0000101199us-gaap:PensionPlansDefinedBenefitMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanEquitySecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-12-31
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


 FORM 10-K
☒Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 20172023
OR
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______ to ______
Commission File Number 001-34257
UNITED FIRE GROUP, INC.
(Exact name of registrant as specified in its charter)
Iowa45-2302834
Iowa45-2302834
(State or other jurisdiction of incorporation or organization)(I.R.SI.R.S. Employer Identification No.)
118 Second Avenue SE
Cedar RapidsIowa
52401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (319) 399-5700
Securities Registered Pursuantregistered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par valueUFCSThe NASDAQ Global Select Market
Securities Registered Pursuantregistered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES Yes ☒ NO No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES Yes ☐ NO No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES Yes ☒ NO No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES Yes ☒ NO No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or aan emerging growth company. See the definitions of "large accelerated filer," "accelerated filer",filer," "smaller reporting company",company," and "emerging growth company" in Rule 12b-2 of the Exchange Act
Act.
Large accelerated filer☒filer☐Accelerated filer☒Non-accelerated filer☐Non-accelerated filer ☐Smaller reporting company ☐☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES Yes ☐ NO No ☒
The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 20172023 was approximately $1.0$0.5 billion. For purposes of this calculation, all directors and executive officers of the registrant are considered affiliates. As of February 26, 2018, 24,912,13723, 2024, 25,277,324 shares ofof common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE

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Part III of this Form 10-K incorporates by reference certain information from the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, for its annual shareholder meeting to be held on May 16, 2018.
15, 2024.


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FORM 10-K TABLE OF CONTENTS
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 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


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FORWARD-LOOKING INFORMATION
This report may contain forward-looking statements about our operations, anticipated performance and other similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for forward-looking statements. The forward-looking statements are not historical facts and involve risks and uncertainties that could cause actual results to differ from those expected and/or projected. Such forward-looking statements are based on current expectations, estimates, forecasts and projections about United Fire Group, Inc. ("UFG," the "Registrant," the "Company," "we," "us," or "our"), the industry in which we operate, and beliefs and assumptions made by management. Words such as "expect(s)," "anticipate(s)," "intend(s)," "plan(s)," "believe(s)," "continue(s)," "seek(s)," "estimate(s)," "goal(s)," "remain(s) optimistic," "target(s)," "forecast(s)," "project(s)," "predict(s)," "should," "could," "may," "will, continue," "might," "hope," "can" and other words and terms of similar meaning or expression in connection with a discussion of future operations, financial performance or financial condition, are intended to identify forward-looking statements. See Part I, Item 1A "Risk Factors" of this report for more information concerning factors that could cause actual results to differ materially from those in the forward-looking statements.
Risks and uncertainties that may affect the actual financial condition and results of the Company include, but are not limited to, the following:
The frequency•Our ability to effectively underwrite and severity of claims, including thoseadequately price insured risks;
•Risks related to catastrophe lossesour investment portfolio that could negatively affect our profitability;
•Generalmacroeconomicconditions,interestraterisk,theimpactofinflationandchangesingovernmental regulations and the impact those claims have on our loss reserve adequacy; the occurrence of catastrophic events, including international events, significant severe weather conditions, climate change, acts of terrorism, acts of war and pandemics;monetary policy;
The adequacy of our reserves for property and casualty insurance losses and loss settlement expenses and our life insurance reserve for future policy benefits;
•Geographic concentration risk in both our property and casualty insurance business;
•The properties we insure are exposed to various natural perils that can give rise to significant claims costs;
•Changing weather patterns and lifeclimate change add to the unpredictability, frequency and severity of catastrophe losses and may adversely affect our results of operations, liquidity and financial condition;
•Furtherdowngradesofthefinancialstrengthratingsofouroperatingsubsidiariesorourissuercreditratingsand the adverse impact such action may have on our premium writings, policy retention, profitability and liquidity;
•We may be unable to attract, retain or effectively manage the succession of key personnel;
•The risk of not being able to predict the rising cost of insurance businesses;claims resulting from changing societal expectations that lead to increasing litigation, broader definitions of liability, broader contract interpretations, more plaintiff-friendly legal decisions and larger compensatory jury awards;
•The potential disruption of our operations and reputation due to unauthorized data access, cyber-attacks or cyber-terrorism and other security breaches;
Developments in general economic conditions, domestic and global financial markets, interest rates and other-than-temporary impairment losses that could affect the performance•The adequacy of our investment portfolio;reserves for property and casualty insurance losses and loss settlement expenses;
•Our ability to effectively underwritecore insurance business is dependent on strong and adequately price insured risks;beneficial relationships with a large network of independent insurance agents and not maintaining these relationships could result in loss of sufficient business opportunities within our expertise and stated risk appetite;
Changes in industry trends, an increase in competition and significant industry developments;
Litigation or regulatory actions that could require us to pay significant damages, fines or penalties or change the way we do business;
Lowering of one or more of the financial strength ratings of our operating subsidiaries or our issuer credit ratings and the adverse impact such action may have on our premium writings, policy retention, profitability and liquidity;
Governmental actions, policies and regulations, including, but not limited to, domestic health care reform, financial services regulatory reform, corporate governance, new laws or regulations or court decisions interpreting existing laws and regulations or policy provisions; laws, regulations and stock exchange requirements relating to corporate governance and the cost of compliance;
Our relationship with and the financial strength of our reinsurers;
•Competitive, legal, regulatory or tax changes that affect the distribution cost or demand for our products through our independent agent/agency distribution network;
•Governmental actions, policies and regulations, including, but not limited to, domestic health care reform, financial services regulatory reform, and other federal stimulus relief legislation, corporate governance, new laws or regulations or court decisions interpreting existing laws and regulations or policy provisions; changes in laws, regulations and stock exchange requirements relating to corporate governance and the cost of compliance;
The satisfaction
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•We will be at a competitive disadvantage if, over time, our competitors are more effective than us in their utilization of technology and evolving data analytics;
•We may be unable to the consummation of the sale of our life insurance subsidiary, including the receipt of regulatory approvals.secure reinsurance capacity that provides necessary risk protection at a reasonable cost; and

•Ourstockpricecouldbecomemorevolatileandyourinvestmentcould lose value.

These are representative of the risks, uncertainties, and assumptions that could cause actual outcomes and results to differ materially from what is expressed in forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report or as of the date they are


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made. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission ("SEC"), we do not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.


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PART I.
ITEM 1. BUSINESS
GENERAL DESCRIPTIONOVERVIEW
United Fire Group, Inc. ("UFG", "United Fire", the "Registrant", the "Company", "we", "us", or "our") and its consolidated subsidiaries and affiliates are engaged in the business of writing property and casualty insurance and life insurance and selling annuities through a network of independent agencies. Our insurance company subsidiaries are currently licensed as a property and casualty insurerinsurers in 4650 states, plus the District of Columbia and as a life insurer in 37 states.Columbia. United Fire & Casualty Company was incorporated in Iowa in January 1946. Our principal executive office is located at 118 Second Avenue SE, Cedar Rapids, Iowa 52401; telephone: 319-399-5700.
United Fire Group, Inc. owns 100 percent of one subsidiary, United Fire & Casualty Company. United Fire & Casualty Company owns 100 percent of eight subsidiaries: (1) United LifeAddison Insurance Company; (2) AddisonLafayette Insurance Company; (3) Lafayette Insurance Company; (4) United Fire & Indemnity Company; (5)(4) Mercer Insurance Company; (6)(5) Financial Pacific Insurance Company; (7)(6) UFG Specialty Insurance Company; and (8)(7) United Real Estate Holdings Company, LLC.LLC and (8) McIntyre Cedar UK Limited. Mercer Insurance Company owns 100 percent of two subsidiaries: (1) Franklin Insurance Company; and (2) Mercer Insurance Company of New Jersey, Inc. United Fire Lloyds, which is organized as a Texas Lloyds plan, is an affiliate of United Fire & Indemnity Company. McIntyre Cedar UK Limited owns 100 percent of McIntyre Cedar Corporate Member LLP.
In 2015, the Company dissolved three of its holding companies in order to flatten our organizational chart. The companies dissolved were American Indemnity Financial Corporation, Mercer Insurance Group, Inc. and Financial Pacific Insurance Group, Inc. In addition, Texas General Indemnity Company was renamed to UFG Specialty Insurance Company on July 1, 2015.
Reportable Segments and Discontinued Operations
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 US Holdings, Inc. ("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 Balance Sheets, Consolidated Statements of Income and Comprehensive Income and Consolidated Statements of Cash Flows (collectively, 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, refer to Note 17 "Discontinued Operations".
Our property and casualty insurance business is comprised of commercial lines insurance, including surety bonds, personal lines insurance and assumed reinsurance. All of our property and casualty insurance subsidiaries and our affiliateaffiliates belong to an intercompany reinsurance pooling arrangement. On July 1, 2015, UFG Specialty Insurance Company entered the pooling arrangement. Pooling arrangements permit 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. Under such arrangements, the members share substantially all of the insurance business that is written and allocate the combined premiums, losses and expenses based on percentages defined in the arrangement.
PROPERTY AND CASUALTY INSURANCE BUSINESS
Products and Operations
Our life insurance business consists solely of the operations of United Life Insurance Company. Our life insurance business is comprised primarily of deferredcommercial lines property and immediate fixed annuities, universal lifecasualty insurance, products and traditional lifeincluding surety bonds. In 2020, the Company announced its intent to withdraw as a direct writer of personal lines insurance products.
Employees
with the last exposures related to this business expected to lapse by 2025. As of December 31, 2017, we employed 1,164 full-time employees and 16 part-time employees. We are not a party to any collective bargaining agreement.
Available Information
We provide free and timely access to all our reports filed with2023, minimal exposure from the SEC in the Investor Relations sectiondirect personal lines of our website at www.ufginsurance.com. Under the "Investors" tab, select "Financial Documents" and then, select "SEC


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Filings" to view the list of our SEC filings, which includes annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, beneficial ownership reports on Forms 3, 4 and 5 and amendments to reports filed or furnished pursuant to Section 13(a), 15(d) or 16(a) of the Exchange Act. Such reports are made available as soon as reasonably practicable after they are filed with or furnished to the SEC.business remains.
Our Codecore commercial products support a wide variety of Ethicscustomers including small business owners and Business Conduct is also available at www.ufginsurance.commiddle market businesses operating in the Investor Relations section. To view it, under the "Investors" tab, select "Governance Documents"industries such as construction, services, retail trade, financial and then "Code of Ethicsmanufacturing, along with contract surety and Business Conduct."
Free paper copies of any materials that we file with or furnish to the SEC can also be obtained by writing to Investor Relations, United Fire Group, Inc., 118 Second Avenue SE, Cedar Rapids, Iowa 52401.

MARKETING AND DISTRIBUTION
We market our products through our home office in Cedar Rapids, Iowa, and five regional offices: (1) Westminster, Colorado, a suburb of Denver; (2) Webster, Texas, a suburb of Houston; (3) Pennington, New Jersey; (4) Phoenix, Arizona; and (5) Rocklin, California. We are representedcommercial surety bonds offered through approximately 1,2001,000 independent property and casualty agenciesagencies. We also provide specialty and by approximately 1,600 independent life agencies.
Continuing Operations - Propertysurplus lines coverage written exclusively through wholesale brokers on an admitted and Casualty Insurance Business
In 2017, 2016 and 2015non-admitted basis. Additionally, the direct statutory premiums written by ourCompany offers reinsurance coverage for property and casualty insurance operations were distributedthrough traditional treaty reinsurance channels. The Company assumes premium in Lloyd's of London syndicates through a Funds at Lloyd's subsidiary. The reinsurance operation supports primarily commercial lines of business but also assumes risk in professional, financial and personal lines of insurance. We also partner with managing general agents ("MGAs") to offer delegated underwriting programs providing niche products including marine specialty, professional liability and earthquake coverages. For a more detailed discussion of our products, refer to the "Business Overview" section in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations".
Our property and casualty insurance business is reported as follows:
 Years Ended December 31,% of Total
(In Thousands)201720162015201720162015
Texas$178,314
$156,926
$142,485
16.7%15.6%15.4%
California123,285
117,669
109,420
11.6
11.7
11.8
Iowa100,826
105,948
99,949
9.5
10.5
10.8
Missouri64,746
58,964
53,867
6.1
5.9
5.8
Colorado53,981
47,678
45,805
5.1
4.7
4.9
Minnesota50,432
51,033
44,993
4.7
5.1
4.9
New Jersey49,305
52,232
50,979
4.6
5.2
5.5
Illinois41,042
43,666
43,381
3.9
4.3
4.7
Louisiana39,849
38,219
36,594
3.7
3.8
3.9
All Other States363,427
333,788
299,027
34.1
33.2
32.3
Direct Statutory Premiums Written$1,065,207
$1,006,123
$926,500
100.0%100.0%100.0%

We staffone business segment. Underwriting, sales and distribution are supported across our key products by regional offices with underwriting, claimsunderwriters and marketing representatives executing on overall strategy and administrative technicians, allunderwriting governance. These areas are supported by a business enablement function as well as claims, actuarial and business analytics and risk control enabling functions. Our business enablement function provides efficient, centralized underwriting operations, premium processing, underwriting governance and product management. In addition to servicing policyholders with optimized claim processing and payment capabilities, the claims function's specialized approach supports underwriting, risk control and marketing in writing and retaining quality business. Actuarial and business analytics provide transparency and insight to business decisions through actuarial pricing, actuarial reserving, predictive modeling, and other business analytics. Other
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enabling functions that support and assistance to the independent agencies. Also, home office staff technicians and specialists provide support to our subsidiaries, regional offices and independent agencies. We use management reports to monitor subsidiary and regional offices for overall results and conformity to our business policies.include technology, finance, human capital, legal and governance functions.

Competition
The property and casualty insurance industry is highly competitive. We compete with numerous property and casualty insurance companies in the regional and national market, many of which are substantially larger and have considerably greater financial and other resources. Except for regulatory considerations, there are limited barriers to entry into the insurance industry. Our competitors may be domestic or foreign, as well as licensed or unlicensed. The exact number of competitors within the industry is not known. Insurers compete on the basis of reliability, financial strength and stability, ratings, underwriting consistency, service, business ethics, price, performance, capacity, policy terms and coverage conditions.


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In addition, because 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.
Because we rely solely on independent agencies, we offer a competitive commissions program and a rewarding profit-sharing plan as incentives for agents to place high-quality property and casualty insurance business with us. We tier our agents to objectively recognize our top performers including additional compensation in our profit-sharing plan. We offer incentive trips and promotions to build UFG loyalty. Property and casualty insurance agencies willare expected to receive profit-sharing payments of $15.1$23.9 million in 2018,2024, based on profitable business produced by the agencies in 2017. In 2017 for 2016 business, agencies received $16.1 million in profit-sharing payments and in 2016 for 2015 business, agencies received $21.2 million in payments.2023.
Our competitive advantages include our commitmentcommitments to:
•Strong agency relationships —
◦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.
◦Highly-experienced personnel focused on strong service-oriented relationships.
◦A team of regional managers is responsible for deepening the agency relationships needed to drive profitable growth and the field execution of underwriting strategies for the core commercial business.
•Exceptional service — ourOur agents and policyholders always have the option to speak with a real person.
•Fair and prompt claims handling — weWe view claims handling experiences as an opportunity to provedemonstrate our exemplary customer service to our customers that they have chosen the right insurance company.policyholders.
Disciplined•Specialized underwriting expertise — weWe empower our underwriters with the knowledge and tools needed to make good decisions for the Company.
•Superior loss control services — ourOur loss control representatives make multiple visits to policyholder businesses and job sites each year to ensure safety.safety and make loss prevention recommendations.
•Effective and efficient use of technology — weWe use technology to provide enhanced service to our agents and policyholders, not to replace our personal relationships, but to reinforce them.
Discontinued Operations - Life Insurance Business
Our life insurance subsidiary markets its products primarily in the Midwest, East Coast and West. In 2017, 2016 and 2015 the direct statutory premiums written by our life insurance operations were distributed as follows:
 Years Ended December 31,% of Total
(In Thousands)201720162015201720162015
Iowa$40,773
$41,559
$47,616
32.5%30.1%32.6%
Wisconsin14,897
12,578
12,513
11.9
9.1
8.6
Minnesota12,201
14,289
13,269
9.7
10.3
9.1
Illinois10,872
12,481
16,128
8.7
9.0
11.0
Nebraska10,197
10,351
9,334
8.1
7.5
6.4
All Other States36,581
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.


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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 coveredIncorporated 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 resultsreference 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
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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"; andPolicies," Note 1 "Significant"Summary of Significant Accounting Policies" under the headingsheading "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.
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 its affiliate, United Fire Lloyds)Lloyds, which is organized as a Texas Lloyds plan). 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.
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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 ShareholderStockholder 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 2017.2023.
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 nonadmittednon-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 NonrenewingNon-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
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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 RulesPrinciples
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 rulesprinciples 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.
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, 2017,2023, 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.
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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 insurerssubsidiaries (collectively known as "United Fire & Casualty Group") are rated by A.M. Best Company, Inc. ("A.M. Best") on a group basis. Our pooled property and casualty insurers have allOn August 18, 2023, the Company received an "A" (Excellent) financial strengtha credit rating downgrade from A.M. Best. Our life insurance subsidiary has received an "A-The Financial Strength Rating (FSR) was downgraded to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) was downgraded to "a-" (Excellent) financial strength rating from "a" (Excellent) of the United Fire & Casualty Group. Concurrently, A.M. Best.Best has downgraded the Long-Term ICR to "bbb-" (Good) from "bbb" (Good) of UFG. The outlook of these Credit Ratings (ratings) has been revised to stable from negative. According to A.M. Best, companies rated "A" and "A-" have "an excellent ability to meet their ongoing obligations to policyholders." The Company has not experienced material impacts to its business or financial results as a result of the downgrade, but is subject to heightened risks associated with any further potential downgrades. Please see Part I, Item 1A. "Risk Factors" of this Annual Report on Form 10-K for more information.
A.M. Best
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 "One UFG: Boldly Forward" strategic plan unites our people in purpose and drives our mission of superior operational and financial performance. It is centered on five strategic pillars of long-term profitability, diversified growth, people development, continuous innovation and expense management. These pillars provide us with a strong foundation of success as we work together to deliver on our promises to all UFG stakeholders.

Diversity Equity and Inclusion
We are committed to fostering, cultivating and preserving a culture of diversity, equity, and inclusion. Our purpose is to invest in people to build enduring relationships with those we serve. Diversity, equity, and inclusion are core to this purpose and are an integral part of our values and culture.
We are committed to building a diverse, equitable, and inclusive culture that encourages, supports, and celebrates the distinct voices of our people. We invite our people to bring their authentic whole self to work, be inspired to form lasting relationships and to do their best each day, because we are all different, yet equal, humans. Our commitment extends into every facet of who we are:
a.We recognize that our people are our most valuable asset. To excel, we must each feel that we belong to a welcoming environment that values both our differences and the collective sum of our individuality, experiences, knowledge, creativity, innovation, self-expression, unique capabilities, talents, beliefs and points of view.
b.We look to positively impact the communities where we live and work and partner with clients, vendors, and suppliers who share in our beliefs and commit to equity through building awareness, advocacy, and allyship.
c.Succeeding as a national enterprise means embracing differences in an informed, sensitive, and welcoming manner so that we continue providing our people, clients, vendors and suppliers with the best of our company, because their success is our success.
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We embrace and encourage our employees' differences in age, color, disability, ethnicity, family or marital status, gender identity or expression, language, national origin, physical and mental ability, political affiliation, race, religion, sexual orientation, socio-economic status, veteran status, and other ways that make our employees unique.
Our commitment is reinforced through initiatives centered on our people, partners, and philanthropy, creating an inclusive work environment built on the premise of a strong sense of belonging that encourages:
a.Respectful communication and cooperation between all employees.
b.Teamwork and participation that empowers and advances all groups and perspectives.
c.Work-life balance to accommodate employees' varying needs.
d.Giving back to the communities we serve to advance change and promote greater understanding and respect for diversity.
At UFG, inclusive conduct is centered on:
a.Treating others with dignity and respect at all times, because how we act is as important as what we accomplish.
b.Meeting the evolving needs of our expansive risk profile though investment in our talent through training and recruiting.
c.Striving to do what is right - even when no one is looking.
d.Continuously listening to our people, agents, partners, vendors, and community to effectuate our goals.
e.Deepening our sensitivity and understanding towards others, so we can connect in a meaningful way.
f.Ensuring that employees exhibit conduct that reflects inclusion during work, at work functions on or off the work site, and at all other company-sponsored and company-participating events. Inclusive conduct applies to all in-office, hybrid, remote and field employees, regardless of the location of their physical workplace.
It is through our shared awareness and commitment to these principles that we foster a culture of belonging, where everyone is welcome, respected and appreciated. Championing diversity, equity, and inclusion is not just something we do, it is the core of who we are.
202320222021
Employee data
Workforce dataHeadcount8521,0951,075
Average tenure in years9.08.710.0
Percent of self-identified women in workforce55.0%57.4%54.8%
Percent of self-identified racial/ethnic minorities in workforce14.1%13.8%13.8%
Voluntary turnover rate*26.8%12.3%11.7%
Human rights/SocialEqual employment opportunity policyYYY
Diversity, equity and inclusion policyYYY
Human and labor rights policyYYY
EthicsAnti-bribery & anti-corruption policy and trainingYYY
Code of ethics and business conductYYY
CommunityEmployee volunteer hours1,6761,690720
* The 2023 voluntary turnover rate includes employees who accepted the Company's early retirement plan offering.


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

Employee success is part of UFG's mission, therefore, health, wellness and education are core cultural values. 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: in our Cedar Rapids home office and our Houston and Denver regional offices. We are proud to have built our own state-of-the-art fitness center in Cedar Rapids, and we have a full-time Manager of Corporate Wellness on staff. The manager provides one-on-one coaching, customized wellness plans and group fitness and wellness classes for all skill levels. She also assigns issuer credit ratingsprovides change management consulting to business units and/or individual employees.
•Empowering employees to make healthy decisions:
◦Fitness classes – We offer a variety of both in-person group classes as well as virtual classes to cater to our hybrid workforce. We partner with Wellbeats Virtual Fitness to offer tailored virtual fitness to all employees and their families. To mesh our passion for community with wellness, we have also held multiple physical activity fundraisers.
◦Weekly wellness webinars – These webinars are intended to educate employees on everything from nutrition best practices to mental and emotional well-being and mindfulness. Subject matter experts are oftentimes brought in to present on various topics.
◦Enterprise-wide resiliency program – Our Manager of Corporate Wellness offers a monthly resiliency course, year-round. This course focuses on building upon life skills to help employees become more emotionally resilient in their professional and personal lives. In addition, we established a mental wellness employee resource group and held senior leadership training on mental wellness and suicide prevention.
◦A wellness reward system – Our employees have the option to enroll 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.
◦Access to a company's abilityhealth advocate program where we are partnering with a service to repay its debts. All of ourhelp employees navigate the healthcare system and address personal and work-related issues at no cost to them.
◦A well-being and weight management program - Digital platform taught by renowned experts that will assist with a personalized approach for weight loss results together with coaching.

Sustainability
As a property and casualty insurersinsurer, UFG is acutely aware of the growing risks to business, insureds and communities stemming from sustainability issues. Sustainability is top of mind for our Management Team and Board of Directors, and as a result we have received an issuer credit ratingmade important updates to our environmental, social and governance ("ESG") structure. Various Board committees maintain oversight of "a" from A.M. Best. Our life insurance subsidiaryrelevant ESG initiatives:

a.The Nominating and Governance Committee oversees our ESG policies and practices, generally, and reviews our voluntary ESG disclosures, goals and related sustainability metrics. Additionally, the Nominating and Governance Committee is responsible for oversight of business ethics.
b.The Audit Committee, in its oversight of financial risk exposures, internal controls and financial reporting, reviews policies, processes and internal controls for collecting ESG data to ensure disclosures containing ESG data are accurate, reliable and consistent. Additionally, the Audit Committee has received an issuer credit ratingoversight of "a-" from A.M. Best. Beginning in 2012,the whistleblower program.
c.The Compensation and Human Capital Committee oversees our holding company parent was also rated by A.M. Best, receiving an issuer credit ratinghuman capital management and diversity, equity, and inclusion initiatives, as well as corporate culture matters. Additionally, the Compensation and Human Capital Committee reviews and approves our Human and Labor Rights Policy.
d.The Investment Committee reviews risks related to our investment portfolio, including oversight of "bbb."








any responsible investment strategies and associated risks (in consultation with the Risk Management

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Committee). Additionally, the Investment Committee reviews and approves our ESG Investment Policy (a component of the Company's Investment Policy Statement) and monitors investment activity to ensure investments are made consistent with the ESG Investment Policy.

e.The Risk Management Committee reviews and evaluates the Company's identification, assessment and management of risks associated with ESG matters, including but not limited to climate change, cybersecurity, and ESG-related emerging risks. It also coordinates with other committees of the Board of Directors on ESG risks specific to such committee's area of oversight.

Together with Board oversight, UFG established our ESG Management Committee, a cross-functional team of leaders who are dedicated to actively leading UFG's sustainability, corporate social responsibility, health and safety and human capital efforts, as well as cultivating an ESG-focused culture. The ESG Management Committee meets regularly and provides routine updates to the Board's Nominating and Governance Committee. Our Chief Risk Officer, supported by our Chief Legal Officer and Assistant Vice President ("AVP") of Workplace Environment, is responsible for developing and deepening UFG's understanding of climate change as an enterprise-level risk and informing the Board how the related risks are monitored and mitigated.
In 2023, UFG undertook a comprehensive effort to improve sustainability and improve transparency in our sustainability reporting. We established targets for greenhouse gas ("GHG") emissions reduction, and reported our progress towards these targets, as well as our aggregated energy and wastewater discharge. Our full sustainability report can be found on our website at: www.ufginsurance.com. We also developed a third party code of conduct that, among other things, details UFG's right to request metrics on suppliers' environmental efforts. We view climate change as a transversal risk impacting and elevating other critical enterprise risks, and we have begun developing strategies to address and build resiliency to these risks. While this disclosure is a first step, UFG will continue to enhance and act on our understanding of the risks and opportunities a changing climate presents to our business.

UFG was appointed the insurance provider for members of the 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.
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 of our practices intended to lesson our impact on the environment:
•Responsible Scaling of Corporate Real Estate
We continue to evaluate our space needs and in support of on-going flexible working arrangements. We were able to consolidate our Cedar Rapids home office space, subleasing a portion of our Security building. Additionally, we decommissioned our Los Angeles office building site, and right-sized our Sacramento and Phoenix offices. From the beginning of 2022 through the end of 2023, we successfully decreased our real estate footprint by over 28%.
•Pursuit of WELL Building Certification
The WELL Building Standard, a leading global framework focuses exclusively on the ways that buildings and organizations can improve employee comfort, drive better choices, and enhance health and well-being. Organizations are given three years to complete all performance testing and documentation. In 2023, we started the process and achieved a platinum WELL V2 Building designation. We are one of only a handful of organizations in the US to reach this level of achievement, illustrating our dedication to our employees' well-being.
•Commitment to Community Service
In 2023, our employees dedicated a total of 3,055 hours to their communities, an increase of 6% from 2022. We provided a benefit of 16 hours of paid time off to each employee to participate in community service activities. In 2023, employees benefited from 1,676 hours of paid time off for community service.
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•Net Zero Waste Initiative
UFG continued to embrace the opportunity for environmental stewardship in 2023 with excellent results from the net zero waste program that was initiated in 2022. We successfully diverted 15 tons of waste from the landfill, composted nearly five tons of materials, and saved on janitorial costs by implementing UFGreen stations and encouraging our employees to separate their own compost and recycling in 2023. In 2024, UFG is striving to receive the TRUE certification (Total Resource Use and Efficiency) in support of zero waste, reduction of carbon footprint, and supporting public health.
•GHG Emission Targets and Sustainability Reporting
We recently set initial GHG emission targets. In 2024, we will be implementing a sustainability platform that will allow us to measure, manage, and report out on targeted sustainability efforts. Sustainability reporting and GHG emission targets are disclosed to our employees, shareholders, and insureds on our public facing website www.ufginsurance.com.

COMPANY WEBSITE AND AVAILABILITY OF INFORMATION
We provide free and timely access to all our reports filed with the SEC in the Investor Relations section of our website at www.ufginsurance.com. Under the "Investors" tab, select "Financial Documents" and then, select "SEC Filings" to view the list of our SEC filings, which includes annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, beneficial ownership reports on Forms 3, 4 and 5 and amendments to reports filed or furnished pursuant to Section 13(a), 15(d) or 16(a) of the Exchange Act. Such reports are made available as soon as reasonably practicable after they are filed with or furnished to the SEC. They are also available on the SEC's website at www.sec.gov.
Our Code of Ethics and Business Conduct is also available at www.ufginsurance.com in the Investor Relations section. To view it, under the "Investors" tab, select "Overview," then "Governance Documents" and then "Code of Ethics and Business Conduct."
Free paper copies of any materials that we file with or furnish to the SEC can also be obtained by writing to Investor Relations, United Fire Group, Inc., 118 Second Avenue SE, Cedar Rapids, Iowa 52401.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth information concerning the following executive officers:
NameAgePosition
Kevin J. Leidwinger60
NameAgePosition
Randy A. Ramlo56President and Chief Executive Officer, Principal Executive Officer
Michael T. WilkinsEric J. Martin5453Executive Vice President, Chief Financial Officer and Principal Financial Officer
Julie A. Stephenson56Executive Vice President and Chief Operating Officer
Dawn M. JaffrayJeremy J. Bahl5146Senior Vice President, and Chief Financial OfficerField Operations
Barrie W. ErnstRobert F. Cataldo6353Vice President and Chief Investment and Strategy Officer
Neal R. ScharmerSarah E. Madsen6145Vice President, General CounselChief Legal Officer and Corporate Secretary
Michael J. SheeleyCorey L. Ruehle5750Vice President and Chief OperatingClaims Officer United Life Insurance Company
Micah G. Woolstenhulme48Vice President and Chief Risk Officer
Kelly A. Walsh45Vice President and Chief Underwriting Officer
Lindsay E. Lovvorn44Vice President and Chief Administrative Officer


A brief description of the business experience of these officers follows:
Randy A. RamloKevin J. Leidwinger became our President and Chief Executive Officer in May 2007. He previouslyAugust 2022. Prior to joining UFG, Mr. Leidwinger served as ourPresident and Chief Operating Officer at CNA Commercial from May 2006 until May 2007, as Executive Vice President from May 2004 until May 2007,2015 - 2022. Prior to joining CNA Commercial in 2015, he was global casualty manager for Chubb Commercial Insurance, and as Vice President, Fidelitywas responsible for the company's worldwide portfolio of general liability, workers' compensation, excess umbrella, auto errors 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.omissions, and environmental business.
Michael T. WilkinsEric J. Martin became our Executive Vice President and Chief OperatingFinancial Officer in May 2014. He servedFebruary 2023, after joining UFG 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. Ms. Jaffray previouslyApril 2022. Prior to joining UFG, he served as Head of Enterprise Transformation at Transamerica Corporation (an insurance company), beginning in 2020. Mr. Martin also held numerous other positions at Transamerica including: Chief FinancialOperating Officer, Individual Solutions and Retail Affiliates (2019-2020); Senior Vice President, Controller and Head of Soleil Advisory Group, a consulting firm specializingFinance (2016-2019) and various other roles dating back to 2001.
Julie A. Stephenson joined UFG as our Executive Vice President and Chief Operating Officer effective as of the end of January 2023. Ms. Stephenson has over 25 years of experience in operational consulting, mergers and acquisitions, investment and strategy from 2009 to 2015.the insurance industry, most recently serving as global head of casualty reinsurance at Swiss Re. Prior to her service with Soleil Advisory Group, Ms. Jaffrayjoining Swiss Re in 2021, she held numerousthe positions of Chief Operating Officer-Middle Market (2019-2021) and Commercial Chief Underwriting Officer (2015-2019) at CNA Insurance and Global Liability Manager for Chubb Insurance.
Jeremy J. Bahl became Vice President, Field Operations in insurance operationsDecember 2023. Mr. Bahl joined UFG as an accountant in 2000. He transferred to the underwriting department of the Great Lakes region in 2002 and mergers/acquisition activities, primarilyserved as an Underwriting Supervisor from 2010 to 2014. In 2014, he became Underwriting Supervisor of the Denver region. In 2016, he was named Vice President and Branch Manager of our Denver region and assumed oversight of the Sacramento region in 2018. From 2020 through 2023, Mr. Bahl served as Vice President and Chief Underwriting Officer. Mr. Bahl has the role of principal financial officer. Ms. Jaffray's business experience has been focused in particular on insurance, finance and capital management.Chartered Property Casualty Underwriter (CPCU) professional designation.
Barrie W. Ernst isRobert F. Cataldo became our Vice President and Chief Investment Officer. He joined usand Strategy Officer of UFG in August 2002. Previously,2020, serving the Company since 2011. Mr. ErnstCataldo was Vice President and Strategy Officer for UFG from 2018 to 2020. From 2015 to 2018, he served as AVP & Senior Portfolio Manager. Mr. Cataldo joined UFG as a Senior Portfolio Manager in 2011. On February 1, 2024, we filed a Form 8-K with the SEC to disclose Mr. Cataldo's anticipated departure from UFG, effective no later than May 24, 2024, due to UFG's strategic decision to outsource its investment management function.
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Sarah E. Madsen became our Vice President, of SCI Financial GroupChief Legal Officer, and Corporate Secretary in Cedar Rapids, Iowa, where he workedApril 2022. Ms. Madsen previously served as Assistant General Counsel from 19802018 - 2022. Prior to 2002. SCI Financial Groupjoining UFG, she served as corporate counsel for a national insurance and financial strategies firm, counsel for a global non-profit and was a regionalpartner at a St. Paul, MN-based law firm, where she practiced financial services, firm providing brokerage, insurance, and related services to its clients.commercial litigation. Ms. Madsen holds a CPCU designation.
Neal R. Scharmer was appointedCorey L. Ruehle became our Vice President and General CounselChief Claims Officer in May2019. He joined UFG as a Commercial Underwriter in 2001. Between 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 also2019 he served in various capacities, including commercial underwritingas Underwriting Supervisor, Underwriting Manager and claims sinceBranch Manager of the Midwest region. Mr. Ruehle has the Associate in Commercial Underwriting (AU) and Certified Insurance Counselor (CIC) professional designations.
Micah G. Woolstenhulme serves as Vice President and Chief Risk Officer. Mr. Woolstenhulme joined UFG in 2020 to lead the enterprise risk management activities. Prior to joining usUFG, he served as Head of Risk and Economic Advisory at JLT Re (a reinsurance broker) from 2016-2020 and led the ERM Services group at Guy Carpenter (a global risk and reinsurance specialist company). He also served Swiss Re, Samsung, and Safeco in 1985.various roles including financial modeling, product development and corporate strategy. Mr. Woolstenhulme is a Fellow of the Casualty Actuarial Society.

Kelly A. Walsh joined UFG as our Vice President and Chief Underwriting Officer in December 2023. Ms. Walsh has over two decades of insurance industry experience. Prior to joining UFG, Ms. Walsh held a variety of leadership positions at CNA Insurance, serving as Vice President for branch services (2016-2018), Senior Vice President for general liability & umbrella, middle market (2018-2023) and Senior Vice President and global product leader for general liability in 2023 before joining UFG.

Lindsay E. Lovvorn became our Vice President and Chief Administrative Officer in February 2024. Ms. Lovvorn joined UFG as our Vice President of Business Enablement in February 2023. Prior to joining UFG, she served as the Senior Director of Industry and Product Strategy at Oracle (2007-2012). Ms. Lovvorn also served at CNA Insurance as Assistant Vice President and business lead (2012-2017) and Vice President of Product and Process Systems (2017-2022).

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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 BusinessOperations: Underwriting Risks, Claims Risks, Investments Risks, Management Risks, Cyber Risks and Legal Risks

Our success depends primarily on our ability to underwrite risks effectively and adequately price the risks we insure.
The occurrence,results of our operations and our financial condition depend on our ability to underwrite and set premium rates accurately for a wide variety of 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, and apply appropriate pricing techniques, closely monitor 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, leading to reduced sales volume and severitycompetitiveness. Our ability to undertake these efforts successfully is subject to a number of catastrophe losses are unpredictablerisks 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 risk presented by market conditions presents a unique set of challenges in the property and casualty insurance industry.The property and casualty insurance marketplace 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.

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.

We 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.Our competitors may always attempt to increase their market share by lowering rates. Losing business to competitors offering similar products at lower prices or who have a competitive advantage may adversely affect ourthe results of operations,our operations.

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.

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We 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 discussed as follows.

Credit Risk – The value of our investment in marketable securities is subject to credit losses 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 (98.4 percent of core fixed income portfolio at December 31, 2023) are investment-grade securities. Despite efforts to diversify our portfolio and emphasize 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 (89.4 percent at December 31, 2023) consists of fixed income securities, primarily U.S. government agency, corporate and municipal bonds (70.0 percent at December 31, 2023). 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 income earned from future investments in fixed income securities. 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. Interest rates are highly sensitive to many factors beyond our control including general macroeconomic 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, a large natural catastrophe, 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 in our financial condition.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 or other proceedings; infrastructure failures; wars or terrorist attacks; public health emergencies and pandemics; 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.

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 geographic concentration ties our performance to the business, economic and regulatory conditions of certain states.
The following states provided 47.0 percent of the direct statutory premiums written for the property and casualty insurance businesses in 2023: Texas (17.4 percent), California (12.4 percent), Iowa (7.1 percent), Missouri (5.8 percent) and Louisiana (4.3 percent).
Our revenues and profitability are subject to the prevailing regulatory, legal, economic, political, competitive, weather, and other conditions in the principal states in which we do business. With respect to regulatory conditions,
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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. In addition, our exposure to severe losses from localized natural perils, such as tornadoes, wildfires or hailstorms, is increased in those areas where we have written a significant amount of property insurance policies.

We insure property that is exposed to various natural perils that can give rise to significant claims costs.

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, which may increase in severity and frequency due to climate change, 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, severe convective storms, windstorms, and hail stormshailstorms 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 perhaps the greatest risk oflargest short-term underwriting loss we face in the ordinary course of our business. 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.

We have exposure to catastrophe losses under both our commercial insurance policies as well as through our assumed reinsurance and our personal insurance policies. The lossesmanaging general agency contracts.Losses from catastrophic events are a function of both the extent of our exposure the frequency and severity of the events themselvesprofile and the level of reinsurance assumed and ceded.purchased to mitigate these losses. 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.
In addition, as with catastrophe losses generally, it can take a longrequire 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 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.
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Changing weather patterns and climate change add to the unpredictability, frequency and severity of catastrophe losses and may adversely affect our results of operations, liquidity and financial condition.

Long-term weather trends may be changing, a phenomenon that has been associated with extreme weather events linked to rising temperatures, including effects on global weather patterns, sea, land and air temperature, sea levels, rain, snow, and drought. 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 also adds to the unpredictability of natural disasters and creates uncertainty as to future trends and exposures.

Climate change presents risks in four categories to UFG:

a.Physical Risk: The cost of natural perils may change. This is a concern for our property insurance underwriting strategy and, to a lesser extent, our real estate costs.
b.Regulatory Risk: Certain regulatory bodies may impose laws that require UFG to report GHG emissions from our own operations and our strategies to mitigate emissions, resulting in compliance with such regulations requiring increased time and expense.
c.Transition Risk: Financial risks arising from a global transition to a lower-carbon economy could impact long-term return on certain invested assets.
d.Liability Risk: New areas of law enabling litigation alleging damage from climate change may present legal risk to UFG.

We maintain catastrophe exposure modeling and management in house and incorporate our view of natural peril risk into forward-looking projections that reflect our view on climate. Our property catastrophe reinsurance program is designed to meet the needs of a changing risk profile. A key area of current focus is our exposure to severe convective storms. We endeavor to reduce GHG emissions from operations via energy saving construction features/devices and leasing of fuel-efficient fleet vehicles. Our business continuity plan is tested annually, including failover of all systems to our disaster recovery data center. Additional capabilities and plans are being developed that support continuance of operations after a regional weather event. UFG offers a green replacement option for equipment breakdown coverage to encourage installation of more energy efficient heating and cooling systems. Underwriting requires wind and hail deductibles in coastal and severe convective storm areas to minimize our exposure and encourage policyholders to adopt stronger building codes. UFG endeavors to comply with a growing number of federal and state regulations pertaining to climate disclosures and questionnaires.
A further 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, results of operations and liquidity
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. Since 2012, A.M. Best has also provided 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 RatingIssuer Credit RatingRating Held Since
Pooled Property and Casualty CompaniesA-a-2023
United Fire Group, Inc.N/Abbb-2023

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.

On August 18, 2023, UFG and our property/casualty subsidiaries received a rating downgrade from A.M. Best. For our property/casualty subsidiaries, the Financial Strength Rating (FSR) was downgraded to A- (Excellent) from A
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(Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) was downgraded to "a-" (Excellent) from "a" (Excellent). Concurrently, for UFG, A.M. Best has downgraded the Long-Term ICR to "bbb-" (Good) from "bbb" (Good). The outlook of these ratings has been revised to stable from negative.

The recent downgrades and any further downgrades in our financial strength ratings could adversely affect our ability to transact our current business, access the capital markets, or lead to increased borrowing costs (including through elevated interest rates). For more information, see Note [8] "Debt" in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K. Perceptions of the Company by investors, producers, other businesses and consumers could also be significantly impaired.

The ratings assigned by A.M. Best are an important factor in marketing our products. Our ratings from A.M. Best affect our ability to retain our existing business, and to attract new business in our insurance operations. Failure to maintain our ratings, or any other further adverse changes with respect to our ratings, could motivate current and future independent agents and policyholders to choose to transact their business with more highly rated competitors.IfA.M.Bestfurtherdowngradesourratingsorpubliclyindicatesthatourratingsareunderreview,itis possible that we will not be able to compete as effectively, leading to a decrease in premium revenue and earnings. Forexample,manyofouragenciesandpolicyholdershaveguidelinesthatrequireustohaveanA.M.Bestfinancial strength rating of "A-" or higher. A reduction of our A.M. Best ratings below "A-" could prevent us from issuing policies to a portion of our current policyholders or other potential policyholders with ratings requirements.

The failure of our insurance company subsidiaries to maintain their current ratings could dissuade a lender or reinsurancecompanyfromconductingbusinesswithus.Afurtherratingsdowngradecouldalsocausesomeofour
existingliabilitiestobesubjecttoacceleration,additionalcollateralsupport,changesinterms,orcreationof additional financial obligations.

We may be unable to attract, retain or effectively manage the succession of key personnel.

Our success depends on our ability to attract and retain key personnel, including members of our executive and senior management team. Any unplanned turnover or our failure to develop an adequate succession plan for one or more of our executive officers or other key positions could compromise our institutional knowledge base and erode our competitive advantage. The loss or limited availability of the services of one or more of our executive officers or other key personnel, or our inability to recruit and retain qualified executive officers or other key personnel in the future, could, at least temporarily, have a material adverse effect on our operating results and financial condition.

We have experienced several transitions in key roles in recent years, including the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Legal Officer positions. These changes and any future significant leadership changes or senior management transitions involve inherent risk and can be disruptive to our operations. Any failure to find a timely and suitable replacement for key personnel and ensure an effective transition, including the effective onboarding, could hinder our strategic planning, business execution and future performance.

We may be unable to predict the rising cost of insurance claims resulting from changing societal expectations that lead to increasing litigation, broader definitions of liability, broader contract interpretations, more plaintiff-friendly legal decisions and larger compensatory jury awards.

We refer to these phenomena collectively as "social inflation" and they present a significant challenge in accurately pricing risk and managing the liabilities that arise on insurance policies. As a commercial casualty insurance company, we have always been sensitive to the effects of emerging claims and coverage issues, including class action lawsuits. But more recent trends such as litigation financing have led to an unprecedented number of large liability losses for us as well as our competitors.

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 difficult to predict. Further examples of these issues
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include: (1) judicial expansion of policy coverage and the impact of new theories of liability; (2) an increase in 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 automobile repair costs.

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.

We maintain an internal education plan on the risk of social inflation. We endeavor to find ways to keep claims out of litigation and manage downward the length of time that certain claims are open. We also steer our portfolio away from business that is most exposed to these trends, and we target business in our assumed reinsurance operations and other alternative distribution channels that offer more short tail risks.
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 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.

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Although, to date, we have not identified any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents that have, or are likely to, materially affect us, our business strategy, results of operation or financial condition, the 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 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.

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 ofbased on 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 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."

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 percent of the direct statutory premiums written for the property and casualty insurance businesses in 2017: Texas (16.7 percent), California (11.6 percent), Iowa (9.5 percent), Missouri (6.1 percent) and Colorado (5.1 percent). The following states provided 70.9 percent of the direct statutory premiums written for the lifecore insurance business is dependent on strong and beneficial relationships with a large network of independent insurance agents and not maintaining these relationships could result in 2017: Iowa (32.5 percent), Wisconsin (11.9 percent), Minnesota (9.7 percent), Illinois (8.7 percent)loss of sufficient business opportunities within our expertise and Nebraska (8.1 percent).stated risk appetite.

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Our revenuesdirect insurance products are marketed exclusively through independent insurance agencies, all of which represent more than one company. We face competition within each agency and profitability arecompetition to retain qualified independent agents. Our competitors include companies that market their products via independent agents, exclusive agents and companies that sell insurance directly to their customers.

Our distribution model is subject to the prevailing regulatory, legal, economic, political, demographic, competitive, weatherrisks of possible loss of independent agencies for various reasons and other conditions in the principal states indiscretion agencies have to reduce their business with us. Other potential consequences of not maintaining strong and beneficial relationships include the loss of sufficient business opportunities within our specific risk appetite, impacting the quality of our underwriting and loss ratio. If the quality of the independent agencies with which we do business. With respectbusiness were 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 uncertaintydecline, policyholders might consider purchasing their insurance through different agencies 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.channels.
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.
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, 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.
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 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:
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% at December 31, 2017) 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 percent at December 31, 2017) consists of fixed income securities, primarily corporate and municipal bonds (69.9 percent at December 31, 2017). 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.
Fluctuationsin 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 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 percent at December 31, 2017) 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:
the availability of sufficient reliable data and our ability to properly analyze available data;
market and competitive conditions;
changes in medical care expenses and restoration costs;
our selection and application of appropriate pricing techniques; and
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.
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


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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. 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 RatingIssuer Credit RatingRating Held Since
Property and Casualty InsurersAa1994
Life InsurerA-a-1998
United Fire Group, Inc.N/Abbb2012

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:
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;
some of our independent agents, who collect premiums from policyholders on our behalf and are required to remit the collected premiums to us;
some of our policyholders, which may be significant; and
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.

