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 September 30, 2001

Commission File Number 2-39621


UNITED FIRE & CASUALTY COMPANY
(Exact name of registrant as specified in its charter)



              Iowa                             42-0644327
- ---------------------------------   ---------------------------------
(State of Incorporation)            (IRS Employer Identification No.)


118 Second Avenue, S.E.
Cedar Rapids, Iowa                                        52407
- ---------------------------------------------------------------------
(Address of principal executive offices)               (Zip Code)


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


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   X         NO
   -------        --------



As of October 31, 2001, 10,035,819 shares of common stock were outstanding.




UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES

INDEX



                                                                                                               
Part I. Financial Information

    Item 1. Financial Statements

    Consolidated Balance Sheets as of September 30, 2001 (unaudited) and
    December 31, 2000                                                                                               2

    Consolidated Statements of Income (unaudited) for the three-month periods ended
    September 30, 2001 and 2000                                                                                     3

    Consolidated Statements of Income (unaudited) for the nine-month periods ended
    September 30, 2001 and 2000                                                                                     4

    Consolidated Statements of Cash Flows (unaudited) for the nine-month periods ended
    September 30, 2001 and 2000                                                                                     5

    Notes to Unaudited Consolidated Financial Statements                                                            6

    Report of Independent Public Accountants                                                                       10

    Item 2. Management's Discussion and Analysis of Financial Condition and
    Results of Operations                                                                                          11


    Item 3. Quantitative and Qualitative Disclosures about Market Risk                                             15


Part II. Other Information

    Item 6. Exhibits and Reports on Form 8-K                                                                       16















UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION      Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS




(In thousands)
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS                                                                                      September 30,           December 31,
                                                                                                 2001                   2000
                                                                                             (Unaudited)             (Audited)
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                             
Investments
  Fixed maturities
    Held-to-maturity, at amortized cost (market
      value $269,958 in 2001 and $292,857 in 2000)                                           $   255,708            $   283,431
    Available-for-sale, at market (amortized cost $1,099,310
      in 2001 and $952,949 in 2000)                                                            1,116,634                928,947
  Equity securities, at market (cost $33,282 in 2001 and $30,667 in 2000)                        107,540                111,132
  Policy loans                                                                                     8,288                  8,437
  Other long-term investments, at market (cost $9,749 in 2001
    and $12,326 in 2000)                                                                           9,486                 12,864
  Short-term investments                                                                          33,249                 58,290
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                             $ 1,530,905            $ 1,403,101

Cash and Cash Equivalents                                                                    $    13,495            $         -
Accrued Investment Income                                                                         23,842                 22,578
Accounts Receivable                                                                               85,705                 63,955
Deferred Policy Acquisition Costs                                                                 91,374                 98,399
Property and Equipment                                                                            15,698                 16,732
Reinsurance Receivables                                                                           43,029                 41,487
Prepaid Reinsurance Premiums                                                                       3,562                  2,846
Intangibles                                                                                        5,279                  6,459
Income Taxes Receivable                                                                            2,561                    658
Other Assets                                                                                       5,969                  6,279
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                                                 $ 1,821,419            $ 1,662,494
================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
  Future policy benefits and losses, claims and settlement expenses
    Property and casualty insurance                                                          $   369,004            $   358,032
    Life insurance                                                                               925,888                822,158
  Unearned premiums                                                                              192,141                165,212
  Accrued expenses and other liabilities                                                          29,750                 34,303
  Employee benefit obligations                                                                    12,859                 13,115
  Deferred income taxes                                                                           16,873                 12,245
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                                            $ 1,546,515            $ 1,405,065
================================================================================================================================
Stockholders' Equity
  Common stock                                                                               $    33,453            $    33,453
  Additional paid-in capital                                                                       6,912                  6,912
  Retained earnings                                                                              178,862                172,346
  Accumulated other comprehensive income, net of tax                                              55,677                 44,718
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                                                   $   274,904            $   257,429
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                   $ 1,821,419            $ 1,662,494
================================================================================================================================


