United Fire (UFCS) 10-Q 2021 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-34257

________________________

 UNITED FIRE GROUP INC.

(Exact name of registrant as specified in its charter)

Iowa	45-2302834
(State of incorporation)	(I.R.S. Employer Identification No.)

118 Second Avenue SE
Cedar Rapids	Iowa	52401
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (319) 399-5700

Securities Registered Pursuant to Section 12(b) of the Exchange Act of 1934:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value	UFCS	The NASDAQ Global Select Market

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☒	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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐

No ☒

As of August 2, 2021, 25,117,340 shares of common stock were outstanding.

United Fire Group, Inc.

Index to Quarterly Report on Form 10-Q

June 30, 2021

	Page
Forward-Looking Information	1
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020	3
Consolidated Statements of Income and Comprehensive Income (unaudited) for the three- and six-month periods ended June 30, 2021 and 2020	4
Consolidated Statement of Stockholders’ Equity (unaudited) for the three- and six-month periods ended June 30, 2021 and 2020	5
Consolidated Statements of Cash Flows (unaudited) for the three- and six-month periods ended June 30, 2021 and 2020	7
Notes to Unaudited Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3. Quantitative and Qualitative Disclosures About Market Risk	53
Item 4. Controls and Procedures	53
Part II. Other Information
Item 1. Legal Proceedings	54
Item 1A. Risk Factors	54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3. Defaults Upon Senior Securities	54
Item 4. Mine Safety Disclosures	54
Item 5. Other Information	54
Item 6. Exhibits	56
Signatures	57

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," "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" in our Annual Report on Form 10-K for the year ended December 31, 2020 and in our other filings with the Securities and Exchange Commission ("SEC") 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 and severity of claims, including those related to catastrophe losses 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, including the ongoing impact of the novel coronavirus (COVID-19) pandemic (including the recent emergence of variant strains);

•The adequacy of our reserves for property and casualty insurance losses and loss settlement expenses;

•Geographic concentration risk in our property and casualty insurance business;

•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 of our investment portfolio;

•Litigation or regulatory actions that could require us to pay significant damages, fines or penalties or change the way we do business;

•Our ability to effectively underwrite and adequately price insured risks;

•Changes in industry trends, an increase in competition and significant industry developments;

•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, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") 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;

•Our relationship with and the financial strength of our reinsurers; and

•Competitive, legal, regulatory or tax changes that affect the distribution cost or demand for our products through our independent agent/agency distribution network.

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 made. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have

1

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 — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

United Fire Group, Inc.
Consolidated Balance Sheets

(In Thousands, Except Share Data)	June 30, 2021		December 31, 2020
	(unaudited)
ASSETS
Investments
Fixed maturities
Available-for-sale, at fair value (amortized cost $1,697,219 in 2021 and $1,720,291 in 2020; allowance for credit losses $170 in 2021 and $5 in 2020)	$	1,781,865	$	1,825,438
Equity securities at fair value (cost $67,295 in 2021 and $49,085 in 2020)	196,880		206,685
Mortgage loans	47,449		47,690
Less: allowance for mortgage loan losses	76		76
Mortgage loans, net	47,373		47,614
Other long-term investments	80,326		69,305
Short-term investments available-for-sale, at fair value (amortized cost $800 in 2021 and $175 in 2020)	801		175
	2,107,245		2,149,217
Cash and cash equivalents	118,519		87,948
Accrued investment income	13,826		14,615
Premiums receivable (net of allowance for doubtful accounts of $779 in 2021 and $687 in 2020)	334,267		317,292
Deferred policy acquisition costs	96,286		87,094
Property and equipment (primarily land and buildings, at cost, less accumulated depreciation of $57,967 in 2021 and $55,141 in 2020)	134,650		129,874
Reinsurance receivables and recoverables (net of allowance for credit losses of $126 in 2021 and $190 in 2020)	124,785		160,540
Prepaid reinsurance premiums	12,351		12,965
Intangible assets	6,388		6,743
Income taxes receivable	62,268		66,194
Other assets	47,568		37,196
TOTAL ASSETS	$	3,058,153	$	3,069,678
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Losses and loss settlement expenses	$	1,568,453	$	1,578,131
Unearned premiums	474,171		464,845
Accrued expenses and other liabilities	101,542		126,624
Long term debt	50,000		50,000
Deferred tax liability	24,512		24,929
TOTAL LIABILITIES	$	2,218,678	$	2,244,529
Stockholders’ Equity
Common stock, $0.001 par value; authorized 75,000,000 shares; 25,117,340 and 25,055,479 shares issued and outstanding in 2021 and 2020, respectively	$	25	$	25
Additional paid-in capital	203,055		202,359
Retained earnings	580,767		555,854
Accumulated other comprehensive income, net of tax	55,628		66,911
TOTAL STOCKHOLDERS’ EQUITY	$	839,475	$	825,149
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,058,153	$	3,069,678