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, stateState regulatory authorities may resist or delay our efforts to raise premium rates even if the property and casualty industry generally is not experiencing regulatory resistanceat their discretion due to general market, economic, or political factors or factors specific to UFG. If increases to premium rate increases. If premium rate increasesrates 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 affiliateaffiliates 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 affiliateaffiliates 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
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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, weWe 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 20152019 ("TRIPRA") was signed into law. TRIPRA, extendswhich extended the Terrorism Risk Insurance Program until December 31, 2020;2027, gradually increasesincreased the coverage trigger for shared terrorism losses between the federal government and the insurance industry to $200 billionmillion per year, (up from $100 billion); and gradually increasesincreased 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, 2023, 2022 and 2021" 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"Summary of Significant Accounting Policies”Policies" to Part II, Item 8, “Financial"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 aThe Federal Insurance Office, established within the U.S. Department of the Treasury. The Federal Insurance OfficeTreasury 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
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certain circumstances. While certain details and much of the impact of Dodd-Frank will not be known for some time, 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

Information Privacy Regulation. We are required to safeguard the areapersonal information of compensation disclosure, particularly regarding internal pay equity, officerour customers and director hedging activitiesapplicants and compensation clawback policies is still expected.
U.S. Social Security Administration's Death Master File. We have received regulatory inquiries from certain state insurance regulators relatingare subject to compliance with unclaimed propertyan increasing number of laws and the use ofregulations 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, annuitiesgovernmental enforcement actions and retained asset accounts are payable. Itfines, penalties, litigation, or public statements against us by consumer advocacy groups if personal information is possible that other jurisdictionsnot appropriately controlled. Strategic service providers may pursue similar inquiries and that such inquiries may result in paymentsrefuse to beneficiaries, escheatment of funds deemed abandoned under state laws and changescontinue to procedures for the identification and escheatment of abandoned property.
do business with us if we do not meet particular standards.


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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
We will be at a competitive disadvantage if, over time, our competitors are more effective than us in their utilization of technology and evolving data analytics.

We use various actuarial techniques and data analytics to understand our risk exposures such as frequency and severity of different types of insurance claims. The data we rely on for these analytics includes experience data from our own business (policies written, characteristics, coverages, and details of associated losses) and data attained from third parties, including industry results. We use outputs of predictive models and other analytics to assist in decision making related to underwriting, pricing, claims management (including reserving), and catastrophe risk exposure management. Emerging technology, including artificial intelligence, offers opportunities to underwrite and price business more efficiently and accurately, thus lowering costs. If we are not able to use technology and data analytics as effectively as our competitors, our competitiveness and ability to write and retain business within our risk appetite will be impacted. This may affect our access to andreduce 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 amountsprofitability of the risk thatbusiness we do write and our insurance company subsidiariesretain 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, we ceded premiums written of $61.3 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 tonegatively affect our ability to recover amounts due frommeet our reinsurers.business objectives.

We may be unable to secure reinsurance capacity that provides necessary risk protection at a reasonable cost.

Our abilityreinsurance strategy seeks to collect reinsurance recoverables may be subject to uncertainty. Our losses must meetprotect 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 event, our inability to collect a material recoveryCompany from a reinsurer on a timely basis, or at all, could have a materialextremely 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,underwriting outcomes as well as the levelunnecessary volatility in underwriting results. We purchase conservative levels of reinsurance as measured by our property catastrophe models, our economic capital model, and types of risk we retain. Although we purposely workbenchmarking with severalour peers.

We retain multiple reinsurance intermediaries to plan, create, and facilitate our ceded reinsurance placements. These intermediaries work closely with our risk, corporate underwriting, and finance departments to design reinsurance transactions that align with corporate strategy and risk appetite. Reinsurance transactions are supported by a large and diverse array of reinsurance providers to ensure that the capacity is reliable in each underwriting year. However, in hard reinsurance market conditions, reinsurance capacity can become constrained as reinsurers are pressed with concerns about capital or profitability. In these conditions, we may be unable to maintainsecure our currentdesired reinsurance facilitiesprotection at a reasonable cost.

Lost reinsurance capacity could expose the Company to larger retained losses per loss occurrence, per risk, or obtain other reinsurance facilitiesper year 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 oftotal. To mitigate this risk, we underwrite.maintain a large panel of reinsurers and prefer to trade with partners that participate in each of our ceded programs. We transact with multiple intermediary companies to ensure full access to the entire reinsurance market. We monitor the credit quality of our reinsurance providers. We have a clear view of the criticality of various components of our reinsurance program. Finally, we maintain active dialogue with intermediaries and underwriters throughout the year.
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 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:
the timely receipt of any required regulatory approvals;
the retention and assimilation of their key management, sales and other personnel;
the coordination of their lines of insurance products and services;
the adaptation of their technology, information systems and other processes; and
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 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

Our stock price could become more volatile and your investment could lose value.

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.
Themarket price of our common stock historically has been, and we expect will continue to be, subject to fluctuations. These fluctuations may be volatile.
due to our operating results or factors specific to our operations (including those discussed in our risk factors), changes in securities analysts' estimates of our future financial performance, ratingsorrecommendations,ourresultsfallingbelowourexpectationsandanalysts'andinvestors'expectations,the failure of our capital return programs to meet analysts' and investors' expectations, significant catastrophe events, departure of key personnel, cyber-attacks, or factors largely outside of our control, including those affecting the propertyandcasualtyinsuranceindustry.Thestockmarketingeneralhasexperiencedpriceandvolumefluctuations that have often been unrelated or disproportionate to the actual operating performance of listed companies. In addition, our stock is followed by a small number of analysts and the average daily trading volume tends to be low. These factors could adversely affect the 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 not consider being in their best interests. For example:
ourOur 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.
ourOur articles of incorporation limit the rights of shareholders to call special shareholder meetings;meetings.
ourOur 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.
ourOur 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.
ourOur Board of Directors may fill vacancies on the Board of Directors;Directors.
ourOur 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; andstock.
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
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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 lifesubsidiaries 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 subsidiarylaws 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 be further 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.

General Risk Factor

Macroeconomic conditions could materially and adversely affect our business, results of operations, financial condition, and growth.

Macroeconomic conditions such as growth, inflation, market stability, and geopolitics can impact our operations, opportunities, and risk profile. Important sectors we follow include goods, services, and housing. Markets exhibit stability when credit is available, there is liquidity in the system, and banks are stable. Geopolitical concerns can also disrupt the business environment. All of these factors can contribute to adverse financial consequences for UFG.

These risks are not met, including the receiptonly risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also have a material effect on our business, results of regulatory approvals, it may diminish the value of our common stockoperations, financial condition and/or liquidity.
On September 18, 2017, we signed a definitive agreement to sell our subsidiary, United Life Insurance Company, to Kuvare. This agreement contains several conditions precedent that must be satisfied prior to closing, including



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planning for the separation and migration of information technology systems and business operations. Further, the Iowa Insurance Division must approve Kuvare's acquisition of United Life Insurance Company. Failure to complete the transaction could adversely affect market prices for our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

ITEM 1C. CYBERSECURITY
Overview

We recognize the importance of assessing, identifying, and managing risks associated with cybersecurity threats. Our cybersecurity risks are identified and addressed through a comprehensive, cross-functional approach to develop strategies for preserving the confidentiality, integrity and availability of Company and customer information, identifying, preventing and mitigating cybersecurity threats, and effectively responding to cybersecurity incidents.
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Oversight

Cybersecurity risk oversight is a focus area of our Risk Management Committee and the full Board of Directors. The Risk Management Committee's charter requires it to assist the Board of Directors in identifying and evaluating risks inherent in our business and to oversee and review the significant policies, procedures, and practices employed to manage risks. The Risk Management Committee receives a quarterly cybersecurity update from the Chief Administrative Officer, which is shared with the full Board of Directors. The Board of Directors discusses cybersecurity matters and risks on a quarterly basis or more frequently, as needed, at the recommendation of the Risk Management Committee.

The Company's executive enterprise risk management committee (the "Executive ERM Committee") is tasked with, among other responsibilities, identifying and evaluating operational risks, which includes risks associated with information technology and cybersecurity. The Executive ERM Committee includes senior leaders across business functions, including the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Legal Officer, Chief Risk Officer and Chief Administrative Officer. The Executive ERM Committee, as part of its comprehensive risk management duties, discusses Company strategies to prevent cyber-attacks and the Company's response and remediation of threats. The Chief Administrative Officer provides a quarterly report to the Risk Management Committee that summarizes cybersecurity risks, relevant events and other items of note identified by management or the Executive ERM Committee. The Executive ERM Committee meets independently of the Risk Management Committee, with a representative from the Risk Management Committee in attendance. Certain members of the Executive ERM Committee are invited to attend and participate in meetings of the Risk Management Committee.

In addition, we maintain internal working groups called "corporate risk register groups" dedicated to assessing and managing the various ERM risks facing the Company. There are two corporate risk register groups that relate to cybersecurity risk: Cyber Incident Prevention and Cyber Incident Recovery; the Chief Administrative Officer is the leader of both of these risk register groups. The Chief Administrative Officer likewise serves on the Business Continuity Team as the business continuity technology lead, a role in which she comprehensively evaluates IT system readiness and preparedness should a business continuity event involving cybersecurity or technology interruption occur.

The lead management team member responsible for cybersecurity matters is the Chief Administrative Officer, who has 20 years of experience in information technology and a B.A. in Management Information Systems. She is assisted by the Information Security Manager and the Assistant Vice President and Senior Corporate Counsel for Privacy and Governance.

Cybersecurity Program

We have adopted a Written Information Security Program (WISP) designed to align with the guidelines recommended by the National Institute of Standards and Technology (NIST). We have made ongoing continuous improvements to our information security program; specifically in the implementation of secure remote access solutions with multifactor authentication, next-generation endpoint detection and remediation, cloud-based security controls, automated scanning and outside validation of security controls. Additionally, we require employees to complete cybersecurity training at least annually. When a specific cyber threat is identified, we may create additional trainings with targeted content for our employees. As part of our efforts to manage our cybersecurity risks, we have engaged an independent firm to assist with conducting penetration tests and provide advice on our information security program. We also carry insurance to mitigate losses from cyber events.

We have processes in place to oversee and identify risks from cybersecurity threats associated with our use of third-party service providers. All proposed third parties are subject to a preliminary assessment to identify those that may handle or have access to company information and scope appropriate due diligence activities relating to the engagement. Third parties that may handle or have access to company information are subject to enhanced due diligence procedures prior to onboarding and security risk assessments at the time of onboarding, contract renewal, and upon detection of an increase in risk profile. We use a variety of inputs in such risk assessments, including information supplied by third parties and information obtained through other channels. In addition, we require our
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providers to adhere to appropriate security requirements and controls, and we investigate security incidents that have impacted our third-party service providers, as appropriate.

We have established comprehensive incident response and recovery plans and continue to regularly test and evaluate the effectiveness of those plans. Our incident response and recovery plans address – and guide our employees, management and the Board of Directors on – our response to a cybersecurity incident, including the requirements of notification, classification, analysis and communication of cybersecurity incidents based on the identified severity level. The Executive ERM Committee regularly reviews and evaluates the corporate incident response plan and business continuity plan.

Cybersecurity Threats

To date, we have not identified any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have, or are likely to, materially affect us, our business strategy, results of operation or financial condition. Refer to "Item 1A. Risk Factors" in this Annual Report on Form 10-K, for additional discussion about cybersecurity-related risks.

ITEM 2. PROPERTIES
Our headquarters are located in Cedar Rapids, Iowa, where we own approximately 182,000235,000 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, 20172023 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 SHAREHOLDERSTOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Shareholders
United Fire Group, Inc.'s common stock is traded on the NASDAQNasdaq stock market under the symbol "UFCS." On February 26, 2018, there23, 2024, there were 814645 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, at December 31, 2017,2023, our insurance company subsidiary, United Fire & Casualty, is able to make a maximum of $35.7$58.6 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
 HighLow 
2017    
Quarter Ended:    
March 31$49.93
$40.19
 $0.25
June 3045.80
41.38
 0.28
September 3046.83
38.98
 0.28
December 3149.74
44.10
 0.28
Year-end closing share price: $45.58    
     
2016    
Quarter Ended:    
March 31$44.43
$35.16
 $0.22
June 3045.75
39.12
 0.25
September 3044.00
40.37
 0.25
December 3150.75
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, There were no repurchases during the year ended December 31, 2017:
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 - 2/28/1712,000
 41.85
 12,000
 2,926,471
3/1/17 - 3/31/17122,981
 42.66
 122,981
 2,803,490
4/1/17 - 4/30/17140,821
 42.50
 140,821
 2,662,669
5/1/17 - 5/31/17200,624
 42.78
 200,624
 2,462,045
6/1/17 - 6/30/1720,182
 42.94
 20,182
 2,441,863
7/1/17 - 7/31/174,904
 43.00
 4,904
 2,436,959
8/1/17 - 8/31/17127,387
 42.41
 127,387
 2,309,572
9/1/17 - 9/30/1773,000
 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
Total701,899
   701,899
  
(1)2023. Our share repurchase program was originally announcedmost recently renewed in November 2022 through 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.2024. As of December 31, 20172023, we remained authorized to repurchase 2,236,5721,719,326 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, 2018 through December 31, 2012 through December 31, 2017,2023, 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, 20122018 in our common stock and in each of the below listed indices and that all dividends were reinvested on the date of payment withoutwithout payment of any commissions. Dollar amounts in the graph are rounded to
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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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3876
The following table shows the data used in the total return performance graph above.
Period Ended Period Ended
Index12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17Index12/31/201812/31/201912/31/202012/31/2112/31/2212/31/23
United Fire Group, Inc.$100.00
 $134.52
 $143.38
 $189.66
 $248.99
 $236.64
S&P 500 Index100.00
 132.39
 150.51
 152.59
 170.84
 208.14
S&P 600 P&C Index100.00
 127.45
 134.01
 153.98
 192.74
 210.30
The foregoing performance graph is being furnisedfurnished 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[RESERVED]
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."Not applicable.




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(In Thousands, Except Per Share Data)         
As of and for the years Ended December 312017 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 operations2,597,297
 2,449,140
 2,280,674
 2,127,623
 1,995,069
Assets held for sale1,586,134
 1,605,618
 1,609,702
 1,729,066
 1,725,603
Total assets4,183,431
 4,054,758
 3,890,376
 3,856,689
 3,720,672
Losses and loss settlement expenses1,224,183
 1,123,896
 1,003,895
 969,437
 960,651
Unearned premiums - continuing operations465,391
 443,802
 414,971
 378,635
 340,387
Total liabilities         
Continuing operations1,862,923
 1,722,651
 1,606,869
 1,540,416
 1,435,222
Liabilities held for sale1,347,135
 1,390,223
 1,404,610
 1,498,858
 1,502,617
Total liabilities3,210,058
 3,112,874
 3,011,479
 3,039,274
 2,937,839
Net unrealized investment gains, after tax214,865
 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' equity973,373
 941,884
 878,897
 817,415
 782,833
Book value per share39.06
 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 expenses51,190
 55,284
 46,559
 44,236
 46,332
Net realized investment gains4,055
 4,947
 1,124
 4,177
 6,261
Other income (loss)—
 —
 (107) 911
 88
Revenues1,052,737
 996,362
 899,271
 816,263
 746,873
Losses and loss settlement expenses725,713
 652,433
 520,087
 509,811
 437,354
Amortization of deferred policy acquisition costs207,746
 202,892
 180,183
 161,310
 147,175
Other underwriting expenses103,628
 83,540
 83,631
 79,117
 73,626
Net income44,870
 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 income49,720
 51,538
 54,222
 60,373
 66,467
Revenues115,713
 140,585
 135,647
 125,631
 130,169
Losses and loss settlement expenses40,451
 31,365
 29,001
 26,432
 21,461
Increase in liability for future policy benefits27,632
 59,969
 50,945
 36,623
 37,625
Other underwriting expenses13,281
 19,881
 19,306
 15,754
 16,235
Interest on policyholders' accounts18,525
 20,079
 23,680
 30,245
 35,163
Net income6,153
 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 share1.75
 1.90
 3.38
 2.05
 2.64
Discontinued operations:         
Basic earnings per common share0.24
 0.03
 0.15
 0.27
 0.34
Diluted earnings per common share0.24
 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 Annual Report on 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 Annual Report on 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 4650 states plus the District of Columbia and are represented by approximately 1,2001,000 independent agencies.
Reportable Segments

Our life insurance subsidiary is licensed in 37 statesproperty 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. As a result, our lifecasualty insurance business has been considered held for saleoperates and accounted forreports as discontinued operations in the Consolidated Financial Statements of Cash Flows. 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.one business segment. For more information, refer to Part II,I, Item 8, Note 17 "Discontinued Operations."1 "Property and Casualty Insurance Business" under "Products and Operations".

Products and Lines of Business
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 withOur core commercial products support a wide rangevariety of products:

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

earthquake coverages.
We manage 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 operatereview and report oneour results using lines of business. The following table shows the principle types of property and casualty insurance policies we write and issue, and which lines of business segment, which contains our continuing operations. Our life insurancethey are reported in:


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Direct Writer
Treaty Reinsurance(1)
Funds at Lloyd'sMGAs
Commercial Lines
Other LiabilityxPx
Fire and allied linesxPx
AutomobilexP
Workers' compensationxP
Fidelity and suretyxP
Otherxx
Personal Lines
Fire and allied lines*P
Automobile*
Other*
Reinsurance AssumedNPx
* Personal lines direct business is considered held for sale and reported aswas discontinued operations throughout this Form 10-K, unless otherwise noted.in 2020 with only a minimal number of exposures still in force due to certain regulatory non-renewal limitations. For more information, refer to Part II,I, Item 8, Note 10. "Segment Information".1 "Property and Casualty Insurance Business" under "Products and Operations"
(1) Treaty Reinsurance is split between proportional reinsurance (P) and non-proportional reinsurance (NP)

Commercial other liability - primarily business insurance covering bodily injury and property damage including construction defect, excess and surplus lines excess casualty, and standard umbrella. Proportional assumed reinsurance on these lines and professional liability coverage managed by an MGA partner.
Commercial fire and allied lines - primarily multi-peril non-liability property coverage, inland marine. Proportional assumed reinsurance on these lines and earthquake coverage managed by an MGA partner.
Commercial automobile - physical damage to an insured's vehicle, as well as liabilities to third parties. Automobile physical damage insurance covers loss or damage to vehicles from collision, vandalism, fire, theft, flood or other causes. Automobile liability insurance covers bodily injury, damage to property resulting from automobile accidents caused by the insured, uninsured or under-insured motorists and the legal costs of defending the insured against lawsuits. Proportional reinsurance on these lines is also included.
Workers' compensation - business coverage for employees who are injured or become ill as a result of their job, including proportional assumed reinsurance for this coverage. Our workers' compensation insurance covers primarily small- to mid-sized accounts.
Fidelity and surety - contract and commercial surety bond coverage which guarantees performance and payment by our bonded principals, protects owners from failure to perform on the part of our principals, and protects material suppliers and subcontractors from nonpayment by our contractors.
Commercial other - commercial theft coverage, boiler and machinery and ocean marine business managed by an MGA partner.
Personal fire and allied lines - proportional assumed reinsurance for homeowners multi-peril coverage.
Reinsurance assumed - primarily non-proportional assumed reinsurance and Funds at Lloyd's property and casualty syndicates.
Lloyd's Syndicates
On January 1, 2021, the Company became a member of Lloyd's of London ("Lloyd's") through McIntyre Cedar Corporate Member LLP. As a member of Lloyd's, the Company is required to maintain capital at Lloyd's, referred to as Funds at Lloyd's ("FAL"), to support underwriting of property and casualty and reinsurance business by
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Syndicate 1492, Syndicate 1729, Syndicate 1969, Syndicate 1971, Syndicate 4747, Syndicate 2988, Syndicate 1699 and Syndicate 5623.
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’sparticipant's own surplus level.
Geographic Concentration
For 2017, approximately 49.02023, 47.0 percent of our property and casualty statutory direct premiums written were written in Texas, California, Iowa, Missouri, and Colorado.Louisiana.
Sources of RevenueIn 2023, 2022 and Expense2021 the direct statutory premiums written by our property and casualty insurance operations were distributed as follows:
Years Ended December 31,% of Total
(In Thousands)202320222021202320222021
Texas$176,287 $148,207 $158,676 17.4 %16.6 %17.4 %
California126,262 111,037 119,171 12.4 12.4 13.1 
Iowa71,975 70,128 73,097 7.1 7.8 8.0 
Missouri59,094 54,090 55,693 5.8 6.1 6.1 
Louisiana43,769 37,124 39,280 4.3 4.2 4.3 
New Jersey42,369 41,030 49,468 4.2 4.6 5.4 
Illinois37,157 28,538 29,755 3.7 3.2 3.3 
Colorado36,900 34,480 38,761 3.6 3.9 4.3 
Minnesota35,718 32,659 35,697 3.5 3.7 3.9 
South Dakota33,770 31,609 30,429 3.3 3.5 3.3 
All Other States350,976 304,839 281,485 34.6 34.1 30.9 
Direct Statutory Premiums Written$1,014,277 $893,741 $911,512 100.0 %100.0 %100.0 %

MEASUREMENT OF RESULTS
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 expensesexpenses. Management uses metrics to provide financial statement users with a better understanding of results of operations, including net premiums written and interestthree components of the loss ratio: underlying loss ratio, impacts of catastrophes and non-catastrophe prior period reserve development.
Net premiums written is frequently used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies. Net premiums written is the amount charged for insurance policy contracts issued and recognized on policyholders' accounts.an annualized basis at the effective date of the policy. Management believes net premiums written is a meaningful measure for evaluating insurance company sales performance and geographical expansion efforts. Net premiums written for an insurance company consists of direct premiums written and premiums assumed, less premiums ceded. Net premiums earned is calculated on a pro-rata basis over the terms of the respective policies. Unearned premium reserves are established for the portion of premiums written applicable to the unexpired terms of the insurance policies in force. The difference between net premiums earned and net premiums written is the change in unearned premiums and the change in prepaid reinsurance premiums.
Profit Factors
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Underlying loss ratio represents the net loss ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The underlying combined ratio represents the combined ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The Company believes that the underlying loss ratio and underlying combined ratio are meaningful measures to understand the underlying trends in the core business in the current accident year, removing the volatility of prior period impacts and catastrophes. Management believes separate discussions on catastrophe losses and prior period reserve development are important to understanding how the Company is managing catastrophe risk and in identifying developments in longer-tailed business.

Prior period reserve development is the increase (unfavorable) or decrease (favorable) in incurred loss and loss adjustment expense reserves at the valuation dates for losses which occurred in previous calendar years. This measure excludes development on catastrophe losses.

Catastrophe losses is an operational measure that utilizes the designations of the Insurance Services Office ("ISO") and is reported with losses and loss adjustment expense amounts net of reinsurance recoverables, unless specified otherwise. In addition to ISO catastrophes, we also include as catastrophes those events ("non-ISO catastrophes"), which may include U.S. or international losses, that we believe are, or will be, material to our operations, either in amount or in number of claims made. Catastrophes are not predictable and are unique in terms of timing and financial impact. While management estimates catastrophe losses as incurred, due to the inherently unique nature of catastrophe losses, the impact in a reporting period is inclusive of catastrophes that occurred in the reporting period, as well as development on catastrophes that may have occurred in prior periods. The following table shows the breakdown of ISO and non-ISO catastrophes in 2023, 2022 and 2021:

Years Ended December 31,
(In Thousands)2023 20222021
ISO catastrophes$61,269 $73,342 $83,386 
Non-ISO catastrophes (1)
2,883 124 15,230 
Total catastrophes$64,152 $73,466 $98,616 
(1) Includes international assumed losses.
We evaluate our property catastrophe exposure by considering planned portfolio growth, market conditions, business needs, portfolio aggregation, and results of third-party vendor model output. As a result of the evaluation, we may limit our exposure in regions that are prone to naturally occurring catastrophic events through a combination of geographic diversification and restrictions on the amount and location of new business production in such regions. We regularly assess our concentration of risk exposures in natural catastrophe exposed areas and consider the impacts of climate change and the unpredictability of future trends in adjusting our geographic concentrations. We have strategies and underwriting standards to manage these exposures through individual risk selection, subject to regulatory constraints. We use third-party vendor catastrophe modeling and a risk concentration management tool to monitor and control our accumulation of potential losses in natural catastrophe exposed areas, such as the Gulf Coast and East Coast. We model several perils against our exposure profile to produce a view into portfolio aggregation and property catastrophe exposure. Our staff regularly performs portfolio analysis, creating and utilizing custom model output which is used to further expand our insights into our exposure profile. We use all of these evaluations when renewing our catastrophe reinsurance programs on an annual basis.
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, 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.
We measure our cash flows and liquidity to ensure we meet our short- and long-term cash obligations. We monitor our capital adequacy to support our business.

Ceded Reinsurance
MEASUREMENT OF RESULTS
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Our consolidated financial statements are prepared on the basis of GAAP. We also prepare financial statements for eachreinsurance allows us to manage our risk, increase our underwriting capacity and protect us from large events. A summary of our insurance company subsidiaries basedkey 2024 reinsurance program is as follows. For details on statutory accounting principlesour 2021 - 2023 plans please refer to Part II, Item 8, Note 4 "Reinsurance"
Property Catastrophe Excess of Loss
Our corporate property catastrophe reinsurance program, effective January 1, 2024, is an excess of loss ("XOL") treaty. The program consists of $110 million in coverage for losses in excess of $20 million. The treaty protects from catastrophic events such as earthquakes, hail, windstorms, and file them with insurance regulatory authoritiesfires. The treaty consists of three layers and is fully placed. It includes exclusions for communicable diseases and cyber loss. In addition, it includes a terrorism exclusion. Each layer can be reinstated once to its full amount at the same premium.The business written through our delegated underwriting arrangement for earthquake and flood business is no longer subject to the corporate treaty. That exposure is now completely, and separately, reinsured and detailed below.

LayerLimitRetentionPlacement
First$10,000 $20,000 100 %
Second$30,000 $30,000 100 %
Third$70,000 $60,000 100 %

Property & Casualty Core XOL Treaty

Our property and casualty working program, which we refer to as the core treaty, includes a multi-line layer which applies 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 understandingexcess of our financial performance.retention and annual aggregate deductible, as well as property-only and casualty-only towers above the multi-line exhaustion point. Our core treaty begins January 1, 2024 and each layer is fully placed. Each layer includes provisions for extra-contractual and excess of policy limit losses. The following provides further explanationmulti-line treaty includes a provision that limits the per occurrence maximum limit to $24 million. Reinstatement is free and unlimited, upon erosion of the key measures management usesdeductible. This treaty provides coverage to evaluate our results:
Catastrophe losses is a commonly used non-GAAP financial measure which utilizes the designationsmajority of the Insurance Services Office ("ISO")commercial property and casualty business that we write. The multi-line treaty combined with the property per risk provide for a combined limit of $22 million coverage excess of the $3 million retention. If we have a property risk that requires limits in excess of our reinsured limit, facultative reinsurance is generally obtained.

LayerLimitRetentionPlacement
Multi-Line8,000 3,000 100 %
Property Per Risk14,000 11,000 100 %
Casualty 2nd9,000 11,000 100 %
Casualty 3rd20,000 20,000 100 %
Casualty 4th20,000 40,000 100 %

Surety Per Principal XOL Treaty

Our surety treaty begins on January 1, 2024 and is an excess of loss treaty. The program consists of $45 million in coverage for losses in excess of $5 million per principal. The first layer includes three reinstatements, while the second and third include one. Losses are reported with losses and loss settlement expense amounts net of reinsurance recoverables, unless specified otherwise. Accordingconsidered discovered to the ISO,treaty year in accordance with the contract terms and conditions.

LayerLimitRetentionPlacement
First5,000 5,000 100 %
Second15,000 10,000 100 %
Third25,000 25,000 100 %

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Earthquake and Flood XOL Treaty

We delegate underwriting authority to write a catastrophespecific portfolio of flood and earthquake difference in conditions ("DIC") business. This arrangement began in 2019. An excess of loss treaty, effective January 1, 2024, is defined as a single unpredictable incident or seriesin place to specifically and exclusively reinsure business written through this arrangement. This program consists of closely related incidents that result$160 million for losses in $25.0excess of $10 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,is fully placed. This treaty replaces the earthquake quota share that we believe are, or will be, materialhad previously placed in treaty years 2022 and 2023, as well as the remaining coverage that had been provided by the corporate property catastrophe XOL. Effecting the above change allowed us to reduce our operations, either in amount or in number of claims made. Management, at times, may determineretention to these events from $20 million to $10 million.

LayerLimitRetentionPlacement
First20,000 10,000 100 %
Second30,000 30,000 100 %
Third60,000 60,000 100 %
Fourth (Q1 only)50,000 120,000 100 %

Assumed Reinsurance
The Company offers reinsurance coverage 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 through traditional treaty reinsurance channels and participates in the Funds at Lloyd's syndicates. We target diversifying risks that complement our direct portfolio. The following provides more detail on the type of assumed reinsurance business we evaluate performance bothtarget.
•Treaty reinsurance with regional property and casualty carriers, including casualty XOL, property per risk, and excludingproperty catastrophe losses. Portions ofXOL.
•Treaty reinsurance with professional reinsurers and Lloyd's syndicates.
•Mortgage reinsurance with Freddie Mac and Fannie Mae, private mortgage insurers and surety carriers.
•Treaty reinsurance on risks underwritten by managing general agents.
•Treaty reinsurance underwritten on our catastrophe losses may be recoverable under our catastrophebehalf through 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.intermediary management agreements (RIMA) that define underwriting boundaries by product, class and type.
36
 Years Ended December 31,
(In Thousands)2017 2016 2015
ISO catastrophes$66,421
 $57,932
 $25,380
Non-ISO catastrophes (1)
7,618
 3,299
 6,933
Total catastrophes$74,039
 $61,231
 $32,313
(1) Includes international assumed losses.


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RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2017, 20162023, 2022 AND 20152021


FINANCIAL HIGHLIGHTS
Years Ended December 31,Years Ended December 31,% Change
202320232022
(In Thousands)(In Thousands)202320222021vs. 2022vs. 2021
Revenues
Net premiums earned
Net premiums earned
Net premiums earned$1,034,587 $951,541 $962,823 8.7 %(1.2)%
Investment income, net of investment expenses
Years Ended December 31, % Change
Net investment gains (losses)
      2017 2016
(In Thousands)2017 2016 2015 vs. 2016 vs. 2015
Revenues         
Net premiums earned$997,492
 $936,131
 $851,695
 6.6 % 9.9 %
Investment income, net of investment expenses51,190
 55,284
 46,559
 (7.4) 18.7
Net realized investment gains4,055
 4,947
 1,124
 (18.0) 340.1
Other income (loss)—
 —
 (107) —
 (100.0)
Net investment gains (losses)
Net investment gains (losses)
Other income
Total revenues$1,052,737
 $996,362
 $899,271
 5.7 % 10.8 %Total revenues$1,095,467 $$980,286 $$1,066,191 11.7 11.7 %(8.1)%
         
Benefits, losses and expenses         
Benefits, losses and expenses
Benefits, losses and expenses
Losses and loss settlement expenses
Losses and loss settlement expenses
Losses and loss settlement expenses$725,713
 $652,433
 $520,087
 11.2 % 25.4 %$769,414 $$637,301 $$652,155 20.7 20.7 %(2.3)%
Amortization of deferred policy acquisition costs207,746
 202,892
 180,183
 2.4
 12.6
Other underwriting expenses103,628
 83,540
 83,631
 24.0
 (0.1)
Interest expense
Interest expense
Interest expense
Other non-underwriting expenses
Total benefits, losses and expenses$1,037,087
 $938,865
 $783,901
 10.5 % 19.8 %Total benefits, losses and expenses$1,135,188 $$968,209 $$969,348 17.2 17.2 %(0.1)%
         
Income from continuing operations before income taxes$15,650
 $57,497
 $115,370
 (72.8)% (50.2)%
Income (loss) before income taxesIncome (loss) before income taxes$(39,721)$12,077 $96,843 (428.9)(87.5)%
Federal income tax expense (benefit)(29,220) 8,379
 30,050
 NM
 (72.1)%Federal income tax expense (benefit)(10,021)(2,954)(2,954)16,249 16,249 239.2 239.2 (118.2)(118.2)%
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
 $89,126
 2.2 % (44.0)%
Net income (loss)Net income (loss)$(29,700)$15,031 $80,594 (297.6)(81.3)%
         
GAAP Ratios:         
Net loss ratio (without catastrophes)65.4% 63.2% 57.2% 3.5 % 10.5 %
Catastrophes - effect on net loss ratio7.4% 6.5% 3.8% 13.8 % 71.1 %
GAAP Ratios:
GAAP Ratios:
Net loss ratio (1)
Net loss ratio (1)
Net loss ratio(1)
72.8% 69.7% 61.0% 4.4 % 14.3 %74.4 %67.0 %67.7 %11.0 %(1.0)%
Expense ratio(2)
31.2% 30.6% 31.0% 2.0 % (1.3)%
Expense ratio (2)
34.9 %34.5 %32.6 %1.2 %5.8 %
Combined ratio(3)
104.0% 100.3% 92.0% 3.7 % 9.0 %
Combined ratio (3)
109.3 %101.5 %100.3 %7.7 %1.2 %
Additional Loss Ratios:
Additional Loss Ratios:
Additional Loss Ratios:
Net loss ratio (1)
Net loss ratio (1)
Net loss ratio (1)
74.4 %67.0 %67.7 %11.0 %(1.0)%
Catastrophes - effect on net loss ratio (4)
Catastrophes - effect on net loss ratio (4)
6.2 %7.7 %10.2 %(19.5)%(24.5)%
Reserve development-effect on net loss ratio (4)
Reserve development-effect on net loss ratio (4)
6.0 %0.1 %(6.9)%NM(101.4)%
Underlying loss ratio (4) (Non-GAAP)
Underlying loss ratio (4) (Non-GAAP)
62.2 %59.2 %64.4 %5.1 %(8.1)%
NM = not meaningful
(1) The netNet loss ratio is calculated by dividing the sum of losses and loss settlement expenses by net premiums earned. We use the net loss ratio as a measure of the overall underwriting profitability of the insurance business we write and to assess the adequacy of our pricing. Our net loss ratio is meaningful in evaluating our financial results as reported in our Consolidated Financial Statements.
(2) The expenseExpense ratio is calculated by dividing nondeferrednon-deferred underwriting expenses and amortization of deferred policy acquisition costs by net premiums earned. The expense ratio measures a company's operational efficiency in producing, underwriting and administering its insurance
business.
(3) The combinedCombined 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. The combined ratio is the sum of the net loss ratio and the underwriting expense ratio.

(4) Underlying loss ratio is defined as the net loss ratio less impacts of catastrophes and non-catastrophe prior year reserve development.
In 2017, our




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Net loss reported in 2023 as compared to net income benefited from the Tax Act, which resulted in a tax benefit of $21.9 million for the year. Income from continuing operations before income taxes decreased 72.8 percent, from 2016,2022 was primarily driven bydue to an 11.2 percent increase in losses and loss settlement expenses due toand an increase in catastrophe losses and deteriorationamortization of our core loss ratio. A portion of this deterioration was driven by an increase in large losses, which we define as losses greater than $500 thousand, in our commercial automobile lines of business in the first three quarters of 2017. Also contributing to the decrease in income from continuing operations before income taxes was an increase in other underwriting expenses due to a deterioration in the profitability of the commercial and personal auto lines of business, which limits the amount of expenses which can be deferred into our deferred acquisition costs, partially


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offset by a decrease in post-retirement benefit expenses.costs. These increases were partially offset by a 6.6 percentwith an increase in net premiums earned.earned, higher investment income and net investment gains, as compared to net investment losses for the same period in 2022.

In 2016,2022, the decrease in net income compared to 2021 was driven by a 25.4 percent increase in losses and loss settlement expensesprimarily due to an increaselower premiums earned, lower net investment income from a decrease in catastrophevalue of other long-term assets, and net investment losses and deterioration of our core loss ratio. A portion of this deterioration was driven by an increase in large losses, which we define as losses greater than $500 thousand,from a decrease in the commercial automobile and commercial fire & allied linesfair value of business. The increaseequity securities, as compared to net investment gains for the same period in losses and loss settlement expenses was partially offset by a 9.9 percent increase in net premiums earned.2021.

Premiums from continuing operations
The following table shows our premiums earned and written and earned for 2017, 2016 2023, 2022and 2015:2021:
    % Change
(In Thousands)   20232022
Years ended December 31,202320222021vs. 2022vs. 2021
Direct premiums earned953,958 889,301 978,190 7.3 %(9.1)%
Assumed premiums earned225,587 163,980 77,283 37.6 %112.2 %
Ceded premiums earned(144,958)(101,740)(92,650)42.5 %9.8 %
Net premiums earned$1,034,587 $951,541 $962,823 8.7 %(1.2)%
(In Thousands)20232022
Years ended December 31,202320222021vs. 2022vs. 2021
Direct premiums written$987,977 $893,741 $911,514 10.5 %(1.9)%
Assumed premiums written232,716 190,215 130,375 22.3 45.9 
Ceded premiums written(153,792)(99,732)(100,541)54.2 (0.8)
Net premiums written(1)
$1,066,901 $984,224 $941,348 8.4 %4.6 %
       % Change
(In Thousands)      2017 2016
Years ended December 31,2017 2016 2015 vs. 2016 vs. 2015
Direct premiums written$1,065,207
 $1,006,123
 $926,500
 5.9 % 8.6 %
Assumed premiums written15,179
 16,834
 18,290
 (9.8) (8.0)
Ceded premiums written(61,273) (57,988) (56,916) 5.7
 1.9
Net premiums written(1)
$1,019,113
 $964,969
 $887,874
 5.6 % 8.7 %
Less: change in unearned premiums(21,588) (28,829) (36,336) 25.1
 20.7
Less: change in prepaid reinsurance premiums(33) (9) 157
 (266.7) (105.7)
Net premiums earned$997,492
 $936,131
 $851,695
 6.6 % 9.9 %
NM = not meaningful
(1) Net premiums written: Net premiums written is a non-GAAP measure. While not a substitute for any GAAP measure of performance, net premiums written is frequently used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies. Net premiums written are the amount charged for insurance policy contracts issued and recognized on an annualized basis at the effective date of the policy. Management believes net premiums written are a meaningful measure for evaluating insurance company sales performance and geographical expansion efforts. Net premiums written for an insurance company consists of direct premiums written and reinsurance assumed, less reinsurance ceded. Net premiums earned is calculated on a pro rata basis over the terms of the respective policies. Unearned premium reserves are established for the portion of premiums written applicable to the unexpired term of insurance policy in force. The difference between net premiums earned and net premiums written is the change in unearned premiums and change in prepaid reinsurance premiums.

Net Premiums Written
Net premiums written comprise direct and assumed premiums written, less ceded premiums written. Direct premiums written are the total policy premiums, net of cancellations, associated with policies issued and underwritten by our property and casualty insurance business. Assumed premiums written are the total premiums associated with the insurance risk transferred to us by other insurance and reinsurance companies pursuant to reinsurance contracts. Ceded premiums written is the portion of direct premiums written that we cede to our reinsurers under our reinsurance contracts. Net premiums earned are recognized ratably over the life of a policy and differ from net premiums written, which are recognized on the effective date of the policy.
Direct Premiums Written
Direct premiums written increased $59.1$94.2 million in 20172023 as compared to 20162022 primarily due to organic growth from a combination of new business and geographical expansion. Written and earned premium growth were within management's expectations of 4 percent to 6 percent growth.
in our core commercial lines. Direct premiums written increased $79.6decreased $17.8 million in 20162022 as compared to 20152021 due to organic growth from a combinationour continued focus on improving profitability through non-renewal of new business and geographical expansion.


under-performing accounts in our commercial automobile line of business.

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Assumed Premiums Written
Assumed premiums written decreased $1.7increased $42.5 million in 20172023 as compared to 2016 is2022 due to a drop in reinsurance rates. In 2017, we renewed our participation in allgrowth of our Funds at Lloyd's participation along with increases in our assumed book by the addition of new programs.
Assumed premiums written decreased $1.5increased $59.8 million in 20162022 as compared to 20152021 due to a drop in reinsurance rates. In 2016, we renewed our participation in allgrowth of our assumed programs.book by the addition of new programs and cedant premium growth.
Ceded Premiums Written
Direct and assumed premiums written are reduced by the ceded premiums that we pay to reinsurers. For 2017, we2023, the ratio of ceded 5.7premiums to direct written premiums increased as compared to 2022 as a result of higher reinsurance costs, in addition to an increase in our direct written premiums. Ceded premiums also increased $12.8 million in 2023 as a result of increased surety reinstatement premium due to a small number of large claims. All these contributed to ceding 54.2 percent more premiums to reinsurers in 2023 as compared to 2022. For 2022, the ratio of ceded premiums to direct written premiums is nearly the same as it was in 2021, and thus ceded premiums written are only down as a resultreflection of continued growth indecreased direct premiums written offset by declining ceded reinsurance rates. For 2016, we ceded 1.9 percent more premiums to reinsurers as a result of continued growth in direct premiums written offset by declining ceded reinsurance rates.written.
Losses and Loss Settlement Expenses from continuing operations
Climate Change and Catastrophe Exposures
Catastrophe losses are inherent risks of the property and casualty insurance business. Catastrophic events include, without limitation, hurricanes, tornadoes, earthquakes, hailstorms, wildfires, high winds, winter storms and other natural disasters, along with man-made exposures to losses resulting from, without limitation, acts of war, acts of terrorism and political instability. Such events result in insured losses that can be, and may continue to be, a material factor in our results of operations and financial position, as the extent of losses from a catastrophe is a function of both the total amount of insured exposure in an area affected by the event and the severity of the event. Because the level of insured losses that may occur in any one year cannot be accurately predicted, these losses contribute to fluctuations in our year-to-year results of operations and financial position. Some types of catastrophes are more likely to occur at certain times within the year than others, which adds an element of seasonality to our property and casualty insurance claims. 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. Losses and loss settlement expenses incurred tend to remain consistent throughout the year, with the exception of catastrophe losses, which generally are highest in the second and third quarters. The frequency and severity of catastrophic events are difficult to accurately predict in any year. However, some geographic locations are more susceptible to these events than others.
We control our direct insurance exposures in regions that are prone to naturally occurring catastrophic events through a combination of geographic diversification, restrictions on the amount and location of new business production in such regions, and reinsurance. We regularly assess our concentration of risk exposures in natural catastrophe exposed areas.areas and consider the impacts of climate change and the unpredictability of future trends in adjusting our geographic concentrations in the United States. We have strategies and underwriting standards to manage these exposures through individual risk selection, subject to regulatory constraints, and through the purchase of catastrophe reinsurance coverage. We use catastrophe modeling and a risk concentration management tool to monitor and control our accumulations of potential losses in natural catastrophe exposed areas of the United States, such as the Gulf Coast and East Coasts,Coast, as well as in areas of exposure in other countries where we are exposed to a portion of an insurer'sinsurer’s underwriting risk under our assumed reinsurance contracts.
Overall, the models indicate increased risk estimates for our exposure to hurricanes in the U.S., but the impact of the models on our book of business varies significantly among the regions that we model for hurricanes. Based on our analysis, we have implemented more targeted underwriting and rate initiatives in some regions. We willintend to continue to take underwriting actions and/or purchase additional reinsurance as necessary to reduce our exposure.
Catastrophe modeling generally relies on multiple inputs based on experience, science, engineering and history, and the selection of those inputs requires a significant amount of judgment. The modeling results may also fail to account for risks that are outside the range of normal probability or are otherwise unforeseen. Because of this, actual results may differ materially from those derived from our modeling assumptions.


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Despite our efforts to manage our catastrophe exposure, the occurrence of one or more severe natural catastrophic events in heavily populated areas could have a material effect on our results of operations, financial condition or liquidity.
The process of estimating and establishing reserves for losses incurred from catastrophic events is inherently uncertain and the actual ultimate cost of a claim, net of reinsurance recoveries, may vary materially from the estimated amount reserved. Although we reinsure a portion of our exposure, reinsurance may prove to be inadequate if a major catastrophic event exceeds our reinsurance limits or if we experience a number of small catastrophic events that individually fall below our reinsurance retention level.
Catastrophe Losses
In 2017,2023, our pre-tax catastrophe losses were $74.0$64.2 million, an increasea decrease of $9.3 million compared to $73.5 million in 2022 and a decrease of $25.2 million as compared to $61.2 million and an increase as compared to $32.3$98.6 million in 2016 and 2015, respectively.2021. In 2017, the increase in catastrophe losses is primarily due to hurricanes (Harvey, Irma, Maria) in the third quarter and destructive California wildfires in the second half of the year. In 2017,2023, our catastrophe losses included 50 catastrophes and our largest single pre-tax catastrophe loss totaled $9.0 million.61 events. Catastrophe losses in 20172023 added 7.46.2 percentage points to the combined ratio, which is slightly abovebelow our historical 10-year average of 7.37.2 percentage points.
The increase in catastrophe losses in 2016 was primarily due to the number of catastrophes and an increase in severity. In 2016, our catastrophe losses included 41 catastrophes, where our largest single pre-tax catastrophe loss totaled $10.4 million. Catastrophe losses in 2016 added 6.5 percentage points to the combined ratio.
Catastrophe Reinsurance
In 2017, 2016 and 2015, we did not exceed our2023, the Company continued the pillared loss occurrence program in addition to the XOL ceded reinsurance program with no substantive structural changes. The catastrophe reinsurance retention level ofwas increased from $15.0 million to $20.0 million, per event.the pillar retention in the pillared loss occurrence program increased from $5.0 million to $6.0 million, and the first layer of the occurrence tower was placed with a co-participation.We did not experience any property catastrophe events that produced a reported loss to either program in 2022 or 2023.
We use many reinsurers, both domestic and foreign, which helps us to avoid concentrations of credit risk associated with our reinsurance. All reinsurers we do business with must meet the following minimum criteria:Our criteria for selecting reinsurance markets is to require capital and surplus of at least $250.0$500.0 million and an A.M. Best rating or an S&P rating of at least "A-." If a reinsurer is rated by both rating agencies, then both ratings must be at least an "A-."














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our reinsurance capacity is placed with reinsurers holding a rating of A- or better. For the small amount of reinsurance capacity we utilize that doesn't meet our criteria, markets are required to collateralize the risk.
The following table represents the primary reinsurers we utilize and their financial strength ratings as of December 31, 2017:
2023:
Name of ReinsurerA.M. BestS&P Rating
Arch Reinsurance CompanyA+A+
Aspen Insurance UK LimitedAA
Everst ReA+A+
FM GlobalA+N/A
General Reinsurance CorporationA++AA
Hannover Rueckversicherung AG (1) Swiss Re(2)
A+AA-
Lloyd'sAA+
Munich ReA+AA-
Odyssey ReAA-
PartnerHannover Re(1)(2)
AA+A+AA-
QBE Reinsurance Corporation Everest Re(1)(2)
AA+A+AA-
R&V Versicherung AGLloyd's(1)(2)
N/AAA-
Renaissance ReA+AA-
SCOR Reinsurance CompanyArch Re(1)(2)
A+AA-A+
Toa
Berkely Re(1)
AA+A+
Tokio Millennium
Partner Re Ltd(1)(2)
A++A+
Transatlantic
R&V Re(1)(2)
A+NRA+
MS Amlin(1)(2)
AA
Renaissance Re(1)
A+A+
SCOR(1)(2)
AA+
(1)Primary reinsurers participating in the property and casualty excess of loss programs.
(2)Primary reinsurers participating in the surety excess of loss program.
(1)Primary reinsurers participating in the property and casualty excess of loss programs.
(2)Primary reinsurers participating in the surety excess of loss program.