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

                                        2



UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME



(In thousands, except per share data and number of shares)
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                         Three months ended September 30,
                                                                                        2001                          2000
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                                            
Revenues
  Net premiums earned                                                               $   97,373                    $   86,071
  Investment income, net                                                                25,321                        22,089
  Realized investment losses and other income                                           (1,637)                       (1,057)
  Commission and policy fee income                                                         549                           568
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                       121,606                       107,671
- ----------------------------------------------------------------------------------------------------------------------------------
Benefits, Losses and Expenses
  Losses and settlement expenses                                                        76,296                        58,192
  Increase in liability for future policy benefits                                       1,298                           520
  Amortization of deferred policy acquisition costs                                     17,327                        14,931
  Other underwriting expenses                                                           13,509                        13,303
  Interest on policyholders' accounts                                                   12,168                        11,619
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                       120,598                        98,565
- ----------------------------------------------------------------------------------------------------------------------------------
  Income before income taxes                                                             1,008                         9,106
  Federal income tax (benefit) expense                                                    (495)                        2,012
- ----------------------------------------------------------------------------------------------------------------------------------
  Net income                                                                        $    1,503                    $    7,094
==================================================================================================================================
  Earnings available to common shareholders                                         $    1,503                    $    7,094
==================================================================================================================================
  Weighted average common shares outstanding                                        10,035,819                    10,036,853
==================================================================================================================================
  Basic and diluted earnings per common share                                       $     0.15                    $     0.71
==================================================================================================================================
  Cash dividends declared per common share                                          $     0.18                    $     0.18
==================================================================================================================================



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

                                        3



UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME



(In thousands, except per share data and number of shares)
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                          Nine months ended September 30,
                                                                                         2001                        2000
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                           
Revenues
  Net premiums earned                                                                $  275,112                  $  244,397
  Investment income, net                                                                 73,596                      64,365
  Realized investment losses and other income                                              (139)                       (916)
  Commission and policy fee income                                                        1,630                       1,668
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                        350,199                     309,514
- -----------------------------------------------------------------------------------------------------------------------------------
Benefits, Losses and Expenses
  Losses and settlement expenses                                                        204,958                     173,163
  Increase in liability for future policy benefits                                        4,101                       4,737
  Amortization of deferred policy acquisition costs                                      48,427                      45,101
  Other underwriting expenses                                                            43,259                      42,337
  Interest on policyholders' accounts                                                    35,496                      31,684
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                        336,241                     297,022
- -----------------------------------------------------------------------------------------------------------------------------------
  Income before income taxes                                                             13,958                      12,492
  Federal income tax expense                                                              2,023                       1,067
- -----------------------------------------------------------------------------------------------------------------------------------
  Net income                                                                         $   11,935                  $   11,425
===================================================================================================================================
  Earnings available to common shareholders                                          $   11,935                  $   11,425
===================================================================================================================================
  Weighted average common shares outstanding                                         10,035,819                  10,051,086
===================================================================================================================================
  Basic and diluted earnings per common share                                        $     1.19                  $     1.14
===================================================================================================================================
  Cash dividends declared per common share                                           $     0.54                  $     0.53
===================================================================================================================================