The Notes to unaudited 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 (Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands, Except Share Data)	2021		2020		2021		2020
Revenues
Net premiums earned	$	224,703	$	263,609	$	483,928	$	532,458
Investment income, net of investment expenses	13,795		12,696		30,876		15,059
Net realized investment gains (losses) (includes reclassifications for net unrealized investment gains/(losses) on available-for-sale securities of $141 and $(666) in 2021 and $80 and $(41) in 2020; previously included in accumulated other comprehensive income)	6,004		15,779		30,512		(77,628)
Other income (loss)	(90)		5,719		(169)		5,719
Total revenues	$	244,412	$	297,803	$	545,147	$	475,608
Benefits, Losses and Expenses
Losses and loss settlement expenses	$	152,139	$	204,973	$	358,537	$	391,476
Amortization of deferred policy acquisition costs	46,007		51,893		99,272		106,345
Other underwriting expenses (includes reclassifications for employee benefit costs of $1,645 and $3,312 in 2021 and $1,072 and $2,144 in 2020; previously included in accumulated other comprehensive income)	28,400		36,701		46,768		78,550
Interest Expense	1,594		0		1,594		0
Total benefits, losses and expenses	$	228,140	$	293,567	$	506,171	$	576,371
Income (loss) before income taxes	$	16,272	$	4,236	$	38,976	$	(100,763)
Federal income tax expense (benefit) (includes reclassifications of $316 and $835 in 2021 and $207 and $458 in 2020; previously included in accumulated other comprehensive income)	2,522		(1,724)		6,524		(34,189)
Net Income (loss)	$	13,750	$	5,960	$	32,452	$	(66,574)
Other comprehensive income (loss)
Change in net unrealized appreciation on investments	$	9,496	$	34,895	$	(21,001)	$	40,470
Change in liability for underfunded employee benefit plans	(3,765)		0		2,740		0
Other comprehensive income, before tax and reclassification adjustments	$	5,731	$	34,895	$	(18,261)	$	40,470
Income tax effect	(1,202)		(7,329)		3,835		(8,499)
Other comprehensive income, after tax, before reclassification adjustments	$	4,529	$	27,566	$	(14,426)	$	31,971
Reclassification adjustment for net realized investment losses included in income	$	(141)	$	(80)	$	666	$	41
Reclassification adjustment for employee benefit costs included in expense	1,645		1,072		3,312		2,144
Total reclassification adjustments, before tax	$	1,504	$	992	$	3,978	$	2,185
Income tax effect	(316)		(207)		(835)		(458)
Total reclassification adjustments, after tax	$	1,188	$	785	$	3,143	$	1,727
Comprehensive income (loss)	$	19,467	$	34,311	$	21,169	$	(32,876)
Diluted weighted average common shares outstanding	25,416,868		25,255,604		25,394,728		25,019,441
Earnings (loss) per common share:
Basic	$	0.55	$	0.24	$	1.29	$	(2.66)
Diluted	0.54		0.24		1.28		(2.66)

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

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United Fire Group, Inc.