Refer to Part II, Item 8, Note 4 "Reinsurance" for further discussion of our reinsurance programs.

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Terrorism Coverage
TheOur principal reinsurance protection is the coverage provided through the Terrorism Risk Insurance Program Reauthorization Act of 2007 was signed into law on December 27, 2007. In January 2015, TRIPRA was signed into law. TRIPRA extends the Terrorism Risk Insurance Program until2019 ("TRIPRA"), effective through December 31, 2020; gradually increases 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 the industry-wide retention to $37.5 billion per year (up from $27.5 billion).2027. TRIPRA coverage includes most direct commercial lines of business, including coverage for losses from nuclear, biological and chemical exposures if coverage was afforded by an insurer, with exclusions for commercial automobile insurance, burglary and theft insurance, surety, professional liability insurance and farm ownersowners' multiple peril insurance. Under TRIPRA, each insurer has a deductible amount, which is 20.0 percent ofFor calendar year 2024, the prior year's direct commercial lines earned premiums for the applicable lines of business, and retention of 15.0 percent above the deductible. No insurer that has met its deductible shall be liable for the payment of any portion of that amount that exceeds the annual aggregate loss cap specified in TRIPRA. TRIPRA provides marketplace stability. As a result, coverage for terrorist events in both the insurance and reinsurance markets is often available. The amount of aggregate losses necessary for an actexceeding a threshold of terrorism to$200.0 million industry-wide would be certified by the U.S. Secretary of Treasury, the Secretary of State and the Attorney General was $100.0 million for 2017 and remains the same for 2018.covered under this protection. Our TRIPRA deductible was $121.5$124.8 million for 20172023 and our TRIPRA deductible willis expected to be $126.1$132.6 million for 2018.2024. Our catastrophe and non-catastrophe reinsurance programs provide limited coverage for terrorism exposure excluding nuclear, biological and chemical-related claims.
20172023 Results
In 2023, our loss and loss settlement expenses were 20.7 percent higher than 2022 and our net loss ratio increased 7.4 points. The primary driver for the increase was an increase in loss and loss settlement expenses of $80.4 million in commercial lines and $48.0 million in reinsurance assumed, which will be discussed in more detail in Net Loss Ratios by Line. In 2023, catastrophe losses were $64.2 million in both our direct and assumed reinsurance business as compared to $73.5 million in 2022.
2022 Results
In 2017,2022, our losses and loss settlement expenses were 11.22.3 percent percent higherlower than 20162021 and our net loss ratio increased 3.1 points duedecreased 0.7 points. The primary driver for the decline is a reduction of loss and loss settlement expenses of $27.0 million in personal lines related to our exit of that business. This was offset by an increase in catastrophe losses, which accounted for 0.9 percentage points ofreinsurance assumed related to our growth in that business from the increase,prior year, and an increase in large losses over $500 thousanda slight decrease in our commercial automobile lines of business in the first three quarters of 2017 and an increase inlines. In 2022, catastrophe losses in our personal lines of business, primarily in personal auto and


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fire and allied lines of business. Catastrophe losses increased to $74.0were $73.5 million in both our direct business and assumed reinsurance business as compared to $61.2$98.6 million in 2016.
2016 Results
In 2016, our losses and loss settlement expenses were 25.4 percent higher than 2015 and our net loss ratio increased 8.7 points due to an increase in catastrophe losses, which accounted for 2.7 percentage points of the increase, and an increase in large losses over $500 thousand in our commercial automobile and commercial fire & allied lines of business. Catastrophe losses increased to $61.2 million in both our direct business and assumed reinsurance business as compared to $32.3 million in 2015.
2015 Results
In 2015, our losses and loss settlement were impacted by a better performing book of business and lower catastrophe losses in both our direct business and assumed reinsurance business.2021.
Reserve Development


For many liability claims, significant periodslines of time, ranging up tobusiness, several years and for certain construction defect claims, more(more than a decade for construction defect) may elapse between the occurrence of the loss, the reporting of the loss to us and the settlement or other disposition of the claim. As a result, loss experience in the more recent accident years for the long-tail liability coverages has limited statistical credibility in our reserving process because a relatively small proportion of losses in these accident years are reported claims and an even smaller proportion are paid losses. In addition, long-tail liability claims are more susceptible to litigation and can be significantly affected by changing contract interpretations, and the legal environment.environment, and inflation (economic and social). Consequently, the estimation of loss reserves for long-tail coverages is more complex and subject to a higher degree of variability. As a result of this complexity and inherent uncertainty, reserve estimates may change over time as new information becomes available. Reserves for these long-tail coverages represent a significant portion of our overall carried reserves.


When establishing reserves and monitoring reserve adequacy, we analyze historical data and consider the potential impact of various loss 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 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 impact of any individual factor on the development of reserves.


Our reserving philosophy is to reserve claims to their ultimate expected loss amount as soon as practicable after information about a claim becomes available. This approach tends to produce, on average, prudently conservative case reserves, which we expect to result in some level of favorable development over the course of settlement.

20172023 Development

The property and casualty insurance business experienced $54.3$67.8 million of adverse development in our net reserves for prior accident years for the twelve-month period ended December 31, 2023, which is comprised of $64.2 million on non-catastrophe losses and $3.6 million on catastrophe losses. Commercial other liability lines experienced adverse development of $52.9 million primarily in our excess and surplus lines excess casualty book along with some adverse development in standard umbrella and construction defect due to increasing severity pressures. The pressure on these longer tailed lines, especially in accident years 2016-2019, related to
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social and economic inflation, continued in 2023 and prompted a re-evaluation of trend assumptions for more recent accident years. The commercial automobile line of business also experienced adverse development of $9.0 million related to increasing severity largely in post-COVID-19 accident years. Commercial fire and allied lines experienced adverse development of $4.4 million largely due to development on both catastrophe and non-catastrophe losses, primarily from accident year 2022. The assumed reinsurance line of business contributed an additional $3.5 million of adverse development largely driven by catastrophe losses.

2022 Development

The property and casualty insurance business experienced $12.9 million of adverse development in our net reserves for prior accident years for the twelve-month period ended December 31, 2022. Most of the adverse development was in commercial other liability with $47.8 million and commercial fire and allied with $24.8 million adverse development. This was offset partially by favorable development on commercial automobile which contributed $56.7 million. The unfavorable development in commercial other liability and commercial fire and allied was due to paid loss and loss adjustment expense ("LAE") which was greater than reductions in reserves for unpaid loss and LAE. The favorable development for commercial automobile was from both loss and LAE where reductions of reserves for unpaid liabilities were more than sufficient to offset actual paid loss and paid LAE. Reductions in reserves for IBNR claims also contributed favorable development.

2021 Development

The property and casualty insurance business experienced $48.9 million of favorable development in our net reserves for prior accident years for the yeartwelve-month period ended December 31, 2017. The2021. Two lines contributed the majority of favorable development camewith the largest contribution coming from two lines, commercial liability with $35.1automobile which had $43.3 million favorable development, andfollowed by workers' compensation with $19.2which had $10.9 million favorable development, partially offset by $6.3development. All other individual lines, with the exception of commercial other liability, experienced favorable development. Commercial other liability experienced $20.7 million of unfavorable development. The favorable development for assumed reinsurance. All other lines combined $6.3 millioncommercial automobile was from both loss and LAE where reductions of reserves for unpaid liabilities were more than sufficient to offset actual paid loss and paid LAE. The favorable development with no single line experiencing more than $3.7 million of development, either favorable or unfavorable. Much offor workers' compensation was from both loss and LAE and for loss the favorable long-tail liability development continues to come from loss adjustment expense and is attributed to our continued litigation management efforts. There was also a reduction in reserves for incurred but not reported claims because our long tail liability has experienced fewer late reported claims than what was initially anticipated. The favorable workers compensation development is due to the combination of reductions in reserves for reported claims and reductions in reserves for incurred but not reported claims for both loss and loss adjustment expense.


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2016 Development

The property and casualty insurance business experienced $31.2 million of favorable development in our net reserves for prior accident years for the year ended December 31, 2016. The majority of favorable development came from two lines: commercial liability with $25.4 million of favorable development and workers compensation with $12.2 million of favorable development. The favorable development was offset by unfavorable development from commercial fire & allied lines with $6.4 million of unfavorable development and commercial automobile with $5.5 million of unfavorable development. During the twelve-month period ended December 31, 2016 all other lines combined development was $5.5 million of favorable development. The favorable development for the year ended December 31, 2016, is attributable to reductions in reserves for loss adjustment expense which continues to benefit from successful management of litigation expenses.

2015 Development

The property and casualty insurance business experienced $40.4 million of favorable development in our net reserves for prior accident years for the year ended December 31, 2015. Three lines in aggregate accounted for a majority of the favorable development. The largest single contributor was long-tail liability with $23.0 million of favorable development followed by workers' compensation with $22.1 million of favorable development and auto physical damage with $4.4 million of favorable development for the year ended December 31, 2015. The favorable development is attributable to reductions in reserves for reported claims as well as reductions in required reserves for incurred but not reported claims combined with continued successful management of litigation expenses. These reserve decreases were more than sufficient to offset claim payments. Thepaid loss; reductions in reserves for IBNR claims also contributed favorable development was partiallyin addition to LAE where reductions in reserves were more than sufficient to offset by adverse development, the majority coming from three lines which included property with $5.6 million of adverse development from an increase in severity and frequency of losses, assumed reinsurance with $8.1 million of adversepayments. Commercial other liability experienced unfavorable development due to prior year development of catastrophe lossespaid loss which was greater than reductions in reserves for unpaid loss; LAE developed favorably and commercial auto liability with $2.8 million of adverse development due to an increase in frequency of losses inpartially offset the year ended December 31, 2015. No other single line of business contributed a significant portion of the totalunfavorable loss development.


Reserve development amounts can vary significantly from year-to-year depending on a number of factors including the number of claims settled(both internal and the settlement terms, and are subject to reallocation between accident years and lines of business.external).




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Net Loss Ratios by Line
The following table depicts our net loss ratios for 2017, 20162023, 2022 and 2015:2021:
Years ended December 31,202320222021
(In Thousands)Net Premiums EarnedNet Losses and Loss Settlement Expenses IncurredNet Loss RatioNet Premiums EarnedNet Losses and Loss Settlement Expenses IncurredNet Loss RatioNet Premiums EarnedNet Losses and Loss Settlement Expenses IncurredNet Loss Ratio
Commercial lines        
Other liability320,762 $249,106 77.7 %$302,446 $231,587 76.6 %$299,961 $184,794 61.6 %
Fire and allied lines244,674 183,533 75.0 232,156 204,278 88.0 238,881 177,136 74.2 
Automobile208,874 176,667 84.6 208,398 114,296 54.8 248,135 181,119 73.0 
Workers' compensation53,039 33,224 62.6 56,015 27,545 49.2 61,690 43,790 71.0 
Fidelity and surety39,922 22,259 55.8 37,975 6,790 17.9 30,989 2,913 9.4 
Other2,702 940 34.8 1,081 821 75.9 1,313 251 19.1 
Total commercial lines869,973 $665,729 76.5 %$838,071 $585,317 69.8 %$880,969 $590,003 67.0 %
Personal lines
Fire and allied lines$4,733 $3,402 71.9 %$4,957 $2,959 59.7 %$14,604 $20,215 138.4 %
Automobile— (837)NM1 (3,123)NM7,144 5,784 81.0 
Other22 (82)NM50 (1,009)NM361 (216)(59.8)
Total personal lines$4,755 $2,483 52.2 %$5,008 $(1,173)(23.4)%$22,109 $25,783 116.6 %
Reinsurance assumed$159,859 $101,202 63.3 %$108,462 $53,157 49.0 %$59,745 $36,369 60.9 %
Total$1,034,587 $769,414 74.4 %$951,541 $637,301 67.0 %$962,823 $652,155 67.7 %





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Years ended December 31,2017 2016 2015
(In Thousands)Net Premiums Earned Net Losses and Loss Settlement Expenses Incurred Net Loss Ratio Net Premiums Earned Net Losses and Loss Settlement Expenses Incurred Net Loss Ratio Net Premiums Earned Net Losses and Loss Settlement Expenses Incurred Net Loss Ratio
Commercial lines                 
Other liability$306,480
 $121,054
 39.5% $289,982
 $130,748
 45.1% $261,303
 $130,904
 50.1%
Fire and allied lines227,711
 178,768
 78.5
 221,758
 176,961
 79.8
 202,375
 128,479
 63.5
Automobile250,465
 266,272
 106.3
 214,009
 211,882
 99.0
 185,970
 152,558
 82.0
Workers' compensation104,166
 71,053
 68.2
 103,605
 74,051
 71.5
 95,672
 47,106
 49.2
Fidelity and surety24,981
 2,206
 8.8
 22,507
 222
 1.0
 21,362
 2,001
 9.4
Other1,829
 312
 17.1
 1,745
 498
 28.5
 2,158
 428
 19.8
Total commercial lines$915,632
 $639,665
 69.9% $853,606
 $594,362
 69.6% $768,840
 $461,476
 60.0%
                  
Personal lines                 
Fire and allied lines$43,005
 $34,503
 80.2% $43,463
 $27,402
 63.0% $44,075
 $28,815
 65.4%
Automobile27,046
 28,997
 107.2
 25,207
 23,123
 91.7
 24,120
 17,817
 73.9
Other1,159
 268
 23.1
 1,090
 260
 23.9
 1,021
 296
 29.0
Total personal lines$71,210
 $63,768
 89.5% $69,760
 $50,785
 72.8% $69,216
 $46,928
 67.8%
Reinsurance assumed$10,650
 $22,280
 209.2% $12,765
 $7,286
 57.1% $13,639
 $11,683
 85.7%
Total$997,492
 $725,713
 72.8% $936,131
 $652,433
 69.7% $851,695
 $520,087
 61.0%
NM=Not meaningful







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Commercial Lines

The net loss ratio in our commercial lines of business, excluding assumed reinsurance, was 69.976.5 percent in 20172023 compared to 69.669.8 percent in 20162022 and 60.067.0 percent in 2015.2021. The net loss ratio in 2017 was comparable2023 increased primarily due to 2016 with an increaseprior accident year reserve strengthening discussed in the commercial autoReserve Development section. The net loss dollars for 2022 compared to 2021 are lower by 0.8 percent, but the net loss ratio increased due to the contraction of premiums in 2022.
Other Liability
We write numerous types of risk that are exposed to liability losses in our direct and fidelityassumed books of business. This includes, but is not limited to, bodily injury, property damage, standard umbrella, excess liability, and suretyproduct liability (including construction defect) loss and loss adjustment expenses.
The net loss ratio and decreasesdeteriorated 1.1 percentage points in other liability and workers compensation. The change in 2016 as2023 compared to 2015 was primarily2022. Both 2022 and 2023 results were the result of an increasedeeper analytical insights and emerging claim experience increasing our view of potential exposure in catastrophe losses and large losses, which we define as losses greater than $500 thousand, in our commercial automobile and commercial fire & allied lines of business.
Other Liability
Otherexcess liability is business insurance covering bodily injury and property damage arising from general business operations, accidents on the insured's premises and products manufactured or sold. Because of the long-tail nature of liability claims, significant periods of time, ranging up to several years, may elapse between the occurrence of the loss, the reporting of the loss to us and the settlement of the claim.
In recent years, we began to use our loss control department more extensively in an attempt to return this line of business to a higher level of profitability. For example, our loss control department has representatives who make multiple visits each year to businesses and job sites to ensure safety. We also do not renew accounts that no longer meet our underwriting or pricing guidelines. We avoid accounts that have become too underpriced for the risk.
Construction Defect Losses
Incurred losses from construction defect claims were $15.7 million in 2017 compared to $10.4 million and $3.6 million in 2016 and 2015, respectively. At December 31, 2017, we had $34.4 million in construction defect loss and loss settlement expense reserves (excluding IBNR reserves which are calculated at the overall other liability commercial line), which consisted of 1,857 claims. In comparison, at December 31, 2016, we had reserves of $22.3 million, excluding IBNR reserves, consisting of 1,382 claims. The increase in the incurred losses is due to an improved economic environment which increased construction activity in 2017. Our West Coast and Rocky Mountain regions continue to be the origin of the majority of the construction defect claim activity. The increase in reserves at December 31, 2017 is due to a increase in open claim counts.
Construction defect claims generally relate to allegedly defective work performed in the construction of structures such as apartments, condominiums, single family dwellings or other housing,coverages as well as the sale of defective building materials. Such claims seek recovery dueconstruction defect. Social and economic inflation pressures continue to damage caused by alleged deficient construction techniques or workmanship. The reporting of such claims can be quite delayed due to an extended statute of limitations, sometimes up to ten years. Court decisions have expanded insurers' exposure to construction defect claims as well. Defense costs are also a part of the insured expenses covered by liability policies and can be significant, sometimes greater than the cost of the actual paid claims.

We have exposure to construction defect liabilitiesincrease severity in Colorado and surrounding states. We have historically insured small- to medium-sized contractorsthese lines, primarily in this geographic area. In an effort to limit the number of future claims from multi-unit buildings, we implemented policy exclusions in 2009, later revised in 2010, that exclude liability coverage for contractors performing "residential structural" operationsaccident years 2016-2019. Additional detail on any building project with more than 12 units or on single family homes in any subdivision where the contractor is working on more than 15 homes. The exclusions do not apply to remodeling or repair of an existing structure. We also changed our underwriting guidelines to add a professional liability exclusion when contractors prepare their own design work or blueprints and implemented the multi-family exclusion and tract home building limitation form for the state of Colorado and our other western states as a means to reduce our exposure in future years. When offering commercial umbrella coverage for structural residential contractors, limits of liability are typically limited to a maximum of $2.0 million per occurrence. Requests to provide additional insured status for "developers" are declined.

As a result of our acquisition of Mercer Insurance Group in 2011, we added construction defect exposure is discussed in the states of California, Nevada and Arizona. Mercer Insurance Group has been writing in these states for more than 20 years. In order to minimize our exposure to construction defect claims in this region, we continually review the


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coverage we offer and our pricing models. In an effort to limit our exposure from residential multi-unit buildings, we started including condominium and townhouse construction policy exclusions in 2012 for our contracting policies in this region. For the majority of our residential contractors we limit the size of any tracts the contractor is working on to 25 homes or less and do not include a continuous trigger with our designated work exclusion. In a majority of the policies in our small service, repair and remodel contractors program, we have a favorable new residential construction exclusion. We also apply strict guidelines when additional insured forms are required and changed our underwriting guidelines to limit our exposure to large, multi-party construction defect claims. Critical Accounting Policies section.
Commercial Fire and Allied Lines
The net loss ratio improved 13.0 percentage points in 2023 compared to 2022. The improvement in 2023 is related to lower catastrophe losses and improvement in severity in both current and prior accident years.

Commercial fire and allied lines include fire, allied lines, commercial multiple peril and inland marine. The insurance covers losses to an insured's property, including its contents, from weather, fire, theft or other causes. We provide this coverage through a variety of business policies.Automobile
The net loss ratio deteriorated 29.8 percentage points in 20172023 compared to 2022 as the 2022 results reflected significant reserve releases. The 2023 results saw an increase in prior accident year reserves driven by severity trends in post-COVID-19 accident years offset by improved frequency and continued rate achievement in the current accident year.
Workers' Compensation

The net loss ratio deteriorated 13.4 percentage points in 2023 compared to 2022. This line deteriorated primarily due to less favorable prior accident year reserve releases in 2023 as compared to 2016 improved slightly, decreasing 1.3 percentage points. The improvement comes from2022. There was also a decreaseslight uptick in reserves for incurred but not reported claims for the current year in the second half of 2017, which is attributable to lower than expected claim emergence from various storms that had occurred earlier in the year. The deterioration in the net loss ratio in 2016 asseverity compared to 2015 was primarily attributable to an increase in severity in commercial fire losses and an increase in catastrophe losses.
Commercial Automobile
Our commercial automobile insurance covers physical damage to an insured's vehicle, as well as liabilities to third parties. Automobile physical damage insurance covers loss or damage to vehicles from collision, vandalism, fire, theft, flood or other causes. Automobile liability insurance covers bodily injury, damage to property resulting from automobile accidents caused by the insured, uninsured or underinsured motorists and the legal costs of defending the insured against lawsuits. The deterioration in our commercial automobile insurance line in 2017 as compared to 2016 was due to an increase in the number of severe losses of claims in the first three quarters of 2017. The deterioration in our commercial automobile insurance line in 2016 as compared to 2015 was due to an increase in frequency and severity of claims in 2016 due to an increase in miles driven by commercial vehicles.
Workers' Compensation
We consider our workers' compensation business to be a companion product; we rarely write stand-alone workers' compensation policies. Our workers' compensation insurance covers primarily small- to mid-size accounts. The improvement in our workers' compensation line of business in 2017 as compared to 2016 was due to the presence of relatively stronger claim reservesfavorable result for prior accident years. As claims were paid and closed the release of reserves for reported claims was more than sufficient to offset claim payments. The deterioration in our workers' compensation line of business in 2016 as compared to 2015 was due to an increase in severity of claims of over $0.1 million and a decrease in favorable reserves development on prior year claims.
The challenges faced by workers' compensation insurance providers to attain profitability include the regulatory climates in some states that make it difficult to obtain appropriate premium rate increases and inflationary medical costs. Despite these pricing issues, we continue to believe that we can improve the results of this line of business. Consequently, we have increased the utilization of our loss control unit in the analysis of current risks, with the intention of increasing the quality of our workers' compensation book of business. We are currently using these modeling analytics to assist us in risk selection, and we will continue to evaluate the model results.2022.
Fidelity and Surety
Our surety products guarantee performance and payment by our bonded principals. Our contract bonds protect owners from failure to perform on the part of our principals. In addition, our surety bonds protect material suppliers and subcontractors from nonpayment by our contractors. When surety losses occur, our loss is determined by estimating the cost to complete the remaining work and to pay the contractor's unpaid bills, offset by contract funds due to the contractor, reinsurance, and the value of any collateral to which we may have access.



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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 net loss ratio deteriorated 16.7 percentage points as compared to 2016. 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 line due to an increase in catastrophe losses.
For our personal lines, we use the CATography™ Underwriter tool, which gives us 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 profile of our customers at the agent's point of sale during the quotation process.
Assumed Reinsurance
Our assumed reinsurance is the business we choose to write by participating in programs insuring insurance companies. The net loss ratio deteriorated 37.9 percentage points in 2017 primarily2023 compared to 2022 due to a few large losses in 2023 and associated reinstatement premiums. The surety market has experienced pressure from construction industry factors, such as increased material costs and limited contractor availability. Due to the nature of this business, results can be volatile, and it is not uncommon to experience occasional outlier results like 2023 over an otherwise very profitable longer time horizon.
Personal Lines

The 2022 results reflected prior accident year reserve releases in lines which we were exiting. The 2023 results reflect a more normal level of loss for this line going forward.
Assumed Reinsurance
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Our assumed reinsurance portfolio is comprised of contracts that provide reinsurance protection to insurance companies. We only reinsure companies with attractive expected claims from three hurricanes (Harvey, Irma,profitability, relevant materiality, and Maria) as well as expected claims from California wildfires.strong reputation. Our reinsurance business focuses on long-term relationships.

Net earned premium grew to $159.9 million in 2023 compared to $108.5 million in 2022. The net loss ratio improveddeteriorated 14.3 percentage points in 20162023 compared to 2022. This is due 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 allenhanced analysis of our assumed programs. In 2015, we renewed our participation in allbook of our assumed programsbusiness that lead to a realignment of loss reserves to better align with exposures. The realignment was between lines of business and added one new program to our portfolio.accident years and had no impact on the total loss ratio results.
Other
Underwriting ExpensesExpense Ratio
Our underwriting expense ratio, which is a percentage of amortization of deferred policy acquisition costs and other underwriting expenses over net premiums earned, was 31.234.9 percent,, 30.6 34.5 percent and 31.032.6 percent for 2017, 2016,2023, 2022, and 2015,2021, respectively. The increase in expense ratio in 2023 as compared to 2022 was primarily driven by prior year changes to our employee post-retirement benefit plans. These changes provided benefits to the underwriting expense ratio in 2022 and 2021 that concluded at the end of 2022. Additionally, the 2023 underwriting expense ratio increased in 2017 primarily due to a deteriorationreinsurance premiums which were offset by our ongoing actions to sustainably reduce expenses and direct premium growth. The increase in expense ratio in 2022 as compared to 2021 was primarily driven by the profitabilitychange in design of our employee post-retirement benefit plans.
During the commercial and personal auto linesfourth quarter of business, which limits2023, the amountCompany evaluated categories of expenses which can be deferred into our deferred acquisition costs, partially offset by a decreaseincluded in post-retirement benefit expenses.
Thethe underwriting expense ratio improvedand identified two categories of expenses that have been reclassified as non-underwriting expenses: foreign exchange gain/loss and charitable contributions. These expenses have been isolated 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
       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, net49,720
 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 gains4,008
 1,156
 3,022
 246.7 % (61.7)%
Net realized investment gains4,008
 1,156
 1,722
 246.7 % (32.9)%
Other income617
 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 benefits27,632
 59,969
 50,945
 (53.9)% 17.7 %
Amortization of deferred policy acquisition costs5,181
 8,121
 6,634
 (36.2)% 22.4 %
Other underwriting expenses13,281
 19,881
 19,306
 (33.2)% 3.0 %
Interest on policyholders' accounts18,525
 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 of our life insurance business. Our principal life insurance products are deferred 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) comprised our 2017 life insurance premium revenues, as determinednew financial line "Other Non-Underwriting Expenses" on the basis of statutory accounting principles. We do not write variable annuities or variable insurance products.

Income 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 tostatement. As 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 strategicresult, there were immaterial 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 inhistorical underwriting expense ratio and the prior year.combined ratio.
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.
Federal Income Taxes

We reported a federal income tax benefit on a consolidated basis of $24.7$10.0 million or 94.1 percent of per-tax income in 2017 and federal income tax expense of $8.8 million or 14.925.2 percent of pre-tax income and $32.3 million or 26.6 percent of pre-tax incomelosses in 2016 and 2015, respectively. Our2023. For 2023, the effective federal tax rate varied from the statutory federal income tax expense rate of 35.0at 21.0 percent, in each year, due primarily to our portfolio of tax-exempt securities.


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securities and general business tax credits. In addition, in 2017 our effective tax rate was impacted by the Tax Act, which was enacted on December 22, 2017. The Tax Act significantly revised the U.S. corporate2022, federal income tax laws including lowering the U.S.benefit on a consolidated basis was $3.0 million or (24.5) percent of pre-tax income and federal corporate tax rate from 35% to 21% effective January 1, 2018.
In December 2017, the Securities and Exchange Commission 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 we have not completed accounting for the tax effects of enactment of the Tax Act, however for certain items, we have made a reasonable estimate 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 operationson a consolidated basis was $16.2 million or 16.8 percent of $21,884. The Company will continue to refine this estimated provisional adjustment as we gainpre-tax income in 2021.
Deferred tax assets are reduced by a valuation allowance when management believes it is more thorough understandinglikely than not that some, or all, of the deferred taxes will not be realized. After considering all positive and negative evidence of taxable income in the carryback and carryforward periods and our tax lawplanning strategy of holding debt securities with unrealized losses to maturity or recovery, we believe it is more likely than not that all the deferred assets will be realized. As a result, we have no valuation allowance at December 31, 2023 and the Company will take future guidance into consideration when it becomes available.2022.
As of December 31, 2017,2023, 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 acquired in the purchase of American Indemnity Financial Corporation, 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. 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 million in 2017 due to the realization of $1.6 million in NOLs.
As of December 31, 2017, we had $6.0 million ofno alternative minimum tax credit carryforwards.


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INVESTMENTS
Investment Environment

The markets began 2017 with optimism as a new administration arrived in Washington touting an aggressive agenda of 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, followed 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 rates increased 75 to 90 basis points, while 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 is signaling recession. Geopolitically, a looming conflict in Southeast Asia, the impact of "Brexit" on trade relationships across Europe, the U.S. administration’s stance on trade negotiations and conflict in the Middle East all presented challenges. However, the global investment landscape is relatively strong in spite 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.

Investment Philosophy

The Company's assets are invested to preserve capital and maximize after-tax returnstotal return while maintaining an appropriate balance of risk. The risk-adjusted return on our portfolio is an important component of overall financial results, but 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 withEach of our insurance company subsidiaries to developdevelops an appropriate investment strategy that aligns with theirits business needs and supports United Fire's strategic plan and risk appetite. The portfolio is structured so as to be in compliancecompliant with
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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, 20172023 totaled $1.9 billion,$1,886.5 million, compared to $1.8 billion$1,844.9 million at December 31, 2016,2022, an increase of $117.1$41.6 million. At December 31, 2017,2023, fixed maturity securities and equity securities comprised 82.289.4 percent and 15.22.9 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 anthe ability to borrow funds available under our revolving credittake advances through the Federal Home Loan Bank of Des Moines ("FHLB Des Moines") 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, 20172023 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:
Available-for-sale
Available-for-sale
Available-for-sale1,535,070
 81.3
 1,430,025
 96.7
 2,965,095
 88.0
$1,686,502 89.4 89.4 %
Trading securities16,842
 0.9
 —
 —
 16,842
 0.5
Equity securities:           
Available-for-sale280,913
 14.9
 23,653
 1.6
 304,566
 9.0
Trading securities6,431
 0.3
 —
 —
 6,431
 0.2
Equity securities
Mortgage loans—
 —
 3,435
 0.2
 3,435
 0.1
Policy loans—
 —
 5,815
 0.4
 5,815
 0.2
Other long-term investments49,352
 2.6
 16,437
 1.1
 65,789
 2.0
Short-term investments175
 —
 —
 —
 175
 —
Total$1,888,933
 100.0% $1,479,399
 100.0% $3,368,332
 100.0%Total$1,886,494   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, we classified $1.5 billion, or 98.9 percent, of2023 and December 31, 2022, our continuing operations fixed maturities portfolio is classified as available-for-sale, compared to $1.5 billion, or 99.0 percent, at December 31, 2016.available-for-sale. 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 fixed maturities as held-to-maturity or trading. We record held-to-maturity securities at amortized cost. We record 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, 20172023 and 2016,2022, 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, 20172023 and 2016.2022. Information contained in the table is generally 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.
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(In Thousands)December 31, 2017 December 31, 2016(In Thousands)December 31, 2023 December 31, 2022
RatingCarrying Value
 % of Total Carrying Value % of TotalRatingCarrying Value % of Total Carrying Value % of Total
AAA$885,000
 29.7% $782,329
 26.9%AAA$635,023   37.7 % $540,485   34.8 %
AA839,210
 28.1
 857,946
 29.4
A616,787
 20.7
 651,696
 22.4
Baa/BBB585,968
 19.6
 554,475
 19.0
Other/Not Rated55,156
 1.9
 66,268
 2.3
$2,982,121
 100.0% $2,912,714
 100.0% $1,686,502   100.0 % $1,551,336   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 and offsetting 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 5.04.0 years at December 31, 20172023 compared to 5.24.3 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, 2016.2022.
The amortized cost and fair value of held-to-maturity, available-for-sale and trading fixed maturity securities at December 31, 2017,2023, 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
AmortizedFair
December 31, 2023CostValue
Due in one year or less$74,293 $74,066 
Due after one year through five years524,463 515,126 
Due after five years through 10 years523,999 496,643 
Due after 10 years321,300 304,810 
Asset-backed securities3,394 3,831 
Mortgage-backed securities23,800 21,483 
Collateralized mortgage obligations299,792 270,544 
 $1,771,041 $1,686,503 
(In Thousands)Held-To-Maturity Available-For-Sale Trading
 Amortized Fair Amortized Fair Amortized Fair
December 31, 2017Cost Value Cost Value Cost Value
Due in one year or less$—
 $—
 $37,899
 $38,144
 $2,225
 $2,835
Due after one year through five years150
 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, 2017Cost 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 securities34
 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 7.4increased 32.7 percent in 2017,2023, compared with the same period of 2016, primarily2022. While interest on fixed maturities was up $7.5 million driven by higher interest rates, this was offset by a decrease in dividends on equity securities of $1.6 million, due to changesa strategic reallocation of equity securities to fixed income assets during 2023. Income on other long-term investments resulted in valuean additional $3.2 million of ourincome as the valuation of the investments in limited liability partnerships specifically related to financial institutions partially offset by an increase in invested assets. The valuationvaries
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from period to period in large part 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 policyAn allowance for impairment recognition requires other-than-temporary impairment charges to be recorded when we determine that itcredit 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 faircurrent economic conditions, management's expectations of future economic conditions and performance indicators, such as market value versus amortized cost, investment spreads widening or contracting, rating actions, payment and default history. The following table contains a rollforward of the investmentsallowance 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, 2023:
Rollforward of allowance for credit losses for available-for-sale fixed maturity securities:
As of
December 31, 2023
Beginning balance, January 1, 2023$3 
Additions to the allowance for credit losses for which credit losses were not previously recorded0
Reductions for securities sold during the period (realized)— 
Writeoffs charged against the allowance— 
Recoveries of amounts previously written off(2)
Ending balance, December 31, 2023$1 
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, 20172023 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 issuesissues. Non-credit related unrealized gains and corresponding other-than-temporary impairment write-downs.  losses are recognized as a component of other comprehensive income and represent other market movements that are not credit related, for example interest rate changes. We have no intent to sell, and it is more likely than not that we will not be required to sell, these securities until the fair value recovers to at least equal our cost basis or the securities mature.





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Net Investment Income
In 2017,2023, our investment income, net of investment expenses, increased $14.7 million to $59.6 million as compared to 2022, due to interest on fixed maturities, income on other long-term investments in limited liability partnerships, and other income. These increases were slightly offset by a decrease in dividends on equity securities.
In 2022, our investment income, net of investment expenses, decreased $5.9$10.8 million to $100.9$44.9 million as compared to 2016,2021, primarily due to the change in the fair value of our investments in limited liability partnerships, specifically related to financial institutions.
In 2016, our investment income, net of investment expenses, increased $6.0 million to $106.8 million as compared to 2015, primarily due to the change in value of our investments in limited liability partnerships, specifically related to financial institutions.partnerships.
The following table summarizes the components of net investment income:
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(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 securities7,108
 6,448
 6,421
Income on other long-term investments     
Interest6,870
 1,200
 1,200
Change in value (1)
(2,812) 10,178
 2,313
Interest on short-term investments120
 47
 3
Interest on cash and cash equivalents1,125
 352
 234
Other300
 422
 433
Total investment income from continuing operations$57,495
 $61,794
 $52,463
Less investment expenses6,305
 6,510
 5,904
Net investment income from continuing operations$51,190
 $55,284
 $46,559
Net investment income from discontinued operations49,720
 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.

(In Thousands)
Years Ended December 31,
202320222021
Investment income from operations:
Interest on fixed maturities$56,243 $48,702 $43,224 
Dividends on equity securities3,548 5,163 5,031 
Income on other long-term investments— 00
Interest2,833 4,742 4,481 
Change in value (1)
(2,864)(7,930)9,699 
Interest on mortgage loans1,889 1,897 1,995 
Interest on short-term investments1,068 354 18 
Interest on cash and cash equivalents2,228 740 252 
Other4,139 780 152 
Total investment income from operations$69,084 $54,448 $64,852 
Less investment expenses9,478 9,516 9,074 
Net investment income$59,606 $44,932 $55,778 
(1)Represents the change in value of our interests in limited liability partnerships that are recorded on the equity method of accounting.

In 2017, 77.92023, 81.4 percentof our gross investment income from continuing operations originated from interest on fixed maturities, compared to 69.889.4 percent and 79.866.7 percent in 20162022 and 2015,2021, respectively.
The following table details our annualized yield on average invested assets from both continuing operationsfor 2023, 2022, and discontinued operations for 2017, 2016 and 2015,2021, 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
2023$1,891,504 $59,606 3.2 %
20221,992,108 44,932 2.3 %
20212,141,022 55,778 2.6 %
(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%
20163,223,014
 106,822
 3.3%
20153,181,311
 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,
202320222021
Net realized investment gains (losses) from continuing operations:     
Net investment gains (losses):
Net gains (losses):
Net gains (losses):
Net gains (losses):
Fixed maturities:
Fixed maturities:
Fixed maturities:     
Available-for-sale$829
 $1,004
 $814
Available-for-sale
Available-for-sale
Allowance for credit losses
Trading securities     
Change in fair value
Change in fair value
Change in fair value924
 189
 (1,352)
Sales244
 931
 1,381
Equity securities:     
Available-for-sale1,553
 2,359
 1,977
Trading securities     
Change in fair value332
 301
 (448)
Sales57
 (6) 66
Net gains (losses) recognized on equity securities sold during the period
Net gains (losses) recognized on equity securities sold during the period
Net gains (losses) recognized on equity securities sold during the period
Unrealized gains (losses) recognized during the period on equity securities still held at reporting date
Net gains (losses) recognized during the reporting period on equity securities
Mortgage loans
Other long-term investments—
 —
 (1,314)
Short-term investments
Other-than-temporary-impairment charges:
Fixed maturities
Fixed maturities
Fixed maturities
Equity securities
Cash equivalents—
 169
 —
Real Estate116
 —
 $—
Total net realized investment gains from continuing operations$4,055
 $4,947
 $1,124
Total net realized investment gains from discontinued operations4,008
 1,156
 1,722
Total net realized investment gains$8,063
 $6,103
 $2,846
Total net investment gains (losses)
Net Unrealized Investment Gains and Losses
As of December 31, 2017,2023, net unrealized investment gains,losses, after tax, totaled $214.9$67.0 million compared to $133.9unrealized losses of $88.4 million and $128.4unrealized gains of $49.8 million as of December 31, 20162022 and 2015,2021, respectively. The increaseunrealized investment loss position is a result of continued elevated interest rates during 2023, with a slight improvement from 2022 that resulted in a small change in unrealized gains for 2023.
The net unrealized investment gainslosses in 2017 is2022 was primarily the result of a decreasechange 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 an increasehigher interest rates during 2022. The decrease in net unrealized investment gains in 2021 was primarily the result of a decrease in fixed maturity securities held and a change in the value of the fixed maturity portfolio due to higher interest rates.rates during 2021.

The following table summarizes the change in our net unrealized investment gains (losses):
(In Thousands)
Years Ended December 31,
202320222021
Changes in net unrealized investment gains (losses):
Available-for-sale fixed maturity securities$27,091 $(174,858)$(42,159)
Income tax effect(5,689)36,720 8,858 
Total change in net unrealized investment gains (losses), net of tax$21,402 $(138,138)$(33,301)

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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 securities40,168
 34,179
 (6,459)
Deferred policy acquisition costs119
 (4,410) 11,380
Income tax effect(21,545) (2,975) 11,446
Accumulated effect of change in enacted tax rate36,658
 —
 —
Total change in net unrealized investment gains, net of tax$80,973
 $5,523
 $(21,254)
Market RiskMARKET 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 or recovery, 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 specifically related to interest rate risk 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.2023. 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.
51
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 securities34
 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 agency128,008
 125,659
 122,168
 114,089
 104,790
States, municipalities and political subdivisions         
  General obligations:         
     Midwest120,617
 115,198
 109,696
 103,281
 96,647
     Northeast53,374
 50,984
 48,641
 45,959
 43,036
     South157,465
 149,584
 141,519
 132,046
 122,255
     West126,775
 119,874
 113,011
 105,319
 97,498
   Special revenue:         
     Midwest178,089
 168,570
 158,744
 147,044
 135,317
     Northeast92,227
 86,044
 79,760
 72,772
 65,925
     South302,652
 283,580
 263,512
 240,270
 217,754
     West180,577
 169,676
 158,307
 145,118
 132,239
Foreign bonds55,232
 53,973
 52,753
 51,565
 50,410
Public utilities228,371
 218,485
 209,144
 200,243
 191,794
Corporate bonds         
Energy101,889
 98,388
 95,053
 91,806
 88,685
Industrials241,265
 231,207
 221,707
 212,661
 204,058
Consumer goods and services202,563
 194,188
 186,257
 178,652
 171,380
Health care81,510
 78,382
 75,408
 72,562
 69,844
Technology, media and telecommunications163,508
 155,992
 148,979
 142,403
 136,246
Financial services308,825
 295,604
 283,151
 271,088
 259,404
Mortgage backed securities14,053
 13,986
 13,691
 13,204
 12,567
Collateralized mortgage obligations         
Government national mortgage association172,630
 167,268
 157,483
 145,198
 132,208
Federal home loan mortgage corporation214,067
 208,963
 199,152
 185,680
 170,990
Federal national mortgage association113,469
 110,647
 105,432
 98,375
 90,653
Asset-backed securities4,813
 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 services1,642
 1,588
 1,535
 1,484
 1,436
Health care4,374
 4,039
 3,741
 3,493
 3,285
Financial services5,670
 5,618
 5,566
 5,407
 5,222
Technology, media and telecommunications1,264
 1,242
 1,221
 1,201
 1,180
Redeemable preferred stock2,559
 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, 2023-200 Basis-100 Basis+100 Basis+ 200 Basis
(In Thousands)PointsPointsBasePoints Points
AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury$52,859 $51,844 $50,861 $49,911 $48,992 
U.S. government agency102,613 99,114 94,493 89,071 83,292 
States, municipalities and political subdivisions
  General obligations:
     Midwest53,470 53,103 52,707 51,832 50,333 
     Northeast11,601 11,493 11,380 11,156 10,728 
     South55,992 55,118 54,207 52,835 50,921 
     West79,588 78,553 77,426 75,825 73,272 
   Special revenue:
     Midwest104,874 102,973 100,981 97,900 92,935 
     Northeast54,484 53,365 52,227 50,716 48,367 
     South172,308 168,451 164,266 158,149 149,398 
     West106,032 103,876 101,565 98,023 92,858 
Foreign bonds20,915 20,020 19,172 18,371 17,617 
Public utilities155,483 147,723 140,467 133,688 127,364 
Corporate bonds
Energy47,101 45,234 43,473 41,808 40,238 
Industrials78,246 74,246 70,548 67,124 63,953 
Consumer goods and services106,170 100,844 95,921 91,369 87,158 
Health care38,428 35,828 33,472 31,332 29,387 
Technology, media and telecommunications92,001 86,625 81,788 77,420 73,467 
Financial services155,386 150,555 145,691 140,838 136,095 
Mortgage backed securities23,117 22,375 21,483 20,504 19,509 
Collateralized mortgage obligations
Government national mortgage association162,765 158,024 153,206 147,995 142,186 
Federal home loan mortgage corporation79,179 75,569 71,685 67,770 64,074 
Federal national mortgage association48,670 47,291 45,653 43,801 41,854 
Asset-backed securities4,829 4,251 3,831 3,519 3,284 
Total Available-For-Sale Fixed Maturities$1,806,111 $1,746,475 $1,686,503 $1,620,957 $1,547,282 
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.



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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, 2017:2023:
(In Thousands) -10% Base +10%(In Thousands)-10%Base+10%
Estimated fair value of equity securities $258,610
 $287,344
 $316,078
Foreign Currency Exchange Rate Risk
Foreign currency exchange rate risk arises from the possibility that changes in foreign exchange rates will impact our transactions withfinancial results. Foreign currency exchange rate risk can occur as a result of investment holdings in foreign reinsurers relating to thecurrency, settlement of amounts due to or from foreign reinsurers or our participation in the normal course of business.FAL. 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 believe that 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, 99.198.2 percent and 98.998.7 percent were rated "A" or above, and 93.795.0 percent and 93.295.2 percent were rated "AA" or above at December 31, 20172023 and 2016,2022, 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$7.6 million or 20.828.9 percent of our insured municipal securities at December 31, 2017,2023, as compared to $32.9$7.7 million or 19.129.1 percent at December 31, 2016.2022. Our five largest indirect exposures to financial guarantors accounted for 66.6 percent$28.6 million and 63.9 percent$28.7 million of our insured municipal securities at December 31, 20172023 and 2016,2022, respectively.



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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, 20162023, 2022 and 2015 from continuing and discontinued operations:
2021:
Cash Flow SummaryYears Ended December 31,Cash Flow SummaryYears Ended December 31,
(In Thousands)2017 2016 2015(In Thousands)2023 20222021
Cash provided by (used in)     
Operating activities$170,094
 $214,384
 $189,999
Operating activities
Operating activities
Investing activities(61,985) (112,403) (36,286)
Financing activities(107,549) (97,577) (137,837)
Net increase in cash and cash equivalents$560
 $4,404
 $15,876
Net increase (decrease) in cash and cash equivalents


In the Consolidated Statement of Cash Flows, cash flows from discontinued operations are shown in separate lines in each of the operating, investing and financing sections of the Cash Flow Statement. Our cash flows from continuing operations were sufficient to meet our current liquidity needs for the full-year periods ended December 31, 2017, 20162023, 2022 and 20152021 and we anticipate they will be sufficient to meet our future liquidity needs. We also have the ability to take advances through the Federal Home Loan Bank facility. See Part II, Item 8, Note 13 "Debt" for more information.
Operating Activities
Net cash flows provided by operating activities totaled $170.1$171.7 million, $214.4 in 2023, used in operating activities totaled $(1.3) million in 2022 and $190.0provided by operating activities totaled $29.9 million in 2017, 2016 and 2015,2021, respectively. Our cash flows from operationsoperating activities were sufficient to meet our liquidity needs for 2017, 20162023, 2022 and 2015.2021.
Investing Activities
Cash in excess of operating requirements is generally invested in fixed maturity securities and equity securities. Fixed maturity securities provide regular interest payments and allow us to match the duration of our liabilities. Equity securities provide dividend income, potential dividend income growth and potential appreciation. For further


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discussion of our investments, including our philosophy and portfolio, see the "Investment Portfolio" section contained in this Item.
In addition to investment income, possible sales of investments and proceeds from calls or maturities of fixed maturity securities also can provide liquidity. During the next five years, $0.8$0.6 billion,, or 28.135.64 percent of our fixed maturity portfolio will mature.
We invest funds required for short-term cash needs primarily in money market accounts, which are classified as cash equivalents. At December 31, 2017,2023, our cash and cash equivalents included $16.8$20.3 million related to these money market accounts, compared to $16.8$31.3 million at December 31, 2016.2022.
Net cash flows used in investing activities totaled $62.0$149.9 million, $112.4 in 2023 and net cash flows used in investing activities totaled $19.2 million and $36.3 in 2022. Net cash flows provided by investing activities totaled $31.7 million in 2017, 2016 and 2015, respectively.2021. In 2017,2023, we had cash inflows from scheduled and unscheduled investment maturities, redemptions, prepayments, and sales of investments from continuing operations, that totaled $205.1 million compared to $328.1 million and $252.2 million for the same period in 2016 and 2015, respectively. In 2017, we had cash inflows from scheduled and unscheduled investment maturities, redemptions, prepayments, and sales of investments, from discontinued operations, that totaled $148.6$162.1 million compared to $223.0$280.4 million and $422.7$451.1 million for the same period in 20162022 and 2015,2021, respectively. The cash inflows over the last three years primarily relate to redemptions of fixed maturity securities that are reinvested.
Our cash outflows for investment purchases from continuing operations totaled $267.5$301.1 million in 2017,2023, compared to $448.2 million and $360.3 million for the same period in 2016 and 2015, respectively. Our cash outflows for investment purchases from discontinued operations totaled $131.0 million in 2017, compared to $207.7$297.5 million and $340.7$405.4 million for the same period in 20162022 and 2015,2021, respectively.
Financing Activities
Net cash flows used in financing activities from continuing operations totaled $107.5$16.5 million, $97.6 in 2023 and $15.0 million and $137.8 in 2022. Net cash flow used in financing activities totaled $17.5 million in 2017, 2016 and 2015, respectively.2021. The change is due to repurchases of common stock, an increase in the payment of cash dividends and a decrease in the issuance of common stock. Netnet cash flows used in financing activities from discontinued operations totaled $55.3are
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primarily the payment of cash dividends of $16.2 million, $78.3$15.9 million and $133.4$15.1 million in 2017, 20162023, 2022 and 2015,2021, respectively, primarilyalong with share repurchases of $2.0 million in 2021.
Contractual Obligations and Commitments
The following table shows our contractual obligations and commitments, including our estimated payments due by period at December 31, 2023. Time periods of less than one year are considered short-term cash obligations and time periods greater than one year are considered long-term cash obligations.
(In Thousands)Payments Due By Period

Contractual Obligations		TotalLess Than
One Year		One to
Three Years		Three to
Five Years		More Than
Five Years
Loss and loss settlement expense reserves$1,638,755 $567,672 $563,091 $220,939 $287,053 
Long term debt105,250 3,250 6,5006,50089,000 
Operating leases32,262 9,361 16,777 5,313 811 
Profit-sharing commissions23,904 23,904 — — — 
Total$1,800,171 $604,187 $586,368 $232,752 $376,864 
Loss and Loss Settlement Expense Reserves
The amounts presented are estimates of the dollar amounts and time periods in which we expect to net annuity withdrawals.pay out our gross loss and loss settlement expense reserves. Because the timing of future payments may vary from the stated contractual obligation, these amounts are estimates based upon historical payment patterns and may not represent actual future payments. Refer to "Critical Accounting Policies — Losses and Loss Settlement Expenses" in this section for further discussion.
Long term debt
The Company executed a private placement debt transaction on December 15, 2020 between United Fire & Casualty Company, Federated Mutual Insurance Company, a mutual insurance company domiciled in Minnesota ("Federated Mutual"), and Federated Life Insurance Company, an insurance company domiciled in Minnesota ("Federated Life" and together with Federated Mutual, the "Note Purchasers").