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

                                        4



UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS



(In thousands)
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                       Nine months ended September 30,
                                                                                       2001                        2000
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                          
Cash Flows From Operating Activities
Net income                                                                          $  11,935                   $  11,425
- -------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by
operating activities
  Net bond discount accretion                                                       $    (667)                  $    (269)
  Depreciation and amortization                                                         3,602                       3,890
  Realized investment losses                                                              139                       1,173
  Changes in:
     Accrued investment income                                                         (1,264)                       (982)
     Accounts receivable                                                              (21,750)                    (20,553)
     Deferred policy acquisition costs                                                  7,025                      (6,886)
     Reinsurance receivables                                                           (1,542)                    (12,805)
     Prepaid reinsurance premiums                                                        (716)                        421
     Income taxes receivable                                                           (1,903)                      1,169
     Other assets                                                                         310                       1,037
     Future policy benefits and losses, claims and
       settlement expenses                                                             18,546                      22,042
     Unearned premiums                                                                 26,929                      20,342
     Accrued expenses and other liabilities                                            (4,553)                      3,085
     Employee benefit obligations                                                        (256)                        283
     Income taxes payable                                                                   -                         680
     Deferred income taxes                                                             (1,273)                     (1,277)
     Other, net                                                                       (17,327)                        443
- -------------------------------------------------------------------------------------------------------------------------------
  Total adjustments                                                                 $   5,300                   $  11,793
- -------------------------------------------------------------------------------------------------------------------------------
  Net cash provided by operating activities                                         $  17,235                   $  23,218
- -------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
  Proceeds from sale of available-for-sale investments                              $  68,392                   $  49,332
  Proceeds from call and maturity of held-to-maturity investments                      29,453                      23,663
  Proceeds from call and maturity of available-for-sale investments                    61,497                      48,390
  Proceeds from sale of short-term and other investments                              296,945                      69,995
  Purchase of held-to-maturity investments                                             (1,397)                     (3,332)
  Purchase of available-for-sale investments                                         (278,616)                   (208,509)
  Purchase of short-term and other investments                                       (269,363)                    (68,170)
  Proceeds from sale of property and equipment                                              -                         165
  Purchase of property and equipment                                                   (1,388)                     (1,824)
- -------------------------------------------------------------------------------------------------------------------------------
  Net cash used in investing activities                                             $ (94,477)                  $ (90,290)
- -------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
  Policyholders' account balances
     Deposits to investment and universal-life-type contracts                       $ 166,590                   $ 158,703
     Withdrawals from investment and universal-life-type contracts                    (70,434)                    (76,683)
  Purchase and retirement of common stock                                                   -                        (421)
  Payment of cash dividends                                                            (5,419)                     (5,328)
- -------------------------------------------------------------------------------------------------------------------------------
  Net cash provided by financing activities                                         $  90,737                   $  76,271
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents                                           $  13,495                   $   9,199
Cash and Cash Equivalents at Beginning of Year                                              -                       9,749
- -------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period                                          $  13,495                   $  18,948
===============================================================================================================================


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

                                        5



UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Basis of Presentation

    In the opinion of the management of United Fire & Casualty Company and
Subsidiaries (the "Company"), the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the financial position, the results of operations,
and cash flows for the periods presented. The results for the interim periods
are not necessarily indicative of the results of operations that may be expected
for the year. The financial statements contained herein should be read in
conjunction with the Company's annual report on Form 10-K for the year ended
December 31, 2000. The review report of Arthur Andersen LLP accompanies the
unaudited consolidated financial statements included in Item 1 of Part I.

    The Company maintains its records in conformity with the accounting
practices prescribed or permitted by the Insurance Departments of the states in
which the Company is domiciled (statutory accounting principles). To the extent
that certain of these practices differ from generally accepted accounting
principles ("GAAP"), adjustments have been made in order to present the
accompanying financial statements on the basis of GAAP.

    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, the 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.

    For purposes of reporting cash flows, cash and cash equivalents include cash
and non-negotiable certificates of deposit with original maturities of three
months or less. Net income taxes paid(received) for the nine-month periods ended
September 30, 2001 and 2000 were $4,652,000 and $(215,000), respectively. The
$(215,000) attributable to the nine months ended September 30, 2000 includes
amounts received from refunds and the settlement of a Federal income tax Revenue
Agent Review. There were no significant payments of interest through September
30, 2001 and 2000, other than interest credited to policyholders' accounts.

Note 2.  New Accounting Standards

     Effective January 1, 2000, the Company adopted Statement of Position
("SOP") 98-7, "Deposit Accounting: Accounting for Insurance and Reinsurance
Contracts That Do Not Transfer Insurance Risk." The SOP provides guidance on
accounting for insurance and reinsurance contracts that do not transfer
insurance risk. All of the Company's reinsurance agreements are
risk-transferring arrangements, accounted for according to SFAS No. 113,
"Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts." The adoption of SOP 98-7 had no effect on the Company's Consolidated
Financial Statements.

     Effective July 1, 2000, the Company adopted Financial Accounting Standards
Board ("FASB") Interpretation ("FIN") No. 44, "Accounting for Certain
Transactions Including Stock Compensation (an Interpretation of Accounting
Principles Board ("APB") Opinion No. 25)". FIN No. 44 clarifies the application
of APB Opinion No. 25 for only certain issues, such as (a) the definition of
employee for purposes of applying APB Opinion No. 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. The adoption of FIN No. 44 had no
impact on the Company's Consolidated Financial Statements.

                                       6



UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

     Effective December 31, 2000, the Company adopted Staff Accounting Bulletin
("SAB") No. 101, "Revenue Recognition." The adoption of SAB No. 101 had no
effect on the Company's Consolidated Financial Statements.