Consolidated Statement of Stockholders’ Equity (Unaudited)

	Common Stock
(In Thousands, Except Share Data)	Shares outstanding	Common stock		Additional paid-in capital		Retaining Earnings		Accumulated other comprehensive income		Total
Balance, January 1, 2021	25,055,479	$	25	$	202,359	$	555,854	$	66,911	$	825,149
Net income	—	—		—		18,702		—		18,702
Shares repurchased	(207)	—		(7)		—		—		(7)
Stock based compensation	64,583	—		522		—		—		522
Dividends on common stock ($0.15 per share)	—	—		—		(3,767)		—		(3,767)
Change in net unrealized investment appreciation(1)	—	—		—		—		(23,456)		(23,456)
Change in liability for underfunded employee benefit plans(2)	—	—		—		—		6,456		6,456
Balance, March 31, 2021	25,119,855	$	25	$	202,874	$	570,789	$	49,911	$	823,599
Net income	—	$	—	$	—	$	13,750	$	—	$	13,750
Shares repurchased	(31,027)	—		(1,000)		—		—		(1,000)
Stock based compensation	28,512	—		1,181		—		—		1,181
Dividends on common stock ($0.15 per share)	—	—		—		(3,772)		—		(3,772)
Change in net unrealized investment appreciation(1)	—	—		—		—		7,391		7,391
Change in liability for underfunded employee benefit plans(2)	—	—		—		—		(1,674)		(1,674)
Balance, June 30, 2021	25,117,340	$	25	$	203,055	$	580,767	$	55,628	$	839,475

(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 reclassification adjustments and income taxes.

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	Common Stock
(In Thousands, Except Share Data)	Shares outstanding	Common stock		Additional paid-in capital		Retaining Earnings		Accumulated other comprehensive income		Total
Balance, January 1, 2020	25,015,963	$	25	$	200,179	$	697,116	$	13,152	$	910,472
Net income (loss)	—	—		—		(72,534)		—		(72,534)
Shares repurchased	(70,467)	—		(2,741)		—		—		(2,741)
Stock based compensation	70,597	—		879		—		—		879
Dividends on common stock $0.33 per share)	—	—		—		(8,249)		—		(8,249)
Change in net unrealized investment appreciation(1)	—	—		—		—		4,500		4,500
Change in liability for underfunded employee benefit plans(2)	—	—		—		—		847		847
Cumulative effect of change in accounting principle	—	—		—		(30)		—		(30)
Balance, March 31, 2020	25,016,093	$	25	$	198,317	$	616,303	$	18,499	$	833,144
Net income	—	$	—	$	—	$	5,960	$	—	$	5,960
Stock based compensation	15,141	—		1,479		—		—		1,479
Dividends on common stock $0.33 per share)	—	—		—		(8,267)		—		(8,267)
Change in net unrealized investment appreciation(1)	—	—		—		—		27,504		27,504
Change in liability for underfunded employee benefit plans(2)	—	—		—		—		847		847
Balance, June 30, 2020	25,031,234	$	25	$	199,796	$	613,996	$	46,850	$	860,667

(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 reclassification adjustments and income taxes.

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

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United Fire Group, Inc.

Consolidated Statements of Cash Flows (Unaudited)

	Six Months Ended June 30,
(In Thousands)	2021		2020
Cash Flows From Operating Activities
Net income (loss)	$	32,452	$	(66,574)
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Net accretion of bond premium	7,203		5,501
Depreciation and amortization	3,175		3,318
Stock-based compensation expense	2,115		2,927
Net realized investment (gains) losses	(30,512)		77,628
Net cash flows from equity and trading investments	40,983		17,148
Deferred income tax benefit	2,582		(19,229)
Changes in:
Accrued investment income	789		697
Premiums receivable	(16,975)		(19,176)
Deferred policy acquisition costs	(9,192)		(3,274)
Reinsurance receivables	35,755		(55,512)
Prepaid reinsurance premiums	614		(4,956)
Income taxes receivable	3,926		(19,184)
Other assets	(10,372)		(9,162)
Losses and loss settlement expenses	(9,678)		55,935
Unearned premiums	9,326		25,639
Accrued expenses and other liabilities	(19,077)		(2,098)
Deferred income taxes	0		4,184
Other, net	(8,284)		10,420
Cash from operating activities	2,378		70,806
Net cash provided by operating activities	$	34,830	$	4,232
Cash Flows From Investing Activities
Proceeds from sale of available-for-sale investments	$	116,664	$	16,907
Proceeds from call and maturity of available-for-sale investments	153,567		159,709
Proceeds from sale of other investments	2,214		2,750
Purchase of investments in mortgage loans	0		(5,323)
Purchase of investments available-for-sale	(255,489)		(117,299)
Purchase of other investments	(4,663)		(3,577)
Net purchases and sales of property and equipment	(7,594)		(12,040)
Net cash provided by investing activities	$	4,699	$	41,127
Cash Flows From Financing Activities
Issuance of common stock	$	(412)	$	(562)
Repurchase of common stock	(1,007)		(2,741)
Payment of cash dividends	(7,539)		(16,516)
Net cash used in financing activities	$	(8,958)	$	(19,819)
Net Change in Cash and Cash Equivalents	$	30,571	$	25,540
Cash and Cash Equivalents at Beginning of Period	87,948		120,722
Cash and Cash Equivalents at End of Period	$	118,519	$	146,262