UFG sold an aggregate $50.0 million of notes due 2040 to the Note Purchasers. One note with a principal amount of $35.0 million was issued to Federated Mutual and one note with a principal amount of $15.0 million was issued to Federated Life.

Interest payments will be paid quarterly on March 15, June 15, September 15 and December 15 of each year (each such date, an "Interest Payment Date"). The interest rate will equal the rate that corresponds to the A.M. Best Co. (or its successor's) financial strength rating for members of the United Fire & Casualty Pooled Group as of the applicable Interest Payment Date. Interest expense totaled $3.3 million for the year ended December 31, 2023. Payment of interest is subject to approval by the Iowa Insurance Division.
Operating Leases
Our operating lease obligations are for the rental of office space, vehicles, computer equipment and office equipment. For further discussion of our operating leases, refer to Part II, Item 8, Note 12 "Lease Commitments."
Profit-Sharing Commissions
We offer our agents a profit-sharing plan as an incentive for them to place high-quality property and casualty insurance business with us. Based on business produced by the agencies in 2023, property and casualty agencies expect to receive profit-sharing payments of $23.9 million in 2024.
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Guaranty Fund Assessments
The Company is subject to guaranty fund and other assessments by the states in which it writes business. At December 31, 2023 the accrued liability for guaranty fund assessments was $0 and the premium tax benefit asset was $1.6 million. Guaranty fund assets are typically realized over the next five to 10 years.
Commitments for Capital Expenditures
Dividends
Dividends paid to shareholders totaled $27.3$16.2 million,, $24.6 $15.9 million and $21.7$15.1 million in 2017, 20162023, 2022 and 2015,2021, respectively. Our practice has been to pay quarterly cash dividends, which we have paid every quarter since March 1968.
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.
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, 2017,2023, our insurance company subsidiary, United Fire & Casualty, wasis able to make a maximum of $35.7$58.6 million in dividend payments without prior regulatory approval. These restrictions are not expected to have a material impact in meeting our cash obligations.


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Share Repurchases
Under our share repurchase program, first announced in August 2007, 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, economic and general market conditions, and corporate and regulatory requirements. Our share repurchase program may be modified or discontinued at any time.
During 2017, 20162023, 2022 and 2015,2021, pursuant to authorization by our Board of Directors, we repurchased 701,899, 90,415,0, 0, and 79,39667,651 shares of our common stock, respectively, which used cash totaling $29.8$0.0 million in 2017, $3.72023 and 2022 and $2.0 million in 2016 and $2.4 million2021. The Board of Directors reauthorized the share repurchase program in 2015.November 2022 through August 2024. At December 31, 2017,2023, we were authorized to purchase an additional 2,236,5721,719,326 shares of our common stock under our share repurchase program, which expires in August 2018.stock.
Credit Facilities
Information specific to our credit facilities is incorporated by reference from Note 14 "Credit Facility"13 "Debt" contained in Part II, Item 8, "Financial Statements8. On December 29, 2023, the Company terminated its existing credit agreement, dated as of March 31, 2020, with Wells Fargo Bank, National Association, as administrative agent, issuing lender, swing-line lender and Supplementary Data."lender, and the other lenders from time to time party thereto.
In December 2023, the Company became a member of the Federal Home Loan Bank of Des Moines ("FHLB Des Moines"). Membership allows access to loans or advances. As of December 31, 2023, there were no advances outstanding under the FHLB Des Moines agreement. For further information regarding the agreement with FHLB Des Moines, see Note 13 "Debt" contained in Part II, Item 8.
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Stockholders' Equity
Stockholders' equity increased 3.3decreased 0.9 percent to $973.4$733.7 million at December 31, 2017,2023, from $941.9$740.1 million at December 31, 2016.2022. The increasedecrease is primarily attributed to full yeara net incomeloss of $51.0$29.7 million, and stockholder dividends of $16.2 million, offset by an increase in net unrealized investment gains of $44.3 million,value from our fixed maturity securities, net of tax, both offset by, the payment of stockholder dividends of $27.3$21.4 million theand a $15.1 million increase due to a change in benefits and the valuation of our post retirementliability for employee benefit obligations of $16.4 million, and share repurchases of $29.8 million.plans. As of December 31, 2017,2023, the book value per share of our common stock was $39.06, $29.04, compared to $37.04$29.36 at December 31, 2016.2022.
Risk-Based Capital
The NAIC adopted risk-based capital requirements, which requires 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, 2017,2023, all of our insurance companies had capital well in excess of required levels.
Contractual Obligations and Commitments
The following table shows our contractual obligations and commitments, including our estimated payments due by period at December 31, 2017:
(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 reserves1,224,183
 438,067
 409,041
 158,571
 218,504
Operating leases22,525
 6,435
 11,555
 3,817
 718
Profit-sharing commissions15,100
 15,100
 —
 —
 —
Pension plan contributions6,400
 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.



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Future Policy Benefits
The amounts presented for future payments to be made to policyholders and beneficiaries must be actuarially estimated and are not determinable from the contract. The projected payments are based on our current assumptions for mortality, morbidity and policy lapse, but are not discounted with respect to interest. Additionally, the projected payments are based on the assumption that the holders of our annuities and life insurance policies will withdraw their account balances upon the expiration of their contracts. Policies must remain in force for the policyholder or beneficiary to receive the benefit under the policy. Depending on the terms of a particular policy, future premiums from the policyholder may be required for the policy to remain in force. In contrast, our future policy benefit reserves are generally based on historical assumptions for mortality and policy lapse rates and are on a discounted basis. Accordingly, the amounts presented above for future policy benefit reserves significantly exceeds the amount of future policy benefit reserves reported on our Discontinued Operations Balance Sheets at December 31, 2017.
Loss and Loss Settlement Expense Reserves
The amounts presented are estimates of the dollar amounts and time periods in which we expect to pay out our gross loss and loss settlement expense reserves. Because the timing of future payments may vary from the stated contractual obligation, these amounts are estimates based upon historical payment patterns and may not represent actual future payments. Refer to "Critical Accounting Policies: Loss and Loss Settlement Expenses — Property and Casualty Insurance Business" in this section for further discussion.
Operating Leases
Our operating lease obligations are for the rental of office space, vehicles, computer equipment and office equipment. For further discussion of our operating leases, refer to Part II, Item 8, Note 13 "Lease Commitments."
Profit-Sharing Commissions
We offer our agents a profit-sharing plan as an incentive for them to place high-quality property and casualty insurance business with us. Based on business produced by the agencies in 2017, property and casualty agencies will receive profit-sharing payments of $15.1 million in 2018.
Pension Plan Payments
We estimated the pension contribution for 2018 in accordance with the Pension Protection Act of 2006 (the "Act"). Contributions for future years are dependent on a number of factors, including actual performance versus assumptions made at the time of the actuarial valuations and maintaining certain funding levels relative to regulatory requirements. Contributions in 2018, and in future years, are expected to be at least equal to the IRS minimum required contribution in accordance with the Act.

OFF BALANCE SHEET ARRANGEMENTS
Funding Commitments
We hold investments in limited liability partnerships as part of our investment strategy. At December 31, 2017, pursuantPursuant to an agreementagreements with two of our limited liability partnership investments, we are contractually committed through July 10, 2030 to make consolidated capital contributions up to $2.2 million upon request of the partnerships throughpartnerships. Our remaining potential contractual obligation was $28.6 million at December 31, 2023. These two partnerships are included in our other invested assetslong term investments on the Consolidated Balance Sheets with a current fair value of $4.3$98.3 million, or less than 0.5%5.2 percent of our total invested assets, at December 31, 2017. We recognized investment income of less than $0.1 million from these two investments during 2017.2023.


CRITICAL ACCOUNTING POLICIES
Critical accounting policies are defined as those that are representative of significant judgments and uncertainties and that may potentially result in materially different results under different assumptions and conditions. We base


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our discussion and analysis of our results of operations and financial condition on the amounts reported in our Consolidated Financial Statements, which we have prepared in accordance with GAAP. As we prepare these Consolidated Financial Statements, we must make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on other assumptions we believe to be reasonable under the circumstances. Actual results could differ from those estimates. We believe our most critical accounting policies are as follows.
Investment Valuation
Upon acquisition, we classify investments in marketable securities as held-to-maturity, available-for-sale, or trading. We record investments in held-to-maturity fixed maturity securities at amortized cost. We record investments in available-for-sale and trading fixed maturity securities and equity securities at fair value. Other long-term investments consist primarily of our interests in limited liability partnerships that are recorded on the equity method of accounting. We record mortgage loans at their unpaid principal balance and policy loans at the outstanding loan amount due from policyholders.amortized cost less any valuation allowance.
In general, investment securities are exposed to various risks, such as interest rate risk, credit risk, and overall market volatility risk. Therefore, it is reasonably possible that changes in the fair value of our investment securities that are reported at fair value will occur in the near term and such changes could materially affect the amounts reported in the Consolidated Financial Statements. Also, it is reasonably possible that changes in the value of our investments in trading securities and limited liability partnerships could occur in the future and such changes could materially affect our results of operations as reported in our Consolidated Financial Statements.
Fair Value Measurement
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Information specific to the fair value measurement of our financial instruments and disclosures is incorporated by reference from Note 3 "Fair Value of Financial Instruments" contained in Part II, Item 8, "Financial Statements and Supplementary Data."
Other-Than-Temporary Impairment Charges ("OTTI")
We continually monitor the difference between our cost basis and the estimated fair value of our investments. Our accounting policy for impairment recognition requires 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. 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.
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 as conditions change and new information becomes available. 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.
At December 31, 2017 and 2016, we had a number of securities with fair value less than the cost basis. The total unrealized loss on these securities was $16.9 million at December 31, 2017, compared with $34.8 million at December 31, 2016. At December 31, 2017, the largest pre-tax unrealized loss on an individual equity security was


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$0.2 million. Our rationale for not recording OTTI charges on these securities is discussed in Part II, Item 8, Note 2 "Summary of Investments."8.
Deferred Policy Acquisition Costs ("DAC") — Continuing Operations - Property and Casualty Insurance
We record an asset for certain costs of underwriting new business, primarily commissions, premium taxes and variable underwriting and policy issue expenses that have been deferred. The amount of underwriting compensation expense eligible for deferral is based on time studies and a ratio of success in policy placement. At December 31, 20172023 and 2016,2022, our DAC asset was $88.1$126.5 million and $93.4$104.2 million, respectively.
The DAC asset is amortized over the life of the policies written, generally one year. We assess the recoverability of DAC on a quarterly basis by line of business. This assessment is performed by comparing recorded unearned premium to the sum of unamortized DAC and estimates of expected losses and loss settlement expenses. If the sum of these costs exceeds the amount of recorded unearned premium (i.e., the line of business is expected to generate an operating loss), the excess is recognized in current period other underwriting expenses as an offset against the established DAC asset. We refer to this offset as a premium deficiency charge.
To calculate the premium deficiency charge by line of business, we estimate an expected loss and loss settlement expense ratio which is based on our best estimate of future losses for each line of business. This calculation is performed on a quarterly basis and developed in conjunction with our quarterly reserving process. The expected loss and loss settlement expense ratios are the only assumptions we utilize in our premium deficiency calculation. Changes in these assumptions can have a significant impact on the amount of premium deficiency charge recognized for a line of business. The premium deficiency calculation is aggregated by line of bussinessbusiness in a manner consistent with how the policies are currently being marketed and managed. The Company does not consider anticipated investment income in determining if a premium deficiency exists.
The following table illustrates the hypothetical impact on the premium deficiency charge recorded for the quarter ended December 31, 2017,2023, of reasonably likely changes in the assumed loss and loss settlement expense ratios utilized for purposes of this calculation. The entire impact of these changes would be recognized through income as other underwriting expenses. The following table illustrates the impact of potential changes in the expected loss and loss settlement expense ratios for all lines of business on the premium deficiency charge. The base amount indicated below is the actual premium deficiency charge recorded as an offset against the DAC asset established as of the quarter ended December 31, 2017:2023:
Sensitivity Analysis — Impact of Changes in Projected Loss and Loss Settlement Expense Ratios
(In Thousands)-10%-5%Base+5%+10%
Premium deficiency charge estimated$66 $76 $86 $10,630 $22,276 
Sensitivity Analysis — Impact of Changes in Projected Loss and Loss Settlement Expense Ratios
(In Thousands)-10% -5% Base +5% +10%
Premium deficiency charge estimated$—
 $—
 $6,123
 $13,862
 $21,996
Actual future results could differ materially from our assumptions used to calculate the recorded DAC asset. Changes in our assumed loss and loss settlement expense ratios in the future would impact the amount of deferred costs in the period such changes in assumptions are made. The premium deficiency charge calculated for the quarter ended December 31, 20172023 was $6.1$0.1 million compared to the premium deficiency charge of $0.1$0.9 million calculated for the same period of 2016.
Deferred Policy Acquisition Costs — Discontinued Operations
Costs that vary with and relate to the successful acquisition of life insurance and annuity business are deferred. Such costs consist principally of commissions, premium taxes, and related variable underwriting, agency and policy issue expenses. The amount of underwriting and other acquisition related compensation and other internal expense eligible for deferral is based on time studies and a ratio of success in policy placement. At December 31, 2017 and 2016, our DAC asset was $71.2 million and $70.8 million, respectively.
We defer and amortize policy acquisition costs on traditional life insurance policies over the premium-paying period in proportion to the ratio of the expected annual premium revenue to the expected total premium revenue. Expected annual premium revenue and gross profits are based on the same mortality and withdrawal assumptions used in


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determining future policy benefits. These assumptions are not revised after policy issuance unless the recorded DAC asset is deemed to be unrecoverable from future expected profits.
We defer policy acquisition costs related to non-traditional business and amortize these costs in proportion to the ratio of the expected annual gross profits to the expected total gross profits. The assumptions used to determine expected gross profits include claims, interest rate spread, mortality experience, and expense margins and policy lapse experience. Of these factors, we anticipate that assumptions for claims, investment returns, expenses and persistency are reasonably likely to have a significant impact on the rate of DAC amortization each year. Changes in the amount or timing of expected gross profits result in adjustments to the cumulative amortization of these costs. The effect on amortization of DAC for revisions to estimated gross profits is reported in earnings in the period the estimated gross profits are revised.
We periodically review estimates of expected profitability and evaluate the need to "unlock" or revise the assumptions for the amortization of the DAC asset related to our non-traditional business. The primary assumptions utilized when estimating future profitability relate to interest rate spread, operating expenses, mortality and policy lapse experience. The table below illustrates the impact that a reasonably likely change in our assumptions used to estimate expected gross profits would have on the DAC asset for our non-traditional business recorded as of December 31, 2017. The entire impact of the changes illustrated would be recognized through income as an increase or decrease to amortization expense:
Sensitivity Analysis — Impact of changes in assumptions on DAC asset
(In Thousands)
   
Changes in assumptions-10% +10%
Mortality experience$3,169
 $(3,516)
Policy lapse experience1,437
 (1,371)
Changes in assumptions-1% +1%
Interest rate spread$(1,684) $1,613
A material change in these assumptions could have a significant negative or positive effect on our reported DAC asset, earnings and stockholders' equity.
The DAC asset recorded in connection with our non-traditional business is also adjusted with respect to estimated expected gross profits as a result of changes in the net unrealized gains or losses on available-for-sale fixed maturity securities allocated to support the block of deferred annuities and universal life policies. That is, because we carry available-for-sale fixed maturity securities at fair value, we make an adjustment to the DAC asset equal to the change in amortization that would have been recorded if we had sold such securities at their stated fair value and reinvested the proceeds at current yields. We include this adjustment, which is called "shadow" DAC, net of tax, as a component of accumulated other comprehensive income. At December 31, 2017 and 2016, the "shadow" DAC adjustment decreased our DAC asset by $6.3 million and $6.4 million, respectively.2022.
Losses and Loss Settlement Expenses — Continuing Operations
Reserves for losses and loss settlement expenses are reported using our best estimate of ultimate liability for claims that occurred prior to the end of any given reporting period but have not yet been paid. Before credit for reinsurance recoverables, these reserves were $1,224.2 million$1.6 billion and $1,123.9 million$1.5 billion at December 31, 20172023 and 2016,2022, respectively. We purchase reinsurance to mitigate the impact of large losses and catastrophic events. Loss and loss settlement expense reserves ceded to reinsurers were $59.9$191.6 million for 20172023 and $59.8$146.9 million for 2016.2022. Our reserves, before credit for reinsurance recoverables, by line of business as of December 31, 2017,2023, were as follows:


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(In Thousands)Case Basis IBNR 
Loss
Settlement
Expense
 Total Reserves(In Thousands)Case BasisIBNRLoss
Settlement
Expense		Total Reserves
Commercial lines       Commercial lines  
Fire and allied lines$87,659
 $14,385
 $24,637
 $126,681
Other liability219,195
 100,141
 177,767
 497,103
Automobile191,898
 57,629
 62,591
 312,118
Workers' compensation174,076
 7,600
 29,593
 211,269
Fidelity and surety5,022
 2,520
 172
 7,714
Miscellaneous312
 680
 240
 1,232
Total commercial lines$678,162
 $182,955
 $295,000
 $1,156,117
Personal lines       
Automobile$12,561
 $911
 $2,138
 $15,610
Automobile
Automobile
Fire and allied lines9,312
 1,725
 2,566
 13,603
Miscellaneous651
 129
 271
 1,051
Total personal lines$22,524
 $2,765
 $4,975
 $30,264
Reinsurance assumed22,536
 15,105
 161
 37,802
Total$723,222
 $200,825
 $300,136
 $1,224,183
Case-Basis Reserves


For each of our lines of business, with respect to reported claims, we establish reserves on a case-by-case basis. Our experienced claims personnel estimate these case-basis reserves using adjusting guidelines established by management. Our goal is to set the case-basis reserves at the ultimate expected loss amount as soon as possible after information about the claim becomes available.


Establishing the case reserve for an individual claim is subjective and complex, requiring us to estimate future payments and values that will be sufficient to settle an individual claim. Setting a reserve for an individual claim is an inherently uncertain process. When we establish and adjust individual claim reserves, we do so based on our knowledge of the circumstances and facts of the claim. Upon notice of a claim, we establish a preliminary (average claim cost) reserve based on the limited claim information initially reported. Subsequently, we conduct an investigation of each reported claim, which allows us to more fully understand the factors contributing to the loss and our potential exposure. This investigation may extend over a long period of time. As our claim investigation progresses, and as our claims personnel identify trends in claims activity, we may refine and adjust our estimates of case reserves. To evaluate and refine our overall reserving process, we track and monitor all claims until they are settled and paid in full, with all salvage, and subrogation claims, and liability deductible recoveries being resolved.
Most of our insurance policies are written on an occurrence basis that provides coverage if a loss occurs during the policy period, even if the insured reports the loss many years later. For example, some liability claims for construction defect coverage aremay be reported 10 years or more after the policy period, and the workers' compensation coverage provided by our policies pays unlimited medical benefits for the duration of the claimant's injury up to the lifetime of the claimant. In addition, final settlement of certain claims can be delayed for years due to litigation or other reasons. Reserves for these claims require us to estimate future costs, including the effect of judicial actions, litigation trends and medical cost inflation, among others. Reserve development can occur over time as conditions and circumstances change many years after the policy was issued and/or the loss occurred.
Our loss reserves include amounts related to both short-tail and long-tail lines of business. "Tail" refers to the time period between the occurrence of a loss and the ultimate settlement of the claim. A short-tail insurance product is one where ultimate lossesclaim settlement values are known and settled comparatively quickly. Ultimate losses under aFinal settlement values for long-tail insurance productproducts are sometimes not known and settled for many years. The longer the time span between the incidence of a loss and the settlement of the claim, the more the ultimatefinal settlement amount can vary from the reserves initially established. Accordingly, long-tail insurance products can have significant implications on the reserving process.


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Our short-tail lines of business include fire and allied lines, homeowners, commercial property, autoautomobile physical damage and inland marine. The amounts of the case-based reserves that we establish for claims in these lines depend upon various factors, such as individual claim facts (including type of coverage and severity of loss), our historical loss experience and trends in general economic conditions (including changes in replacement costs, medical costs and inflation).
For short-tail lines of business, the estimation of case-basis loss reserves is less complex than for long-tail lines because the claims relate to tangible property. Because of the relatively short time from claim occurrence to settlement, actual losses typically do not vary significantly from reserve estimates.
Our long-tail lines of business include workers' compensation and other liability. In addition, certain product lines such as personal and commercial auto,automobile, commercial multi-peril and surety include both long-tail coverages and short-tail coverages. For many long-tail liability claims, significant periods of time, ranging up to several years, may elapse between the occurrence of the loss, the reporting of the loss to us and the settlement of the claim. As a result, loss experience in the more recent accident years for the long-tail liability coverages has limited statistical credibility in our reserving process because a relatively small proportion of losses in these accident years are reported claims and an even smaller proportion are paid losses. In addition, long-tail liability claims are more susceptible to litigation and can be significantly affected by changing contract interpretations and the legal environment. Consequently, the estimation of loss reserves for long-tail coverages is more complex and subject to a higher degree of variability than for short-tail coverages.
The amounts of the case-basis loss reserves that we establish for claims in long-tail lines of business depends upon various factors, including individual claim facts (including type of coverage, severity of loss and underlying policy limits), company historical loss experience, changes in underwriting practice, legislative enactments, judicial decisions, legal developments in the awarding of damages, changes in political attitudes and trends in general economic conditions, including inflation. As with our short-tail lines of business, we review and make changes to long-tail case-based reserves based on our review of continually evolving facts as they become available to us during the claims settlement process. Our adjustments to case-based reserves are reported in the financial statements in the period that new information arises about the claim. Examples of facts that become known that could cause us to change our case-based reserves include, but are not limited to: evidence that loss severity is different than previously assessed; new claimants who have presented claims; and the assessment that no coverage exists.
Incurred But Not Reported ("IBNR") Reserves


On a quarterly basis, the Company's internal actuaryactuarial reserving department performs a detailed analysis of IBNR reserves. This analysis uses various loss projection methods to provide several estimates of ultimate loss (or loss adjustment expense ("LAE"))LAE) for each individual accident year and line of business. The loss projection methods include, but are not limited to, paid loss development; reported loss development; expected loss emergence basedratio methods; and Bornhuetter Ferguson methods on both a paid losses; and expected loss emergence based on reported losses. The twobasis. These methods utilized by ourmay need to be adjusted for anomalies or outliers in the data, unusual internal actuary to project loss settlement expenses are paid expenses development and developmentor external trends, or other factors impacting the reliability/credibility of the ratio of paid expense versus paid loss.historical company experience. Results of the projection methods are compared, and a point estimate of ultimate loss (or LAE) is established for each individual accident year and line of business. The specific projection methods used to establish point estimates vary depending on what is deemed most appropriate for a particular line of business and accident year. Results of these methods are usually averaged together to provide a final point estimate. Given that there are several inputs depending on the line of business, the methods may be averaged and modified based on changes known to management or trends in the market. IBNR estimates are derived by subtracting reported loss from the final point estimate loss.estimates.


Senior management meets with our internal actuaryactuarial team and controller quarterly to review the adequacy of carried IBNR reserves based on results from this actuarial analysis and makes adjustments for changes in business and other factors not completely captured by the data within the actuarial analysis. There are two fundamental types or sources of IBNR reserves. We record IBNR 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 specific IBNR reserves because an analysis of existing historical data would not provide an appropriate estimate. This method of


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establishing our IBNR reserves has consistently resulted in aggregate reserve levels that management believes are reasonable in comparison to the reserve estimates indicated by the actuarial analysis.


For our short-tail lines of business, IBNR reserves constitute a small portion of the overall reserves. These claims are generally reported and settled shortly after the loss occurs. In our long-tail lines of business, IBNR reserves constitute a relatively higher proportion of total reserves, because, for many liability claims, significant periods of time may elapse between the initial occurrence of the loss,losses, the reporting of the losslosses to us, and the ultimate settlement of the claim.losses.
Loss Settlement Expense Reserves
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Loss settlement expense reserves include amounts ultimately allocable to individual claims, as well as amounts required for the general overhead of the claims handling operation that are not specifically allocable to individual claims. We do not establish loss settlement expensecase reserves on a claim-by-claim basis.for these expenses. Instead, on a quarterly basis, our internal actuaryreserving department performs a detailed statistical analysis (using historical data) to estimate the required reserve for unpaid loss settlement expenses. On a monthly basis, the required reserve estimate is adjusted to reflect additional earned exposure and expense payments that have occurred subsequent to completion of the quarterly analysis.
LAE is composed of two distinct kinds of expenses which are allocated LAEdefense and cost containment ("ALAE"DCC") and unallocated LAEadjusting and other ("ULAE"A&O"). These two expense types have different purposes and characteristics which necessitates different estimation methods in order to provide a valid quarterly estimate of the required reserve for unpaid expense which is generally referred to as an LAE incurred IBNR reserve.


Reserves for unpaid ALAEDCC are estimated quarterly by line of business for each individual accident year using three methods: (1) Paid development, (2) Expected emergence of ALAE,DCC, and (3) Development of the ratio of paid ALAE to paid loss.Bornhuetter Ferguson. Each of the three methods produces an estimate of the ultimate ALAEDCC cost for an individual accident year and the final estimate is generally a weighted average of the various methods. Inception to date paid ALAEDCC is subtracted from the final ultimate ALAEDCC estimate to provide the estimated ALAE IBNRDCC unpaid reserve for each individual accident year.


Reserves for unpaid ULAEA&O are estimated quarterly by line of business for each individual accident year using a single method. This method consists of applying a percentage factor to unpaid loss reserves. The percentage factor used differs by line of business and is evaluated and established on an annual basis using year-end data. The percentage factor is evaluated and selected after reviewing the ratio of paid ULAEA&O to paid loss using calendar year data for the most recent five years.
Generally, the loss settlement expense reserves for long-tail lines of business are a greater portion of the overall reserves, as there are often substantial legal fees and other costs associated with the complex liability claims that are associated with long-tail coverages. Because short-tail lines of business settle much more quickly and the costs are easier to determine, loss settlement expense reserves for such claims constitute a smaller portion of the total reserves.
Reinsurance Reserves
The estimation of assumed and ceded reinsurance loss and loss settlement expense reserves is subject to the same factors as the estimation of loss and loss settlement expense reserves. In addition to those factors, which give rise to inherent uncertainties in establishing loss and loss settlement expense reserves, there exists a delay in our receipt of reported claims for assumed business due to the procedure of having claims first reported through one or more intermediary insurers or reinsurers.
Reserves for assumed reinsurance are established using methods and techniques identical to those used for direct lines of business. The additional delay inherent in assumed reinsurance reporting is considered in our reserving process and payment is not problematic. Assumed reinsurance, like every independent line of business, has unique reporting and payment patterns that are reviewed as part of the reserve estimation process.



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There are three distinct types of reserves ceded to reinsurers:for expected recoveries: (1) reported claim reserves, (2) loss IBNR, and (3) allocated LAE IBNR. Ceded reserves for reported claims are calculated by subtracting the primary retention from the claim value established by our claim adjuster. Ceded IBNR comes from multiple treaties and is reviewed quarterly by our reserving actuaries in conjunction with the direct reviews. Multiple methods are utilized in the ceded reviews which vary by line of business. These include estimates based on the relationship of ceded premium to direct premium, Bornhuetter Ferguson methods, and methods based on industry excess of loss IBNR originates solely fromfactors. Some of our boiler and machinery business which is 100100.0 percent reinsured. For this businessceded or based on a set quota share percentage. In those cases, ceded loss IBNR is equal totypically formulaic based on direct loss IBNR. Boiler and machinery business is included in our commercial fire and allied line of business. We will cede some allocated LAE expenses when we cede loss. Our ceded allocated LAE IBNR is estimated based on our ceded unpaid loss reserves and the general relation, by line of business, between LAE and loss. Our primary retention for the core multi-line reinsurance treaty was $2.0 million for 2012 through 2015, and increased to $2.5 million forfrom 2016 through 2017.2021, and increased again to $3.0 million beginning in 2022.
Key Assumptions


Our internal and external actuaries and management useactuarial reserving department uses a number of key assumptions in establishing an estimate of loss and loss settlement expense reserves, including the following assumptions: future loss settlement expenses can be estimated based on the Company's historical ratios of loss settlement expenses paid to losses; the Company's case-basis reserves reflect the most up-to-date information available about the unique circumstances of each individual claim;
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no new judicial decisions or regulatory actions will increase our case-basis obligations; historical aggregate claim reporting and payment patterns will continue into the future consistent with the observable past; significant unique and unusual claim events have been identified and appropriate adjustments have been made; and, to the best of our knowledge, there are no new latent trends that would impact our case-basis reserves.


Our key assumptions are subject to change as actual claims occur and as we gain additional information about the variables that underlie our assumptions. Accordingly, management reviews and updates these assumptions periodically to ensure that the assumptions continue to be valid. If necessary, management makes changes not only in the estimates derived from the use of these assumptions, but also in the assumptions themselves. Due to the inherent uncertainty in the loss reserving process, management believes that there is a reasonable chance that modification to key assumptions could individually, or in aggregate, result in reserve levels that are either significantly above or below the actual amount for which the related claims will eventually settle.
As an example, if our loss and loss settlement expense reserves of $1,224.2 million$1.6 billion as of December 31, 2017,2023, is 10.0 percent inadequate, we would experience a reduction in future pre-tax earnings of up to $122.4 million.$163.9 million. This reduction could be recorded in one year or multiple years, depending on when we identify the deficiency. The deficiency would also affect our financial position in that our equity would be reduced by an amount equivalent to the reduction in net income. Any deficiency that would be recognized in our loss and loss settlement expense reserves usually does not have a material effect on our liquidity because the claims have not been paid. Conversely, if our estimates of ultimate unpaid loss and loss settlement expense reserves prove to be redundant, our future earnings and financial position would be improved. We believe our reserving 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 reasonable as to their relative position within a range of reasonable reserves from year-to-year.


We are unable to reasonably quantify the impact of changes in our key assumptions utilized to establish individual case-basis reserves on our total reported reserves because the impact of these changes would be unique to each specific case-basis reserve established. However, based on historical experience, we believe that aggregate case-basis reserve volatility levels of 5.0 percent and 10.0 percent can be attributed to the ultimate development of our net case-basis reserves. The impact to pre-tax earnings would be a decrease if the reserves were to be adjusted upwards and an increase if the reserves were to be adjusted downwards. The table below details the impact of this development volatility on our reported net case-basis reserves at December 31, 2017:2023:

(In Thousands)   (In Thousands)  
Change in level of net case-basis reserve development5% 10%Change in level of net case-basis reserve development5%10%
Impact on reported net case-basis reserves$33,415
 $66,831


Due to the formula-based nature of our IBNR and loss settlement expense reserve calculations, changes in the key assumptions utilized to generate these reserves can impact our estimate of projected loss and potentially impact reported results. It is not possible to isolate and


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measure the potential impact of just one of these factors, and future loss trends could be partially impacted by all factors concurrently. Nevertheless, it is meaningful to view the sensitivity of the reserves to potential changes in these variables.variables such as claim frequency and severity. To demonstrate the sensitivity of reserves to changes in significant assumptions, the following example is presented. The amounts reflect the pre-tax impact on earnings from a hypothetical percentage change in the calculation of IBNR and loss settlement expense reserves at December 31, 2017.2023. The impact to pre-tax earnings would be a decrease if the reserves were to be adjusted upwards and an increase if the reserves were to be adjusted downwards. We believe that the changes presented are reasonably likely based upon an analysis of our historical IBNR and loss settlement expense reserve experience.

(In Thousands)  
Change in claim frequency and claim severity assumptions5%10%
Impact due to change in IBNR reserving assumptions$25,339 $50,678 

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(In Thousands)   
Change in claim frequency and claim severity assumptions5% 10%
Impact due to change in IBNR reserving assumptions$10,011
 $20,023

(In Thousands)   (In Thousands)  
Change in LAE paid to losses paid ratio1% 2%Change in LAE paid to losses paid ratio1%2%
Impact due to change in LAE reserving assumptions$2,958
 $5,916
In 2017,2023, we did not change the key method through which we develop our assumptions on which we based our reserving calculations. In estimating our 20172023 loss and loss settlement expense reserves, we did not anticipate future events or conditions that were inconsistent with past development patterns.
Certain of our lines of business are subject to the potential for greater loss and loss settlement expense development than others, which are discussed below:
Other Liability Reserves
Other liability is considered a long-tail line of business, as it can take a relatively long period of time to settle claims from prior accident years. This is partly due to the lag time between the date a loss or event occurs that triggers coverage and the date when the claim is actually reported. Defense costs are also a part of the insured expenses covered by liability policies and can be significant, sometimes greater than the cost of the actual paid claims. For the majority of our products, defense costs are outside of the policy limit, meaning that the amounts paid for defense costs are not subtracted from the available policy limit.
Factors that can cause reserve uncertainty in estimating reserves in this line include: reporting time lags; the number of parties involved in the underlying tort action; whether the "event" triggering coverage is confined to only one time period or is spread over multiple time periods; the potential dollars involved in the individual claim actions; whether such claims were reasonably foreseeable and intended to be covered at the time the contracts were written (i.e., coverage disputes); and the potential for mass claim actions.
Claims with longer reporting time lags may result in greater inherent risk. This is especially true for alleged claims with a latency feature, particularly where courts have ruled that coverage is spread over multiple policy years, hence involving multiple defendants (and their insurers and reinsurers) and multiple policies (thereby increasing the potential dollars involved and the underlying settlement complexity). Claims with long latencies also increase the potential time lag between writing a policy in a certain market and the recognition that such policy has potential mass tort and/or latent claim exposure.
Our reserve for other liability claims at December 31, 2017,2023 was $497.1$819.2 million and consisted of 6,3514,351 claims,compared with $513.6$757.5 million, consisting of 5,6344,860 claims at December 31, 2016.2022. Of the $497.1$819.2 million total reserve for other liability claims,$143.3103.7 millionis identified as defense costs and $33.1$54.6 million is identified as general overhead required in the settlement of claims.
Included in the other liability line of business are gross reserves for construction defect losses and loss settlement expenses. Construction defect exposure is unique because of its very long tail as claims can often take over six years to be reported to us and another four years to settle. This exposure relates to a liability allegation relating to defective work performeddeficiency in the design or construction of


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structures such as commercial buildings, apartments, condominiums, single family dwellings a building or other housing, as well as the sale of defective building materials. These claims seek recovery due to damage caused by alleged deficient construction techniques or workmanship. At December 31, 2017, we had $34.4 million in construction defect loss and loss settlement expense reserves, excluding IBNR reserves that are calculated for the overall other liability commercial line, which consisted of 1,857 claims. At December 31, 2016, our reserves, excluding IBNR reserves, totaled $22.3 million, which consisted of 1,382 claims. The reporting of such claims can be delayed, as the statute of limitations can be up to 10 years. Court decisions in recent years have expanded insurers' exposure to construction defect claims. As a result, claims may be reported more than 10 years after a project has been completed, as litigation can proceed for several years before an insurance company is identified as a potential contributor. Claims have also emerged from parties claiming additional insured status on policies issued to other parties, such as contractors seeking coveragestructure resulting from a subcontractor's policy.failure to design or construct in a reasonably workmanlike manner, and/or in accordance with a buyer's reasonable expectation. In the cases involving latent defects, the determination of when a loss occurred is often unclear and governed by various theories that vary by state.Further, each state has a unique Statute of Repose that determines the length of time an insured has to report a claim generally from the date of substantial completion of a project.
In addition to these issues, other variables also contribute to a high degree of uncertainty in establishing reserves for construction defect claims. These variables include: whether coverage exists; when losses occur; the size of each loss; expectations for future interpretive rulings concerning contract provisions; and the extent to which the assertion of these claims will expand geographically. In recent years, we have implemented various underwriting measures that we anticipate will mitigate the amount of construction defect losses experienced. These initiatives include increased care regarding additional insured endorsements; stricter underwriting guidelines on the writing of residential contractors; and an increased utilization of loss control.
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Asbestos and Environmental Reserves
Included in the other liability and assumed reinsurance lines of business are reserves for asbestos and other environmental losses and loss settlement expenses. At December 31, 20172023 and 2016,2022, we had $2.6$0.8 million and $3.7$1.9 million, respectively, in direct and assumed asbestos and environmental loss reserves. The estimation of loss reserves for environmental claims and claims related to long-term exposure to asbestos and other substances is one of the most difficult aspects of establishing reserves, especially given the inherent uncertainties surrounding such claims. Although we record our best estimate of loss and loss settlement expense reserves, the ultimate amounts paid upon settlement of such claims may be more or less than the amount of the reserves, because of the significant uncertainties involved and the likelihood that these uncertainties will not be resolved for many years.
Commercial AutoAutomobile Reserves
Commercial autoautomobile claim reserves are established at exposure based on information either known and provided or obtained through the investigation, with some pessimism built in.investigation. Incorporated are the perspective and experience the claims staff has acquired, which may include assumptions as to how the claim will develop over time, and with a slightly pessimistic view.time. Exposures are identified and reserves established within 30 to 60 days depending on the complexity of the case.
Workers' Compensation Reserves
Like the other liability line of business, workers' compensation losses and loss settlement expense reserves are based upon variables that create imprecisionuncertainty in estimating the ultimate reserve. Estimates for workers' compensation are particularly sensitive to assumptions about medical cost inflation, which has been steadily increasingrelatively stable over the past few years. Other variables that we consider and that contribute to the uncertainty in establishing reserves for workers' compensation claims include: state legislative and regulatory environments; trends in jury awards; and mortality rates. Because of these variables, the process of reserving for the ultimate loss and loss settlement expense to be incurred requires the use of informed judgment and is inherently uncertain. Consequently, actual loss and loss settlement expense reserves may deviate from our estimates. Such deviations may be significant. Our reserve for workers' compensation claims at December 31, 20172023 was $211.3$121.0 million and consisted of 4,8441,077 claims, compared with $205.4$138.9 million,, consisting of 2,2991,414 claims, at December 31, 2016.




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2022.
Reserve Development


The following reserve development section should be read in conjunction with the "Consolidated Results"Results of Operations"Operations for the Years Ended December 31, 2023, 2022 and 2021" section of this Item 7.


In 2017, 2016 and 2015,2023, we recognized a favorablean adverse development in our net reserves for prior accident years totaling $54.3$67.8 million, $31.2 and adverse development of $12.9 million and $40.9favorable $48.9 million, in 2022 and 2021, respectively.
The adverse development in 2023 was driven by the commercial other liability and commercial automobile lines of business. The adverse development in commercial other liability was primarily in our excess and surplus lines excess casualty book along with some adverse development in standard umbrella and construction defect due to increasing severity pressures. The pressure on these longer tailed lines, especially in accident years 2016-2019, related to social and economic inflation continued in 2023. Commercial automobile also experienced adverse development related to increasing severity largely in post-COVID-19 accident years. The remaining lines experienced very small amounts of reserve development.
Adverse development in 2022 was driven by leveraging deeper data insights and emerging claim experience on longer tailed lines where the most uncertainty in the reserving process exists. Our actions were focused on other liability lines, including excess umbrella business and construction defect, where increased loss exposure in these longer tailed businesses are also subject to social and economic inflation. This was offset by continued favorable development in commercial automobile which has seen consistent releases over the past two years.
Other factors contributing to our year-to-year redundancydevelopment include: establishing reserves at their ultimate expected loss amount as soon as practicable after information becomes available, which produces, on average, prudently conservative case reserves;available; using claims negotiation to control the size of
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settlements; assuming that we have liability for all claims, even though the issue of liability may, in some cases, be resolved in our favor; promoting claims management services to encourage return-to-work programs; case management by nurses for serious injuries and management of medical provider services and billings; and using programs and services to help prevent fraud and to assist in favorably resolving cases.
Based upon our comparison of carried reserves to actual claims experience over the last several years, we believe that using our Company's historical premium and claims data to establish reserves for losses and loss settlement expenses results in adequate and reasonable reserves. Reserve development is discussed in more detail under the heading "Reserve Development" in the "Consolidated Results"Results of Operations"Operations for the Years Ended December 31, 2023, 2022 and 2021" section in this Item.Item 7.