     In July 2001, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations", which becomes effective January 1,
2002. SFAS No. 141 requires all business combinations initiated after June 30,
2001 to be accounted for using the purchase method. The impact of adopting SFAS
No. 141 will not have any effect on the Company's Consolidated Financial
Statements.

     In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets", which becomes effective January 1, 2002. SFAS No. 142 eliminates the
amortization of goodwill over its estimated useful life, but requires goodwill
to be subject to at least an annual assessment for impairment by applying a
fair-value-based test. Additionally, an acquired intangible asset should be
recognized separately from goodwill if the benefit of the intangible asset is
obtained through contractual or other legal rights, or if the intangible asset
can be sold, transferred, licensed, rented, or exchanged, regardless of the
acquirer's intent to do so. Recognized intangible assets (other than those with
an indefinite life) will then be amortized over their estimated useful lives.
The Company is currently evaluating the impact that the adoption of SFAS No. 142
will have on its results of operations and financial position.

     In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations", which becomes effective for fiscal years beginning
after June 15, 2002. SFAS No. 143 addresses financial accounting and reporting
for obligations associated with the retirement of tangible, long-lived assets
and the associated asset retirement costs. The Company has not yet determined
the impact that the adoption of this statement will have on its Consolidated
Financial Statements.

     In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which becomes effective for fiscal
years beginning after December 15, 2001 and interim periods within those fiscal
years. SFAS No. 144 revises and clarifies the existing professional guidance
addressing (a) recognition and measurement of the impairment of long-lived
assets to be held and used, (b) the measurement of long-lived assets to be
disposed of by sale, and (c) the reporting of discontinued operations and
components of an entity that either has been disposed of (by sale, by
abandonment, or in a distribution to owners) or is classified as held for sale.
The Company has not yet determined the impact that the adoption of this
statement will have on its Consolidated Financial Statements.

Note 3.  Segment Information

    The Company has two reportable business segments in its operations; property
and casualty insurance and life insurance. The property and casualty segment has
five locations from which it conducts its business. All offices target a similar
customer base and market the same products, using the same marketing strategies,
and are therefore aggregated. The life insurance segment operates from the
Company's home office. The two segments are evaluated by management on both a
statutory and a GAAP basis. Results are analyzed based on a variety of factors
including profitability, expenses and return on equity. The basis for
determining and analyzing segments and the measurement of segment profit has not
changed from that reported in the Company's 2000 Form 10-K. Since all insurance

                                       7



UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

is sold domestically, the Company has no revenue allocated to foreign
operations. The following analysis is reported on a GAAP basis and is reconciled
to the Company's Consolidated Financial Statements.



- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                  (Dollars in Thousands)
- ---------------------------------------------------------------------------------------------------------------------------------
                                                          Property and                       Life
                                                       Casualty Insurance                  Insurance                Total
- ---------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30, 2001
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Revenues                                                     $ 279,663                 $   70,793               $   350,456
- ---------------------------------------------------------------------------------------------------------------------------------
Intersegment eliminations                                          (94)                      (163)                     (257)
- ---------------------------------------------------------------------------------------------------------------------------------
Total revenues                                               $ 279,569                 $   70,630               $   350,199
=================================================================================================================================
Net income                                                     $ 6,092                 $    5,843               $    11,935
=================================================================================================================================
Assets                                                       $ 714,507                 $1,106,912               $ 1,821,419
=================================================================================================================================

Nine Months Ended September 30, 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Revenues                                                     $ 248,461                 $   61,314               $   309,775
- ---------------------------------------------------------------------------------------------------------------------------------
Intersegment eliminations                                         (103)                      (158)                     (261)
- ---------------------------------------------------------------------------------------------------------------------------------
Total revenues                                               $ 248,358                 $   61,156               $   309,514
=================================================================================================================================
Net income                                                   $   8,027                 $    3,398               $    11,425
=================================================================================================================================
Assets                                                       $ 690,815                 $  915,604               $ 1,606,419
=================================================================================================================================


Depreciation expense and property and equipment acquisitions are reflected in
the property and casualty insurance segment.