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

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UNITED FIRE GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of Business

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

Basis of Presentation

The unaudited consolidated interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X promulgated by the SEC. Certain financial information that is included in our Annual Report on Form 10-K for the year ended December 31, 2020, including certain financial statement footnote disclosures, is not required by the rules and regulations of the SEC for interim financial reporting and has been condensed or omitted.

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

Certain prior year amounts have been reclassified to conform to the current year presentation.

Management of UFG believes the accompanying unaudited Consolidated Financial Statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. All significant intercompany transactions have been eliminated in consolidation. The results reported for the interim periods are not necessarily indicative of the results of operations that may be expected for the year. The unaudited Consolidated Financial Statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020.

Segment Information

Our property and casualty insurance business is reported as 1 business 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. We will continue to evaluate our operations on the basis of both statutory accounting principles prescribed or permitted by our states of domicile and GAAP.

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Lloyd's Syndicates

On January 1, 2021, the Company became a member of Lloyd's of London ("Lloyd's"). 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 Syndicate 1492, Syndicate 1729, Syndicate 1969, Syndicate 1971 and Syndicate 4747. At June 30, 2021, the Company's FAL investments were comprised of cash of $21,331 on deposit with Lloyd's in order to satisfy these FAL requirements.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash, money market accounts, cash on deposit and held by Lloyd's and non-negotiable certificates of deposit with original maturities of three months or less.

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, including the related amortization recognized for the six-month period ended June 30, 2021.

	Total
Recorded asset at beginning of period	$	87,094
Underwriting costs deferred	108,464
Amortization of deferred policy acquisition costs	(99,272)
Recorded asset at June 30, 2021	$	96,286

Property and casualty insurance policy acquisition costs deferred are 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.

Other Intangible Assets

Our other intangible assets, which consist primarily of agency relationships, trade names, state insurance licenses, and software, are being amortized using the straight-line method over periods ranging from two years to 15 years, with the exception of state insurance licenses, which are indefinite-lived and not amortized.

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").

UF&C sold an aggregate principal amount of $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.

Interest payments under the surplus notes 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 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

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Group as of the applicable Interest Payment Date. For the six-month period ended June 30, 2021, interest totaled $1,594 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

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss ("NOL") carryovers and carrybacks to offset 100 percent of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company has considered the implications of the CARES Act on its tax provision. As of June 30, 2021, there was 0 income tax benefit as the result of the CARES Act. As of June 30, 2020, there was an income tax benefit of $11,095 as the result of the CARES Act.

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

We reported consolidated federal income tax expense of $6,524 for the six-month period ended June 30, 2021 compared to income tax benefit of $34,189 during the same period of 2020. Our effective tax rate for 2021 and 2020 is different than the federal statutory rate of 21 percent, due principally to the net effect of tax-exempt municipal bond interest income. Our effective tax rate for 2020 is also different than the federal statutory rate of 21 percent, due principally to the impact of the provisions of the CARES Act.

The Company performs a quarterly review of its tax positions and makes a determination of 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 positions will be sustained, the Company will calculate any unrecognized tax benefits and, if necessary, calculate and accrue any related interest and penalties. We did 0t recognize any liability for unrecognized tax benefits at June 30, 2021 or December 31, 2020. 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.

For the six-month periods ended June 30, 2021 and 2020, we made payments for income taxes totaling $29 and $35, respectively. We did 0t receive a tax refund during the six-month periods ended June 30, 2021 and 2020.

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 2017.

Leases

The Company determines if a contract contains a lease at inception of the 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 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 10 "Leases."

10

Variable Interest Entities

The Company and certain related parties are equity investors in 1 investment 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 estate. The Company and certain related parties are not the primary beneficiary 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 June 30, 2021 was $3,371 and there are no future funding commitments.