The following table details the pre-tax impact on our property and casualty insurance business' financial results and financial condition of reasonably likely reserve development. Our lines of business that have historically been most susceptible to significant volatility in reserve development have been shown separately and utilize hypothetical levels of volatility of 5.0 percent and 10.0 percent. Our other, less volatile, lines of business have been aggregated and utilize hypothetical levels of volatility of 3.0 percent and 5.0 percent.
(In Thousands)       (In Thousands)  
Hypothetical Reserve Development Volatility Levels-10% -5% +5% +10%Hypothetical Reserve Development Volatility Levels-10%-5%+5%+10%
Impact on loss and loss settlement expenses       Impact on loss and loss settlement expenses  
Other liability$(47,892) $(23,946) $23,946
 $47,892
Workers' compensation(21,056) (10,528) 10,528
 21,056
Automobile(33,737) (16,869) 16,869
 33,737
       
Hypothetical Reserve Development Volatility Levels-5% -3% +3% +5%
Hypothetical Reserve Development Volatility Levels
Hypothetical Reserve Development Volatility Levels-5%-3%+3%+5%
Impact on loss and loss settlement expenses       
All other lines$(9,866) $(5,920) $5,920
 $9,866
All other lines
All other lines
Independent Actuary
We engage an independent actuarial firm to render an opinion as to the reasonableness of the statutory reserves internal management establishes.that are established by management. During 20172023 and 2016,2022, we engaged the services of Regnier Consulting Group, Inc. ("Regnier") as our independent actuarial firm for the property and casualty insurance business. We anticipate that this engagement will continue in 2018.
It is management's policy to utilize staff adjusters to develop our estimate of case-basis loss reserves. IBNR and loss settlement expense reserves are established through various formulae that utilize pertinent, recent Company historical data. The calculations are supplemented with knowledge of current trends and events that could result in adjustments to the level of IBNR and loss settlement expense reserves. On a quarterly basis, we compare our estimate of total reserves to the estimates prepared by Regnier by line of business to ensure that our estimates are within the actuary's acceptable range. Regnier performs a review of loss and loss settlement expense reserves at each year end using generally accepted actuarial guidelines to ensure that the recorded reserves appear reasonable. Our net reserves for losses and loss settlement expenses, net of reinsurance recoverables, as of December 31, 20172023 and 20162022 were $1,164.3$1,447.1 million and


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$1,064.1 $1,350.4 million, respectively. In 20172023 and 2016,2022, after considering the independent actuary's range of reasonable estimates, management believes that carried reserves were reasonable and therefore did not adjust the recorded amount.
Regnier uses four projection methods in its actuarial analysis of our loss reserves and uses two projection methods in its actuarial analysis of our loss settlement expense reserves. Based on the results of the projection methods, the actuaries select an actuarial point estimate of the reserves, which is compared to our carried reserves to evaluate the reasonableness of the carried reserves. The four methods utilized by Regnier to project losses are: paid loss development; reported loss development; expected loss emergence based on paid losses; and expected loss emergence based on reported losses. The two methods utilized by Regnier to project loss expenses are: paid expenses-to-paid loss and paid expense-to-ultimate loss.
Future Policy Benefits and Losses, Claims and Loss Settlement Expenses — Discontinued Operations
We establish reserves for amounts that are payable under traditional insurance policies, including traditional life products, disability income and income annuities. Reserves are calculated as the present value of future benefits expected to be paid, reduced by the present value of future expected premiums. Our estimates use methods and underlying assumptions that are in accordance with GAAP and applicable actuarial standards. The key assumptions that we utilize in establishing reserves are mortality, morbidity, policy lapse, renewal, retirement, investment returns, inflation and expenses. Future investment return assumptions are determined based upon prevailing investment yields as well as estimated reinvestment yields. Mortality, morbidity and policy lapse assumptions are based on our experience. Expense assumptions include the estimated effects of inflation and expenses to be incurred beyond the premium-paying period. These assumptions are established at the time the policy is issued, are consistent with the assumptions for determining DAC amortization for these contracts, and are generally not changed during the policy coverage period. However, if actual experience emerges in a manner that is significantly adverse relative to the original assumptions, adjustments to reserves (or DAC) may be required resulting in a charge to earnings which could have a material adverse effect on our operating results and financial condition.
For limited pay traditional life products, we periodically determine if any profit occurs at the issuance of a contract that should be deferred over the life of that contract. To the extent that this occurs, we establish an unearned revenue liability at issuance that is amortized over the anticipated life of the contract.
Liabilities for future policy benefits for disability claims are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest.
Other reserves include claims that have been reported but not settled and IBNR reserves for claims on life and disability income insurance. We use our own historical experience and other assumptions such as any known or anticipated developments or trends to establish reserves for these unsettled or unreported claims. The effects of changes in our estimated reserves are included in our results of operations in the period in which the changes occur.
We periodically review the adequacy of traditional life product reserves and recoverability of DAC for these contracts on an aggregate basis using actual experience. In the event that actual experience is significantly adverse compared to the original assumptions, any remaining unamortized DAC asset must be expensed to the extent not recoverable and the establishment of a premium deficiency reserve may be required. The effects of changes in reserve estimates are reported in the results of operations in the period in which the changes are determined. We have made no changes in our methods in the past three years, other than minor changes in assumptions for new issues in each of the past three years, mostly relating to anticipated mortality rates and investment yields. These assumption changes were made due to corresponding changes in the interest rate environment and the historical mortality of these products. We anticipate that changes in mortality, investment and reinvestment yields, and policy termination assumptions are the factors that would most likely require an adjustment to these reserves or related DAC asset.
Our reserves for universal life and deferred annuity contracts are based upon the policyholders' current account value. Acquisition expenses are amortized in relation to expected gross profits forecasted based upon current best estimates of anticipated premium income, investment earnings, benefits and expenses. Annually, we review our


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estimates of reserves and the related DAC asset and compare them with actual experience. Differences between actual experience and the assumptions that we used in the pricing of these policies, guarantees and riders, and in the establishment of the related reserves will result in variances in profit for the underlying contract. The effects of the changes in such estimated reserves are included in our results of operations in the period in which the changes occur.
The following table reflects the estimated pre-tax impact to DAC, net of unearned revenue liabilities to our universal life and fixed annuity products that could occur in a twelve-month period because of an unlocking adjustment due to reasonably likely changes in significant assumptions. Changes in assumptions of the same magnitude in the opposite direction would have an impact of a similar magnitude but opposite direction of the examples provided.
AssumptionDetermination MethodologyPotential One-Time Effect on DAC Asset, Net of Unearned Revenue Liabilities
Mortality ExperienceBased on our mortality experience with consideration given to industry experience and trendsA 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 RatesBased on our policy surrender experience with consideration given to industry experience and trendsA 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 SpreadsBased on our expected future investment returns and expected future crediting rates applied to policyholder account balances; future crediting rates include constraints imposed by policy guaranteesA 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 ExpensesBased on our experience using an internal expense allocation methodologyA 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.
Independent Actuary
We engage an independent actuarial firm to assist us in establishing our future policy benefit reserves for statutory and GAAP reporting and our DAC asset and related amortization for GAAP reporting and to render an opinion as to the reasonableness of the statutory reserves we establish. Statutory reserves are established using prescribed assumptions which are considerably more conservative assumptions regarding future investment earnings and contractual benefit payments than are used for GAAP reserves. During 2017 and 2016, we engaged the services of Griffith, Ballard and Company as our independent actuarial firm for the life insurance business. We anticipate that this engagement will continue in 2018 until the close of the sale of life business to Kuvare.
Pension and Post-retirement Benefit ObligationsObligation
The process of estimating our pension and post-retirement benefit obligationsobligation and related benefit expense is inherently uncertain, and the actual cost of benefits may vary materially from the estimates recorded. These liabilities are particularly volatile due to their long-term nature and are based on several assumptions. The main assumptions used in the valuation of our benefit obligationsobligation are: estimated mortality of the employees and retirees eligible for benefits; estimated expected long-term rates of return on investments; estimated compensation increases; estimated employee turnover; estimated medical expense trend rate; and estimated rate used to discount the ultimate estimated liability to a present value. We engage a consulting actuary from Principal Financial Group, an independent firm, to assist in evaluating and establishing assumptions used in the valuation of our benefit obligations.
A change in any one or more of these assumptions is likely to result in an ultimate liability different from the original actuarial estimate. Such changes in estimates may be material. For example, a 100 basis point decrease in our estimated discount rate would increase the pension and post-retirement benefit obligation at December 31, 2017,


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2023 by $37.7$28.0 million and $10.0 million, respectively, while a 100 basis point increase in the rate would decrease the benefit obligation at December 31, 2017, by $29.5$22.9 million, and $8.0 million, respectively.
In addition, for the post-retirement benefit plan, a 100 basis point decrease in the medical trend rate would decrease the post-retirement benefit obligation at December 31, 2017, by $7.7 million, while a 100 basis point increase in the medical trend rate would increase the benefit obligation at December 31, 2017, by $9.5 million.same period.
A 100 basis point decrease in our estimated long-term rate of return on pension plan assets would increase the benefit expense for the year ended December 31, 2017,2023 by $1.6$2.6 million,, while a 100 basis point increase in the rate would decrease benefit expense by $1.6$2.6 million,, for the same period.
For the post-retirement benefit plan, a 100 basis point increase in our estimated medical trend rate would increase the benefit expense for the year ended December 31, 2017, by $1.1 million, while a 100 basis point decrease in the rate would decrease benefit expense by $0.9 million, for the same period.
Recently Issued Accounting Standards
Information specific to accounting standards that we adopted in 20172023 or pending accounting standards that we expect to adopt in the future is incorporated by reference from Note 1 "Summary of Significant Accounting Policies" contained in Part II, Item 8, "Financial Statements and Supplementary Data."


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Information required by this Item 7A is incorporated by reference from Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the headings "Investments" and "Market Risk."

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



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 investments49,352
 51,769
Short-term investments175
 175
 1,888,933
 1,771,784
Cash and cash equivalents95,562
 89,194
Accrued investment income13,841
 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 costs88,102
 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 recoverables63,194
 62,707
Prepaid reinsurance premiums3,749
 3,782
Income taxes receivable6,031
 14,285
Goodwill and net intangible assets23,971
 24,740
Other assets16,409
 13,943
Assets held for sale1,586,134
 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 premiums465,391
 443,802
Accrued expenses and other liabilities167,396
 147,104
Deferred income taxes5,953
 7,849
Liabilities held for sale1,347,135
 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 capital196,334
 216,482
Retained earnings608,700
 616,322
Accumulated other comprehensive income, net of tax168,314
 109,055
Total stockholders' equity$973,373
 $941,884
Total liabilities and stockholders' equity$4,183,431
 $4,054,758
United Fire Group, Inc.
Consolidated Balance Sheets
December 31,
(In Thousands, Except Share Data)2023 2022
   
Assets   
Investments   
Fixed maturities   
Available-for-sale, at fair value (amortized cost $1,771,041 in 2023 and $1,662,680 in 2022; allowance for credit losses $1 in 2023 and $3 in 2022)$1,686,502  $1,551,336 
Equity securities, at fair value (cost $29,238 in 2023 and $75,292 in 2022)55,019  169,106 
Mortgage loans45,421 37,947 
Less: allowance for mortgage loan losses55 49 
Mortgage loans, net45,366  37,898 
Other long-term investments99,507  86,276 
Short-term investments100  275 
1,886,494  1,844,891 
Cash and cash equivalents102,046  96,650 
Accrued investment income15,934  14,480 
Premiums receivable (net of allowance for doubtful accounts of $1,794 in 2023 and $1,575 in 2022)464,791  365,729 
Deferred policy acquisition costs126,532  104,225 
Property and equipment (primarily land and buildings, at cost, less accumulated depreciation of $68,242 in 2023 and $59,566 in 2022)134,247  133,113 
Reinsurance receivables and recoverables (net of allowance for credit losses of $97 in 2023 and $82 in 2022)223,269  170,953 
Prepaid reinsurance premiums27,682  11,300 
Goodwill and net intangible assets4,615 5,324 
Deferred tax asset, net13,621 15,531 
Income taxes receivable21,463 31,418 
Other assets123,496  88,672 
Total assets$3,144,190  $2,882,286 
Liabilities and stockholders' equity   
Liabilities   
Losses and loss settlement expenses$1,638,755  $1,497,274 
Unearned premiums549,384  474,388 
Accrued expenses and other liabilities172,306  120,510 
Long term debt50,000 50,000 
Total liabilities$2,410,445  $2,142,172 
Stockholders' equity   
Common stock, $0.001 par value; authorized 75,000,000 shares; 25,269,842 and 25,210,541 shares issued and outstanding in 2023 and 2022, respectively$25 $25 
Additional paid-in capital209,986 207,030 
Retained earnings574,691 620,555 
Accumulated other comprehensive income (loss), net of tax(50,957)(87,496)
Total stockholders' equity$733,745  $740,114 
Total liabilities and stockholders' equity$3,144,190  $2,882,286 
The Notes to Consolidated Financial Statements are an integral part of these statements.

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United Fire Group, Inc.
Consolidated Statements of Income and Comprehensive Income
For the Years Ended December 31,
(In Thousands, Except Share Data)2023 20222021
 
Revenues   
Net premiums earned$1,034,587  $951,541 $962,823 
Investment income, net of investment expenses59,606  44,932 55,778 
Net investment gains (losses) (includes reclassifications for net unrealized gains (losses) on available-for-sale securities of $(718) in 2023; $(1,323) in 2022; and $2,256 in 2021 previously included in accumulated other comprehensive income)1,274  (15,892)47,383 
Other income (loss)—  (295)207 
Total revenues$1,095,467  $980,286 $1,066,191 
   
Benefits, losses and expenses  
Losses and loss settlement expenses$769,414  $637,301 $652,155 
Amortization of deferred policy acquisition costs244,991  213,075 203,432 
Other underwriting expenses (includes reclassifications for employee benefit costs of $(207) in 2023; $(3,601) in 2022; and $(6,603) in 2021 previously included in accumulated other comprehensive income)115,800  115,169 110,103 
Interest Expense3,260 3,188 3,187 
Other nonunderwriting expenses1,723 (524)471 
Total benefits, losses and expenses$1,135,188  $968,209 $969,348 
Income (loss) before income taxes$(39,721) $12,077 $96,843 
Federal income tax expense (benefit) (includes reclassifications of $194 in 2023; $1,034 in 2022 and $913 in 2021 previously included in accumulated other comprehensive income)(10,021) (2,954)16,249 
Net income (loss)$(29,700) $15,031 $80,594 
Other comprehensive income (loss)
Change in net unrealized appreciation on investments$26,373  $(176,181)$(39,901)
Change in liability for underfunded employee benefit plans18,953 (8,278)19,633 
Other comprehensive income (loss), before tax and reclassification adjustments45,326 (184,459)(20,268)
Income tax effect(9,518)38,736 4,260 
Other comprehensive income (loss), after tax, before reclassification adjustments35,808 (145,723)(16,008)
Reclassification adjustment for net (gains) losses included in income718  1,323 (2,256)
Reclassification adjustment for employee benefit costs included in expense207 3,601 6,603 
Total reclassification adjustments, before tax925  4,924 4,347 
Income tax effect(194) (1,034)(913)
Total reclassification adjustments, after tax731  3,890 3,434 
Comprehensive income (loss)$6,839  $(126,802)$68,020 
Earnings (loss) per common share:
Basic$(1.18)$0.60 $3.21 
Diluted(1.18)0.59 3.16 
 For the Years Ended December 31,
(In Thousands, Except Share Data)2017 2016 2015
      
Revenues     
Net premiums earned$997,492
 $936,131
 $851,695
Investment income, net of investment expenses51,190
 55,284
 46,559
Net realized investment gains (includes reclassifications for net unrealized gains on available-for-sale securities of $6,390 in 2017; $4,520 in 2016; and $4,513 in 2015 previously included in accumulated other comprehensive income)4,055
 4,947
 1,124
Other income (loss)—
 —
 (107)
Total revenues$1,052,737
 $996,362
 $899,271
      
Benefits, losses and expenses     
Losses and loss settlement expenses$725,713
 $652,433
 $520,087
Amortization of deferred policy acquisition costs207,746
 202,892
 180,183
Other underwriting expenses (includes reclassifications for employee benefit costs of $5,408 in 2017; $5,486 in 2016; and $7,468 in 2015 previously included in accumulated other comprehensive income)103,628
 83,540
 83,631
Total benefits, losses and expenses$1,037,087
 $938,865
 $783,901
      
Income from continuing operations before income taxes$15,650
 $57,497
 $115,370
Federal income tax expense (benefit) (includes reclassifications of ($344) in 2017; $338 in 2016; and $1,034 in 2015 previously included in accumulated other comprehensive income)(29,220) 8,379
 30,050
Net income from continuing operations$44,870
 $49,118
 $85,320
Income from discontinued operations, net of taxes6,153
 786
 3,806
Net income$51,023
 49,904
 89,126
      
Other comprehensive income (loss)     
Change in net unrealized appreciation on investments$72,251
 $13,017
 $(28,185)
Change in liability for underfunded employee benefit plans(26,122) 30,045
 8,714
Other comprehensive income (loss), before tax and reclassification adjustments46,129
 43,062
 (19,471)
Income tax effect(17,540) (15,072) 6,814
Other comprehensive income (loss), after tax, before reclassification adjustments28,589
 27,990
 (12,657)
Reclassification adjustment for net realized gains included in income(6,390) (4,520) (4,513)
Reclassification adjustment for employee benefit costs included in expense5,408
 5,486
 7,468
Total reclassification adjustments, before tax(982) 966
 2,955
Income tax effect344
 (338) (1,034)
Total reclassification adjustments, after tax(638) 628
 1,921
Comprehensive income$78,974
 $78,522
 $78,390
      
Weighted average common shares outstanding25,103,720
 25,335,706
 25,047,405
Earnings per common share from continuing operations:     
Basic$1.79
 $1.94
 $3.41
Diluted1.75
 1.90
 3.38
Earnings per common share:     
Basic$2.03
 $1.97
 $3.56
Diluted1.99
 1.93
 3.53


The Notes to Consolidated Financial Statements are an integral part of these statements.

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United Fire Group, Inc.
Consolidated Statement of Stockholders' Equity

Common Stock
(In Thousands, Except Share Data)Shares outstandingCommon stockAdditional paid-in capitalRetaining earningsAccumulated other comprehensive income (loss)Total
Balance, January 1, 202125,055,479 $25 $202,359 $555,854 $66,911 $825,149 
Net income (loss)— — — 80,594 — 80,594 
Shares repurchased(67,651)— (2,007)— — (2,007)
Stock based compensation94,276 — 3,023 — — 3,023 
Dividends on common stock ($0.60 per share)— — — (15,064)— (15,064)
Change in net unrealized investment appreciation(1)
— — — — (33,301)(33,301)
Change in liability for underfunded employee benefit plans(2)
— — — — 20,727 20,727 
Balance, January 1, 202225,082,104 $25 $203,375 $621,384 $54,337 $879,121 
Net income (loss)— $— $— $15,031 $— $15,031 
Stock based compensation128,437 — 3,655 — — 3,655 
Dividends on common stock ($0.63 per share)— — 0(15,860)— (15,860)
Change in net unrealized investment appreciation(1)
— — — — (138,138)(138,138)
Change in liability for underfunded employee benefit plans(2)
— — — — (3,695)(3,695)
Balance, January 1, 202325,210,541 $25 $207,030 $620,555 $(87,496)$740,114 
Net income (loss)— $— $— $(29,700)$— $(29,700)
Stock based compensation59,301 — 2,956 — — 2,956 
Dividends on common stock ($0.64 per share)— — — (16,164)— (16,164)
Change in net unrealized investment appreciation(1)
— — — — 21,402 21,402 
Change in liability for underfunded employee benefit plans(2)
— — — — 15,137 15,137 
Balance, December 31, 202325,269,842 $25 $209,986 $574,691 $(50,957)$733,745 
(1)The change in net unrealized appreciation is net of reclassification adjustments and income taxes.
 For the Years Ended December 31,
(In Thousands, Except Share Data)201720162015
    
Common stock   
Balance, beginning of year$25
$25
$25
Shares repurchased (701,899 in 2017; 90,415 in 2016; and 79,396 in 2015)—
—
—
Shares issued for stock-based awards (198,694 in 2017; 376,142 in 2016; and 202,882 in 2015)—
—
—
Balance, end of year$25
$25
$25
    
Additional paid-in capital   
Balance, beginning of year$216,482
$207,426
$202,676
Compensation expense and related tax benefit for stock-based award grants4,808
2,880
1,677
Shares repurchased(29,784)(3,746)(2,423)
Shares issued for stock-based awards4,828
9,922
5,496
Balance, end of year$196,334
$216,482
$207,426
    
Retained earnings   
Balance, beginning of year$616,322
$591,009
$523,541
Net income51,023
49,904
89,126
Accumulated effect of change in enacted tax rate(31,308)—
—
Dividends on common stock ($1.09 per share in 2017; $0.97 per share in 2016; $0.86 per share in 2015)(27,337)(24,591)(21,658)
Balance, end of year$608,700
$616,322
$591,009
    
Accumulated other comprehensive income, net of tax   
Balance, beginning of year$109,055
$80,437
$91,173
Change in net unrealized investment appreciation (1)
44,315
5,523
(21,254)
Change in liability for underfunded employee benefit plans (2)
(16,364)23,095
10,518
Accumulated effect of change in tax enacted tax rate31,308
—
—
Balance, end of year$168,314
$109,055
$80,437
    
Summary of changes   
Balance, beginning of year$941,884
$878,897
$817,415
Net income51,023
49,904
89,126
All other changes in stockholders' equity accounts(19,534)13,083
(27,644)
Balance, end of year$973,373
$941,884
$878,897
(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.

(2)The change in liability for underfunded employee benefit plans is net of income taxes.
The Notes to Consolidated Financial Statements are an integral part of these statements.

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United Fire Group, Inc.
Consolidated Statements of Cash Flows

For the Years Ended December 31,
For the Years Ended December 31,For the Years Ended December 31,
(In Thousands)2017 2016 2015(In Thousands)2023 20222021
Cash Flows From Operating Activities     
Net income$51,023
 $49,904
 $89,126
Less net income from discontinued operations, net of taxes6,153
 786
 3,806
Net income (loss)
Net income (loss)
Net income (loss)
Adjustments to reconcile net income to net cash provided by operating activities
Adjustments to reconcile net income to net cash provided by operating activities
Adjustments to reconcile net income to net cash provided by operating activities     
Net accretion of bond premium8,872
 7,049
 5,420
Net accretion of bond premium
Net accretion of bond premium
Depreciation and amortization4,574
 6,035
 6,473
Stock-based compensation expense4,808
 3,696
 2,510
Net realized investment gains(4,055) (4,947) (1,124)
Stock-based compensation expense
Stock-based compensation expense
Net investment (gains) losses
Net cash flows from trading investments(1,909) (2,390) 3,080
Deferred income tax expense (benefit)(5,921) 3,331
 (5,574)
Deferred income tax benefit
Changes in:     
Accrued investment income
Accrued investment income
Accrued investment income(224) (874) (363)
Premiums receivable(22,311) (29,685) (27,487)
Deferred policy acquisition costs5,260
 (2,815) (17,686)
Reinsurance receivables(487) 4,206
 12,609
Prepaid reinsurance premiums33
 8
 (158)
Income taxes receivable8,254
 (14,285) —
Other assets(2,465) 758
 (1,097)
Losses, claims and loss settlement expenses100,287
 120,001
 34,458
Unearned premiums21,589
 28,830
 36,336
Accrued expenses and other liabilities(423) (7,605) 16,470
Income taxes payable—
 (5,365) 66
Deferred income taxes
Deferred income taxes
Deferred income taxes(25,883) 1,495
 (858)
Other, net3,378
 (9,943) (2,914)
Cash from operating activities - continuing operations93,377
 97,500
 60,161
Cash from operating activities - discontinued operations31,847
 67,766
 44,518
Total adjustments$125,224
 $165,266
 $104,679
Net cash provided by operating activities$170,094
 $214,384
 $189,999
Cash from operating activities
Net cash provided by (used in) operating activities
Net cash provided by (used in) operating activities
Net cash provided by (used in) operating activities
Cash Flows From Investing Activities     
Proceeds from sale of available-for-sale investments$7,404
 $1,968
 $478
Proceeds from call and maturity of held-to-maturity investments150
 493
 105
Proceeds from sale of available-for-sale investments
Proceeds from sale of available-for-sale investments
Proceeds from call and maturity of available-for-sale investments191,521
 323,653
 247,692
Proceeds from short-term and other investments6,032
 1,947
 3,881
Purchase of held-to-maturity investments(150) (42) (450)
Purchase of available-for-sale investments(260,957) (443,953) (355,192)
Purchase of available-for-sale investments
Purchase of available-for-sale investments
Purchase of mortgage loans
Purchase of short-term and other investments(6,428) (4,155) (5,103)
Net purchases and sales of property and equipment(17,158) (7,600) (9,696)
Cash from investing activities - continuing operations(79,586) (127,689) (118,285)
Cash from investing activities - discontinued operations17,601
 15,286
 81,999
Net cash used in investing activities$(61,985) $(112,403) $(36,286)
Net purchases and sales of property and equipment
Net purchases and sales of property and equipment
Net cash provided by (used in) investing activities
Cash Flows From Financing Activities     
Cash Flows From Financing Activities
Cash Flows From Financing Activities
Borrowings of long-term debt
Borrowings of long-term debt
Borrowings of long-term debt
Payment of cash dividends$(27,337) $(24,591) $(21,658)
Dividends from discontinued operations—
 —
 15,000
Payment of cash dividends
Payment of cash dividends
Repurchase of common stock
Repurchase of common stock
Repurchase of common stock(29,784) (3,746) (2,423)
Issuance of common stock4,828
 9,922
 5,496
Tax impact from issuance of common stock—
 (816) (833)
Cash from financing activities - continued operations(52,293) (19,231) (4,418)
Cash from financing activities - discontinued operations(55,256) (78,346) (133,419)
Net cash used in financing activities$(107,549) $(97,577) $(137,837)
Net cash provided by (used in) financing activities
Net cash provided by (used in) financing activities
Net cash provided by (used in) financing activities
Net Change in Cash and Cash Equivalents$560
 $4,404
 $15,876
Less: decrease (increase) in cash and cash equivalents - discontinued operations5,808
 (4,706) 6,902
Net increase (decrease) in cash and cash equivalents - continuing operations6,368
 (302) 22,778
Cash and Cash Equivalents at Beginning of Year - Continuing Operations89,194
 89,496
 66,718
Cash and Cash Equivalents at End of Year - Continuing Operations$95,562
 $89,194
 $89,496
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year
Supplemental Disclosures of Cash Flow Information
Supplemental Disclosures of Cash Flow Information
Supplemental Disclosures of Cash Flow Information
Income taxes paid
Income taxes paid
Income taxes paid
Interest paid
The Notes to Consolidated Financial Statements are an integral part of these statements.

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Index of Notes to Consolidated Financial StatementsPage
142
Note 12. Earnings Per Common Share







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UNITED FIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share dataunless otherwise noted)


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
United Fire Group, Inc. ("UFG", "United Fire", the "Registrant", the "Company","we" "we", "us", or "our") and its consolidated subsidiaries and affiliates are engaged in the business of writing property and casualty insurance and life insurance and selling annuities through a network of independent agencies. Our insurance company subsidiaries are licensed as a property and casualty insurerinsurers in 4650 states, plus the District of Columbia, and as a life insurer in 37 states.
Discontinued Operations
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 ("United Life"), to Kuvare US Holdings, Inc. ("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 Balance Sheets, Consolidated Statements of Income and Comprehensive Income and Consolidated Statements of Cash Flows (collectively, 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, refer to Note 17 "Discontinued Operations."Columbia.
Principles of Consolidation
The accompanying Consolidated Financial Statements include United Fire and its wholly owned subsidiaries: United Fire & Casualty Company, United Real Estate Holdings, Company, LLC, United Life, Addison Insurance Company, Lafayette Insurance Company, United Fire & Indemnity Company, United Fire Lloyds, UFG Specialty Insurance Company, Financial Pacific Insurance Company, Franklin Insurance Company, Mercer Insurance Company, and Mercer Insurance Company of New Jersey, Inc.Inc, McIntyre Cedar UK Limited, Mercer Insurance Company and McIntyre Cedar Corporate Member LLP.
United Fire Lloyds, an affiliate of United Fire & Indemnity Company, is organized as a Texas Lloyds plan, which is an aggregation of underwriters who, under a common name, engage in the business of insurance through a corporate attorney-in-fact. United Fire Lloyds is financially and operationally controlled by United Fire & Indemnity Company, its corporate attorney-in-fact, pursuant to three types of agreements: trust agreements between United Fire & Indemnity Company and certain individuals who agree to serve as trustees; articles of agreement among the trustees who agree to act as underwriters to establish how the Lloyds plan will be operated; and powers of attorney from each of the underwriters appointing a corporate attorney-in-fact, who is authorized to operate the Lloyds plan. Because United Fire & Indemnity Company can name the trustees, the Lloyds plan is perpetual, subject only to United Fire & Indemnity Company's desire to terminate it.
United Fire & Indemnity Company provides all of the statutory capital necessary for the formation of the Lloyds plan by contributing capital to each of the trustees. The trust agreements require the trustees to become underwriters of the Lloyds plan, to contribute the capital to the Lloyds plan, to sign the articles of agreement and to appoint the attorney-in-fact. The trust agreements also require the trustees to pay to United Fire & Indemnity Company all of the profits and benefits received by the trustees as underwriters of the Lloyds plan, which means that United Fire & Indemnity Company has the right to receive 100 percent of the gains and profits from the Lloyds plan. The trustees serve at the pleasure of United Fire & Indemnity Company, which may remove a trustee and replace that trustee at any time. Termination of a trustee must be accompanied by the resignation of the trustee as an underwriter, so that the trustee can obtain the capital contribution from the Lloyds plan to reimburse United Fire & Indemnity Company. By retaining the ability to terminate trustees, United Fire & Indemnity Company possesses the ability to name and remove the underwriters.


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United Real Estate Holdings, LLC, formed in 2013, is a wholly owned subsidiary of United Fire & Casualty Company and is organized as an Iowa limited liability corporation, an unincorporated association formed for the purpose of holding United Fire & Casualty Company's ownership in commercial real estate.
In 2015, the Company dissolved three of its holding companies in order to flatten our organizational chart. The companies dissolved were American Indemnity Financial Corporation, Mercer Insurance Group, Inc. and Financial Pacific Insurance Group, Inc. In addition, Texas General Indemnity Company was renamed UFG Specialty Insurance Company on July 1, 2015.
Basis of Presentation


The accompanying Consolidated Financial Statements have been prepared on the basis of U.S. generally accepted accounting principles ("GAAP"), which differ in some respects from those followed in preparing our statutory reports to insurance regulatory authorities. Our stand-alone and consolidated subsidiary financial statements submitted to insurance regulatory authorities are presented on the basis of accounting practices prescribed or permitted by the insurance departments of the states in which we are domiciled ("statutory accounting principles").
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Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The financial statement categories that are most dependent on management estimates and assumptions include: investments; deferred policy acquisition costs; reinsurance receivables and recoverables; future policy benefits andgoodwill impairment; losses claims and loss settlement expenses; and pension and post-retirement benefit obligations.
Continuing Operations - Property and Casualty Insurance Business
Premiums written are deferred and recorded as earned premium on a daily pro rata basis over the terms of the respective policies. Unearned premium reserves are established for the portion of premiums written applicable to the unexpired term of insurance policies in force. Premiums receivable are presented net of an estimated allowance for doubtful accounts, which is based on a periodic evaluation of the aging and collectability of amounts due from agents and policyholders.
To establish loss and loss settlement expense reserves, we make estimates and assumptions about the future development of claims. Actual results could differ materially from those estimates, which are subjective, complex and inherently uncertain. When we establish and adjust reserves, we do so given our knowledge at the time of the circumstances and facts of known claims. To the extent that we have overestimated or underestimated our loss and loss settlement expense reserves, we adjust the reserves in the period in which such adjustment is determined.
We record our best estimate of reserves for claim litigation that arises in the ordinary course of business. We consider all of our pending litigation as of December 31, 20172023 to be ordinary, routine and incidental to our business.
Discontinued Operations - Life Insurance BusinessSegment Information

Our whole lifeproperty and termcasualty insurance (i.e., traditional business) premiums arebusiness is reported as earned when dueone business segment. The property and benefitscasualty insurance business profit or loss is consistent with consolidated reporting as disclosed on the Consolidated Statements of Income and expenses are associated with premium income in order to result inComprehensive Income. We analyze the recognition of profits over the lives of the related contracts. Premiums receivable are presented net of an estimated allowance for doubtful accounts. Income annuities with life contingencies (single premium immediate annuitiesproperty and supplementary contracts) have premium recorded and any related expense charge fees recorded as income and expense when the contract is issued. On universal life and deferred annuity policiescasualty insurance business results based on profitability (i.e., non-traditional business)loss ratios), incomeexpenses and expenses are reported when chargedreturn on equity. The Company's property and creditedcasualty insurance business was determined using a management approach to policyholder account balances in ordermake decisions on operating matters, including allocating resources, assessing performance, determining which products to result in recognitionmarket 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. We continually evaluate our operations on the basis of profits over the livesboth statutory accounting principles prescribed or permitted by our states of the related contracts. We accomplish this by means of a provision for future policy benefitsdomicile and the deferral and subsequent amortization of policy acquisition costs.GAAP.


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Liabilities for future policy benefits for traditional products are computed by the net level premium method, using interest assumptions ranging from 3.15 percent to 6.0 percent and withdrawal, mortality and morbidity assumptions appropriate at the time the policies were issued. Liabilities for non-traditional business are stated at policyholder account values before surrender charges. Liabilities for traditional immediate annuities are based primarily upon future anticipated cash flows using assumptions for mortality and interest rates. Liabilities for deferred annuities are carried at the account value.
Reinsurance
PremiumsNet premiums earned and losses and loss settlement expenses incurred are reported net of reinsurance ceded. Ceded insurance business is accounted for on a basis consistent with the original policies issued and the terms of the reinsurance contracts. Refer to Note 4 "Reinsurance" for a discussion of our reinsurance activities.

Investments
Investments in fixed maturities include bonds and redeemable preferred stocks. Our investments in held-to-maturity fixed maturities are recorded at amortized cost.includes bonds. Our investments in available-for-sale fixed maturities and trading securities are recorded at fair value.
Investments in equity securities, which include common and non-redeemable preferred stocks, are classified as available-for-sale or trading and are recorded at fair value.
Changes in unrealized appreciation and depreciation, with respect to available-for-sale fixed maturities and equity securities, are reported as a component of accumulated other comprehensive income, net of applicable
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deferred income taxes, in stockholders' equity. Changes in unrealized appreciation and depreciation, with respect to trading securities, are reported as a component of income.
Investments in equity securities, which includes common stocks, are recorded at fair value with changes in value recorded as a component of income.
Other long-term investments consist primarily of our interests in limited liability partnerships that are recorded on the equity method of accounting.
Included in investments at December 31, 20172023 and 2016,2022, are securities on deposit with, or available to, various regulatory authorities as required by law, with fair values of $1,492,928$106,297 and $1,509,339,$92,932 respectively.
We review all of our investment holdings for appropriate valuation on an ongoing basis. Refer to Note 2 "Summary of Investments" for a discussion of our accounting policy for impairment recognition.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash, money market accounts and non-negotiable certificates of deposit with original maturities of three months or less.
In 2017, 2016, and 2015, we made cash payments for income taxes of $7,667, $24,034 and $39,497, respectively. In addition, we received federal tax refunds of $13,383 and $919 in 2017 and 2015, respectively, that resulted from the utilization of our 2011 net operating losses and net capital losses in the carryforward period. In 2016, we did not receive any federal tax refunds. We made no interest payments in 2017, 2016 and 2015. These payments exclude interest credited to policyholders' accounts.
Deferred Policy Acquisition Costs ("DAC")


Certain costs associated with underwriting new business (primarily commissions, premium taxes and variable underwriting and policy issue expenses associated with successful acquisition efforts) are deferred. The following table is a summary of the components of DAC that are reported in the accompanying Consolidated Financial Statements.

Property and Casualty Insurance202320222021
Recorded asset at beginning of year$104,225 $91,446 $87,094 
Underwriting costs deferred267,298 225,854 207,784 
Amortization of deferred policy acquisition costs(244,991)(213,075)(203,432)
Recorded asset at end of year$126,532 $104,225 $91,446 


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Continuing Operations - Property and Casualty Insurance2017 2016 2015
Recorded asset at beginning of year$93,362
 $90,547
 $72,861
Underwriting costs deferred202,486
 205,707
 197,869
Amortization of deferred policy acquisition costs(207,746) (202,892) (180,183)
Recorded asset at end of year$88,102
 $93,362
 $90,547
      
Discontinued Operations - Life Insurance     
Recorded asset at beginning of year$70,750
 $77,717
 $66,858
Underwriting costs deferred5,463
 5,564
 6,113
Amortization of deferred policy acquisition costs(5,181) (8,121) (6,634)
 $71,032
 $75,160
 $66,337
Change in "shadow" deferred policy acquisition costs119
 (4,410) 11,380
Recorded asset at end of year$71,151
 $70,750
 $77,717
      
Total     
Recorded asset at beginning of year$164,112
 $168,264
 $139,719
Underwriting costs deferred207,949
 211,271
 203,982
Amortization of deferred policy acquisition costs(212,927) (211,013) (186,817)
 $159,134
 $168,522
 $156,884
Change in "shadow" deferred policy acquisition costs119
 (4,410) 11,380
Recorded asset at end of year$159,253
 $164,112
 $168,264

PropertyOur property and casualty insurance policy acquisition costs deferred areDAC is amortized as premium revenue is recognized. The method followed in computing DAC limits the amount of such deferred costs to their estimated realizable value. This takes into account the premium to be earned, losses and loss settlement expenses expected to be incurred and certain other costs expected to be incurred as the premium is earned. This estimatecalculation is performed by line of business in a manner consistent with how the policies are currently being marketed and managed.

For traditional life insurance policies, DAC is amortized to income over the premium-paying period in proportion to the ratio of the expected annual premium revenue to the expected total premium revenue. Expected premium revenue and gross profits are based on the same mortality and withdrawal assumptions used in determining future policy benefits. These assumptions are not revised after policy issuance unless the recorded DAC asset is deemed to be unrecoverable from future expected profits.

For non-traditional life insurance policies, DAC is amortized over the anticipated terms in proportion to the ratio of the expected annual gross profits to the total expected gross profits. Changes in the amount or timing of expected gross profits result in adjustments to the cumulative amortization of these costs. The effect on amortization of DAC for revisions to estimated gross profits is reported in earnings in the period the estimated gross profits are revised.

The effect on DAC that results from the assumed realization of unrealized gains (losses) on investments allocated to non-traditional life insurance business is recognized with an offset to net unrealized investment appreciation as of the balance sheet date. The impact of unrealized gains (losses) on available-for-sale securities decreased the DAC asset by $6,294, $6,413 and $2,003 at December 31, 2017, 2016 and 2015, respectively.
Property, Equipment and Depreciation
Property and equipment is presented at cost less accumulated depreciation. The following table is a summary of the components of the property and equipment that are reported in the accompanying Consolidated Financial Statements.


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20172016
202320232022
Real estate: 
Land
Land
Land$8,396
$8,231
Buildings48,677
41,119
Furniture and fixtures4,645
4,711
Computer equipment and software7,274
1,463
Airplane—
—
Internally developed software
Other computer equipment and software
Total property and equipment$68,992
$55,524
Total property and equipment
Total property and equipment
Expenditures for maintenance and repairs on property and equipment are generally expensed as incurred. We periodically review these assets for impairment whenever events or changes in business circumstances indicate that the carrying value of the underlying asset may not be recoverable. A loss would be recognized if the estimated fair value of the asset were less than its carrying value.
Depreciation is computed primarily by the straight-line method over the following estimated useful lives:
Useful Life
Useful Life
Computer equipment and softwareThree years
Furniture and fixturesSeven years
Internally developed softwareTen years
Leasehold improvementsShorter of the lease term or useful life of the asset
Real estateSeven years to thirty-nine years
AirplaneFive years
Depreciation expense totaled $3,805, $5,266$9,799, $6,961 and $5,704$5,861 for 2017, 20162023, 2022 and 2015,2021, respectively.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets arise as a result of business combinations and consist of the excess of the fair value of consideration paid over the tangible and intangible assets acquired and liabilities assumed. All of ourThe goodwill has been impaired to $0 for 2023, 2022 and the majority of our intangible assets relate to the acquisition of Mercer Insurance Group on March 28, 2011. 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 its implied fair value. Goodwill is evaluated at the reporting unit level. Any impairment is charged to operations in the period that the impairment is identified. In 2016 and 2015, we performed a quantitative impairment assessment of our goodwill and in 2017, we performed a qualitative impairment assessment of our goodwill. As a result of these assessments, we did not recognize an impairment charge on our goodwill in 2017, 2016 or 2015.2021.
Our other intangible assets, which consist primarily of agency relationships, trade names, state insurance licenses, and software, are being amortized by the straight-line method over periods ranging from 2two years to 15 years, with the exception of state insurance licenses, which are indefinite-lived and not amortized. In 20162023, 2022 and 2015, we performed a quantitative impairment assessment of our indefinite-lived intangible assets and, in 2017,2021 we performed a qualitative impairment assessment of our indefinite lived intangible assets. As a result of these assessments, we did not recognize an impairment charge on our intangible assets in 2017, 20162023, 2022 and 2015.2021. Amortization expense totaled $769$709, $709 and $709 in 2017, 20162023, 2022 and 2015,2021, respectively.
Long term debt
The Company executed a private placement debt transaction on December 15, 2020 between United Fire & Casualty Company ("UF&C"), and Federated Mutual Insurance Company, a mutual insurance company domiciled in Minnesota ("Federated Mutual"), and Federated Life Insurance Company, an insurance company domiciled in Minnesota ("Federated Life" and, together with Federated Mutual, the "Note Purchasers").

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 notes are presented as a long term debt liability in the Consolidated Balance Sheets and as a financing activity in the Consolidated Statement of Cash Flows.

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Interest payments under the long term debt are 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 equals 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 of December 31, 2023, interest totaled $3,260 and is included in accrued expenses and other liabilities in the Consolidated Balance Sheets and as interest expense in the Consolidated Statements of Income and Comprehensive Income. Payment of interest is subject to approval by the Iowa Insurance Division.
Income Taxes
Deferred tax assets and liabilities are established based on differences between the financial statement bases of assets and liabilities and the tax bases of those same assets and liabilities, using the currently enacted statutory tax rates. Deferred income tax expense is measured by the year-to-year change in the net deferred tax asset or liability,


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except for certain changes in deferred tax amounts that affect stockholders' equity and do not impact federal income tax expense.


The Company performs a quarterly review of its tax positions and makes a determination whether it is more likely than not that the tax position will be sustained upon examination. If, based on this review, it appears not more likely than not that the position will be sustained, the Company will calculate any unrecognized tax benefits and calculate any interest and penalties. At December 31, 2017, 2016,2023, 2022, and 20152021 the Company did not recognize any liability for unrecognized tax benefits. In addition, we have not accrued for interest and penalties related to unrecognized tax benefits. However, if interest and penalties would need to be accrued related to unrecognized tax benefits, such amounts would be recognized as a component of federal income tax expense.

Deferred tax assets are reduced by a valuation allowance when management believes it is more likely than not that some, or all, of the deferred taxes will not be realized. After considering all positive and negative evidence of taxable income in the carryback and carryforward periods and our tax planning strategy of holding debt securities with unrealized losses to recovery, we believe it is more likely than not that all the deferred assets will be realized. As a result, we have no valuation allowance at December 31, 2023 and 2022.

In 2023, 2022, and 2021, we made cash payments for income taxes of $1,348, $21,548 and $5,360, respectively. In 2023, 2022 and 2021 we received federal tax refunds of $14,017, $20,789 and $28,083, respectively, which resulted from the utilization of our net operating losses and net capital loss carryforwards and carrybacks. We have $185 of tax credit carryforwards expiring in 2039 through 2042. We made no interest payments in 2023, 2022 and 2021.
We file a consolidated federal income tax return. We also file income tax returns in various state jurisdictions. We are no longer subject to federal or state income tax examination for years before 2014. 2018.
Leases

The Internal Revenue Service is conductingCompany determines if a routine examinationcontract contains a lease at inception of our income tax returnthe contract. The Company's inventory of leases consists of operating leases 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 Company's operating leases consist of office space, vehicles, computer equipment and office equipment. The lease right-of-use asset represents the Company's right to use each underlying asset for the 2015 tax year.lease term and the lease obligation liability represents the Company's obligation over the lease term. The Company's lease obligation is recorded at the present value of the lease payments based on the term of the applied lease. Short-term leases of 12 months or less are recorded on the Consolidated Balance Sheets and lease payments are recognized on the Consolidated Statements of Income and Comprehensive Income. For more information on leases refer to Note 12 "Lease Commitments."
Variable Interest Entities
The Company and certain related parties are equity investors in one investment in which the Company determined is a variable interest entity ("VIE") as a result of participation in the risks and rewards of the VIE based on the objectives and strategies of the VIE. The VIE is a limited liability company that primarily invests in commercial real
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estate. The Company and certain related parties are not the primary beneficiaries largely due to their inability to influence management or direct the activities that most significantly impact the VIE's economic performance. Based on these facts and circumstances, the Company has a variable interest in the VIE, but has not consolidated the VIE's financial results as it is not the primary beneficiary. The Company's investment is reported in other long-term investments in the Consolidated Balance Sheets and accounted for under the equity method of accounting. The fair value of the VIE at December 31, 2023 was $2.9 million and there are no future funding commitments.
Stock-Based Compensation
We currently have two equity compensation plans. One plan allows us to grant restricted and unrestricted stock, stock appreciation rights, incentive stock options, and non-qualified stock options to employees. The other plan allows us to grant restricted and non-qualified stock options to non-employee directors.
We utilize the Black-Scholes option pricing method to establish the fair value of non-qualified stock options granted under our equity compensation plans. Our determination of the fair value of stock options on the date of grant using this option-pricing model is affected by our stock price, as well as assumptions regarding a number of complex and subjective variables, which include the expected volatility in our stock price, the expected term of the award, the expected dividends to be paid over the term of the award and the expected risk-free interest rate. Any changes in these assumptions may materially affect the estimated fair value of the award. For our restricted and unrestricted stock awards, we utilize the fair value of our common stock on the date of grant to establish the fair value of the award. Refer to Note 9 "Stock-Based Compensation" for further discussion.
Credit Losses
The Company recognizes credit losses for our available-for-sale fixed-maturity portfolio, reinsurance receivables, mortgage loans and premium receivables by setting up allowances which are remeasured each reporting period and recorded in the Consolidated Statements of Income and Comprehensive Income.
For our available-for-sale fixed-maturity portfolio an allowance for credit losses is recorded net of available-for-sale fixed maturities in the Consolidated Balance Sheets and a corresponding credit loss recognized as a recognized loss or gain in the Consolidated Statements of Income and Comprehensive Income. The Company determines if an allowance for credit losses is recorded based on a number of factors including the current economic conditions, management's expectations of future economic conditions and performance indicators, such as market value versus amortized cost, investment spreads widening or contracting, rating actions, payment and default history. For more information on credit losses and the allowance for credit losses for available-for-sale fixed-maturity portfolio, see Note 2 "Summary of Investments."
An allowance for mortgage loan losses is established based on historical loss information of the collective pool of the Company's commercial mortgage loan investments which have similar risk characteristics. To calculate the allowance for mortgage loan losses, the Company starts with historical loan experience to predict the future expected losses and then layers on a market-linked adjustment. On a quarterly basis, quantitative credit risk metrics, including for example, cash-flows, rent rolls and financial statements are reviewed for each loan to determine if it is performing in line with its expectations. This allowance is presented as a separate line in the Consolidated Balance Sheets beneath the asset value as well as presented net and recorded through "Net investment gains (losses)" in the Consolidated Statements of Income and Comprehensive Income. For more information on credit losses and the allowance for credit losses for our investment in mortgage loans see Note 3 "Fair Value of Financial Instruments."
For reinsurance receivables, the Company's model estimates expected credit loss by multiplying the exposure at default by both the probability of default and loss given default ("LGD"). The LGD is estimated by the rating of the reinsurer, historical relationship with UFG, existence of letters of credit and known regulation for which the Company may be held accountable. The ultimate LGD percentage is estimated after considering Moody's experience with unsecured year 1 bond recovery rates from 1983-2017. The allowance calculated as of December 31, 2023 is recorded through the line "Reinsurance receivables and recoverables" in the Consolidated Balance Sheets and through the line "Other underwriting expenses" in the Consolidated Statements of Income and Other Comprehensive Income. As of December 31, 2023, the Company had a credit loss allowance for reinsurance receivables of $97.
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Rollforward of Credit Loss Allowance for Reinsurance Receivable
As of
December 31, 2023
Beginning balance, January 1, 2023$82 
Current-period provision for expected credit losses15
Ending balance of the allowance for reinsurance receivable, December 31, 2023$97 
With respect to premiums receivable, the Company utilizes an aging method to estimate credit losses. An allowance for doubtful accounts is based on a periodic evaluation of the aging and collectability of amounts due from agents and policyholders. "Premiums receivable" are presented in the Consolidated Balance Sheets net of an estimated allowance for doubtful accounts and recorded through "Other underwriting expenses" in the Consolidated Statements of Income and Comprehensive Income. Outstanding audit premiums that are overdue after six months with no payments are written off and turned over to our collection agency.
Comprehensive Income
Comprehensive income includes all changes in stockholders' equity during a period except those resulting from investments by and dividends to stockholders.
Subsequent Events
In the preparation of the accompanying financial statements, the Company has evaluated all material subsequent events or transactions that occurred after the balance sheet date through the date on which the financial statements were issued for potential recognition or disclosure in the Company's financial statements.
On February 1, 2024, the Company filed a Form 8-K with the SEC to disclose that we entered into an investment management agreement (the "Investment Management Agreement") with New England Asset Management ("NEAM"), effective as of February 1, 2024, pursuant to which NEAM will provide investment management services subject to the terms and conditions set forth in the Investment Management Agreement. The Investment Management Agreement can be terminated at any time upon 30 days' written notice by either party and will remain in effect until terminated.

On January 31, 2024, the Company and Robert Cataldo mutually agreed to the separation of Mr. Cataldo's employment as Vice President and Chief Investment and Strategy Officer of the Company, effective no later than May 24, 2024. The complete terms of Mr. Cataldo's separation package are under negotiation and are expected to be set forth in a definitive separation agreement.

Recently Issued Accounting Standards

Accounting Standards Adopted in 20172021
Share-Based PaymentsDefined Benefit Plans - Disclosures
In March 2016,August 2018, the Financial Accounting Standards Board ("FASB")FASB issued new guidance onwhich modifies the accountingdisclosure requirements for share-based payments.employers that sponsor defined benefit pension and postretirement plans. The new guidance was issuedremoves the requirement for disclosing the amounts in accumulated other comprehensive income expected to simplify the accountingbe recognized as components of share-based payments, specificallynet periodic benefit costs in the areasnext year and the sensitivity of income taxes, classification on the balance sheets as liabilities or equity and classificationpostretirement health plans to one-percentage-point changes in the cash flow statement.medical trend rates. The new guidance is effective for annual periods beginning after December 15, 2016 and interim periods within those years. The Company adopted the new guidance prospectively as of January 1, 2017. The new guidance resulted in classification changes between the financing and operating section of the Statement of Cash Flow for stock based compensation expense. The adoption also resulted in a tax benefit of $149 and $695 during the three- and twelve-months ended December 31, 2017.