Note 4. Derivative Instruments

    The Company writes covered call options on its equity portfolio to generate
additional portfolio income; it does not use these instruments for hedging
purposes. Covered call options are recorded at fair value and included in
accrued expenses and other liabilities. Any income or loss, including the change
in the fair value of the covered call options, is recognized currently in
earnings and included in realized investment gains (losses) and other income. At
September 30, 2001 the Company had no open covered call options. In assessing
the impact of any embedded derivative instruments, the Company has elected to
apply SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", only to those instruments or contracts with embedded derivative
instruments issued, acquired, or substantively modified by the Company after
December 31, 1997. The Company has analyzed its financial instruments and
contracts in accordance with SFAS No. 133 and determined there is no material
effect on the Company's Consolidated Financial Statements.

Note 5. Comprehensive Income

    The change in the stockholders' equity of the Company from transactions and
other events and circumstances from non-shareholder sources is referred to as
comprehensive income. It includes all changes in equity during a period except
those resulting from investments by shareholders and dividends to shareholders.
The primary components of the Company's comprehensive income are net income and
net unrealized gains and losses on available-for-sale securities. Comprehensive
income was $22,894,000 and $15,367,000 for the nine months ended September 30,
2001 and 2000, respectively. Comprehensive income was $10,139,000 and
$15,575,000 for the three months ended September 30, 2001 and 2000,
respectively.

                                       8



UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 6. Termination of Escrow Agreement

     During the third quarter of 2001, the Company presented a claim against an
escrow account held for the deferred payment of $1.00 per share to prior
shareholders of American Indemnity Financial Corporation ("AIFC"), which was
acquired by the Company in August of 1999. As of September 30, 2001, the amount
of this escrow totaled $1,990,000 and is recorded as a part of other assets on
the Company's consolidated balance sheet. Representatives of AIFC have responded
to the Company's claim. The Company is currently evaluating the response of
AIFC.

                                       9



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders and Board of Directors of
United Fire & Casualty Company:

We have reviewed the accompanying consolidated balance sheet of UNITED FIRE &
CASUALTY COMPANY (an Iowa corporation) AND SUBSIDIARIES as of September 30,
2001, and the related consolidated statements of income for the three-month and
nine-month periods ended September 30, 2001 and 2000, and the consolidated
statements of cash flows for the nine-month periods ended September 30, 2001 and
2000. These financial statements are the responsibility of the Company's
management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above in order for them to be in
conformity with accounting principles generally accepted in the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of United Fire &
Casualty Company and Subsidiaries as of December 31, 2000 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended (not presented separately herein) and, in our report dated
February 15, 2001, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 2000, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.

                               Arthur Andersen LLP

Chicago, Illinois
October 31, 2001

                                       10



UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

    This discussion contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, which are not historical facts, and involve risks and
uncertainties that could cause actual results to differ materially from those
expected and projected. Such risks and uncertainties include the following: 1)
the uncertainties of the loss reserving process; 2) the occurrence of
catastrophic events or other insured or reinsured events with a frequency or
severity exceeding the Company's estimates; 3) the actual amount of new and
renewal business; 4) the competitive environment in which the Company operates;
5) developments in global financial markets that could affect the Company's
investment portfolio and financing plans; 6) estimates of the financial
statement impact due to regulatory actions; 7) uncertainties relating to
government and regulatory policies; 8) legal developments; 9) changing rates of
inflation and other economic conditions; and 10) the impact of mergers and
acquisitions, including the ability to successfully integrate acquired
businesses and achieve cost savings. The words "believe," "anticipate,"
"estimate," "expect," "intend," or "will continue" and variations thereof and
similar expressions identify forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of their dates. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

RESULTS OF OPERATIONS

    The Company reported net operating income of $2,566,000, or $.26 per share,
for the third quarter of 2001, compared to $7,781,000, or $.78 per share, for
the third quarter of 2000. Net operating income excludes net realized gains and
losses on securities. The decline between quarters was driven primarily by
increased claim costs in the property and casualty lines of business. The
Company did not have direct exposure related to the September 11 national
events. However, the 2001 results include $2,948,000 in after-tax charges
related to the terrorist attacks from assumed property reinsurance. Incurred
losses and expenses on all catastrophes totaled $6,048,000 (after-tax), or $.60
per share, for the three months ended September 30, 2001, compared to
$1,545,000, or $.15 per share, for the same period of 2000.