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 realized 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 vs. 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 realized 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 the Company may be held accountable for. 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 June 30, 2021 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 June 30, 2021, the Company had a credit loss allowance for reinsurance receivables of $126.

11

Rollforward of credit loss allowance for reinsurance receivable:
	As of
	June 30, 2021
Beginning balance, January 1, 2021	$	190
Current-period provision for expected credit losses	0
Recoveries of amounts previously written off, if any	(64)
Ending balance of the allowance for reinsurance receivable, June 30, 2021	$	126

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.

COVID-19 Pandemic

The COVID-19 pandemic caused significant financial market volatility, economic uncertainty and interruptions to normal business activities. As of the date of this report, we expect the effect of the COVID-19 pandemic on claims currently under our coverages to be manageable, based on the information presently available. However, the effects of the COVID-19 pandemic, including the emergence of variant strains, continue to evolve and we cannot predict the extent to which our business, results of operations, financial condition, liquidity, capital position, the value of investments we hold in our investment portfolio, premiums and the demand for our products and our ability to collect premiums or requirement to return premiums to our policyholders, will ultimately be impacted. Additionally, if established written contract policy exclusions of business interruption coverage for losses attributable to the COVID-19 pandemic are voided or changed through legislation, regulations or interpretations by the courts, such changes have the potential to materially increase claims, losses and legal expenses which may impact our business, financial condition, results of operations or liquidity. See further discussion in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations.

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.

Recently Issued Accounting Standards

Accounting Standards Adopted in 2021

Defined Benefit Plans - Disclosures

In August 2018, the FASB issued new guidance which modifies the disclosure requirements for employers that sponsor defined benefit pension and postretirement plans. The new guidance removes the requirement for disclosing the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit costs in the next year and the sensitivity of postretirement health plans to one-percentage-point changes in medical trend rates. The new guidance is effective for annual periods beginning after December 15, 2020. The Company adopted the new guidance as of January 1, 2021. The new guidance modifies disclosures, but will not have an impact on the Company's financial position and results of operations.

12

Income Taxes

In December 2019, the FASB issued new guidance which 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 clarifies and amends existing guidance, including removing certain requirements that an entity evaluate when a step-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 should be considered a separate transaction and requiring an entity to reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The new guidance is effective for annual periods beginning after December 15, 2020. The Company adopted the new guidance as of January 1, 2021. The new guidance did not have an impact on the Company’s financial position and results of operations.

13

NOTE 2. SUMMARY OF INVESTMENTS

Fair Value of Investments

A reconciliation of the amortized cost to fair value of investments in available-for-sale fixed maturity and short-term investments, presented on a consolidated basis, as of June 30, 2021 and December 31, 2020, is provided below:

June 30, 2021
Type of Investment	Cost or Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Fair Value		Allowance for Credit Losses		Carrying Value
AVAILABLE-FOR-SALE
Fixed maturities:
Bonds
U.S. Treasury	$	73,072	$	318	$	420	$	72,970	$	0	$	72,970
U.S. government agency	79,070		3,073		1,071		81,072		0		81,072
States, municipalities and political subdivisions
General obligations:
Midwest	70,118		3,155		0		73,273		0		73,273
Northeast	28,964		1,010		0		29,974		0		29,974
South	93,271		4,694		0		97,965		0		97,965
West	97,282		6,334		0		103,616		0		103,616
Special revenue:
Midwest	119,011		8,481		0		127,492		0		127,492
Northeast	56,067		4,392		0		60,459		0		60,459
South	202,317		16,266		49		218,534		0		218,534
West	130,229		9,225		0		139,454		0		139,454
Foreign bonds	26,359		1,199		73		27,485		0		27,485
Public utilities	95,984		5,907		88		101,803		0		101,803
Corporate bonds
Energy	24,296		2,418		0		26,714		0		26,714
Industrials	52,095		3,094		76		55,113		0		55,113
Consumer goods and services	65,280		3,221		434		68,067		0		68,067
Health care	28,984		704		302		29,386		0		29,386
Technology, media and telecommunications	66,175		4,261		852		69,584		0		69,584
Financial services	93,396		5,807		282		98,921		170		98,751
Mortgage-backed securities	24,800		268		162		24,906		0		24,906
Collateralized mortgage obligations
Government national mortgage association	97,913		3,648		1,065		100,496		0		100,496
Federal home loan mortgage corporation	127,051		1,398		1,086		127,363		0		127,363
Federal national mortgage association	45,166		1,517		186		46,497		0		46,497
Asset-backed securities	319		572		0		891		0		891
Total Available-for-Sale Fixed Maturities	$	1,697,219	$	90,962	$	6,146	$	1,782,035	$	170	$	1,781,865
Short-Term Investments	$	800	$	1	0		$	801	$	0	$	801
Total Available-for-Sale Investments	$	1,698,019	$	90,963	$	6,146	$	1,782,836	$	170	$	1,782,666

