December 31, 2020	25,055,479	$	25	$	202,359	$	555,854	$	66,911	$	825,149


~~(1)~~	~~The change in net unrealized appreciation is net of reclassification adjustments and income taxes.~~


~~(2)~~	~~The change in liability for underfunded employee benefit plans is net of income taxes.~~



Index of Notes to Consolidated Financial Statements			Page
Note 1. Summary of Significant Accounting Policies			7973
Note 2. Summary of Investments			8783
Note 3. Fair Value of Financial Instruments			9888
Note 4. Reinsurance			~~108~~98
Note 5. Reserves for Losses and Loss Settlement Expenses			~~111~~100
Note 6. Statutory Reporting, Capital Requirements and Dividends and Retained Earnings Restrictions			~~126~~116
Note 7. Federal Income Tax			~~127~~117
Note 8. Employee Benefits			~~129~~119
Note 9. Stock-Based Compensation			~~137~~127
Note 10. Segment Information			~~139~~130
Note 11. Quarterly Supplementary Financial Information (Unaudited)			~~142~~132
Note 12. Earnings Per Common Share			~~142~~132
Note 13. Lease Commitments			~~144~~133
Note 14. ~~Credit Facility~~Debt			~~144~~134
Note 15. Intangible Assets			~~144~~136
Note 16. Accumulated Other Comprehensive Income			~~145~~137
Note 17. Discontinued Operations			~~147~~138


		Useful Life
		~~Useful Life~~
Computer equipment and software	Three years
Furniture and fixtures		Seven years
Leasehold improvements		Shorter of the lease term or useful life of the asset
Real estate		Seven years to thirty-nine years
Airplane		Five years


Rollforward of Credit Loss Allowance for Reinsurance Receivable
	As of
	December 31, 2020
Beginning balance, January 1, 2020	$	38
Current-period provision for expected credit losses	152
Write-off charged against the allowance, if any	0
Recoveries of amounts previously written off, if any	0
Ending balance of the allowance for reinsurance receivable, December 31, 2020	$	190



Maturities - Consolidated:
	Held-To-Maturity				Available-For-Sale				Trading
December 31, 2017	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	—	$	—	$	97,450	$	97,994	$	2,225	$	2,835
Due after one year through five years	150		150		749,372		763,260		9,055		10,547
Due after five years through 10 years	—		—		823,257		839,360		1,302		1,156
Due after 10 years	—		—		776,653		784,087		2,000		2,304
Asset-backed securities	—		—		4,282		4,636		—		—
Mortgage-backed securities	34		34		13,828		13,691		—		—
Collateralized mortgage obligations	—		—		464,059		462,067		—		—
	$	184	$	184	$	2,928,901	$	2,965,095	$	14,582	$	16,842



Maturities - Continuing Operations:
	Held-To-Maturity				Available-For-Sale				Trading
December 31, 2017	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	—	$	—	$	37,899	$	38,144	$	2,225	$	2,835
Due after one year through five years	150		150		204,494		208,353		9,055		10,547
Due after five years through 10 years	—		—		394,107		402,799		1,302		1,156
Due after 10 years	—		—		694,850		700,879		2,000		2,304
Asset-backed securities	—		—		3,175		3,535		—		—
Mortgage-backed securities	—		—		9,205		9,231		—		—
Collateralized mortgage obligations	—		—		172,880		172,129		—		—
	$	150	$	150	$	1,516,610	$	1,535,070	$	14,582	$	16,842



Maturities - Discontinued Operations:
	Held-To-Maturity				Available-For-Sale				Trading
December 31, 2017	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	—	$	—	$	59,551	$	59,850	$	—	$	—
Due after one year through five years	—		—		544,878		554,907		—		—
Due after five years through 10 years	—		—		429,150		436,561		—		—
Due after 10 years	—		—		81,803		83,208		—		—
Asset-backed securities	—		—		1,107		1,101		—		—
Mortgage-backed securities	34		34		4,623		4,460		—		—
Collateralized mortgage obligations	—		—		291,179		289,938		—		—
	$	34	$	34	$	1,412,291	$	1,430,025	$	—	$	—