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Income Taxes
In December 2015, the FASB issued guidance on the balance sheet classification of deferred taxes. The new guidance eliminates the requirement to split deferred tax liabilities and assets between current and non-current in a classified balance sheet. The new guidance allows deferred tax liabilities and assets to be included in non-current accounts.2020. The Company adopted the new guidance as of January 1, 2017.2021. The adoption had nonew guidance modified disclosures but did not have an impact on the Company's financial position and results of operations since we do not currently report deferred taxes in classified balance sheets.operations.
ReclassificationIncome Taxes
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Table of Certain Tax Effects from Accumulated Other Comprehensive IncomeContents
In February 2018, the FASB finalized the proposed accounting guidance which allows entities to reclassify from accumulated other comprehensive income to retained earnings stranded tax effects resulting from the new federal corporate income tax rate. The pronouncement permits the reclassification of other stranded tax effects that relate to the Tax Cuts and Jobs Act (the "Tax Act") but do not directly relate to the change in the federal rate. The guidance is effective for fiscal years beginning after 15 December 2018, and interim periods within those fiscal years. Early adoption is permitted for reporting periods for which financial statements have not yet been issued or made available for issuance. The Company has early adopted this guidance for the December 31, 2017 Consolidated Financial Statements. The reclassification from Accumulated Other Comprehensive Income to Retained Earnings for the stranded tax effects resulting from the new federal corporate income tax rate was $31.3 million at December 31, 2017.
Pending Adoption of Accounting Standards
Revenue Recognition
In May 2014,2019 the FASB issued comprehensive new guidance on revenue recognition which supersedes nearly all existing revenue recognition guidance under GAAP.simplifies the accounting for income taxes by removing certain exceptions to income tax accounting. The amendments also improve consistent application of and simplify GAAP for other areas of income tax accounting. The new guidance requiresclarifies and amends existing guidance, including removing certain requirements that an entity evaluate when a company to recognize revenuestep-up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it transfers promised goodsshould be considered a separate transaction, and requiring an entity to reflect the effect of an enacted change in tax laws or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard creates a five-step model that requires companies to exercise judgment when considering the terms of the contract(s) and all relevant facts and circumstances. Insurance contracts are not within the scope of this new guidance. The new guidance is effective for annual and interim periods beginning after December 15, 2017. The Company has adopted the guidance as of January 1, 2018. The Company has completed its review of revenue streams under this new guidance and concluded that the adoption of the new guidance will have no impact on the Company's reporting and disclosure of net premiums earned from insurance contracts, net investment income or net realized gains and losses, as these revenue streams are not within the scope of this new guidance. The remaining revenue streams are immaterial and not impacted by the new standard.
Financial Instruments
In January 2016, the FASB issued guidance updating certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments in this update supersede the guidance to classify equity securities with readily determinable fair values into different categories (for example, trading or available-for-sale) and require equity securities to be measured at fair value with changesrates in the fair value recognized through net income. The new guidance also simplifiesannual effective tax rate computation in the impairment process for equity investments without readily determinable fair values.interim period that includes the enactment date. The new guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those years.2020. The Company has adopted the new guidance as of January 1, 2018. If the2021. The new guidance had been adopted as of December 31, 2017, there would be a reclassification from accumulated other comprehensive income to retained earnings of $242.1 million, which is equal to the amount of net unrealized gains and losses on available-for-sale equity securities at December 31, 2017 disclosed in Note 2 "Summary of Investments," of this section. The impact to net realized gains (losses) would equal the change in net unrealized gains and losses on available-for-sale equity securities between December 31, 2017 and December 31, 2016, in the same tables.


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Statement of Cash Flows - Classification of Certain Cash Receipts and Payments
In August 2016, the FASB issueddid not have an update that clarifies the classification of certain cash receipts and payments in the Statement of Cash Flows. The update addresses eight existing cash flow issues by clarifying the correct classification to establish uniformity in practice. The updated guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those years. The Company has adopted the new guidance as of January 1, 2018. The adoption will have no impact on the Company's financial position and results of operations.
Defined Benefit Retirement Plan Cost
In March 2017,Accounting Standards Adopted in 2022

Inflation Reduction Act

On August 16, 2022, the FASB issued guidanceU.S. government enacted the Inflation Reduction Act ("IRA") which, among other changes, created a new corporate alternative minimum tax ("CAMT") based on the presentationadjusted financial statement income and imposes a 1% excise tax on corporate stock repurchases. The effective date of net periodic benefit costs of defined benefit retirement benefit plansthese provisions is January 1, 2023. The Company was not subject to CAMT in the Statements of Income. The new guidance requires the service cost component of net periodic benefit cost of defined benefit plans2023, does not expect to be presented in the same line in the Statements of Income as other employee compensation expenses. Also, under the new guidance, the service cost component of the net periodic benefit costs will be the only portion of costs subject to be capitalizedCAMT in assets. The new guidance is effective for annual periods beginning after December 15, 20172024 and interim periods within those years. The Company has adopteddoes not expect the new guidance as of January 1, 2018 and will update the presentation of net periodic benefit costs in its financial statements beginning with its first quarter Form 10-Q as of March 31, 2018. The adoption willIRA to have an immaterial impact on the Company's financial position and results of operations.
Share-Based Payments
In May 2017, the FASB issued new guidance which clarifies and addresses the diversity in practice when there is a change in the terms of a share-based payment award. The updated guidance clarifies when to use modification accounting when there is a change in the terms of a share-based payment and provides three conditions where modification accounting should not be applied. The new guidance is effective for annual and interim periods beginning after December 15, 2017. The Company has adopted the new guidance as of January 1, 2018. The adoption will have no impact on the Company's financial position and results of operations.
Leases
In February 2016, the FASB issued guidance on the accounting for leases. The new guidance requires lessees to place a right-of-use asset and a lease liability, for all leases with terms greater than 12 months, on their balance sheets. The lease liability will be based on the present value of the future lease payments and the asset will be based on the liability. Expenses will be recognized on the income statement in a similar manner as previous methods. The new guidance is effective for annual periods beginning after December 15, 2018 and interim periods within those years. The Company will adopt the new guidance as of January 1, 2019. The Company has created an inventory of its operating leases and has calculated the undiscounted future minimum lease payments, which are disclosed in Note 13. Lease Commitments. The undiscounted future minimum lease payments at December 31, 2017 is $22.5 million, which represents less than 1.0 percent of the Company's total assets at December 31, 2017. The Company is reviewing and working on updating it's processes and controls under the new guidance. Management currently believes that the adoption will not have a significant impact on the Company's financial position and results of operations.
Financial Instruments - Credit Losses
In June 2016, the FASB issued new guidance on the measurement of credit losses for most financial instruments. The new guidance replaces the current incurred loss model for recognizing credit losses with an expected loss model for instruments measured at amortized cost and requires allowances to be recorded for available-for-sale debt securities rather than reduce the carrying amount. These allowances will be remeasured each reporting period. The new guidance is effective for annual periods beginning after December 15, 2020 and interim periods within those years. The Company will adopt the new guidance as of January 1, 2021 and is currently evaluating the impact on the Company's financial position, results of operations and key processes.




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Income Taxes - Intra-entity Transfers
In October 2016, the FASB issued new guidance on the income tax treatment of intra-entity transfers. The new guidance replaces the current guidance which prohibits the recognition of current and deferred income taxes of intra-entity transfers until the asset is sold externally. Under the new guidance, the exemption is eliminated and income taxes will be recognized on transfers of intra-entity assets. The new guidance is effective for annual periods beginning after December 15, 2018 and interim periods beginning after December 15, 2019. The Company will adopt the new guidance as of January 1, 2019 and is currently evaluating the impact on the Company's financial position and results of operations.
Goodwill
In January 2017, the FASB issued new guidance which simplifies the test for goodwill impairment. The new guidance eliminates the implied fair value calculation when measuring a goodwill impairment charge. Under the new guidance, impairment charges will be based on the excess of the carrying value over fair value of goodwill. The new guidance is effective for annual and interim periods beginning after December 15, 2019. The Company will adopt the new guidance as of January 1, 2020 and it currently believes the adoption will have no impact on the Company's financial position and results of operations.

NOTE 2. SUMMARY OF INVESTMENTS
Fair Value of Investments


The table that follows 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 available-for-sale equity securities, presented on a consolidated basis including both continuing and discontinued operations as of December 31, 20172023 and 2016.2022.





December 31, 2023
Type of InvestmentCost or Amortized Cost Gross Unrealized Appreciation Gross Unrealized Depreciation Fair ValueAllowance for Credit LossesCarrying Value
AVAILABLE-FOR-SALE
Fixed maturities:
Bonds
U.S. Treasury$51,211 $325 $675 $50,861 $— $50,861 
U.S. government agency102,540 255 8,302 94,493 — 94,493 
States, municipalities and political subdivisions
General obligations:
Midwest52,712 132 137 52,707 — 52,707 
Northeast11,422 1 43 11,380 — 11,380 
South54,560 47 400 54,207 — 54,207 
West77,874 23 471 77,426 — 77,426 
Special revenue:
Midwest101,037 302 358 100,981 — 100,981 
Northeast52,708 79 560 52,227 — 52,227 
South166,119 302 2,155 164,266 — 164,266 
West102,254 147 836 101,565 — 101,565 
Foreign bonds21,255 — 2,083 19,172 — 19,172 
Public utilities149,734 787 10,054 140,467 — 140,467 
Corporate bonds
Energy45,351 249 2,127 43,473 — 43,473 
Industrials74,760 727 4,939 70,548 — 70,548 
Consumer goods and services103,315 271 7,665 95,921 — 95,921 
Health care37,872 99 4,499 33,472 — 33,472 
Technology, media and telecommunications87,002 451 5,665 81,788 — 81,788 
Financial services152,329 743 7,381 145,691 1 145,690 
Mortgage-backed securities23,800 11 2,328 21,483 — 21,483 
Collateralized mortgage obligations
Government national mortgage association164,666 1,282 12,742 153,206 — 153,206 
Federal home loan mortgage corporation84,842 20 13,177 71,685 — 71,685 
Federal national mortgage association50,284 33 4,664 45,653 — 45,653 
Asset-backed securities3,394 524 87 3,831 — 3,831 
Total Available-for-Sale Fixed Maturities$1,771,041 $6,810 $91,348 $1,686,503 $1 $1,686,502 

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December 31, 2022
Type of InvestmentCost or Amortized Cost Gross Unrealized Appreciation Gross Unrealized Depreciation Fair ValueAllowance for Credit LossesCarrying Value
AVAILABLE-FOR-SALE
Fixed maturities:
Bonds
U.S. Treasury$15,684 $— $1,009 $14,675 $— $14,675 
U.S. government agency94,092 35 9,721 84,406 — 84,406 
States, municipalities and political subdivisions
General obligations:
Midwest61,191 185 263 61,113 — 61,113 
Northeast15,518 18 73 15,463 — 15,463 
South64,851 57 927 63,981 — 63,981 
West87,094 163 712 86,545 — 86,545 
Special revenue:
Midwest103,107 224 1,065 102,266 — 102,266 
Northeast55,292 76 1,148 54,220 — 54,220 
South184,108 278 3,529 180,857 — 180,857 
West113,594 275 1,657 112,212 — 112,212 
Foreign bonds36,129 — 4,480 31,649 — 31,649 
Public utilities138,752 65 13,406 125,411 — 125,411 
Corporate bonds
Energy36,507 — 3,298 33,209 — 33,209 
Industrials58,334 62 5,554 52,842 — 52,842 
Consumer goods and services100,539 — 10,598 89,941 — 89,941 
Health care32,987 24 5,419 27,592 — 27,592 
Technology, media and telecommunications67,193 — 7,253 59,940 — 59,940 
Financial services132,849 851 9,408 124,292 3 124,289 
Mortgage-backed securities20,450 — 2,750 17,700 — 17,700 
Collateralized mortgage obligations
Government national mortgage association97,839 — 13,291 84,548 — 84,548 
Federal home loan mortgage corporation92,366 — 13,528 78,838 — 78,838 
Federal national mortgage association50,272 5 4,891 45,386 — 45,386 
Asset-backed securities3,932 466 145 4,253 — 4,253 
Total Available-for-Sale Fixed Maturities$1,662,680 $2,784 $114,125 $1,551,339 $3 $1,551,336 
December 31, 2017 
Type of InvestmentCost 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 securities34
 —
 —
 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 agency121,574
 1,311
 717
 122,168
States, municipalities and political subdivisions       
  General obligations:       
     Midwest107,689
 2,446
 439
 109,696
     Northeast47,477
 1,174
 10
 48,641
     South139,870
 2,462
 813
 141,519
     West111,123
 2,351
 463
 113,011
   Special revenue:       
     Midwest155,475
 3,620
 351
 158,744
     Northeast79,028
 1,351
 619
 79,760
     South260,145
 5,218
 1,851
 263,512
     West156,576
 2,929
 1,198
 158,307
Foreign bonds51,361
 1,441
 49
 52,753
Public utilities206,028
 3,386
 270
 209,144
Corporate bonds       
Energy93,191
 1,972
 110
 95,053
Industrials218,067
 3,881
 241
 221,707
Consumer goods and services183,253
 3,498
 494
 186,257
Health care74,125
 1,312
 29
 75,408
Technology, media and telecommunications146,853
 2,376
 250
 148,979
Financial services277,824
 5,769
 442
 283,151
Mortgage-backed securities13,828
 101
 238
 13,691
Collateralized mortgage obligations       
Government national mortgage association157,836
 1,921
 2,274
 157,483
Federal home loan mortgage corporation201,320
 1,879
 4,047
 199,152
Federal national mortgage association104,903
 1,703
 1,174
 105,432
Asset-backed securities4,282
 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
Energy6,514
 8,171
 120
 14,565
Industrials13,117
 53,522
 120
 66,519
Consumer goods and services10,110
 15,742
 164
 25,688
Health care7,763
 32,340
 —
 40,103
Technology, media and telecommunications6,067
 11,556
 115
 17,508
Financial services11,529
 104,985
 67
 116,447
Nonredeemable preferred stocks992
 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


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December 31, 2016 
Type of InvestmentCost 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 securities48
 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 agency76,692
 1,445
 540
 77,597
States, municipalities and political subdivisions       
   General obligations:       
      Midwest143,747
 1,808
 1,412
 144,143
      Northeast57,731
 909
 231
 58,409
      South129,475
 1,249
 2,355
 128,369
      West114,524
 1,380
 2,173
 113,731
   Special revenue:       
      Midwest167,430
 2,313
 1,433
 168,310
      Northeast70,202
 487
 2,624
 68,065
      South244,225
 1,753
 6,791
 239,187
      West134,287
 1,509
 4,052
 131,744
Foreign bonds62,995
 2,239
 —
 65,234
Public utilities212,360
 3,761
 447
 215,674
Corporate bonds       
Energy107,084
 2,195
 419
 108,860
Industrials225,526
 5,359
 982
 229,903
Consumer goods and services178,135
 3,847
 295
 181,687
Health care81,211
 2,063
 151
 83,123
Technology, media and telecommunications143,402
 2,029
 819
 144,612
Financial services269,981
 5,328
 1,358
 273,951
Mortgage-backed securities17,288
 201
 241
 17,248
Collateralized mortgage obligations       
Government national mortgage association145,947
 1,279
 2,766
 144,460
Federal home loan mortgage corporation176,226
 1,638
 3,406
 174,458
Federal national mortgage association101,414
 1,816
 1,334
 101,896
Asset-backed securities4,407
 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
Energy6,514
 8,555
 22
 15,047
Industrials13,252
 38,715
 173
 51,794
Consumer goods and services10,324
 13,851
 58
 24,117
Health care7,763
 19,657
 —
 27,420
Technology, media and telecommunications5,931
 9,476
 38
 15,369
Financial services17,289
 98,728
 67
 115,950
Nonredeemable preferred stocks1,037
 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


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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 InvestmentCost or Amortized Cost Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value
HELD-TO-MATURITY       
Fixed maturities:       
Continuing operations$150
 $—
 $—
 $150
Discontinued operations34
 —
 —
 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 operations1,412,291
 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 operations5,099
 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 InvestmentCost or Amortized Cost Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value
HELD-TO-MATURITY       
Fixed maturities:       
Continuing operations$150
 $—
 $—
 $150
Discontinued operations48
 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 operations1,429,270
 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 operations8,510
 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



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Maturities
The amortized cost and fair value of held-to-maturity, available-for-sale and trading fixed maturity securities at December 31, 2017,2023, 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.
81
Maturities - Consolidated:           
 Held-To-Maturity Available-For-Sale Trading
December 31, 2017Amortized 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 years150
 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 securities34
 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, 2017Amortized 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 years150
 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, 2017Amortized 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 securities34
 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, 2023 Amortized Cost Fair Value
Due in one year or less $74,293  $74,066 
Due after one year through five years 524,463  515,126 
Due after five years through 10 years 523,999  496,643 
Due after 10 years 321,300  304,810 
Asset-backed securities3,394 3,831 
Mortgage-backed securities 23,800  21,483 
Collateralized mortgage obligations 299,792  270,544 
  $1,771,041  $1,686,503 
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, 20162023, 2022 and 2015,2021, is as follows:
 2017 2016 2015
Net realized investment gains (losses) from continuing operations     
Fixed maturities:     
Available-for-sale$829
 $1,004
 $814
Trading securities     
Change in fair value924
 189
 (1,352)
Sales244
 931
 1,381
Equity securities:     
Available-for-sale1,553
 2,359
 1,977
Trading securities     
Change in fair value332
 301
 (448)
Sales57
 (6) 66
Other long-term investments—
 —
 (1,314)
Other-than-temporary-impairment charges:     
Fixed maturities—
 —
 —
Cash equivalents—
 169
 —
   Real Estate116
 —
 —
   Total net realized investment gains from continuing operations$4,055

$4,947

$1,124
   Total net realized investment gains from discontinued operations4,008
 1,156
 1,722
Total net realized investment gains$8,063
 $6,103
 $2,846
2023 20222021
Net investment gains (losses)   
Fixed maturities:
Available-for-sale$(442)$(1,397)$(277)
Allowance for Credit Losses1 (3)5 
Equity securities:
Net gains (losses) recognized on equity securities sold during the period150 (1,767)14,444 
Unrealized gains (losses) recognized during the period on equity securities still held at reporting date1,842 (12,802)30,682 
Net gains (losses) recognized during the reporting period on equity securities1,992 (14,569)45,126 
Mortgage loans(5)109 5 
Other long-term assets(319) (267)2,780 
Real Estate47 235 (256)
   Total net investment gains (losses)$1,274 $(15,892)$47,383 
The proceeds and gross realized gains (losses) on the sale of available-for-sale fixed maturity securities from continuing operations for 2017, 20162023, 2022 and 2015,2021, are as follows:
2023 20222021
Proceeds from sales$77,388  $83,559 $180,514 
Gross realized gains265  459 843 
Gross realized losses707  1,857 1,120 
 2017 2016 2015
Proceeds from sales$7,404
 $1,968
 $478
Gross realized gains1,046
 920
 451
Gross realized losses(20) —
 —

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



82
 2017 2016 2015
Proceeds from sales$7,315
 $12,354
 $11,066
Gross realized gains1,264
 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 and $20,034 at December 31, 2017 and 2016, respectively.




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Net Investment Income
Net investment income for the years ended December 31, 2017, 20162023, 2022 and 2015,2021, is comprised of the following:
Years Ended December 31,2023 20222021
Investment income:
Interest on fixed maturities$56,243 $48,702 $43,224 
Dividends on equity securities3,548 5,163 5,031 
Income on other long-term investments
Investment income2,833 4,742 4,481 
Change in value (1)
(2,864)(7,930)9,699 
Interest on mortgage loans1,889 1,897 1,995 
Interest on short-term investments1,068 354 18 
Interest on cash and cash equivalents2,228 740 252 
Other4,139 780 152 
Total investment income$69,084 $54,448 $64,852 
Less investment expenses9,478 9,516 9,074 
Net investment income$59,606 $44,932 $55,778 
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 securities7,108
 6,448
 6,421
Income on other long-term investments     
Investment income6,870
 1,200
 1,200
Change in value (1)
(2,812) 10,178
 2,313
Interest on short-term investments120
 47
 3
Interest on cash and cash equivalents1,125
 352
 234
Other300
 422
 433
Total investment income from continuing operations$57,495
 $61,794
 $52,463
Less investment expenses6,305
 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, pursuantPursuant to an agreementagreements 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 throughpartnerships. Our remaining potential contractual obligation was $28,630 at December 31, 2023.
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 versus 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, 2023:
Rollforward of allowance for credit losses for available-for-sale fixed maturity securities:
As of
December 31, 2023
Beginning balance, January 1, 2023$3 
Additions to the allowance for credit losses for which credit losses were not previously recorded$— 
Reductions for securities sold during the period (realized)— 
Writeoffs charged against the allowance— 
Recoveries of amounts previously written off(2)
Ending balance, December 31, 2023$1 




83
Unrealized Appreciation and Depreciation
A summary of changes in net unrealized investment appreciation for 2017, 20162023, 2022 and 2015,2021, is as follows for continuing operations and discontinued operations:follows:
 2017 2016 2015
Change in net unrealized investment appreciation     
Available-for-sale fixed maturities$25,573

$(21,271) $(37,621)
Available-for-sale equity securities40,168
 34,179
 (6,459)
Deferred policy acquisition costs119
 (4,410) 11,380
Income tax effect(21,545) (2,975) 11,446
Accumulated effect of change in enacted tax rate36,658
 —
 —
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.


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2023 20222021
Change in net unrealized investment appreciation (depreciation)   
Available-for-sale fixed maturities$27,091 $(174,858)$(42,159)
Income tax effect(5,689) 36,720 8,858 
Total change in net unrealized investment appreciation (depreciation), net of tax$21,402  $(138,138)$(33,301)
The tables on the following pagestables summarize our fixed maturity and equity securities that were in an unrealized loss position reported on a consolidated basis at December 31, 20172023 and 2016 for continuing operations and discontinued operations.2022. 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 thatNon-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 incomprehensive 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 intentionintent 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
84
December 31, 2023Less than 12 months12 months or longerTotal
Type of InvestmentNumber
of Issues		Fair
Value		Gross Unrealized
Depreciation		Number
of Issues		Fair
Value		Gross Unrealized DepreciationFair
Value		Gross Unrealized Depreciation
AVAILABLE-FOR-SALE
Fixed maturities:
Bonds
U.S. Treasury2 $4,138 $46 6 $12,717 $629 $16,855 $675 
U.S. government agency3 10,986 14 23 71,375 8,288 82,361 8,302 
States, municipalities and political subdivisions
General obligations:
Midwest11 19,534 61 310,7377630,271 137 
Northeast3 5,371 8 13,469358,840 43 
South12 21,753 91 916,61030938,363 400 
West17 38,204 140 720,06433158,268 471 
Special revenue:
Midwest17 29,535 113 1123,37524552,910 358 
Northeast6 15,131 67 824,27149339,402 560 
South21 45,639 232 32 66,925 1,923 112,564 2,155 
West20 32,789 248 16 38,49558871,284 836 
Foreign bonds— — — 9 19,172 2,083 19,172 2,083 
Public utilities4 7,151 74 48 111,793 9,980 118,944 10,054 
Corporate bonds
Energy— — — 15 34,331 2,127 34,331 2,127 
Industrials1 1,210 19 21 47,462 4,920 48,672 4,939 
Consumer goods and services4 14,724 98 28 68,837 7,567 83,561 7,665 
Health care1 3,000 2 11 26,544 4,497 29,544 4,499 
Technology, media and telecommunications1 3,969 35 27 62,988 5,630 66,957 5,665 
Financial services5 14,327 223 44 112,517 7,158 126,844 7,381 
Mortgage-backed securities3 2,783 33 48 15,758 2,295 18,541 2,328 
Collateralized mortgage obligations
Government National Mortgage Association2 7,055 27 40 72,565 12,715 79,620 12,742 
Federal Home Loan Mortgage Corporation2 2,589 22 31 66,361 13,155 68,950 13,177 
Federal National Mortgage Association2 5,454 55 20 31,460 4,609 36,914 4,664 
Asset-backed securities— — — 1 2,962 87 2,962 87 
Total Available-for-Sale Fixed Maturities137 $285,342 $1,608 459 $960,788 $89,740 $1,246,130 $91,348 

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 recognizedour 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 intentionintent to sell, any ofand 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 monitoruntil the fair value reported for theserecovers to at least equal our cost basis or the securities as part of our overall process to evaluate investments for OTTI recognition.



















mature.

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94

December 31, 2022Less than 12 months12 months or longerTotal
Type of InvestmentNumber
of Issues		Fair
Value		Gross Unrealized DepreciationNumber
of Issues		Fair
Value		Gross Unrealized DepreciationFair
Value		Gross Unrealized Depreciation
AVAILABLE-FOR-SALE
Fixed maturities
Bonds
U.S. Treasury4 $6,656 $212 4 $8,019 $797 $14,675 $1,009 
U.S. government agency24 70,158 5,606 3 11,242 4,115 81,400 9,721 
States, municipalities and political subdivisions
South58 126,388 3,124 1 866 405 127,254 3,529 
Foreign bonds9 21,377 1,861 5 10,272 2,619 31,649 4,480 
Public utilities45 101,867 8,737 9 19,979 4,669 121,846 13,406 
Corporate bonds
Energy15 28,612 1,930 1 4,597 1,368 33,209 3,298 
Industrials21 43,639 3,542 4 7,049 2,012 50,688 5,554 
Consumer goods and services28 69,320 4,440 7 20,620 6,157 89,940 10,597 
Health care5 9,829 487 6 15,928 4,933 25,757 5,420 
Technology, media and telecommunications23 49,970 3,279 5 9,970 3,974 59,940 7,253 
Financial services40 101,411 6,997 5 11,236 2,208 112,647 9,205 
Mortgage-backed securities38 7,909 1,056 12 9,791 1,693 17,700 2,749 
Collateralized mortgage obligations
Government National Mortgage Association29 48,898 4,500 12 35,650 8,791 84,548 13,291 
Federal Home Loan Mortgage Corporation21 35,456 5,629 19 43,383 7,900 78,839 13,529 
Federal National Mortgage Association14 24,146 1,281 7 16,674 3,611 40,820 4,892 
Total Available-for-Sale Fixed Maturities534 $1,085,847 $58,671 100 $225,276 $55,252 $1,311,123 $113,923 
                
December 31, 2017Less than 12 months 12 months or longer Total
Type of InvestmentNumber
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. Treasury5
 $10,370
 $67
 2
 $5,765
 $119
 $16,135
 $186
U.S. government agency11
 64,842
 390
 5
 19,372
 327
 84,214
 717
States, municipalities and political subdivisions               
   General obligations               
      Midwest2
 2,177
 8
 3
 19,729
 431
 21,906
 439
      Northeast—
 —
 —
 1
 3,644
 10
 3,644
 10
      South3
 7,959
 32
 11
 29,545
 781
 37,504
 813
      West2
 5,944
 18
 8
 25,755
 445
 31,699
 463
   Special revenue               
      Midwest2
 3,486
 15
 7
 19,130
 336
 22,616
 351
      Northeast1
 4,471
 37
 11
 28,476
 582
 32,947
 619
      South8
 7,749
 107
 27
 69,917
 1,744
 77,666
 1,851
      West3
 5,424
 16
 22
 56,753
 1,182
 62,177
 1,198
Foreign bonds1
 857
 49
 —
 —
 —
 857
 49
Public utilities8
 19,186
 79
 5
 8,446
 191
 27,632
 270
Corporate bonds               
Energy1
 2,236
 13
 1
 1,606
 97
 3,842
 110
Industrials10
 27,773
 146
 2
 4,275
 95
 32,048
 241
Consumer goods and services14
 32,781
 248
 3
 6,813
 246
 39,594
 494
Health care4
 9,947
 29
 —
 —
 —
 9,947
 29
Technology, media and telecommunications12
 35,319
 122
 3
 10,413
 128
 45,732
 250
Financial services22
 50,144
 256
 4
 11,389
 186
 61,533
 442
Mortgage-backed securities10
 2,458
 18
 10
 6,641
 220
 9,099
 238
Collateralized mortgage obligations               
Government national mortgage association20
 49,764
 629
 17
 46,969
 1,645
 96,733
 2,274
Federal home loan mortgage corporation11
 37,543
 577
 20
 75,679
 3,470
 113,222
 4,047
Federal national mortgage association11
 31,958
 342
 11
 20,123
 832
 52,081
 1,174
Asset-backed securities1
 992
 8
 —
 —
 —
 992
 8
Total Available-for-Sale Fixed Maturities162
 $413,380
 $3,206
 173
 $470,440
 $13,067
 $883,820
 $16,273
Equity securities               
Common stocks               
Public utilities—
 $—
 $—
 1
 $278
 $30
 $278
 $30
Energy2
 528
 120
 —
 —
 —
 528
 120
Industrials1
 99
 13
 5
 193
 107
 292
 120
Consumer goods and services—
 —
 —
 2
 151
 164
 151
 164
Technology, media and telecommunications2
 466
 95
 1
 4
 20
 470
 115
Financial services2
 193
 55
 1
 9
 12
 202
 67
Total Available-for-Sale Equity Securities7
 $1,286
 $283
 10
 $635
 $333
��$1,921
 $616
Total Available-for-Sale Securities169
 $414,666
 $3,489
 183
 $471,075
 $13,400
 $885,741
 $16,889


95

                
December 31, 2016Less than 12 months 12 months or longer Total
Type of InvestmentNumber
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. Treasury9
 $10,800
 $108
 —
 $—
 $—
 $10,800
 $108
U.S. government agency10
 36,593
 540
 —
 —
 —
 36,593
 540
States, municipalities and political subdivisions               
   General obligations               
      Midwest27
 40,545
 1,412
 —
 —
 —
 40,545
 1,412
      Northeast9
 9,874
 231
 —
 —
 —
 9,874
 231
      South37
 53,699
 2,355
 —
 —
 —
 53,699
 2,355
      West30
 55,265
 2,173
 —
 —
 —
 55,265
 2,173
   Special revenue               
      Midwest41
 62,937
 1,433
 —
 —
 —
 62,937
 1,433
      Northeast22
 54,993
 2,624
 —
 —
 —
 54,993
 2,624
      South79
 152,979
 6,791
 —
 —
 —
 152,979
 6,791
      West44
 81,676
 4,052
 —
 —
 —
 81,676
 4,052
Public utilities20
 38,511
 423
 2
 2,122
 24
 40,633
 447
Corporate bonds               
Energy8
 15,938
 313
 3
 8,232
 106
 24,170
 419
Industrials24
 42,854
 596
 3
 5,641
 386
 48,495
 982
Consumer goods and services11
 21,059
 295
 —
 —
 —
 21,059
 295
Health care9
 20,918
 151
 —
 —
 —
 20,918
 151
Technology, media and telecommunications16
 41,230
 516
 3
 10,241
 303
 51,471
 819
Financial services37
 75,286
 1,358
 —
 —
 —
 75,286
 1,358
Mortgage-backed securities16
 9,611
 187
 5
 1,198
 54
 10,809
 241
Collateralized mortgage obligations               
Government national mortgage association36
 82,430
 2,261
 9
 13,603
 505
 96,033
 2,766
Federal home loan mortgage corporation41
 105,775
 3,165
 3
 5,141
 241
 110,916
 3,406
Federal national mortgage association27
 46,633
 1,091
 4
 4,341
 243
 50,974
 1,334
Asset-backed securities1
 971
 29
 1
 2,559
 253
 3,530
 282
Total Available-for-Sale Fixed Maturities554
 $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 services3
 282
 55
 2
 15
 3
 297
 58
Technology, media and telecommunications7
 26
 5
 8
 33
 33
 59
 38
Financial services3
 53
 3
 2
 150
 64
 203
 67
Total Available-for-Sale Equity Securities13
 $361
 $63
 22
 $720
 $483
 $1,081
 $546
Total Available-for-Sale Securities567
 $1,060,938
 $32,167
 55
 $53,798
 $2,598
 $1,114,736
 $34,765


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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:

                
December 31, 2017Less than 12 months 12 months or longer Total
Type of InvestmentNumber
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:               
Continuing operations88
 232,489
 1,791
 112
 302,815
 7,161
 $535,304
 $8,952
Discontinued operations74
 180,891
 1,415
 61
 167,625
 5,906
 348,516
 7,321
Total Available-for-Sale Fixed Maturities162
 $413,380
 $3,206
 173
 $470,440
 $13,067
 $883,820
 $16,273
Equity securities:               
Continuing operations5
 1,129
 236
 6
 385
 303
 $1,514
 $539
Discontinued operations2
 157
 47
 4
 250
 30
 407
 77
Total Available-for-Sale Equity Securities7
 $1,286
 $283
 10
 $635
 $333
 $1,921
 $616
Total Available-for-Sale Securities169
 $414,666
 $3,489
 183
 $471,075
 $13,400
 $885,741
 $16,889

                
December 31, 2016Less than 12 months 12 months or longer Total
Type of InvestmentNumber
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:               
Continuing operations404
 $654,235
 $23,359
 12
 $6,288
 $315
 $660,523
 $23,674
Discontinued operations150
 406,342
 8,745
 21
 46,790
 1,800
 453,132
 10,545
Total Available-for-Sale Fixed Maturities554
 $1,060,577
 $32,104
 33
 $53,078
 $2,115
 $1,113,655
 $34,219
Equity securities:               
Continuing operations12
 $351
 $62
 17
 $477
 $254
 $828
 $316
Discontinued operations1
 10
 1
 5
 243
 229
 253
 230
Total Available-for-Sale Equity Securities13
 $361
 $63
 22
 $720
 $483
 $1,081
 $546
Total Available-for-Sale Securities567
 $1,060,938
 $32,167
 55
 $53,798
 $2,598
 $1,114,736
 $34,765



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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.
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•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'ssecurity's fair value, which is a Level 3 fair value measurement.


98

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.value.
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, 2017,2023, the cash surrender value of the COLI policies was $4,029,$11,913, 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.


























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99





A summary of the carrying value and estimated fair value of our financial instruments from continuing operations at December 31, 20172023 and 20162022 is as follows:
 December 31, 2023December 31, 2022
Fair ValueCarrying ValueFair ValueCarrying Value
Assets    
Investments    
Fixed maturities:
Available-for-sale securities$1,686,503 $1,686,502 $1,551,339 $1,551,336 
Equity securities55,019 55,019 169,106 169,106 
Mortgage loans42,632 45,366 35,302 37,898 
Other long-term investments99,507 99,507 86,276 86,276 
Short-term investments100 100 275 275 
Cash and cash equivalents102,046 102,046 96,650 96,650 
Corporate-owned life insurance11,913 11,913 10,588 10,588 
Liabilities
Long term debt38,413 50,000 36,168 50,000 
 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 securities1,535,070
 1,535,070
 1,453,286
 1,453,286
Trading securities16,842
 16,842
 14,390
 14,390
Equity securities:       
Available-for-sale securities280,913
 280,913
 246,370
 246,370
Trading securities6,431
 6,431
 5,644
 5,644
Other long-term investments49,352
 49,352
 51,769
 51,769
Short-term investments175
 175
 175
 175
Cash and cash equivalents95,562
 95,562
 89,194
 89,194
Corporate-owned life insurance4,029
 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:













88
 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 securities1,430,025
 1,430,025
 1,444,840
 1,444,840
Equity securities:       
Available-for-sale securities23,653
 23,653
 24,046
 24,046
Mortgage loans3,594
 3,435
 3,895
 3,706
Policy loans5,815
 5,815
 5,366
 5,366
Other long-term investments16,437
 16,437
 15,870
 15,870
Cash and cash equivalents15,851
 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

The following tables present the categorization for our financial instruments measured at fair value on a recurring basis and financial instruments not recorded at fair value on a recurring basis. The tabletables include financial instruments from both continuing and discontinued operations at December 31, 20172023 and 2016:2022:
Fair Value Measurements
DescriptionDecember 31, 2023Level 1Level 2Level 3
AVAILABLE-FOR-SALE
Fixed maturities:
Bonds
U.S. Treasury$50,861 $— $50,861 $— 
U.S. government agency94,493 — 94,493 — 
States, municipalities and political subdivisions
General obligations
Midwest52,707 — 52,707 — 
Northeast11,380 — 11,380 — 
South54,207 — 54,207 — 
West77,426 — 77,426 — 
Special revenue
Midwest100,981 — 100,981 — 
Northeast52,227 — 52,227 — 
South164,266 — 164,266 — 
West101,565 — 101,565 — 
Foreign bonds19,172 — 19,172 — 
Public utilities140,467 — 140,467 — 
Corporate bonds
Energy43,473 — 43,473 — 
Industrials70,548 — 70,548 — 
Consumer goods and services95,921 — 95,921 — 
Health care33,472 — 33,472 — 
Technology, media and telecommunications81,788 — 81,788 — 
Financial services145,691 — 140,799 4,892 
Mortgage-backed securities21,483 — 21,483 — 
Collateralized mortgage obligations
Government national mortgage association153,206 — 153,206 — 
Federal home loan mortgage corporation71,685 — 66,862 4,823 
Federal national mortgage association45,653 — 45,653 — 
Asset-backed securities3,831 — 2,962 869 
Total Available-for-Sale Fixed Maturities$1,686,503 $— $1,675,919 $10,584 
EQUITY SECURITIES
Public utilities3,993 3,993 — — 
Energy9,477 9,477 — — 
Industrials14,164 14,164 — — 
Consumer goods and services11,385 11,385 — — 
Health care2,060 2,060 — — 
Technology, media and telecommunications6,405 6,405 — — 
89
   Fair Value Measurements
DescriptionDecember 31, 2017 Level 1 Level 2 Level 3
AVAILABLE-FOR-SALE       
Fixed maturities       
Bonds       
U.S. Treasury$16,891
 $—
 $16,891
 $—
U.S. government agency122,168
 —
 122,168
 —
States, municipalities and political subdivisions       
General obligations       
   Midwest109,696
 —
 109,696
 —
   Northeast48,641
 —
 48,641
 —
   South141,519
 —
 141,519
 —
   West113,011
 —
 113,011
 —
Special revenue       
   Midwest158,744
 —
 158,744
 —
   Northeast79,760
 —
 79,760
 —
   South263,512
 —
 263,512
 —
   West158,307
 —
 158,307
 —
Foreign bonds52,753
 —
 52,753
 —
Public utilities209,144
 —
 209,144
 —
Corporate bonds       
Energy95,053
 —
 95,053
 —
Industrials221,707
 —
 221,707
 —
Consumer goods and services186,257
 —
 185,589
 668
Health care75,408
 —
 75,408
 —
Technology, media and telecommunications148,979
 —
 148,979
 —
Financial services283,151
 —
 275,474
 7,677
Mortgage-backed securities13,691
 —
 13,691
 —
Collateralized mortgage obligations       
Government national mortgage association157,483
 —
 157,483
 —
Federal home loan mortgage corporation199,152
 —
 199,152
 —
Federal national mortgage association105,432
 —
 105,432
 —
Asset-backed securities4,636
 —
 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
 $—
 $—
Energy14,565
 14,565
 —
 —
Industrials66,519
 66,517
 2
 —
Consumer goods and services25,688
 25,688
 —
 —
Health care40,103
 40,103
 —
 —
Technology, media and telecommunications17,508
 17,508
 —
 —
Financial services116,447
 116,447
 —
 —
Nonredeemable preferred stocks1,297
 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

Financial services7,535 7,535 — — 
Total Equity Securities$55,019 $55,019 $— $— 
Short-Term Investments$100 $100 $— $— 
Money Market Accounts$20,333 $20,333 $— $— 
COLI$11,913 $— $11,913 $— 
Total Assets Measured at Fair Value$1,773,868 $75,452 $1,687,832 $10,584 

Consumer goods and services1,535
 —
 1,535
 —
Health care3,741
 —
 3,741
 —
Technology, media and telecommunications1,221
 —
 1,221
 —
Financial services5,566
 —
 5,566
 —
Redeemable preferred stocks2,559
 2,559
 —
 —
Equity securities       
Public utilities874
 874
 —
 —
Energy190
 190
 —
 —
Industrials989
 989
 —
 —
Consumer goods and services1,314
 1,314
 —
 —
Health care325
 325
 —
 —
     Financial Services198
 198
 —
 —
Nonredeemable preferred stocks2,541
 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



102

   Fair Value Measurements
DescriptionDecember 31, 2016 Level 1 Level 2 Level 3
AVAILABLE-FOR-SALE       
Fixed maturities       
Bonds       
U.S. Treasury$23,195
 $—
 $23,195
 $—
U.S. government agency77,597
 —
 77,597
 —
States, municipalities and political subdivisions       
General obligations       
   Midwest144,143
 —
 144,143
 —
   Northeast58,409
 —
 58,409
 —
   South128,369
 —
 128,369
 —
   West113,731
 —
 113,731
 —
Special revenue       
   Midwest168,310
 —
 168,142
 168
   Northeast68,065
 —
 68,065
 —
   South239,187
 —
 239,187
 —
   West131,744
 —
 131,744
 —
Foreign bonds65,234
 —
 65,234
 —
Public utilities215,674
 —
 215,674
 —
Corporate bonds       
Energy108,860
 —
 108,860
 —
Industrials229,903
 —
 229,903
 —
Consumer goods and services181,687
 —
 180,590
 1,097
Health care83,123
 —
 83,123
 —
Technology, media and telecommunications144,612
 —
 144,612
 —
Financial services273,951
 —
 265,154
 8,797
Mortgage-backed securities17,248
 —
 17,248
 —
Collateralized mortgage obligations       
Government national mortgage association144,460
 —
 144,460
 —
Federal home loan mortgage corporation174,458
 —
 174,458
 —
Federal national mortgage association101,896
 —
 101,896
 —
Asset-backed securities4,270
 —
 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
 $—
 $—
Energy15,047
 15,047
 —
 —
Industrials51,794
 51,794
 —
 —
Consumer goods and services24,117
 24,117
 —
 —
Health care27,420
 27,420
 —
 —
Technology, media and telecommunications15,369
 15,369
 —
 —
Financial services115,950
 111,958
 —
 3,992
Nonredeemable preferred stocks1,048
 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 services127
 —
 127
 —
Health care3,410
 —
 3,410
 —
Technology, media and telecommunications787
 —
 787
 —


103

Financial services4,842
 —
 4,842
 —
Redeemable preferred stocks1,305
 1,305
 —
 —
Equity securities       
Public utilities613
 613
 —
 —
Energy286
 286
 —
 —
Industrials877
 877
 —
 —
Consumer goods and services1,202
 1,202
 —
 —
Health care339
 339
 —
 —
     Financial Services206
 206
 —
 —
Nonredeemable preferred stocks2,121
 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






































104


The following tables are a reconciliation for both continuing and discontinued operationsfair value of the presentation of the categorization for ourfinancial financial instruments measuredthat are not carried at fair value on a recurring basis in the financial statements at December 31, 2017 and 2016:2023 are summarized below:
DescriptionFair Value TotalLevel 1Level 2Level 3Net Asset Value
Financial assets:
Cash and cash equivalents$81,713 $81,713 $— $— $— 
Other Long Term Investments$99,507 $— $1,249 $— $98,258 
Mortgage Loans$42,632 $— $— $42,632 $— 
Total Financial assets not accounted for at fair value$223,852 $81,713 $1,249 $42,632 $98,258 
Long Term Debt$38,413 $— $38,413 $— $— 
Total Financial liabilities not accounted for at fair value$38,413 $— $38,413 $— $— 
90
December 31, 2017  Fair Value Measurements
DescriptionTotal Level 1 Level 2 Level 3
AVAILABLE-FOR-SALE       
Fixed maturities:       
Continuing operations$1,535,070
 $—
 $1,534,323
 $747
Discontinued operations1,430,025
 —
 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 operations23,653
 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 operations6,431
 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 operations10,677
 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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Fair Value Measurements
DescriptionDecember 31, 2022Level 1Level 2Level 3
AVAILABLE-FOR-SALE
Fixed maturities:
Bonds
U.S. Treasury$14,675 $— $14,675 $— 
U.S. government agency84,406 — 84,406 — 
States, municipalities and political subdivisions
General obligations
Midwest61,113 — 61,113 — 
Northeast15,463 — 15,463 — 
South63,981 — 63,981 — 
West86,545 — 86,545 — 
Special revenue
Midwest102,266 — 102,266 — 
Northeast54,220 — 54,220 — 
South180,857 — 180,857 — 
West112,212 — 112,212 — 
Foreign bonds31,649 — 31,649 — 
Public utilities125,411 — 125,411 — 
Corporate bonds
Energy33,209 — 33,209 — 
Industrials52,842 — 52,842 — 
Consumer goods and services89,941 — 89,941 — 
Health care27,592 — 27,592 — 
Technology, media and telecommunications59,940 — 59,940 — 
Financial services124,292 — 118,617 5,675 
Mortgage-backed securities17,700 — 17,700 — 
Collateralized mortgage obligations
Government national mortgage association84,548 — 84,548 — 
Federal home loan mortgage corporation78,838 — 78,838 — 
Federal national mortgage association45,386 — 45,386 — 
Asset-backed securities4,253 — 3,452 801 
Total Available-for-Sale Fixed Maturities$1,551,339 $— $1,544,863 $6,476 
Equity securities
Public utilities$14,846 $14,846 $— $— 
Energy19,743 19,743 — — 
Industrials27,163 27,163 — — 
Consumer goods and services43,139 43,139 — — 
Health care7,981 7,981 — — 
Financial Services28,213 28,213 — — 
Technology, media and telecommunications28,021 28,021 — — 
Total Equity Securities$169,106 $169,106 $— $— 
Short-Term Investments$275 $275 $— $— 
91
December 31, 2016  Fair Value Measurements
DescriptionTotal Level 1 Level 2 Level 3
AVAILABLE-FOR-SALE       
Fixed maturities:       
Continuing operations$1,453,286
 $—
 $1,452,737
 $549
Discontinued operations1,444,840
 —
 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 operations24,046
 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 operations5,644
 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 operations11,992
 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
Money Market Accounts$31,289 $31,289 $— $— 
Corporate-Owned Life Insurance$10,588 $— $10,588 $— 
Total Assets Measured at Fair Value$1,762,597 $200,670 $1,555,451 $6,476 

The fair value of financial financial instruments that are not carried at fair value on a recurring basis in the financial statements at December 31, 2022 are summarized below:
DescriptionFair Value TotalLevel 1Level 2Level 3Net Asset Value
Financial assets:
Cash and cash equivalents$65,361 $65,361 $— $— $— 
Other Long Term Investments$86,276 $— $— $— $86,276 
Mortgage Loans$35,302 $— $— $35,302 $— 
Total Financial assets not accounted for at fair value$186,939 $65,361 $— $35,302 $86,276 
Long Term Debt$36,168 $— $36,168 $— $— 
Total Financial liabilities not accounted for at fair value$36,168 $— $36,168 $— $— 


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 receivesubmit them primarily fromto 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


106

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 selecttest 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, 20172023 and 20162022 was reasonable.