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December 31, 2020
Type of Investment	Cost or Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Fair Value		Allowance for Credit Losses		Carrying Value
AVAILABLE-FOR-SALE
Fixed maturities:
Bonds
U.S. Treasury	$	149,481	$	482	$	25	$	149,938	$	0	$	149,938
U.S. government agency	60,502		4,016		0		64,518		0		64,518
States, municipalities and political subdivisions
General obligations:
Midwest	77,933		4,047		0		81,980		0		81,980
Northeast	29,071		1,379		0		30,450		0		30,450
South	104,522		5,448		0		109,970		0		109,970
West	102,590		7,431		0		110,021		0		110,021
Special revenue:
Midwest	115,956		9,142		0		125,098		0		125,098
Northeast	56,317		4,759		0		61,076		0		61,076
South	208,739		17,967		0		226,706		0		226,706
West	129,417		9,982		0		139,399		0		139,399
Foreign bonds	27,799		1,805		2		29,602		0		29,602
Public utilities	76,114		7,388		0		83,502		0		83,502
Corporate bonds
Energy	22,441		2,895		0		25,336		0		25,336
Industrials	39,513		3,744		0		43,257		0		43,257
Consumer goods and services	46,521		4,046		0		50,567		0		50,567
Health care	6,678		898		0		7,576		0		7,576
Technology, media and telecommunications	37,270		4,381		15		41,636		0		41,636
Financial services	93,736		7,564		269		101,031		5		101,026
Mortgage-backed securities	20,305		326		54		20,577		0		20,577
Collateralized mortgage obligations
Government national mortgage association	81,758		4,439		45		86,152		0		86,152
Federal home loan mortgage corporation	151,362		2,239		758		152,843		0		152,843
Federal national mortgage association	81,952		2,013		683		83,282		0		83,282
Asset-backed securities	314		612		0		926		0		926
Total Available-for-Sale Fixed Maturities	$	1,720,291	$	107,003	$	1,851	$	1,825,443	$	5	$	1,825,438

15

Maturities

The amortized cost and fair value of available-for-sale fixed maturity securities at June 30, 2021, by contractual maturity, are shown in the following tables. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Asset-backed securities, mortgage-backed securities and collateralized mortgage obligations may be subject to prepayment risk and are therefore not categorized by contractual maturity.

Maturities
	Available-For-Sale
June 30, 2021	Amortized Cost		Fair Value
Due in one year or less	$	36,922	$	37,394
Due after one year through five years	482,542		508,398
Due after five years through 10 years	364,841		386,365
Due after 10 years	517,665		549,725
Asset-backed securities	319		891
Mortgage-backed securities	24,800		24,906
Collateralized mortgage obligations	270,130		274,356
	$	1,697,219	$	1,782,035

Net Realized Investment Gains and Losses

Net realized gains on disposition of investments are computed using the specific identification method and are included in the computation of net income. A summary of the components of net realized investment gains (losses) is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net realized investment gains (losses):
Fixed maturities:
Available-for-sale	$	136	$	30	$	(501)	$	0
Allowance for credit losses	5		49		(165)		(10)
Trading Securities	0		1,296		0		(1,162)
Equity securities
Change in the fair value	1,245		29,809		21,827		(60,838)
Sales	4,618		(15,406)		9,351		(15,586)
Mortgage loans allowance for credit losses	0		1		0		(4)
Real estate	0		0		0		(28)
Total net realized investment gains (losses)	$	6,004	$	15,779	$	30,512	$	(77,628)

The proceeds and gross realized gains on the sale of available-for-sale fixed maturity securities are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Proceeds from sales	$	16,982	$	4,996	$	116,664	$	16,907
Gross realized gains	152		26		153		198
Gross realized losses	17		113		655		495

16

Funding Commitment

Pursuant to an agreement with one of our limited liability partnership investments, we are contractually committed through July 10, 2030 to make capital contributions upon request of the partnership. Our remaining potential contractual obligation was $3,846 at June 30, 2021.