Consumer goods and services	1,535		—		1,535		—
Health care	3,741		—		3,741		—
Technology, media and telecommunications	1,221		—		1,221		—
Financial services	5,566		—		5,566		—
Redeemable preferred stocks	2,559		2,559		—		—
Equity securities
Public utilities	874		874		—		—
Energy	190		190		—		—
Industrials	989		989		—		—
Consumer goods and services	1,314		1,314		—		—
Health care	325		325		—		—
Financial Services	198		198		—		—
Nonredeemable preferred stocks	2,541		2,541		—		—
Total Trading Securities	$	23,273	$	8,990	$	14,283	$	—
Short-Term Investments	$	175	$	175	$	—	$	—
Money Market Accounts	$	16,824	$	16,824	$	—	$	—
Corporate-Owned Life Insurance	$	4,029	$	—	$	4,029	$	—
Total Assets Measured at Fair Value	$	3,313,962	$	329,671	$	2,974,417	$	9,874



Financial services	4,842		—		4,842		—
Redeemable preferred stocks	1,305		1,305		—		—
Equity securities
Public utilities	613		613		—		—
Energy	286		286		—		—
Industrials	877		877		—		—
Consumer goods and services	1,202		1,202		—		—
Health care	339		339		—		—
Financial Services	206		206		—		—
Nonredeemable preferred stocks	2,121		2,121		—		—
Total Trading Securities	$	20,034	$	6,949	$	13,085	$	—
Short-Term Investments	$	175	$	175	$	—	$	—
Money Market Accounts	$	16,802	$	16,802	$	—	$	—
Corporate-Owned Life Insurance	$	2,592	$	—	$	2,592	$	—
Total Assets Measured at Fair Value	$	3,208,145	$	289,755	$	2,903,292	$	15,098



	2016 Reinsurance Programs
Type of Reinsurance	Stated Retention		Limits		Coverage
Casualty excess of loss	$	2,500	$	40,000	100	%	of	$	37,500
Property excess of loss	2,500		25,000		100	%	of	$	22,500
Surety excess of loss	1,500		36,000		100	%	of	$	34,500
Property catastrophe, excess	20,000		250,000		100	%	of	$	230,000
Boiler and machinery	N/A		50,000		100	%	of	$	50,000



Line of business: Commercial other liability
	Incurred losses and allocated loss settlement expenses, net of reinsurance																				As of December 31, 2017
	For the years ended December 31,																				Total of incurred but not reported liabilities plus expected development on reported claims		Cumulative development		Cumulative number of reported claims
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017
	(Unaudited)
2008	$	79,455	$	84,944	$	81,963	$	73,892	$	63,231	$	78,152	$	75,178	$	74,115	$	74,915	$	75,364	$	12,636	(4,091	)	6,734
2009			88,298		85,991		73,545		65,831		84,286		83,660		85,761		86,757		86,543		11,268		(1,755	)	6,123
2010					88,987		69,533		65,299		82,865		78,564		77,948		78,291		78,498		14,468		(10,489	)	5,174
2011							81,522		64,738		88,371		88,200		79,591		80,801		81,463		15,016		(59	)	5,328
2012									100,389		96,158		94,195		91,980		92,537		91,346		18,407		(9,043	)	5,540
2013											104,982		91,460		90,502		86,119		85,399		9,697		(19,583	)	6,007
2014													118,928		117,958		106,486		97,809		13,583		(21,119	)	6,109
2015															137,386		125,307		120,005		25,634		(17,381	)	7,083
2016																	139,144		130,041		35,760		(9,103	)	7,512
2017																			139,602		68,465				5,833
																	Total		$	986,070



	U.S. property separate account fund
Balance at January 1, 2017	$	14,330
Unrealized gains	1,172
Balance at December 31, 2017	$	15,502