For the year ended December 31, 2017, 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
92
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’brokers' valuation processes. If pricing cannot be obtained from these sources,Level 3 fair value measurements are inherently uncertain in nature due to management's reliance on significant unobservable inputs which occurs onreasonably could have been different at the reporting date. 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, 2023.
Quantitative Information about Level 3 Fair Value Measurements
Fair Value atValuation Technique(s)Unobservable inputsRange of weighted average significant unobservable inputs
December 31, 2023
Fixed Maturities corporate$4,892 Third Party ValuationOffered Quotes$90 - $100
Fixed Maturities asset-backed securities869 Discounted cash flowProbability of default4% - 6%
Fixed Maturities Federal Home Loan Mortgage Corporation4,823 Third Party ValuationOffered Quotes$45 - $55
During the twelve month period ended December 31, 2017,2023 and 2022, there were notwo 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 2017:2023:
States, municipalities and political subdivisions Corporate bonds Asset-backed securities Equities Total
Balance at January 1, 2017$168
 $9,894
 $449
 $4,587
 $15,098
Corporate bonds Asset-backed securitiesEquitiesTotal
Beginning Balance - January 1, 2023
Realized gains (loss) (1)
Unrealized gains (losses) (1)
(8) (129) 198
 287
 348
Purchases—
 100
 —
 145
 245
Disposals(160) (1,520) —
 (4,137) (5,817)
Balance at December 31, 2017$—
 $8,345
 $647
 $882
 $9,874
Amortization
Transfers in
Transfers out
Ending Balance - December 31, 2023
(1) Realized gains (losses) are recorded as a component of earnings, whereas unrealizedUnrealized gains (losses) are recorded as a component of comprehensive income.












107

The following table provides a summary of the changes in fair value of our Level 3 securities from both continuing and discontinued operations for 2016:2022:
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
Corporate bonds Asset-backed securitiesEquitiesTotal
Beginning Balance - 01/01/2022
Realized gains (losses) (1)
—
 —
 —
 —
 —
Unrealized gains (losses) (1)
(15) 134
 (39) —
 80
Purchases—
 —
 —
 727
 727
Disposals(160) (1,135) (548) (118) (1,961)
Balance at December 31, 2016$168
 $9,894
 $449
 $4,587
 $15,098
Transfers in
Transfers out
Ending Balance - 12/31/2022
(1) Realized gains (losses) are recorded as a component of earnings, whereas unrealizedUnrealized 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.



93
Commercial Mortgage Loans
The following tables present the carrying value of our commercial mortgage loans and additional information at December 31, 2023 and 2022:
Commercial Mortgage Loans
Loan-to-valueDecember 31, 2023December 31, 2022
Less than 65%$36,762 29,231 
65%-75%8,659 8,716 
Total amortized cost$45,421 $37,947 
Valuation allowance(55)(49)
Total mortgage loans$45,366 $37,898 
Mortgage Loans by Region
December 31, 2023December 31, 2022
Carrying ValuePercent of TotalCarrying ValuePercent of Total
East North Central$3,245 7.1 %$3,245 8.6 %
Southern Atlantic17,217 37.9 9,397 24.7 
East South Central7,526 16.6 7,783 20.5 
New England6,588 14.5 6,588 17.4 
Middle Atlantic5,979 13.2 6,139 16.2 
Mountain1,992 4.4 1,992 5.2 
West North Central2,874 6.3 2,803 7.4 
Total mortgage loans at amortized cost$45,421 100.0 %$37,947 100.0 %
Mortgage Loans by Property Type
December 31, 2023December 31, 2022
Carrying ValuePercent of TotalCarrying ValuePercent of Total
Commercial   
Multifamily$8,507 18.7 %$8,493 22.4 %
Office10,950 24.1 11,267 29.7 
Industrial9,985 22.0 10,056 26.5 
Retail10,000 22.0 1,992 5.2 
Mixed use/Other5,979 13.2 6,139 16.2 
Total mortgage loans at amortized cost$45,421 100.0 %$37,947 100.0 %
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Amortized Cost Basis by Year of Origination and Credit Quality Indicator
20232022202020192018Total
Commercial mortgage loans:
Risk Rating:
1-2 internal grade$8,135 $100 $5,263 $7,866 $17,469 $38,833 
3-4 internal grade— — — — 6,588 6,588 
5 internal grade— — — — — — 
6 internal grade— — — — — — 
7 internal grade— — — — — — 
Total commercial mortgage loans$8,135 $100 $5,263 $7,866 $24,057 $45,421 
Current-period write-offs— — — — — — 
Current-period recoveries— — — — — — 
Current-period net write-offs$— $— $— $— $— $— 

Commercial mortgage loans carrying value excludes accrued interest of $174. As of December 31, 2023, 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 amounts which we believe will not be collected according to the contractual terms of the respective loan agreement. As of December 31, 2023, the Company had an allowance for mortgage loan losses of $55, summarized in the following rollforward:
Rollforward of allowance for mortgage loan losses:
As of
December 31, 2023
Beginning balance, January 1, 2023$49 
Current-period provision for expected credit losses6 
Ending balance of the allowance for mortgage loan losses, December 31, 2023$55 
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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. As we are able to obtain information required to estimate ultimate premiums and periods of recognition, we account for assumed foreign reinsurance utilizing the Periodic Method, which provides for current recognition of profits and losses.
We account for premiums, written and earned, and losses and loss settlement expenses incurred net of reinsurance ceded. The ceding of insurance does not legally discharge us from primary liability under our policies, and we must pay the loss if the reinsurer fails to meet its obligation. We 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, 20172023 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$31,725 and $2,447$24,160 at December 31, 20172023 and 2016,2022, 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 31202320222021
Ceded Business
Ceded premiums written$153,792 $99,732 $100,541 
Ceded premiums earned144,958 101,740 92,650 
Loss and loss settlement expenses ceded96,603 89,102 51,878 
Assumed Business
Assumed premiums written$232,716 $190,215 $130,375 
Assumed premiums earned225,587 163,980 77,283 
Loss and loss settlement expenses assumed133,423 104,096 45,543 
      
Years Ended December 31,2017 2016 2015
Ceded Business     
Ceded premiums written$61,273
 $57,988
 $56,916
Ceded premiums earned61,305
 57,996
 56,758
Loss and loss settlement expenses ceded33,303
 13,278
 3,868
      
Assumed Business     
Assumed premiums written$15,179
 $16,834
 $18,290
Assumed premiums earned15,059
 17,037
 18,396
Loss and loss settlement expenses assumed24,688
 9,814
 14,415


In 2017,2023 we continued to grow our assumed programs by renewing the programs added in 2022 and continuing to diversify our risks. We reduced exposure in property catastrophe retrocessional treaty and managing general agent treaty, while significantly growing our standard property and casualty treaty and Funds at Lloyd's businesses. This increased our assumed written premiums by 22.3 percent and earned premiums by 37.6 percent over the prior year.

In 2022, we continued to grow our assumed programs by renewing the programs added in 2021 and continuing to diversify our risks in retrocessional treaty, managing general agent, reinsurance intermediary, and financial lines. This increased our assumed written premiums by 45.9 percent and earned premiums by 112.2 percent over the prior year. Losses and loss settlement expenses ceded increased in 2022 due to two lines of business, other liability and fire and allied lines. Other liability is seeing more recoveries due to inflationary pressures and fire and allied lines has seen an increase in severity, with both of these issues driving increasing ceded recovery.

In 2021, we renewed our participation in all of our 2020 assumed programs. Loss and loss settlement expenses ceded increased in 2017 as compared to 2016, primarily due to an increase in severity of commercial auto losses, assumed reinsurance losses and catastrophe losses.

In 2016, we renewed our participation in all ofWe also grew our assumed programs. Lossbook significantly by signing on to new programs in various channels; including retrocessional treaty, managing general agent, reinsurance intermediary, and loss settlement expenses ceded increased in 2016 as compared to 2015, primarily due to an increase in significant large losses and catastrophe losses.financial lines.

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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.
Ceded Reinsurance Programs and Retentions

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

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

We have several programs that provide reinsurance coverage. This reinsurance coverage limits the risk of loss that we retain by reinsuring direct risks in excess of our retention limits. The following table providestables provide a summary of our primary reinsurance programs. Retention amounts reflect the accumulated retentions and co-participation of all layers within a program. Reinsurance coverage limits the risk of loss that we retain by reinsuring direct risks in excess of our retention limits. New reinsurance programs beginning in 2023 include our marine liability quota share and our specialty variable quota share. For 2017,2022 we decided not to renew the all lines aggregate excess loss program. In its place we added the pillared occurrence program. Another new program for 2022 was the addition of the earthquake quota share program. For 2021, there was an all lines annual aggregate excess of loss program with variable retention of 7.02 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. For 2016, there was an all lines annual aggregate excess of loss program with a variable retention of 7.73million and 65.0 percent of gross net earned premium with a minimum retention of $52.0 million and a maximum of $65.0 million. Our all lines aggregate recovery is also limited to a maximum of $30.0 million. For 2015, therethe program was a $4,000 aggregate annual deductible on our multi-line core program (casualty excess and property excess).placed.
2023 Reinsurance Programs
Type of ReinsuranceStated RetentionExhaustion PointPlacement and Limit
Casualty excess of loss$3,000 $60,000 100 %of$57,000 
Property excess of loss3,000 25,000 100 %of$22,000 
Surety excess of loss2,000 50,000 100 %of$48,000 
Marine liability quota shareN/A5,000 70 %of$5,000 
Specialty casualty variable quota shareN/A5,000 70 %of$5,000 
Property catastrophe, excess20,000 110,000 100 %of$107,150 
Boiler and machineryN/A100,000 100 %of$100,000 
Pillared Occurrence Program6,000 16,000 90 %of$10,000 
Earthquake Quota Share ProgramN/A170,000 100 %of$56,525 

2022 Reinsurance Programs
Type of ReinsuranceStated RetentionLimitsCoverage
Casualty excess of loss$3,000 $60,000 100 %of$57,000 
Property excess of loss3,000 25,000 100 %of$22,000 
Surety excess of loss1,500 45,000 100 %of$43,500 
Property catastrophe, excess15,000 180,000 100 %of$165,000 
Boiler and machineryN/A50,000 100 %of$50,000 
Pillared Occurrence Program5,000 15,000 100 %of$10,000 
Earthquake Quota Share ProgramN/A180,000 100 %of$180,000 

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 2017 Reinsurance Programs
Type of ReinsuranceStated Retention Limits Coverage
Casualty excess of loss$2,500
 $60,000
 100%of$57,500
Property excess of loss2,500
 25,000
 100%of$22,500
Surety excess of loss1,500
 45,000
 100%of$43,500
Property catastrophe, excess20,000
 250,000
 100%of$230,000
Boiler and machineryN/A
 50,000
 100%of$50,000


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 2016 Reinsurance Programs
Type of ReinsuranceStated Retention Limits Coverage
Casualty excess of loss$2,500
 $40,000
 100%of$37,500
Property excess of loss2,500
 25,000
 100%of$22,500
Surety excess of loss1,500
 36,000
 100%of$34,500
Property catastrophe, excess20,000
 250,000
 100%of$230,000
Boiler and machineryN/A
 50,000
 100%of$50,000

2015 Reinsurance Programs
2021 Reinsurance Programs2021 Reinsurance Programs
Type of ReinsuranceStated Retention Limits CoverageType of ReinsuranceStated RetentionLimitsCoverage
Casualty excess of loss$2,000
 $40,000
 100%of$38,000
Property excess of loss2,000
 25,000
 100%of$23,000
Surety excess of loss1,500
 36,000
 96%of$34,500
Property catastrophe, excess20,000
 200,000
 100%of$180,000
Property catastrophe, excess200,000
 250,000
 90.5%of$50,000
Boiler and machineryN/A
 50,000
 100%of$50,000
If we incur property catastrophe losses and loss settlement expenses that exceed the coverage limits of our reinsurance program,retention, our property catastrophe program provides one guaranteed reinstatement. In such an instance, we are required to pay the reinsurers a reinstatement premium equal to the full amount of the original premium, which will reinstate the full amount of reinsurance available under the property catastrophe program.
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
Ceded Business     
Ceded insurance in-force$1,014,794
 $1,023,197
 $1,165,868
Ceded premiums earned2,722
 2,768
 3,161
Loss and loss settlement expenses ceded3,726
 3,359
 2,113
The ceding of insurance does 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. We periodically monitor the financial condition of our reinsurers to confirm that they are financially stable and have strong credit ratings. We believe that all of our reinsurers are 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
Property insurance indemnifies an insured with an interest in physical property for loss of, or damage to, such property or the loss of its income-producing abilities. Casualty insurance is primarily coversconcerned with losses caused by injuries to persons and legal liability imposed on the insured for such injury or for damage to property of or injury to, a person or entity other than the insured.others. In most cases, casualty insurance also obligates the insurance company to provide a defense for the insured in litigation, arising out of events covered by the policy.


Liabilities for losses and loss settlement expenses reflect management's best estimates at a given point in time of what we expect to pay for claims that have been reported and those that have been incurred but not reported ("IBNR"), based on known facts, circumstances, and historical trends. Because property and casualty insurance reserves are estimates of the unpaid portions of incurred losses that have been reported to us, as well as losses that have been incurred but not reported, the establishment of appropriate reserves, including reserves for catastrophes, is an inherently uncertain and complex process. The ultimate cost of losses and related loss settlement expenses may vary materially from recorded amounts. We regularly update our reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in prior year reserve estimates, which may be material, are reported as a component of losses and loss settlement expenses incurred in the period such changes are determined.


The determination of reserves (particularly those relating to liability lines of insurance that have relatively longer lag in claim reporting) requires significant 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 actionevaluate an appropriate response that may include, among other things, increasing the related reserves. Any adjustments we make to reserves are reflected in operating results in the year in which we make those adjustments. 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 actuaryour actuarial reserving department 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 actuaryactuarial team 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.


Our IBNR methodologies and assumptions are reviewed periodically, but changes are infrequent. Between calendar year 2015 and 2016, inIn response to an increase in miles driven by commercial vehicles,severity of losses, we revised our commercial automobile frequency and severity assumptions, resulting in an increase to our
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carried loss IBNR. We also reviewed our methodology and assumptions in our product liability line, associated with our construction defects business and decreasedhave revised our frequency and severity assumptions due to improvement in development patterns related to the statute of limitations on accident years that have matured 13expected severity resulting in an increase to 15 yearsour IBNR reserves. Additionally, similar reviews were completed for standard umbrella and excess liability exposures which haven't developedled to the extent we initially expected. These assumption changes resulteda change in a release ofassumptions related to severity, resulting in an increase in IBNR in 2016 and 2017reserves for our product liability line. other liability.Besides the changes to our assumptions used for our commercial automobile, line and product liability line,and other liability lines, we continually review and revise items affecting our projections of required reserves for unpaid loss and loss adjustment expense ("LAE").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, 20162023, 2022 and 20152021 (net of reinsurance amounts):
   
Years Ended December 31,202320222021
Gross liability for losses and loss settlement expenses
at beginning of year		$1,497,274 $1,514,265 $1,578,131 
Ceded losses and loss settlement expenses(146,875)(112,900)(131,843)
Net liability for losses and loss settlement expenses
at beginning of year		$1,350,399 $1,401,365 $1,446,288 
Losses and loss settlement expenses incurred
for claims occurring during
   Current year$701,664 $624,411 $701,064 
   Prior years67,750 12,890 (48,909)
Total incurred$769,414 $637,301 $652,155 
Losses and loss settlement expense payments
for claims occurring during
   Current year$191,899 $215,891 $277,115 
   Prior years480,800 472,377 419,963 
Total paid$672,699 $688,268 $697,078 
Net liability for losses and loss settlement expenses
at end of year		$1,447,115 $1,350,399 $1,401,365 
Ceded losses and loss settlement expenses191,640 146,875 112,900 
Gross liability for losses and loss settlement expenses
at end of year		$1,638,755 $1,497,274 $1,514,265 
      
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 years313,531
 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 expenses59,871
 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 dollarmonetary 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 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.
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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 adverse reserve development in 2023 were the commercial other liability and commercial automobile lines of business. The adverse development in commercial other liability was primarily in our excess and surplus lines excess casualty book along with some adverse development in standard umbrella and construction defect due to increasing severity pressures. The pressure on these longer tailed lines, especially in accident years 2016-2019, related to social and economic inflation continued in 2023. The commercial automobile line of business also experienced adverse development related to increasing severity largely in post-COVID-19 accident years. The remaining lines experienced small amounts of reserve development.

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





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The following tables provide information about incurred and paid losses and loss settlement expense development as of December 31, 2017,2023, 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 2017years 2023, 2022 and 2016,2021, 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 / and/or multiple independent coverages. Claim counts for calendar years 20152016 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 reinsuranceAs of December 31, 2023
For the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims
Accident Year2014201520162017201820192020202120222023
(Unaudited)
2014$118,928 $117,958 $106,486 $97,809 $102,487 $105,507 $107,417 $111,517 $111,558 $112,733 $2,806 (6,195)6,838 
2015137,385 125,307 120,005 127,091 129,945 131,325 132,694 136,161 137,040 5,348 (345)8,005 
2016139,144 130,041 136,275 142,397 140,784 148,324 153,490 159,284 8,576 20,140 9,627 
2017139,602 139,032 152,547 156,369 159,653 173,091 174,013 16,109 34,411 9,308 
2018163,059 172,894 176,496 187,841 197,696 207,501 21,311 44,442 9,184 
2019149,173 169,344 183,918 179,667 186,205 25,861 37,032 8,573 
2020171,013 158,022 162,471 179,080 37,085 8,067 6,392 
2021145,822 162,359 162,879 52,056 17,057 3,457 
2022161,826 175,579 64,525 13,753 2,878 
2023172,398 118,157 1,944 
Total$1,666,711 

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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 claimsCumulative developmentCumulative number of reported claims
Accident Year2008200920102011201220132014201520162017 
 (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
    





114

Line of business: Commercial other liability
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year2014201520162017201820192020202120222023
(Unaudited)
2014$10,207 $29,679 $50,211 $70,363 $83,109 $93,060 $96,509 $102,042 $103,075 $105,035 
201511,185 27,182 53,901 74,292 96,339 104,472 109,540 117,734 126,364 
201613,782 38,184 63,526 88,885 102,757 115,107 126,561 136,400 
201717,716 43,172 70,500 91,984 111,085 128,430 138,127 
201816,200 44,772 79,168 105,515 130,943 158,851 
201918,221 46,986 72,179 102,510 127,650 
202017,011 43,596 60,114 98,592 
202112,434 33,642 59,278 
202210,468 42,168 
20239,335 
Total$1,001,801 
All outstanding liabilities for unpaid losses and loss settlement expenses before 2014, net of reinsurance13,905 
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance$678,815 

102
Line of business: Commercial other liability
 Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
 For the years ended December 31,
Accident Year2008
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





115

Line of business: Commercial fire and allied
Incurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2023
For the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims
Accident Year2014201520162017201820192020202120222023
(Unaudited)
2014$126,216 $131,198 $128,762 $128,185 $128,503 $126,811 $127,068 $128,180 $128,491 $129,178 $361 2,962 7,964 
2015103,177 108,293 110,633 108,235 105,218 104,646 105,043 104,978 105,385 400 2,208 7,598 
2016147,473 144,208 143,721 143,724 143,108 144,109 145,351 142,644 499 (4,829)9,879 
2017155,139 160,240 160,945 161,693 161,232 161,456 161,611 573 6,472 13,519 
2018143,280 146,950 146,378 146,010 147,356 147,058 1,095 3,778 10,791 
2019164,030 155,482 158,475 157,667 155,850 2,191 (8,180)11,208 
2020207,207 201,391 202,929 207,256 4,095 49 14,629 
2021156,794 169,669 157,905 (7,859)1,111 5,342 
2022161,776 170,594 18,916 8,818 4,225 
2023164,526 59,002 3,223 
Total$1,542,008 

103
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 claimsCumulative developmentCumulative number of reported claims
Accident Year2008
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
    





116

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 Year2014201520162017201820192020202120222023
(Unaudited)
2014$84,456 $113,663 $116,750 $122,370 $123,697 $125,745 $126,307 $127,883 $128,033 $128,403 
201567,217 90,454 95,515 101,367 104,115 103,975 104,127 104,339 104,638 
201692,895 125,962 132,429 137,907 139,353 141,104 142,248 141,008 
201799,484 137,058 145,900 152,219 157,512 159,286 159,456 
201892,770 123,559 133,703 137,794 141,841 145,021 
2019100,980 136,084 142,342 150,196 151,739 
2020128,704 173,055 192,902 197,602 
202197,451 140,406 154,242 
202296,160 138,479 
202375,304 
Total$1,395,891 
All outstanding liabilities for unpaid losses and loss settlement expenses before 2014, net of reinsurance1,453 
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance$147,570 



104
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 Year2008
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







117

Line of business: Commercial automobile
Incurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2023
For the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims
Accident Year2014201520162017201820192020202120222023
(Unaudited)
2014$107,723 $106,076 $113,720 $118,869 $120,385 $121,077 $120,599 $119,214 $121,311 $121,230 $154 13,507 17,327 
2015125,506 129,816 132,206 138,987 137,395 137,335 136,826 137,240 137,934 552 12,428 20,090 
2016174,018 175,357 174,337 175,655 173,823 174,588 175,016 175,387 1,407 1,369 27,309 
2017227,919 224,553 235,110 233,159 233,007 233,535 234,229 2,823 6,310 32,902 
2018236,629 245,173 253,045 255,017 255,409 255,198 3,309 18,569 34,487 
2019279,229 291,139 289,929 282,155 282,680 8,017 3,451 34,757 
2020243,360 216,951 196,412 194,162 6,893 (49,198)24,181 
2021179,880 172,599 173,708 10,210 (6,172)12,332 
2022157,165 161,672 21,313 4,507 10,136 
2023153,502 48,545 8,586 
Total$1,889,702 

105
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 claimsCumulative developmentCumulative number of reported claims
Accident Year2008
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
    





118

Line of business: Commercial automobile
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year2014201520162017201820192020202120222023
(Unaudited)
2014$45,704 $68,033 $87,590 $99,922 $109,682 $113,751 $116,843 $117,770 $118,985 $119,087 
201550,782 78,225 99,201 118,395 129,317 134,100 135,462 137,075 137,085 
201666,013 103,528 128,156 148,224 164,341 168,950 171,380 172,928 
201781,311 126,644 166,170 197,893 212,947 223,076 228,749 
201881,572 138,092 187,405 211,123 235,519 244,284 
201991,919 153,244 205,614 246,800 264,151 
202067,660 109,686 138,158 161,798 
202164,381 99,116 128,283 
202262,477 95,785 
202356,175 
Total$1,608,325 
All outstanding liabilities for unpaid losses and loss settlement expenses before 2014, net of reinsurance345 
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance$281,722 

106
Line of business: Commercial automobile
 Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
 For the years ended December 31,
Accident Year2008
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





119

Line of business: Workers' compensation
Incurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2023
For the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims
Accident Year2014201520162017201820192020202120222023
(Unaudited)
2014$64,051 $60,729 $58,284 $56,630 $54,636 $53,023 $52,889 $52,388 $51,861 $51,773 $391 (12,278)4,821 
201553,788 55,578 51,003 46,682 46,019 44,706 43,751 43,209 43,654 851 (10,134)5,683 
201670,419 66,575 61,648 55,168 53,964 52,870 53,090 53,617 1,131 (16,802)7,982 
201776,184 69,528 55,982 51,874 49,362 47,801 48,074 1,590 (28,110)8,216 
201871,972 67,883 59,192 56,109 53,812 54,783 1,102 (17,189)8,059 
201952,136 49,189 49,336 48,945 49,084 (1,087)(3,052)7,415 
202045,365 46,612 43,724 46,624 735 1,259 4,581 
202145,177 42,283 39,649 (1,731)(5,528)1,875 
202229,597 26,721 1,623 (2,876)1,307 
202329,262 6,455 1,025 
Total$443,240 

107
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 claimsCumulative developmentCumulative number of reported claims
Accident Year2008
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
    





120

Line of business: Workers' compensation
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year2014201520162017201820192020202120222023
(Unaudited)
2014$13,965 $30,289 $38,441 $42,964 $45,193 $45,825 $46,299 $46,664 $47,192 $47,548 
201512,063 27,304 35,229 38,424 39,305 40,034 41,006 41,211 41,865 
201614,413 32,345 40,680 45,743 47,082 48,277 50,127 51,023 
201714,647 31,309 38,083 41,672 43,833 45,508 45,742 
201816,949 35,369 43,189 47,173 48,807 49,964 
201913,582 29,668 38,382 43,044 46,101 
202017,603 29,605 35,542 39,479 
202117,949 29,453 34,074 
20229,434 17,851 
202310,227 
Total$383,875 
All outstanding liabilities for unpaid losses and loss settlement expenses before 2014, net of reinsurance13,649 
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance$73,014 
108
Line of business: Workers' compensation
 Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
 For the years ended December 31,
Accident Year2008
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




121

Line of business: Personal
Incurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2023
For the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims
Accident Year2014201520162017201820192020202120222023
(Unaudited)
2014$53,910 $52,661 $52,944 $52,782 $52,615 $52,702 $52,810 $52,854 $52,910 $52,975 $9 (935)10,969 
201542,847 41,088 40,336 40,368 40,220 40,194 40,189 40,190 40,191 13 (2,656)9,553 
201648,072 45,840 45,379 45,961 45,113 45,297 45,199 45,179 22 (2,893)11,905 
201760,330 59,342 58,695 58,544 59,023 58,790 58,863 32 (1,467)14,717 
201851,639 51,721 52,715 52,062 51,457 51,115 113 (524)13,688 
201959,548 58,378 58,745 57,929 57,630 175 (1,918)13,609 
202081,206 73,761 73,204 72,531 588 (8,675)17,095 
202128,537 26,489 26,372 291 (2,165)2,588 
20221,493 2,287 (556)794 64 
20232,391 2,019 10 
Total$409,534 
109
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 claimsCumulative developmentCumulative number of reported claims
Accident Year2008
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
    




122

Line of business: Personal
Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
For the years ended December 31,
Accident Year2014201520162017201820192020202120222023
(Unaudited)
2014$37,055 $47,912 $49,710 $51,837 $52,018 $52,543 $52,519 $52,526 $52,565 $52,615 
201529,551 37,431 39,027 39,428 39,865 40,029 40,053 40,053 40,053 
201632,999 40,910 42,660 44,046 44,618 44,737 44,828 44,827 
201742,135 53,111 55,982 57,169 57,824 58,206 58,377 
201837,410 47,433 49,464 50,185 50,661 50,852 
201940,544 52,390 54,935 56,658 56,852 
202054,181 68,124 70,543 71,416 
202120,298 23,829 24,889 
2022551 2,128 
2023297 
Total$402,305 
All outstanding liabilities for unpaid losses and loss settlement expenses before 2014, net of reinsurance340 
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance$7,568 


110
Line of business: Personal
 Cumulative paid losses and allocated loss settlement expenses, net of reinsurance
 For the years ended December 31,
Accident Year2008
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.follows:


December 31, 2023
Net outstanding liabilities for unpaid losses and allocated loss settlement expenses:
Commercial other liability$678,815 
Commercial fire and allied147,570 
Commercial automobile281,722 
Commercial workers' compensation73,014 
Personal7,568 
All other lines170,119 
Net outstanding liabilities for unpaid losses and allocated loss settlement expenses1,358,808 
Net outstanding liabilities for unpaid unallocated loss settlement expenses87,949 
Fair value adjustment (purchase accounting adjustment for Mercer acquisition)560 
Liabilities for unpaid losses and loss settlement expenses, net of reinsurance1,447,317 
Reinsurance recoverable on unpaid losses and allocated loss settlement expenses:
Commercial other liability85,753 
Commercial fire and allied9,750 
Commercial automobile2,624 
Commercial workers' compensation38,231 
Personal294 
All other lines55,322 
Reinsurance recoverable on unpaid losses and allocated loss settlement expenses191,974 
Reinsurance fair value amortization (purchase accounting adjustment for Mercer acquisition)(536)
Total reinsurance recoverable on unpaid losses and loss settlement expenses191,438 
Total gross liability for unpaid losses and loss settlement expenses$1,638,755 
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  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, 2017.2023.

Average annual percentage payout of incurred claims by age, net of reinsurance
Year 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10
(Unaudited)
Commercial other liability8.2 %14.9 %15.5 %15.9 %12.1 %9.2 %4.9 %5.7 %3.6 %1.7 %
Commercial fire and allied61.0 %23.1 %5.8 %4.0 %1.9 %1.2 %0.4 %0.2 %0.2 %0.3 %
Commercial automobile35.9 %20.6 %16.4 %12.2 %7.9 %3.4 %1.8 %0.9 %0.5 %0.1 %
Commercial workers' compensation32.4 %31.9 %15.0 %8.3 %3.8 %2.1 %1.8 %0.9 %1.3 %0.7 %
Personal62.0 %24.2 %4.0 %2.2 %0.8 %0.5 %0.1 %— %— %0.1 %
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 Average annual percentage payout of incurred claims by age, net of reinsurance
 Year 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10
 (Unaudited)
Commercial other liability10.1%15.9%16.4%15.3%11.9%6.4%5.6%4.0%3.9%2.2%
Commercial fire and allied64.4%20.9%4.8%3.7%3.0%0.9%0.9%0.4%0.2%—%
Commercial automobile39.9%20.9%15.1%10.9%5.6%2.8%1.8%0.1%—%0.5%
Commercial workers' compensation26.1%29.0%13.6%8.1%4.3%3.2%1.8%4.5%0.8%1.9%
Personal71.9%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, 20162023, 2022 and 20152021 and statutory net income (loss) for the years then ended are as follows:
Statutory Capital and SurplusStatutory Net Income (Loss)
2023  
Property and casualty business$635,474 $(13,251)
2022
Property and casualty business$717,709 $43,111 
2021
Property and casualty business$754,411 $110,827 
 Statutory Capital and Surplus Statutory Net Income (Loss)
2017   
Property and casualty business$757,443
 $19,687
Life, accident and health business144,533
 5,485
2016   
Property and casualty business$770,908
 $39,087
Life, accident and health business139,806
 (3,177)
2015   
Property and casualty business$722,404
 $75,554
Life, accident and health business138,855
 (1,524)
(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 Commissionercommissioner 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,
The Company executed a material$50,000 surplus note private placement transaction with an affiliate is defined as a transaction with an aggregate value exceeding three percent of the life insurer's admitted assets (measured aton December 31 of the preceding year).15, 2020 among UF&C and Federated Mutual and Federated Life. See additional details in Note 13 "Debt."
State laws and regulations generally limit the amount of funds that an insurance company may distribute to a parent as a dividend without Commissionercommissioner 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, 2017,2023, our insurance company subsidiary, United Fire & Casualty, Company, is able to make a maximum of $35,744$58.6 million in dividend payments without prior regulatory approval. At December 31, 2017,2023, 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$16,164, $15,860 and $21,658$15,064 in 2017, 20162023, 2022 and 2015,2021, 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, 20162023, 2022 and 2015,2021, United Fire & Casualty Company received dividends from its wholly owned subsidiaries of $13,300, $26,000$0, $0, and $16,500,$0, respectively. In 2017, 20162023, 2022 and 2015,2021, United Fire & Casualty Company paid dividends to United Fire Group, Inc. totaling $40,000, $24,000$13,200, $12,000 and $22,500,$10,000, 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
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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, 20162023, 2022 and 2015.2021. 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, 2017.2023.


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 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 we had not completed accounting for the tax effects of enactment of the Tax Act, however for certain items, we have made a reasonable estimate 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


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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 31,202320222021
Current$(2,217)$1,627 $11,081 
Deferred(7,803)(4,581)5,168 
Total$(10,021)$(2,954)$16,249 
      
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 35.021.0 percent in 2023, 2022 and 2021 to the amount recorded in the accompanying Consolidated Statements of Income and Comprehensive Income is as follows:
   
Years Ended December 31,202320222021
Computed expected income tax expense (benefit)$(8,339)$2,536 $20,337 
Tax-exempt municipal bond interest income(2,763)(3,115)(3,412)
Nontaxable dividend income(269)(378)(361)
Compensation596 582 770 
Research & development credit540 (1,591)(1,545)
Other, net215 (988)460 
Consolidated federal income tax expense (benefit)$(10,021)$(2,954)$16,249 
Reconciliation of consolidated federal income tax expense (benefit) from:
Consolidated federal income tax expense (benefit)$(10,021)$(2,954)$16,249 
      
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
 $30,050
Discontinued operations4,490
 384
 2,275
Consolidated federal income tax expense (benefit)$(24,730) $8,763
 $32,325












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We remeasuremeasure 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, 20172023 and 20162022 are as follows:
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December 31,2017 2016December 31,20232022
Deferred tax liabilities   
Net unrealized appreciation on investment securities:   
Net unrealized appreciation on investment securities:
Net unrealized appreciation on investment securities:
Equity securities$50,839
 $70,640
All other securities7,599
 3,711
Equity securities
Equity securities
Deferred policy acquisition costs
Deferred policy acquisition costs
Deferred policy acquisition costs30,404
 52,031
Investments in partnerships3,653
 8,112
Over funded pension benefit
Prepaid pension cost3,416
 4,449
Net bond discount accretion666
 1,134
Depreciation593
 854
Revaluation of investment basis (1)
545
 1,342
Identifiable intangible assets (1)
1,838
 3,311
Capitalized Software
Other1,934
 2,831
Gross deferred tax liability$101,487
 $148,415
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
Financial statement reserves in excess of income tax reserves
Unearned premium adjustment19,389
 30,697
Net operating loss carryforwards329
 718
Underfunded benefit plan obligation12,375
 13,374
Post-retirement benefits other than pensions11,942
 20,221
Employee profit sharing
Other-than-temporary impairment of investments2,313
 4,658
Contingent ceding commission accrual317
 2,769
Alternative minimum tax credit carryforward6,011
 1,194
Other-than-temporary impairment of investments
Other-than-temporary impairment of investments
Compensation expense related to stock options3,289
 4,578
Compensation expense related to stock options
Compensation expense related to stock options
Nonqualified deferred compensation
Nonqualified deferred compensation
Nonqualified deferred compensation
Net Unrealized Appreciation - all other securities
Revaluation of investment basis (1)
Other4,145
 6,162
Gross deferred tax asset$77,146
 $113,545
Valuation allowance(329) (718)
Deferred tax asset$76,817
 $112,827
Net deferred tax liability$24,670
 $35,588
Net deferred tax liability (asset)
(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
Deferred tax assets 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 recordedreduced by a valuation allowance against these NOLswhen management believes it is more likely than not that totaled $329some, or all, of the deferred taxes will not be realized. After considering all positive and $718, respectively,negative evidence of taxable income in the carryback and carryforward periods and our tax planning strategy of holding debt securities with unrealized losses to recovery, we believe it is more likely than not that all the deferred assets will be realized. As a result, we have no valuation allowance at December 31, 20172023 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.2022.





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NOTE 8. EMPLOYEE BENEFITS
We offer various benefits to our employees including a noncontributory defined benefitnon-contributory cash balance pension plan and an employee/retireeemployee health and dental benefit plan.
In September 2023, we offered an Early Retirement Package ("ERP") as a voluntary program for a select group of eligible employees to consider retiring earlier than planned. Employees that accepted the offering received a one-time separation package. At the same time, we announced to employees that we would be changing our paid time off ("PTO") policy to a discretionary time off policy as of the end of 2023. As a result, the company will no longer maintain an accrued liability on the balance sheet for PTO. The expense of the severance benefits offered with the ERP largely offset the benefit of the liability released with the change in time off policy in the financial statements. A partial plan a profit-sharing plan and an employee stock ownership plan.curtailment was triggered during the period due to the reduction in active lives resulting from the ERP reduction in force, providing the benefit shown in the table for the Net Periodic Benefit Cost below.

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Pension and Post-retirementPost-Retirement Benefit Plans
We offer a noncontributory defined benefitnon-contributory cash balance 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 cash balance pension plan are based on the number of years of service and level of compensation. Our policy to fund the pension plan on a current basis to not less than the minimum amounts required by the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended, is designed to assureensure that plan assets will be adequate to provide retirement benefits. We estimate that we will contribute approximately $6,400are not required to make a contribution to the pension plan in 2018.2024.
In December 2020, the Company made the decision to amend the non-contributory defined benefit pension plan and put in place a non-contributory cash balance pension plan effective July 1, 2021. All benefits under the former non-contributory defined benefit pension plan stopped accruing on June 30, 2021.
We also offer a health and dental benefit planplans to all of our eligible employees and retirees that consists of two programs: (1) the self-funded employee health and dental benefit plan and (2) the self-funded (pre-65) andare self-funded. We previously offered a fully-funded (post-65) retiree health and dental benefit plan (the "post-retirement benefit plan"). EffectiveIn January 1, 2017, there was a plan amendment, which included2021, 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.
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 forCompany changed the post-retirement benefit plan are responsible for making medicalto a voluntary plan funded exclusively by participants, commencing at the start of 2023. The impact of this decision is reflected in the tables in this note, with a one-time adjustment presented in the line "Special event plan closure" and dental care benefit payments. Participants are required to submit claims for reimbursement or payment toan additional adjustment in the claims administrator within twelve months afterline "Amortization of prior service credit." The amortization of prior service credits continued through the end of the calendar year in which the charges were incurred. An unfunded benefit obligation is reported for2022 related to these plan changes. As of December 31, 2023, the post-retirement benefit plan in the accompanying Consolidated Balance Sheets.obligation was $0.
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 willis intended to allow us to provide for the pension plan's benefit obligation.
The investments held by the pension plan at December 31, 2017 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 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 Financial Officer, Chief Investment Officer, Chief Operating Officer, and Chief OperatingClaims Officer, all of whom periodically 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, we had six external investment managers that are allowed to exercise investment discretion, subject to limitations, if any, established by the investment/retirement committee. We utilize multiple 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,In September 2023, the investment/retirement committee meetsmade a shift in investment strategy to a liability driven investment ("LDI") approach to better match the timing of cash flows between payouts from the plan with each investment managercash flows from the asset portfolio, as well as hedge interest rate risk between assets and liabilities. Changing to reviewthis approach now, while the investment manager's goals, objectives andplan is overfunded, should also reduce the performancelikelihood of the assets they manage. The decisionhaving to establish or terminatemake 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 ascontribution to the average rate of earnings expected onplan in the pension plan funds invested, or to be invested,future.
The investments held by the pension plan to provide forat December 31, 2023 include the settlementfollowing asset categories:
•Fixed income securities, which may include bonds, and convertible securities;
•Equity securities, which may include various types of benefits includedstock, such as large-cap, mid-cap, small-cap, and international stocks;
•Pooled separate accounts, which includes two separate funds, a real estate separate account and a liquid assets separate account;
•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.
As a result of the shift in investment strategy in the projected pension benefit obligation. Investment securities, in general,second half of 2023, we have reduced the number of external investment managers by which the assets are exposed to various risks, such as fluctuating interest rates, credit standingmanaged, with most of the issuerportfolio now part of the security and overall market volatility. Annually, we perform an analysishedge portfolio.
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The following is a summary of the pension plan's actual and target asset allocations at December 31, 20172023 and 20162022 by asset category:
Target
Pension Plan Assets2023% of Total2022% of TotalAllocation
Hedge portfolio:80 %
Fixed maturity securities - corporate bonds166,063 62.9 18,102 7.9 
Redeemable preferred stock— — 2,946 1.3 
Pooled separate accounts
Liquid assets separate account fund4,475 1.7 — — 
Core plus bond separate account fund— — 16,768 7.3 
Cash and cash equivalents785 0.3 5,356 2.3 
Return seeking portfolio:20 %
Equity Securities53,981 20.5 134,663 58.6 
Pooled separate account
U.S. property separate account fund25,407 9.6 28,468 12.4 
United Life annuity13,195 5.0 12,567 5.5 
Arbitrage fund— — 10,831 4.7 
Total plan assets$263,906 100.0 %$229,701 100.0 %100.0 %
         Target
Pension Plan Assets2017 % of Total 2016 % of Total Allocation
Fixed maturity securities - corporate bonds$11,003
 7.0% $9,451
 7.4% 0%-15%
Redeemable preferred stock3,216
 2.0
 3,144
 2.4
 0%-10%
Equity securities87,603
 55.6
 69,770
 54.3
 50%-70%
Pooled separate accounts           
Core plus bond separate account fund17,948
 11.4
 10,401
 8.1
 0%-40%
U.S. property separate account fund15,502
 9.8
 14,330
 11.1
 0%-25%
Arbitrage fund8,506
 5.4
 8,292
 6.5
 0%-10%
United Life annuity9,846
 6.2
 9,377
 7.3
 5%-10%
Cash and cash equivalents4,020
 2.6
 3,665
 2.9
 0%-10%
Total plan assets$157,644
 100.0% $128,430
 100.0%    

The LDI investment return expectations forstrategy has shifted the allocation of pension plan assets from prior periods. The portfolio includes a hedge portfolio, targeting 80.0 percent of the pension plan are usedasset balance, largely comprised of highly rated fixed income securities and designed to developmatch the assets and liabilities and maintain a fully funded position while hedging interest rate, yield curve and credit spread risks. The remaining 20.0 percent target of the asset allocation based onbalance is return seeking with the specific needs ofobjective to account for liability growth and to maintain a healthy surplus position. The largest fund in 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, whichreturn seeking is the fifth largest asset category and was originally writtenexternal fund managed by our life insurance subsidiary in 1976, provides a guaranteed rate of return. The interest rate on the group annuity contract is determined annually.Capital Investment Services. There will be additional portfolio shifts as assets liquidate to achieve these targets.
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’sPlan'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.
Pooled Separate Accounts
The pension plan invests in two pooled separate account funds, a core plus bondU.S. property separate account fund and a U.S. propertyliquid assets 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.fund as this pooled separate account invests mainly in
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commercial real estate and includes mortgage loans which are backed by the associated properties. The fair value of the underlying properties are based onreal estate is estimated using discounted cash flow valuation models that utilize public real estate market data inputs such as transaction prices, market rents, vacancy levels, leasing absorption, market cap rates and discount rates. In addition, each property appraisals conductedis appraised annually by an independent third party.appraiser. The net asset value is the basis for current transactions and the pooled separate account can be redeemed at net asset value as of the measurement date. The fair value measurement is classified within Level 32 of the fair value hierarchy.hierarchy given the inputs reflect observable market data but are not based on quoted prices in an active market. Investments in the liquid assets separate account fund are stated at fair value as provided by the administrator of the fund based on the fair value of the underlying assets owned by the fund. This pooled separate account invests mainly in short term securities such as commercial paper. The majority of the underlying securities have observable Level 1 or 2 pricing inputs, including quoted prices for similar assets in active or non-active markets. The fair value measurement is classified within Level 2 of the fair value hierarchy as the inputs reflect observable market data and quoted prices for similar assets, but in some instances, quoted prices are in markets that are not active. 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 determinedto Level 2 from Level 1 based on its net asset value, which is obtained from the custodianinputs 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.ASC 820 guidance.
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, 20172023 and 2016:2022:
 Fair Value Measurements
DescriptionDecember 31, 2023Level 1Level 2Level 3
Fixed maturity securities - corporate bonds$166,063 $— $166,063 $— 
Equity securities53,981 53,981 — — 
Pooled separate accounts
Liquid assets separate account fund4,475 — 4,475 — 
U.S. property separate account fund25,407 — 25,407 
Money market funds772 772 — — 
Total assets measured at fair value$250,698 $54,753 $195,945 $— 

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   Fair Value Measurements
DescriptionDecember 31, 2017 Level 1 Level 2 Level 3
Fixed maturity securities - corporate bonds$11,003
 $—
 $11,003
 $—
Redeemable preferred stock3,216
 3,216
 —
 —
Equity securities87,603
 87,603
 —
 —
Pooled separate accounts       
Core plus bond separate account fund17,948
 —
 17,948
 —
U.S. property separate account fund15,502
 —
 —
 15,502
Arbitrage fund8,506
 —
 8,506
 —
Money market funds4,011
 4,011
 —
 —
Total assets measured at fair value$147,789
 $94,830
 $37,457
 $15,502


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   Fair Value Measurements
DescriptionDecember 31, 2016 Level 1 Level 2 Level 3
Fixed maturity securities - corporate bonds$9,451
 $—
 $9,451
 $—
Redeemable preferred stock3,144
 3,144
 —
 —
Equity securities69,770
 69,770
 —
 —
Pooled separate accounts       
Core plus bond separate account fund10,401
 —
 10,401
 —
U.S. property separate account fund14,330
 —
 —
 14,330
Arbitrage fund8,292
 —
 8,292
 —
Money market funds3,659
 3,659
 —
 —
Total assets measured at fair value$119,047
 $76,573
 $28,144
 $14,330
There were no transfers of assets in or out of Level 1 or Level 2 during the period.
Fair Value Measurements
DescriptionDecember 31, 2022Level 1Level 2Level 3
Fixed maturity securities - corporate bonds$18,102 $— $18,102 $— 
Redeemable preferred stock2,946 2,946 — — 
Equity securities134,663 134,663 — — 
Pooled separate accounts
Core plus bond separate account fund16,768 — 16,768 — 
U.S. property separate account fund28,468 — — 28,468 
Arbitrage fund10,831 — 10,831 — 
Money market funds5,348 5,348 — — 
Total assets measured at fair value$217,126 $142,957 $45,701 $28,468 
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, 2023$28,468
Unrealized gains(3,061)
Balance at December 31, 2023$25,407
 U.S. property separate account fund
Balance at January 1, 2017$14,330
Unrealized gains1,172
Balance at December 31, 2017$15,502


 U.S. property separate account fund
Balance at January 1, 2016$11,252
Unrealized gains1,078
Purchases2,000
Balance at December 31, 2016$14,330
U.S. property separate account fund
Balance at January 1, 2022$27,328 
Unrealized gains1,140 
Balance at December 31, 2022$28,468 
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 theThe discount rate which is an estimate


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ofassumption uses the interest rate at which these benefits could be effectively settled, that is usedPrincipal© Pension Discount Rate Curve ("Principal Curve") and reflects the expected future benefit discounted cash flows to determine the present value of the respective plan'splan benefit obligations as of December 31. In estimatingThe Principal Curve uses pricing and yield information for high quality corporate bonds. We have reviewed the discount rate, we lookupdated curve and materials provided by our external actuaries with regard to ratesthe assumptions used in the curve. We will continue to monitor this curve and intend to make changes as appropriate.