In addition, the Company invested $25,000 in December 2019 in a limited liability partnership investment fund which is subject to a three-year lockup with a 60 day minimum notice, with 4 possible repurchase dates per year, after the three-year lockup period is met. The fair value of the investment at June 30, 2021 was $24,776 and there are no remaining capital contributions with this investment.

Unrealized Appreciation

A summary of the changes in net unrealized investment appreciation during the reporting period is as follows:

	Six Months Ended June 30,
	2021		2020
Change in net unrealized investment appreciation
Available-for-sale fixed maturities	$	(20,335)	$	40,511
Income tax effect	4,270		(8,507)
Total change in net unrealized investment appreciation, net of tax	$	(16,065)	$	32,004

Credit Risk

An allowance for credit losses is recorded based on a number of factors including the current economic conditions, management's expectations of future economic conditions and performance indicators, such as market value vs. amortized cost, investment spreads widening or contracting, rating actions, payment and default history. The following table contains a rollforward of the allowance for credit losses for available-for-sale fixed maturity securities at June 30, 2021:

Rollforward of allowance for credit losses for available-for-sale fixed maturity securities:
	As of
	June 30, 2021
Beginning balance, January 1, 2021	$	5
Additions to the allowance for credit losses for which credit losses were not previously recorded	170
Recoveries of amounts previously written off	(5)
Ending balance, June 30, 2021	$	170

17

The following tables summarize our fixed maturity securities that were in an unrealized loss position reported on a consolidated basis at June 30, 2021 and December 31, 2020. The securities are presented by the length of time they have been continuously in an unrealized loss position. Non-credit related unrealized losses are recognized as a component of other comprehensive income and represent other market movements that are not credit related, for example interest rate changes. We have no intent to sell, and it is more likely than not that we will not be required to sell, these securities until the fair value recovers to at least equal our cost basis or the securities mature.

June 30, 2021	Less than 12 months					12 months or longer					Total
Type of Investment	Number of Issues	Fair Value		Gross Unrealized Depreciation		Number of Issues	Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation
AVAILABLE-FOR-SALE
Fixed maturities:
Bonds
U.S. Treasury	7	$	45,079	$	420	0	$	0	$	0	$	45,079	$	420
U.S. government agency	4	28,498		1,071		0	0		0		28,498		1,071
States, municipalities and political subdivisions
General obligations
South	1	1,224		49		0	0		0		1,224		49
Foreign bonds	2	2,930		73		0	0		0		2,930		73
Public utilities	5	13,513		88		0	0		0		13,513		88
Corporate bonds
Industrials	2	5,977		76		0	0		0		5,977		76
Consumer goods and services	6	16,690		434		0	0		0		16,690		434
Health care	2	18,936		302		0	0		0		18,936		302
Technology, media and telecommunications	5	16,198		853		0	0		0		16,198		853
Financial services	3	6,497		26		0	0		0		6,497		26
Mortgage-backed securities	6	16,879		163		0	0		0		16,879		163
Collateralized mortgage obligations
Federal home loan mortgage corporation	21	82,021		1,076		1	880		10		82,901		1,086
Federal national mortgage association	8	16,727		162		1	1,359		24		18,086		186
Government national mortgage association	5	22,329		1,065		0	0		0		22,329		1,065
Total Available-for-Sale Fixed Maturities	77	$	293,498	$	5,858	2	$	2,239	$	34	$	295,737	$	5,892

The unrealized losses on our investments in available-for-sale fixed maturities were the result of interest rate movements. 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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December 31, 2020	Less than 12 months					12 months or longer					Total
Type of Investment	Number of Issues	Fair Value		Gross Unrealized Depreciation		Number of Issues	Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation
AVAILABLE-FOR-SALE
Fixed maturities:
Bonds
U.S. Treasury	5	$	86,371	$	25	0	$	0	$	0	$	86,371	$	25
Foreign bonds	1	2,000		2		0	0		0		2,000		2
Technology, media and telecommunications	1	2,020		15		0	0		0		2,020		15
Financial services	1	2,995		5		1	3,000		7		5,995		12
Mortgage-backed securities	2	8,099		53		5	118		1		8,217		54
Collateralized mortgage obligations
Federal home loan mortgage corporation	24	97,691		758		1	26		0		97,717		758
Federal national mortgage association	10	44,677		683		0	0		0		44,677		683
Government national mortgage association	2	12,394		45		1	24		0		12,418		45
Total Available-for-Sale Fixed Maturities	46	$	256,247	$	1,586	8	$	3,168	$	8	$	259,415	$	1,594

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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.

•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. 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' experience and who have demonstrated knowledge of the subject security.

In order to determine the proper classification in the fair value hierarchy, 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 our third party fund manager based on the stated principal and coupon payments provided for in the loan agreements. These cash flows are then discounted using an appropriate risk-adjusted discount rate to determine the security's fair value.

20

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 Supplemental Executive Retirement and Deferral Plan (the "Executive Retirement Plan"). Within the rabbi trust, corporate-owned life insurance ("COLI") policies are utilized as an investment vehicle and source of funding for the Company's Executive Retirement Plan. The COLI policies invest in mutual funds, which are priced daily by independent sources. As of June 30, 2021, the cash surrender value of the COLI policies was $9,567, 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.

Our long-term debt is not carried in the Consolidated Balance Sheet at fair value. The fair value of our long-term debt is estimated using Level 2 inputs based on quoted prices for similar financial instruments. The fair value is estimated using a discounted cash flows analysis.

A summary of the carrying value and estimated fair value of our financial instruments at June 30, 2021 and December 31, 2020 is as follows:

	June 30, 2021				December 31, 2020
	Fair Value		Carrying Value		Fair Value		Carrying Value
Assets
Investments
Fixed maturities:
Available-for-sale securities	$	1,782,035	$	1,781,865	$	1,825,443	$	1,825,438
Equity securities	196,880		196,880		206,685		206,685
Mortgage loans	49,464		47,373		48,932		47,614
Other long-term investments	80,326		80,326		69,305		69,305
Short-term investments	801		801		175		175
Cash and cash equivalents	118,519		118,519		87,948		87,948
Corporate-owned life insurance	9,567		9,567		8,557		8,557
Liabilities
Long Term Debt	47,584		50,000		50,000		50,000

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The following tables present the categorization for our financial instruments measured at fair value on a recurring basis. The table includes financial instruments at June 30, 2021 and December 31, 2020:

June 30, 2021			Fair Value Measurements
Description	Total		Level 1		Level 2		Level 3
AVAILABLE-FOR-SALE
Fixed maturities:
Bonds
U.S. Treasury	$	72,970	$	0	$	72,970	$	0
U.S. government agency	81,072		0		81,072		0
States, municipalities and political subdivisions
General obligations
Midwest	73,273		0		73,273		0
Northeast	29,974		0		29,974		0
South	97,965		0		97,965		0
West	103,616		0		103,616		0
Special revenue
Midwest	127,492		0		127,492		0
Northeast	60,459		0		60,459		0
South	218,534		0		218,534		0
West	139,454		0		139,454		0
Foreign bonds	27,485		0		27,485		0
Public utilities	101,803		0		101,803		0
Corporate bonds
Energy	26,714		0		26,714		0
Industrials	55,113		0		55,113		0
Consumer goods and services	68,067		0		68,067		0
Health care	29,386		0		29,386		0
Technology, media and telecommunications	69,584		0		69,584		0
Financial services	98,921		0		98,771		150
Mortgage-backed securities	24,906		0		24,906		0
Collateralized mortgage obligations
Government national mortgage association	100,496		0		100,496		0
Federal home loan mortgage corporation	127,363		0		127,363		0
Federal national mortgage association	46,497		0		46,497		0
Asset-backed securities	891		0		0		891
Total Available-for-Sale Fixed Maturities	$	1,782,035	$	0	$	1,780,994	$	1,041
EQUITY SECURITIES
Common stocks
Public utilities	$	16,911	$	16,911	$	0	$	0
Energy	10,548		10,548		0		0
Industrials	36,940		36,940		0		0
Consumer goods and services	48,541		48,541		0		0
Health care	16,551