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In October 2014, theThe Society of Actuaries finalized a new("SOA") is an actuarial organization that periodically reviews mortality tabledata and a newpublishes mortality tables and improvement 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 2022 MI"). The Principal 2022 MI scale is based on latest mortality improvement scale. The mortality improvement scale was further refinedrelease, the MIM-2021-v3 application tool issued by SOA in October 2022 with a few user-selected assumptions: 2028 as the Society of Actuaries in 2015, 2016ultimate year for age/cohort transition and 2017. These updated tables reflect improved life expectancieslong-term rate assumptions using sex-distinct and an expectation thatage based rated developed from the trend will continue.latest Social Security Trustee Reports. We have reviewed these updated tables and have updated the mortality assumptions based on this information and also based on research provided by our external actuaries. We will continue to monitor mortality assumptions and intend to make changes as appropriate to reflect additional research and our resulting best estimate of future mortality rates.
Assumptions Used to Determine Benefit Obligations
The following actuarial assumptions were used to determine the reported plan benefit obligations at December 31:
Weighted-average assumptions as ofPension BenefitsPost-retirement Benefits
December 31,2023202220232022
Discount rate4.93 %5.15 %N/AN/A
Interest crediting rate4.00 3.50 N/AN/A
Rate of compensation increase4.00 3.00 N/AN/A
Weighted-average assumptions as ofPension Benefits Post-retirement Benefits
December 31,2017 2016 2017 2016
Discount rate3.65% 4.17% 3.65% 4.17%
Rate of compensation increase3.00
 3.00
 N/A
 N/A
DecreasingRising interest rates resulted in a decreasean increase in the discount rates we use to value our respective plan's benefit obligations at December 31, 20172022 compared to December 31, 2016.2021.
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 ofPension Benefits Post-retirement BenefitsWeighted-average assumptions as ofPension BenefitsPost-retirement Benefits
January 1,2017 2016 2015 2017 2016 2015January 1,202320222021202320222021
Discount rate4.17% 4.21% 3.86% 4.17% 4.21% 3.86%Discount rate5.15 %2.84 %2.58 %N/A0.48 %2.58 %
Expected long-term rate of return on plan assets7.50
 7.50
 7.50
 N/A
 N/A
 N/A
Expected long-term rate of return on plan assets6.70 6.70 6.70 6.70 6.70 N/AN/AN/A
Rate of compensation increase3.00
 3.00
 3.00
 N/A
 N/A
 N/A
Rate of compensation increase3.00 3.00 3.00 2.75 2.75 N/AN/AN/A
Assumed Health Care Cost Trend Rates
 Health Care BenefitsDental Claims
Years Ended December 31,2023202220232022
Health care cost trend rates assumed for next yearN/AN/AN/AN/A
Rate to which the health care trend rate is assumed to decline (ultimate trend rate)N/AN/AN/AN/A
Year that the rate reaches the ultimate trend rateN/AN/AN/AN/A
 Health Care Benefits Dental Claims
Years Ended December 31,2017 2016 2017 2016
Health care cost trend rates assumed for next year7.00% 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 rate2026
 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 $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:
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Pension Benefits Post-retirement Benefits
Pension BenefitsPension BenefitsPost-retirement Benefits
Years Ended December 31,2017 2016 2017 2016Years Ended December 31,2023202220232022
Reconciliation of benefit obligation       
Benefit obligation at beginning of year$171,876
 $160,390
 $46,785
 $72,175
Benefit obligation at beginning of year
Benefit obligation at beginning of year
Service cost6,857
 6,490
 2,021
 3,728
Interest cost7,060
 6,654
 1,927
 3,015
Actuarial loss26,963
 2,215
 6,326
 1,468
Actuarial loss (gain)
Adjustment for plan amendment—
 —
 —
 (32,289)
Special event plan closure
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
Fair value of plan assets at beginning of year
Fair value of plan assets at beginning of year$128,430
 $106,600
 $—
 $—
Actual return on plan assets22,225
 9,320
 —
 —
Actual return on plan assets43,036 (50,420)(50,420)— — 
Employer contributions11,396
 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$209,867 and $152,620$201,669 at December 31, 20172023 and 2016,2022, respectively.
The following table displays the effect that the unrecognized prior service cost and unrecognized actuarial loss of our plans had on accumulated other comprehensive income ("AOCI"), as reported in the accompanying Consolidated Balance Sheets:
Pension BenefitsPost-retirement Benefits
Years Ended December 312023202220232022
Amounts recognized in AOCI
Unrecognized prior service cost$(20,119)$(26,066)$— $— 
Unrecognized actuarial (gain) loss(146)24,961 — — 
Total amounts recognized in AOCI$(20,265)$(1,105)$— $— 
  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 20182024 to be $4,287. We anticipate amortization of the net actuarial losses for our post-retirement benefit plan in 2018 to be $2,355.$0.














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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:
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Pension Plan Post-retirement Benefit Plan
Pension PlanPension PlanPost-retirement Benefit Plan
Years Ended December 31,2017 2016 2015 2017 2016 2015Years Ended December 31,202320222021202320222021
           
Net periodic benefit cost           
Net periodic benefit cost
Net periodic benefit cost
Service cost
Service cost
Service cost$6,857
 $6,490
 $6,675
 $2,021
 $3,728
 $5,220
Interest cost7,060
 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) —
 —
Effect of partial curtailment
Amortization of net loss3,562
 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

The expected return on plan assets is determined using a calculated value. The expected long-term return on plan assets assumption was developed as a weighted average rate based on the target asset allocation of the plan and the Long-Term Capital Market Assumptions ("CMA") November 2023. The capital market assumptions were developed with a primary focus on forward-looking valuation models and market indicators. The key fundamental economic inputs for these models are future inflation, economic growth, and interest rate environment. In addition to forward-looking models, historical analysis of market data and trends was reflected, as well as the outlook of recognized economists, organizations and consensus CMA from other credible studies.
The Corridor Approach is used to amortize actuarial gains and losses. An allowable 10% corridor is utilized under this approach. The period of amortization of such gains and losses is the average future service of members expected to receive benefits. A portion of the 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:
202420252026202720282029-3033
Pension benefits$17,570 $13,950 $14,310 $14,880 $15,100 $80,050 



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  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
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 and 2015, was $4,987, $2,904 and $7,706, 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 FireUFG 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. In May 2021, the Registrant's shareholders approved an additional 650,000 shares of UFG common stock issuable at any time and from time to time pursuant to the Stock Plan, and among other amendments, renamed such plan as the United Fire Group, Inc. 2021 Stock and Incentive Plan (as amended, the "Stock Plan"). At December 31, 2017,2023, there were996,8281,150,834 authorized shares remainingremaining 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 awardsOptions 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 3three years or 5five 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. Forfeitures of awards under the plan are recognized as they occur.

The activity in the Stock Plan is displayed in the following table:
Year EndedYear Ended From Inception to
Authorized Shares Available for Future Award GrantsYear Ended December 31, 2017 From Inception to December 31, 2017Authorized Shares Available for Future Award GrantsDecember 31, 2023December 31, 2023
Beginning balance1,248,651
 1,900,000
Additional shares authorized—
 1,500,000
Number of awards granted(259,405) (2,871,971)
Number of awards forfeited or expired7,582
 468,799
Ending balance996,828
 996,828
Number of option awards exercised136,827
 1,085,895
Number of unrestricted stock awards granted1,145
 8,470
Number of restricted stock awards vested1,198
 38,168


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-EmployeeNon- Employee Director Stock Option and Restricted Stock PlanPlan) (the "Director Stock Plan") authorizes the issuance of restricted stock awards and non-qualified stock options to purchase shares of United Fire'sUFG'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
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(iv) rename the Director Stock Plan as the "United Fire Group, Inc. Non-Employee Director Stock Plan." At December 31, 2017, we2023, the Company had 61,813103,600 authorized shares available for future issuance.
The Board of Directors has the authority to determine which non-employee directors receive awards, when options and restricted stock shall be granted, the option price, the option expiration date, the date of grant, the vesting schedule of options or whether the options shall be immediately vested, the terms and conditions of options and restricted stock (other than those terms and conditions set forth in the plan) and the number of shares of common stock to be issued pursuant to an option agreement or restricted stock agreement (subject to limits set forth in the plan). The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Director Stock Plan.



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awards under the plan are recognized as they occur.
The activity in the Director Stock Plan is displayed in the following table:
Year EndedFrom Inception to
Authorized Shares Available for Future Award GrantsDecember 31, 2023December 31, 2023
Beginning balance123,397  300,000 
Additional authorization— 150,000 
Number of awards granted(31,380) (386,618)
Number of awards forfeited or expired11,583  40,218 
Ending balance103,600  103,600 
Number of option awards exercised1,755  152,336 
Number of restricted stock awards vested20,955 137,956 
Authorized Shares Available for Future Award GrantsYear Ended December 31, 2017 From Inception to December 31, 2017
Beginning balance74,771
 300,000
Number of awards granted(12,958) (262,190)
Number of awards forfeited or expired—
 24,003
Ending balance61,813
 61,813
Number of option awards exercised36,808
 89,281
Number of restricted stock awards vested22,716
 54,272


Stock-Based Compensation Expense

In 2017, 20162023, 2022 and 2015,2021, we recognized stock-based compensation expense of $4,808, $3,696$3,246, $2,827 and $2,510,$3,441, respectively. Stock-based compensation expense is recognized over the vesting period of the stock options.

As of December 31, 2017,2023, we had $8,350$5,655 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.
20243,394 
20251,865 
2026367 
202729 
Total$5,655 












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2018 $4,028
2019 2,776
2020 1,116
2021 390
2022 40
Total $8,350
Analysis of Award Activity
The analysis below details the option award activity for 20172023 and the awards outstanding at December 31, 2017,2023, for both of our plans and ad hoc options, which were granted prior to the adoption of the other plans:
OptionsSharesWeighted-Average Exercise Price
Weighted-Average Remaining Life (in years)
Aggregate Intrinsic Value
Outstanding at January 1, 2023776,338 $36.47 
Granted117,026 28.08 
Exercised(5,755)27.35 
Cancelled/Forfeited(74,350)35.95 
Expired(17,583)27.23 
Outstanding at December 31, 2023795,676 $35.55 3.01$— 
Exercisable at December 31, 2023645,476 $37.21 1.64$— 
OptionsShares Weighted-Average Exercise Price 
Weighted-Average Remaining Life (in years)
 Aggregate Intrinsic Value
Outstanding at January 1, 20171,120,677
 $29.08
    
Granted159,709
 41.75
    
Exercised(173,635) 27.52
    
Forfeited or expired(5,700) 28.66
    
Outstanding at December 31, 20171,101,051
 $31.16
 6.52 $15,875
Exercisable at December 31, 2017495,089
 $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)2023) 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$18, $261 and $1,546$133 in 2017, 20162023, 2022 and 2015,2021, 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, 2017:2023:
Restricted stock awardsSharesWeighted-Average Grant Date Fair Value
Non-vested at January 1, 2023157,387 $30.56 
Adjustment to prior year PSU performance prediction7,329 30.56 
Granted266,070 26.42 
Vested(67,488)32.99 
Forfeited(31,117)31.89 
PSU projected performance adjustment(40,742)28.42 
Non-vested at December 31, 2023291,439 $27.42 
Restricted stock awardsShares Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2017182,086
 $34.08
Granted111,509
 41.94
Vested(23,914) 36.77
Forfeited(1,882) 40.27
Non-vested at December 31, 2017267,799
 $37.07
In 2017, 20162023, 2022 and 20152021 we recognized $2,987, $1,766$2,637, $2,048 and $924,$2,610, respectively, in compensation expense related to the restricted stock and restricted stock unit awards. At December 31, 2017,2023, we had $5,107$4,632 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$5,864 and $1,520$4,306 at December 31, 2017, 20162023 and 2015,2022, 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 31,202320222021
Risk-free interest rate4.09 %2.18 %0.98 %
Expected volatility (historical)
41.85 %40.56 %56.49 %
Expected option life (in years)
777
Expected dividends (in dollars)
$0.64 $0.61 $0.60 
Weighted-average grant-date fair value of options granted during the year (in dollars)
$10.95 $10.49 $13.48 

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December 31,2017 2016 2015
Risk-free interest rate2.23% 1.53% 1.94%
Expected volatility27.58% 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, 2017:2023:
 Options OutstandingOptions 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
$20.24 28.76136,617 7.74$27.36 26,954 $24.50 
28.77 29.44171,963 1.5829.20 165,469 29.19 
29.45 34.76128,246 3.3629.56 94,203 29.59 
34.77 43.54189,022 1.2440.79 189,022 40.79 
43.55 54.26169,828 2.3447.27 169,828 47.27 
$20.24 54.26795,676 3.01$35.55 645,476 $37.21 
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   Options OutstandingOptions 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
-21.00100,805
3.23$20.24
100,805
$20.24
21.01
-28.00159,478
4.5223.38
127,077
23.23
28.01
-35.00508,630
6.4229.49
235,833
29.74
35.01
-43.00332,138
8.6340.77
31,374
39.84
$15.01
-43.001,101,051
6.52$31.16
495,089
$26.77

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. As a result, our life insurance business has been 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


139

to customary conditions, including regulatory approval. For more information, refer to Note 17. "Discontinued Operations."

Prior to the announcement to sell our subsidiary, United Life Insurance Company, we had two reportable business segments in our operations: property and casualty insurance and life insurance. TheOur property and casualty insurance business has six domestic locations from which it conducts its business. The life insuranceis reported as one business operates 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 our life insurance business, the Company has a single reportable segment, the property and casualty insurance business, which includes all continuing operations.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 tocontinually evaluate our segmentoperations on the basis of both statutory accounting principles prescribed or permitted by our states of domicile and GAAP.


Our property and casualty insurance business is comprised of commercial lines insurance, including surety bonds, and assumed reinsurance. The company announced its intent to withdraw from personal lines insurance in 2020 and all remaining exposure is immaterial. All of our property and casualty insurance subsidiaries and our affiliate belong to an intercompany reinsurance pooling arrangement. Pooling arrangements permit 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. Under such arrangements, the members share substantially all of the insurance business that is written and allocate the combined premiums, losses and expenses based on percentages defined in the arrangement.

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 InsuranceCommercial Lines Business
We write both commercial and personal lines of property and casualty insurance. We focus on our commercial lines, which represented 92.9% of our property and casualty insurance premiums earned for 2017. Our personal lines represented 7.1% of our property and casualty insurance premiums earned for 2017.
Products
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. The majority of this transfer was completed by December 31, 2021. There is an immaterial amount of personal lines business remaining primarily in the state of New Jersey as of December 31, 2023. The business remaining in New Jersey is scheduled to lapse by the end of 2025.
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.

127
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 2015Years Ended December 31,202320222021
Continuing Operations - Property and casualty insurance business     
Property and casualty insurance business
Net premiums earned     
Net premiums earned
Net premiums earned
Other liability
Other liability
Other liability$306,480
 $289,982
 $261,303
Fire and allied lines270,716
 265,221
 246,450
Automobile277,511
 239,216
 210,090
Workers' compensation104,166
 103,605
 95,672
Fidelity and surety24,981
 22,507
 21,362
Reinsurance assumed10,650
 12,765
 13,639
Other2,988
 2,835
 3,179
Total net premiums earned from continuing operations$997,492
 $936,131
 $851,695
Discontinued Operations - Life insurance business     
Net premiums earned     
Ordinary life (excluding universal life)$35,388
 $63,668
 $53,114
Universal life policy fees13,145
 11,577
 12,834
Immediate annuities with life contingencies11,691
 10,533
 12,223
Accident and health1,096
 1,434
 1,425
Other48
 58
 388
Total net premiums earned from discontinued operations$61,368
 $87,270
 $79,984
Total net premiums earned
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:
(In Thousands Except Share Data)         
QuartersFirst 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 taxes23,006
 (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 taxes28,165
 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)         
QuartersFirst Second Third Fourth Total
Year Ended December 31, 2017         
Total revenues$31,781
 $28,492
 $27,054
 $28,386
 $115,713
Income before income taxes2,083
 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 taxes609
 (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 12.11. 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


142

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.








128
The components of basic and diluted earnings per share were as follows:
 Years Ended December 31,
202320222021
(In Thousands Except Share and Per Share Data)BasicDilutedBasicDilutedBasicDiluted
Net income (loss)$(29,700)$(29,700)$15,031 $15,031 $80,594 $80,594 
Weighted-average common shares outstanding25,249,269 25,249,269 25,160,809 25,160,809 25,092,297 25,092,297 
Add dilutive effect of restricted stock awards— — — 157,387 — 202,809 
Add dilutive effect of stock options— — — — — 224,620 
Weighted-average common shares25,249,269 25,249,269 25,160,809 25,318,196 25,092,297 25,519,726 
Earnings (loss) per common share$(1.18)$(1.18)$0.60 $0.59 $3.21 $3.16 
Awards excluded from diluted calculation(1)
— 791,735 — 585,853 — 800,903 
(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 outstanding25,103,720
 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 shares25,103,720
 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 operations0.24
 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 13.12. 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 through a review by vendor management of the facts and circumstances of the contract to determine if a lease is present. A questionnaire is then forwarded to the corporate finance department to come to agreement on the determination. There are no significant assumptions made in the identification of lease components and there has been no history of contracts containing both lease and non-lease components. The Company has operating lease agreements forleases relating to office space, vehicles, computer equipment, and office equipment. Mostequipment, 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 10 years and greater than 10 years. The collateralized discount rate used to calculate the present value of future minimum lease payments is based, where appropriate, on current industry borrowing rates for financial companies with similar ratings. The Company does not have any restrictions or covenants associated with its lease arrangements.
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, 2023, we have leases with remaining terms of one year to eight 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 uponto extend the expirationlease terms from six months to five years.
The Company has six lease agreements with the Company serving as the lessor. The properties are office spaces and parking. The terms of the relatedleases vary depending on the property and range from two years to nine years, which may include options for renewal or to extend lease agreements. Rental expense underterms or no options for renewal. The Company has elected to categorize these leases into four categories based on length of lease terms and applies an incremental borrowing rate
129
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 10 years and greater than 10 years. The collateralized discount rate used to calculate the present value of future minimum lease payments is based, where appropriate, on current industry borrowing rates for similar rated financial companies.
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 paymentsleases were as follows:
As of December 31, 2023As of December 31, 2022
Components of lease expense:
Operating lease expense$9,187 8,763 
   Less lessor income507 77 
   Less sublease income532 250 
Net lease expense8,148 8,436 
Cash flows information related to leases:
Operating cash outflow from operating leases8,219 8,396 
Balance sheet information for operating leases:As of December 31, 2023As of December 31, 2022
Operating lease right-of-use assets (Other assets on Consolidated Balance Sheets)$29,184 $26,472 
Operating lease liabilities (Accrued expenses and other liabilities on Consolidated Balance Sheets)29,668 26,924 
Right-of-use assets obtained in exchange for new operating lease liabilities9,336 2,807 
Weighted average remaining lease term3.77 years3.81 years
Weighted average discount rate4.17 %2.91 %
Maturities of lease liabilities:As of December 31, 2023As of December 31, 2022
2023$— $8,452 
20249,361 7,007 
20259,029 6,438 
20267,748 5,141 
20273,617 1,315 
20281,696 — 
Thereafter811 — 
Total lease payments32,262 28,353 
Less imputed interest(2,594)(1,429)
Lease liability$29,668 $26,924 
130
2018$6,435
20196,027
20205,529
20213,173
2022643
Thereafter718
Total$22,525
Maturities of lease receivables:As of December 31, 2023As of December 31, 2022
2023$— $618 
20241,051 487 
20251,066 498 
20261,124 554 
20271,092 519 
2028584 10 
Thereafter2,691 38 
Total lease payments receivable7,608 2,724 



NOTE 14. CREDIT FACILITY13. 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.

Interest payments under the long term debt 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, 2023, interest expense totaled $3,260. Payment of interest is subject to approval by the Iowa Insurance Division.

A.M. Best Co. Financial Strength RatingApplicable Interest Rate
A+5.875%
A6.375%
A-6.875%
B++ (or lower)7.375%

Credit Facilities
On February 2, 2016,March 31, 2020, UF&C a wholly owned subsidiary of the Company, as borrower, entered into a Credit Agreementcredit agreement (the "Credit Agreement") bywith Wells Fargo Bank, National Association ("Wells Fargo"), as administrative agent, issuing lender, swing-line lender and amonglender, and the Company, with theother lenders from time to time party thereto and KeyBank National Association ("Key Bank"(collectively with Wells Fargo, the "Lenders"), as administrative agent, swingline lender and letter of credit issuer. The Credit Agreement providesproviding for a $50,000 four-year unsecured revolving credit facility, that includeswhich included a $20,000 letter of credit subfacilitysub-facility and a swingline subfacility in the amount up to $5,000.$5,000 swing-line loan for working capital and other general corporate purposes. The Credit Agreement allowswas provided by the CompanyLenders on an unsecured basis, and the UF&C had the option to increase the aggregate amountCredit Agreement by $100,000 if agreed to by the Lenders providing such incremental facility.
131
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 the Credit Agreement is due and payable in full at maturity on February 2, 2020. Based on the type of loan, advances under the Credit Agreement would bear interest on either the London interbank offered rate ("LIBOR") 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 containsincluded customary representations, conditions to borrowing, covenants and events of default, including certain covenants that limit or restrict, subjectdefault 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 certain exceptions, the abilityaccelerate payment of the Companyall amounts outstanding thereunder and its subsidiariesterminate any further commitments 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. As of December 31, 2017 we were in compliance with all covenants of the Credit Agreement.lend.
There was no outstanding balance on the Credit Agreement at December 31, 2017 or 2016.2022. As of December 31, 2022, we were in compliance with all covenants under the Credit Agreement. We did not incur any interest expense related to the Credit Agreement in 2017, 20162023, 2022 or 2021.
On December 29, 2023, the Company terminated its existing Credit Agreement. The Company did not have any borrowings outstanding under our prior credit facilitythe Credit Agreement and the Company did not incur any early termination penalties in 2015.connection with the termination of the Credit Agreement.


In December 2023, the Company became a member of the Federal Home Loan Bank of Des Moines ("FHLB Des Moines"). As part of the FHLB Des Moines application process and in connection with its membership in FHLB Des Moines, the Company entered into FHLB Des Moines' standard Advances, Pledge and Security Agreement (the "Advances Agreement"). The Advances Agreement governs the terms and conditions under which the Company may borrow and FHLB Des Moines may make loans or advances from time to time. The Advances Agreement requires the Company to pledge certain collateral, including the capital stock in FHLB Des Moines owned by the Company and such other assets (including mortgage-related securities, loans, and stock in the Company) as agreed by the Company and FHLB Des Moines in connection with any such loans or advances.



Membership in FHLB Des Moines provides the Company with access to FHLB Des Moines' product line of financial services, including funding agreements, general asset/liability management, and collateralized advances that can be used for liquidity management. As a member, the Company has an aggregate borrowing capacity of up to 20.0 percent of total assets. As of December 31, 2023, the Company has FHLB Des Moines borrowing capacity up to $392,194 if an immediate liquidity need would arise. The Company had no outstanding balance as of December 31, 2023 and 2022 related to these lines of credit.


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NOTE 15.14. INTANGIBLE ASSETS
The carrying value of our goodwill was $15,091 at both December 31, 2017 and 2016, respectively. The goodwill is fully allocated to our property and casualty insurance business.
Our major classes of intangible assets are presented in the following table:
Year Ended December 31,Year Ended December 31,
202320232022
Agency relationships
Accumulated amortization - agency relationships
$
Year Ended December 31,
2017 2016
Agency relationships$10,338
 $10,338
Accumulated amortization - agency relationships(5,566) (4,929)
Trade names
$4,772
 $5,409
   
Software$3,260
 $3,260
Accumulated amortization - software(3,260) (3,260)
Trade names
$—
 $—
   
Trade names$1,978
 $1,978
Accumulated amortization - trade names(890) (758)
$
$1,088
 $1,220
   
Favorable contract$286
 $286
Accumulated amortization - favorable contract(286) (286)
State insurance licenses (1)
State insurance licenses (1)
$—
 $—
   
State insurance licenses (1)
$3,020
 $3,020
   
Net intangible assets$8,880
 $9,649
Net intangible assets
Net intangible assets
(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 relationshipsFifteen years
Trade namesUseful LifeFifteen years
Agency relationshipsFifteen years
SoftwareTwo years
Trade namesFifteen years
Favorable contractTwo years

132
Our estimated aggregate amortization expense for each of the next five years is as follows:
2024$709 
2025709 
2026177 
2027– 
2028– 
133
2018$719
2019709
2020709
2021709
2022709













145

NOTE 16.15. ACCUMULATED OTHER COMPREHENSIVE INCOME


The following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the years ended December 31, 2017, 20162023, 2022 and 2015:2021:


Liability for
Net unrealizedunderfunded
appreciationemployee
on investmentsbenefit costsTotal
Balance as of January 1, 2021$83,070 $(16,159)$66,911 
Change in accumulated other comprehensive income before reclassifications(31,519)15,511 (16,008)
Reclassification adjustments from accumulated other comprehensive income(1,782)5,216 3,434 
Balance as of December 31, 2021$49,769 $4,568 $54,337 
Change in accumulated other comprehensive income before reclassifications(139,183)(6,540)(145,723)
Reclassification adjustments from accumulated other comprehensive income1,045 2,845 3,890 
Balance as of December 31, 2022$(88,369)$873 $(87,496)
Change in accumulated other comprehensive income before reclassifications20,835 14,973 35,808 
Reclassification adjustments from accumulated other comprehensive income567 164 731 
Balance as of December 31, 2023$(66,967)$16,010 $(50,957)

Income tax effects are released from accumulated other comprehensive income (loss) for unrealized gains or losses when the gains or losses are realized.
134
   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 reclassifications8,461
 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 reclassifications48,467
 (19,878) 28,589
Reclassification adjustments from accumulated other comprehensive income(4,152) 3,514
 (638)
Accumulated effect of change in enacted tax rate36,658
 (5,350) 31,308
Balance as of December 31, 2017$214,865
 $(46,551) $168,314




146

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 as set forth in the definitive agreement. As a result, our life insurance business (previously reported as a separate segment) has been considered held for sale and reported as discontinued operations and its financial position, results of operations and cash flows are separately reported for all periods presented, unless otherwise noted. The sale is expected 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, among other services, 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 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:
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 loans3,435
 3,706
Policy loans5,815
 5,366
Other long-term investments16,437
 15,870
 1,479,399
 1,493,876
Cash and cash equivalents15,851
 21,659
Deferred policy acquisition costs71,151
 70,750
Other assets19,733
 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 taxes18,716
 27,739
Accrued expenses and other liabilities8,018
 11,981
Total liabilities held for sale$1,347,135
 $1,390,223










147

Summary operating results of discontinued operations were as follows for the periods indicated:
Discontinued Operations
Statements of Income
 For the Years Ended December 31,
(In Thousands, Except Share Data)2017 2016 2015
      
Revenues     
Net premiums earned$61,368
 $87,270
 $79,195
Investment income, net of investment expenses49,720
 51,538
 54,222
Net realized investment gains (losses)     
Other-than-temporary impairment charges—
 —
 (1,300)
Net realized investment gains4,008
 1,156
 3,022
Total net realized investment gains4,008
 1,156
 1,722
Other income617
 621
 508
Total revenues$115,713
 $140,585
 $135,647
      
Benefits, Losses and Expenses     
Losses and loss settlement expenses$40,451
 $31,365
 $29,001
Increase in liability for future policy benefits27,632
 59,969
 50,945
Amortization of deferred policy acquisition costs5,181
 8,121
 6,634
Other underwriting expenses13,281
 19,881
 19,306
Interest on policyholders’ accounts18,525
 20,079
 23,680
Total benefits, losses and expenses$105,070
 $139,415
 $129,566
      
Income from discontinued operations before income taxes$10,643
 $1,170
 $6,081
Federal income tax expense4,490
 384
 2,275
Net income from discontinued operations$6,153
 $786
 $3,806
Earnings per common share from discontinued operations:     
Basic$0.24
 $0.03
 $0.15
Diluted0.24
 0.03
 0.15

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.



148

Report of Independent Registered Public Accounting Firm


To the Stockholders and the Board of Directors and Shareholders
of United Fire Group, Inc.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, 20172023 and 2016, and2022, the related consolidated statements of income and comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2017,2023, and the related notes and financial statement schedules listed in the Index at Item 15(a)(2)2 (collectively referred to as the “financial statements”"consolidated financial statements"). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 20172023 and 2016,2022, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2023, 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, 2017,2023, 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, 201829, 2024 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’sCompany'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 matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates 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 matter 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 matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.






135
Valuation of reserves for property and casualty loss and loss settlement expenses
Description of the Matter
At December 31, 2023, the Company's reserves for losses and loss settlement expenses was $1.6 billion, of which $584.9 million related to Incurred But Not Reported (IBNR) reserves. As described in Note 5 to the consolidated financial statements, liability 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.

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.


/s/ Ernst & Young LLP  
Ernst & Young LLP 







We have served as the Company’sCompany's auditor since 2002.




Des Moines, Iowa
February 28, 2018


29, 2024

136
149

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, 2017,2023, 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, 2017,2023, 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, 2017.2023. 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, 2017,2023, is included in this Item under the heading "Report of Independent Registered Public Accounting Firm."
























137
150


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's (the Company) internal control over financial reporting as of December 31, 2017,2023, 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, 2017,2023, 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 financialbalance sheets of United Fire Group, Inc. as of December 31, 2023 and 2022, 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, 2023 of the Company and our report dated February 28, 201829, 2024 expressed an unqualified opinion thereon.


Basis for Opinion


The Company’sThe 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’sCompany'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’scompany'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’scompany'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’scompany's assets that could have a material effect on the financial statements.










138
151

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, 201829, 2024


139
152

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING


ThereOur 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. We believe our operational processes, internal controls over financial reporting and disclosures, and financial reporting systems are operating effectively in the present environment. Since 2020, our business teams have moved to a hybrid working environment and continue to support our customers, agents and claimants regardless of working location.

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, 2017,2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





153

ITEM 9B. OTHER INFORMATION
None.


ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

PART III.


ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 regarding the Company’sCompany's executive officers is included in '""Information About Our Executive Officers of the Company"Officers" under Part I, Item 1 "Business" 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 Statementproxy statement for our annual meeting of shareholders to be heldheld on May 16, 201815, 2024 (the "2018"2024 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 20182024 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 20182024 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 20182024 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 20182024 Proxy Statement and is incorporated herein by reference.




140
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDERSTOCKHOLDER 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 20182024 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 20182024 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 20182024 Proxy Statement and is incorporated herein by reference.

141

154

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
Consolidated Balance Sheets at December 31, 20172023 and 20162022
7467
Consolidated Statements of Income and Comprehensive Income for the three years ended December 31, 20172023
7568
Consolidated StatementsStatement of Stockholders' Equity for the three years ended December 31, 20172023
7669
Consolidated Statements of Cash Flows for the three years ended December 31, 20172023
7770
Notes to Consolidated Financial Statements
7972
(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
159146
Schedule II. Condensed Financial Statements of Parent Company
161147
Schedule III: Supplementary Insurance Information
164150
Schedule IV: Reinsurance
165151
Schedule V: Valuation and Qualifying Accounts
166152
Schedule VI: Supplemental Information Concerning Property and Casualty Insurance Operations
167153
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.





142
155
Table of Contents

(a) 3. Exhibit Index:
    Incorporated by reference
Exhibit numberExhibit descriptionFiled herewithFormPeriod endedExhibitFiling date
2.1†8-K2.1 9/19/2017
3.1   S-4Annex II5/25/2011
3.2 8-K/A3.1 5/26/2015
3.3   S-4Annex III5/25/2011
4.1 10-K12/31/20194.12/28/2020
10.1 * 10-K12/31/200710.2 2/27/2008
10.2 * 8-K10.1 5/22/2020
10.3 *10-K12/31/201110.4 3/15/2012
10.4 * 10-Q9/30/200710.3 10/25/2007
10.5 *8-K10.1 5/21/2021
10.6 * 10-K12/31/200710.7 2/27/2008
10.7 * 10-K12/31/200710.8 2/27/2008
10.8 * 8-K 99.2 5/22/2008
10.9 * 8-K 99.3 5/22/2008
10.10 * 8-K 99.4 5/22/2008
10.11 * 8-K/A 99.1 2/24/2009
10.12 *10-K12/31/201110.14 3/15/2012
10.13 *10-Q6/30/201610.1 8/3/2016
10.14 *10-K12/31/201110.15 3/15/2012
10.15 *
Deferred Compensation Plan for United Fire Group, Inc. Non-Employee Directors
8-K10.1 11/19/2012

143
Table of Contents
     Incorporated by reference
Exhibit numberExhibit descriptionFiled 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 numberExhibit descriptionFiled herewithFormPeriod endedExhibitFiling date
10.16 *
Executive Nonqualified Excess Plan
8-K10.15/22/2014
10.17 *
Executive Nonqualified "Excess Plan" Adoption Agreement
8-K10.25/22/2014
10.18 *
United Fire & Casualty Company Rabbi Directed Trust Agreement
8-K10.35/22/2014
10.19 *
Form of United Fire Group, Inc. Change in Control Severance Agreement
8-K10.45/22/2014
10.20 *
Amendment Number One to United Fire & Casualty Company Nonqualified Deferred Compensation Plan
8-K10.55/22/2014
10.21 *10-Q6/30/1410.78/5/2014
10.22 *10-Q6/30/1410.88/5/2014
10.23 *10-Q3/31/1710.1 5/3/2017
10.24 *10-Q6/30/202010.2 8/5/2020
10.25 *10-Q9/30/202110.1 11/4/2021
10.26 *10-Q9/30/202110.2 11/4/2021
10.27 *10-Q9/30/202110.3 11/4/2021
10.28 *8-K10.1 1/5/2023
10.29 *10-Q3/31/202310.1 5/9/2023










144
Table of Contents
(a) 3. Exhibit Index (continued):
Incorporated by reference
Exhibit numberExhibit descriptionFiled herewithFormPeriod endedExhibitFiling date
21.0 X
23.1 X
23.2 X
31.1 X
31.2 X
32.1 X
32.2 X
97.0 X
101.1 
The following financial information from United Fire Group, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2023 formatted in Inline eXtensible Business Reporting Language (Inline XBRL): (i) Consolidated Balance Sheets at December 31, 2023 and 2022; (ii) Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2023, 2022 and 2021; (iii) Consolidated Statement of Stockholders' Equity for the years ended December 31, 2023, 2022 and 2021; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021; and (v) Notes to Consolidated Financial Statements.
X
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 CommissionSEC 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.

145
156

(a) 3. Exhibit Index (continued):
     Incorporated by reference
Exhibit numberExhibit descriptionFiled 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

(a) 3. Exhibit Index (continued):

Incorporated by reference
Exhibit numberExhibit descriptionFiled herewithFormPeriod endingExhibitFiling date
31.1
Certification of Randy A. Ramlo Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
31.2
Certification of Dawn M. Jaffray Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
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
X
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
X
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.
X



158

Schedule I. Summary of Investments — Other than Investments in Related Parties
Continuing Operations:
December 31, 2023(In thousands)
Cost or Amortized CostAmounts at Which Shown in Balance Sheet
Type of InvestmentFair Value
Fixed maturities   
Bonds   
United States Government and government agencies and authorities$153,751 $145,354 $145,354 
States, municipalities and political subdivisions618,686 614,759 614,759 
Foreign governments21,255 19,172 19,172 
Public utilities149,734 140,467 140,467 
All other bonds827,615 766,751 766,750 
Redeemable preferred stock— — — 
Total fixed maturities$1,771,041 $1,686,503 $1,686,502 
Equity securities
Common stocks - key from Note 2-3 Cost Fair Value
Public utilities$656 $3,993 $3,993 
Banks, trusts and insurance companies2,359 7,535 7,535 
Industrial, miscellaneous and all other26,223 43,491 43,491 
Redeemable preferred stocks— — — 
Nonredeemable preferred stocks— — — 
Total equity securities$29,238 $55,019 $55,019 
Mortgage loans on real estate$45,421 $42,632 $45,366 
Policy loans— — — 
Other long-term investments99,507 99,507 99,507 
Short-term investments100 100 100 
Total investments$1,945,307 $1,883,761 $1,886,494 





















146
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 subdivisions1,019,420
 1,034,827
 1,034,827
Foreign governments10,865
 11,130
 11,130
Public utilities43,064
 43,692
 43,692
All other bonds360,657
 364,501
 364,501
Redeemable preferred stock2,395
 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 companies11,266
 113,487
 113,487
Industrial, miscellaneous and all other44,077
 153,959
 153,959
Nonredeemable preferred stocks3,271
 3,838
 3,838
Total equity securities$63,275
 $287,344
 $287,344
Other long-term investments35,432
 49,352
 49,352
Short-term investments175
 175
 175
Total investments$1,630,224
 $1,888,933
 $1,888,933

























159

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 subdivisions37,963
 38,363
 38,363
Foreign governments40,496
 41,623
 41,623
Public utilities162,964
 165,452
 165,452
All other bonds1,127,196
 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 companies467
 3,158
 3,158
Industrial, miscellaneous and all other2,088
 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 loans5,815
 5,815
 5,815
Other long-term investments14,077
 16,437
 16,437
Total investments$1,440,751
 $1,479,558
 $1,479,399



160

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)20232022
Assets
Fixed maturities
Available-for-sale, at fair value (amortized cost $0 in 2023 and $0 in 2022)$— $— 
Investment in subsidiary733,152 738,098 
Cash and cash equivalents553 2,038 
Other assets199 134 
Total assets$733,904 $740,270 
Liabilities and stockholders' equity
Liabilities$159 $156 
Stockholders' equity
Common stock, $0.001 par value, authorized 75,000,000 shares 25,269,842 and 25,210,541 issued and outstanding in 2023 and 2022, respectively$25 $25 
Additional paid-in capital209,986 207,029 
Retained earnings574,691 620,556 
Accumulated other comprehensive income, net of tax(50,957)(87,496)
Total stockholders' equity$733,745 $740,114 
Total liabilities and stockholders' equity$733,904 $740,270 
 December 31,
(In thousands, except share data)20172016
   
Assets  
Fixed maturities, held-to-maturity, at amortized cost (fair value $150 in 2017 and $150 in 2016)$150
$150
Investment in subsidiary967,590
925,887
Cash and cash equivalents4,537
14,325
Federal income tax receivable1,095
1,521
Accrued investment income1
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 capital196,334
216,482
Retained earnings608,700
616,322
Accumulated other comprehensive income, net of tax168,314
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.











































147
161

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)202320222021
Revenues
Investment income$99 $85 $23 
Total revenues99 85 23 
Expenses
Other operating expenses— — 3 
Total expenses— — 3 
Income before income taxes and equity in net income of subsidiary99 85 20 
Federal income tax expense (benefit)21 18 5 
Net income before equity in net income (loss) of subsidiary$78 $67 $15 
Equity in net income (loss) of subsidiary(29,778)14,964 80,579 
Net income (loss)$(29,700)$15,031 $80,594 
Other comprehensive income (loss)
Change in unrealized appreciation on investments held by subsidiary$26,373 $(176,183)$(39,901)
Change in liability for underfunded employee benefit plans of subsidiary18,953 (8,277)19,633 
Other comprehensive income (loss), before tax and reclassification adjustments$45,326 $(184,460)$(20,268)
Income tax effect(9,518)38,736 4,260 
Other comprehensive income (loss), after tax, before reclassification adjustments$35,808 $(145,724)$(16,008)
Reclassification adjustment for net realized gains of the subsidiary included in income718 1,323 (2,256)
Reclassification adjustment for employee benefit costs of the subsidiary included in expense207 3,601 6,603 
Total reclassification adjustments, before tax$925 $4,924 $4,347 
Income tax effect(194)(1,034)(913)
Total reclassification adjustments, after tax$731 $3,890 $3,434 
Comprehensive income (loss)$6,839 $(126,803)$68,020 
 For the Years Ended December 31,
(In thousands)201720162015
    
Revenues   
Investment income$133
$66
$25
Total revenues133
66
25
    
Expenses   
Other operating expenses$103
$73
$116
Total expenses103
73
116
    
Income (loss) before income taxes and equity in net income of subsidiary30
(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 subsidiary49,933
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
$(12,657)
Reclassification adjustment for net realized gains of the subsidiary included in income(6,390)(4,520)(4,513)
Reclassification adjustment for employee benefit costs of the subsidiary included in expense5,408
5,486
7,468
Total reclassification adjustments, before tax$(982)$966
$2,955
Income tax effect344
(338)(1,034)
Total reclassification adjustments, after tax$(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.













148
162


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)202320222021
Cash flows from operating activities
Net income (loss)$(29,700)$15,031 $80,594 
Adjustments to reconcile net income to net cash provided by operating activities
Equity in net income of subsidiary29,778 (14,964)(80,579)
Dividends received from subsidiary13,200 12,000 10,000 
Other, net1,691 2,845 3,131 
Total adjustments$44,669 $(119)$(67,448)
Net cash provided by operating activities$14,969 $14,912 $13,146 
Cash flows from investing activities
Net cash used in investing activities$— $— $— 
Cash flows from financing activities
Payment of cash dividends$(16,164)$(15,860)$(15,064)
Repurchase of common stock— — (2,007)
Issuance of common stock(290)828 (421)
Net cash used in financing activities$(16,454)$(15,032)$(17,492)
Net change in cash and cash equivalents$(1,485)$(120)$(4,346)
Cash and cash equivalents at beginning of period2,038 2,158 6,504 
Cash and cash equivalents at end of year$553 $2,038 $2,158 
 For the Years Ended December 31,
(In thousands)201720162015
    
Cash flows from operating activities   
Net income$51,023
$49,904
$89,126
Adjustments to reconcile net income to net cash provided by operating activities   
Equity in net income of subsidiary(49,933)(49,908)(89,175)
Dividends received from subsidiary40,000
24,000
22,500
Other, net1,415
2,995
1,269
Total adjustments$(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)$(21,658)
Repurchase of common stock(29,784)(3,746)(2,423)
Issuance of common stock4,828
9,922
5,496
Tax impact from issuance of common stock—
(816)(833)
Net cash used in financing activities$(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 period14,325
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 Annual Report on Form 10-K.




149
163

Schedule III. Supplementary Insurance Information
(In thousands)Deferred Policy Acquisition CostsFuture Policy Benefits, Losses, Claims and Loss ExpensesUnearned PremiumsEarned Premium RevenueInvestment Income, NetBenefits, Claims, Losses and Settlement ExpensesAmortization of Deferred Policy Acquisition CostsOther Underwriting ExpensesPremiums Written
Year Ended December 31, 2023
Property and Casualty$126,532 $1,638,755 $549,384 $1,034,587 $59,606 $769,414 $244,991 $115,800 $1,066,901 
Year Ended December 31, 2022
Property and Casualty$104,225 $1,497,274 $474,388 $951,541 $44,932 $637,301 $213,075 $114,645 $984,223 
Year Ended December 31, 2021
Property and Casualty$91,446 $1,514,265 $439,733 $962,823 $55,778 $652,155 $203,432 $110,574 $941,348 





150
(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

Schedule IV. Reinsurance
(In thousands)Gross AmountCeded to Other CompaniesAssumed From Other CompaniesNet AmountPercentage of Amount Assumed to Net Earned
Year Ended December 31, 2023     
Premiums earned
Property and casualty insurance$953,958 $144,958 $225,587 $1,034,587 21.80 %
Year Ended December 31, 2022
Premiums earned
Property and casualty insurance$889,301 $101,740 $163,980 $951,541 17.23 %
Year Ended December 31, 2021
Premiums earned
Property and casualty insurance$978,190 $92,650 $77,283 $962,823 8.03 %

151
(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 insurance64,090
 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 insurance90,038
 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 insurance82,356
 3,161
 —
 79,195
 —%
Total$972,413
 $59,919
 $18,396
 $930,890
 1.98%




165

Schedule V. Valuation And Qualifying Accounts
(In thousands)Balance at beginning of periodCharged to costs and expensesDeductionsBalance at end of period
Description
Allowance for bad debts    
Year Ended December 31, 2023$1,575 $219 $1,794 
Year Ended December 31, 2022781 794 — 1,575 
Year Ended December 31, 2021687 94 — 781 
Deferred tax asset valuation allowance
Year Ended December 31, 2023$— $— $— 
Year Ended December 31, 2022— — — — 
Year Ended December 31, 2021— — — — 



152
(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, 2016867
 388
 —
 1,255
Year Ended December 31, 2015618
 249
 —
 867
        
Deferred tax asset valuation allowance (1)
       
Year Ended December 31, 2017$718
 $—
 $389
 $329
Year Ended December 31, 20161,265
 —
 547
 718
Year Ended December 31, 20151,813
 —
 548
 1,265
(1)Recorded in connection with the purchase of American Indemnity Financial Corporation in 1999.




166

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 CostsNet Investment IncomePaid Claims and Claim Adjustment Expenses
Unearned PremiumsEarned PremiumsCurrent YearPrior YearsPremiums Written
2023$126,532 $1,638,755 $549,384 $1,034,587 $1,274 $59,606 $701,664 $67,750 $244,991 $672,699 $1,066,901 
2022$104,225 $1,497,274 $474,388 $951,541 $(15,892)$44,932 $624,411 $12,890 $213,075 $688,268 $984,223 
2021$91,446 $1,514,265 $439,733 $962,823 $47,383 $55,778 $691,933 $(39,778)$203,432 $697,078 $941,348 
153
(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

ITEM 16. FORM 10-K SUMMARY
None.




154
168

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/ Kevin Leidwinger
By:/s/ Randy A. Ramlo
Randy A. Ramlo,Kevin Leidwinger, President, Chief Executive Officer, Director and Principal Executive Officer
Date:2/28/201829/2024
By:/s/ Dawn M. JaffrayEric J. Martin
Dawn M. Jaffray, SeniorEric J. Martin, Executive Vice President, Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer
Date:2/28/201829/2024
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.
By/s/ Kevin LeidwingerBy/s/ Eric J. Martin
Kevin Leidwinger, President, Chief Executive Officer, Director and Principal Executive Officer
By/s/ Jack B. EvansBy/s/ John Paul E. Besong
Jack B. Evans, Chairman and DirectorJohn Paul E. Besong, Director
Date2/28/2018Date2/28/2018
By/s/ Scott L. CarltonBy:/s/ Brenda K. Clancy
Scott L. Carlton, DirectorBrenda K. Clancy, Director
Date2/28/2018Date2/28/2018
By/s/ Christopher R. DrahozalBy/s/ Sarah Fisher Gardial
Christopher R. Drahozal, DirectorSarah Fisher Gardial, Director
Date2/28/2018Date2/28/2018
By/s/ Dawn M. JaffrayBy/s/ George D. Milligan
Dawn M. Jaffray, SeniorEric J. Martin, Executive Vice President, Chief Financial Officer, Principal Financial Officer and Principal Accounting OfficerGeorge D. Milligan, Director
Date2/28/201829/2024DateDate2/28/201829/2024
By/s/ James W. NoyceBy/s/ Mary K. QuassJohn Paul E. Besong
James W. Noyce, Vice Chairman and DirectorMary K. Quass,John Paul E. Besong, Director
Date2/28/201829/2024Date2/28/201829/2024
By/s/ Randy A. RamloScott L. CarltonByBy/s/ Kyle D. SkogmanBrenda K. Clancy
Scott L. Carlton, DirectorRandy A. Ramlo, Chief Executive Officer,Brenda K. Clancy, Director and Principal Executive OfficerKyle D. Skogman, Director
Date2/28/201829/2024DateDate2/28/201829/2024
By/s/ Christopher R. DrahozalBy:/s/ Matthew R. Foran
ByChristopher R. Drahozal, DirectorMatthew R. Foran, Director
Date2/29/2024Date2/29/2024
By/s/ Mark A. GreenBy:/s/ Lura McBride
Mark A. Green, DirectorLura McBride, Director
Date2/29/2024Date2/29/2024
By/s/ George D. MilliganBy/s/ Susan E. Voss
George D. Milligan, DirectorSusan E. Voss, Director
Date2/28/201829/2024Date2/29/2024



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