    Net income for the third quarter of 2001 was $1,503,000, or $.15 per share,
compared to net income of $7,094,000, or $.71 per share, for the third quarter
of 2000. Net premiums earned increased between the third quarters of 2000 and
2001 by $11,302,000 (13%) to $97,373,000. During 2001, the property and casualty
segment implemented rate increases and generated new business, both of which
contributed to the premium growth. This premium growth, coupled with increased
annuity deposits in the life segment, contributed to growth in the Company's
investment portfolio. The invested asset growth contributed to an increase in
net investment income of $3,232,000 (15%). The Company recorded net realized
investment losses of $1,637,000 in the third quarter of 2001, compared to net
realized investment losses of $1,057,000 in the same period of 2000. The net
realized losses in both years resulted primarily from other-than-temporary
impairments on a small number of fixed maturity securities. The tax benefit
recorded for the three-month period ended September 30, 2001 resulted from
tax-deductible interest earned on investments.

                                       11



UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Year-to-date results:
    The Company recorded net operating income of $12,025,000, or $1.20 per
share, for the nine-month period ended September 30, 2001, compared to net
operating income of $12,020,000, or $1.20 per share for the nine-month period
ended September 30, 2000. The total after-tax impact on the Company's nine-month
results from incurred catastrophes was $13,532,000, or $1.35 per share, compared
to $12,854,000, or $1.28 per share, for the nine-month period ended September
30, 2000. Nine-month net income through September 30, 2001 was $11,935,000, or
$1.19 per share, compared to nine-month net income of $11,425,000, or $1.14 per
share, through September 30, 2000.

Property and casualty insurance segment

    For the third quarter of 2001, the property and casualty segment recorded
net income of $644,000, compared to net income of $7,138,000 for the third
quarter of 2000. While premiums grew $11,168,000 (14%), claim costs increased by
$18,104,000 (33%), contributing to the decreased profits. An increase in claim
frequency and severity is driving the increase in loss and expense costs and is
reflected in the third quarter combined ratio of 109%, compared to 98% for the
same period last year. Excluding catastrophes, the third quarter combined ratio
was 99%, compared to 95% for the same period in 2000.

    Year-to-date, the property and casualty segment recorded net income of
$6,092,000, compared to net income of $8,027,000 for the first nine months of
2000. The year-to-date combined ratio was 105% for the nine months ended
September 30, 2001, compared to 104% for the same period last year. Excluding
catastrophes, the year-to-date combined ratio was 97% and 95% for the nine-month
periods ended September 30, 2001 and 2000, respectively.

Life insurance segment

    The life segment reported third-quarter net income of $859,000, compared to
a net loss of $44,000 for the same period in 2000, due primarily to investment
results. Net investment income grew by $2,076,000 (13%) to $17,595,000. Life
segment premium revenue growth remained relatively flat between the third
quarters and on a year-to-date basis.

    For the nine-months ended September 30, 2001, the life segment's net income
was $5,843,000, compared to $3,398,000 for the same period in 2000, driven
primarily by investment results. Net investment income grew by $7,203,000 (16%)
to $52,272,000 for the nine months ended September 30, 2001. The life segment
recorded net realized investment losses of $1,202,000 for the first nine months
of 2001, compared to net realized investment losses of $3,540,000 for the same
period in 2000.

                                       12



UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Investment results

    The composition of the investment portfolio at September 30, 2001, is
presented in the following table.

FINANCIAL CONDITION



                                         Property & Casualty                   Life
                                               Segment                        Segment                             Total
                                      -----------------------------   -----------------------          --------------------------
($ in thousands)                                       Percent of                  Percent of                          Percent of
                                                         Total                       Total                                Total
                                                      ----------                   ----------                          ----------
                                                                                                     
Fixed income securities(1)             $ 376,737          74.0%        $  995,605     97.0%            $ 1,372,342        89.0%
Equity securities                        102,072          20.0              5,468      1.0                 107,540         7.0
Plicy loans                                    -           0.0              8,288      1.0                   8,288         1.0
Short-term                                18,210           4.0             15,039      1.0                  33,249         2.0
Other                                      9,486           2.0                  -      0.0                   9,486         1.0
                                       ---------      ---------        ----------   --------           -----------     ---------
Total                                  $ 506,505         100.0%        $1,024,400    100.0%            $ 1,530,905       100.0%
                                       =========      =========        ==========   ========           ===========     =========

    (1) Available for sale fixed income securities are carried at fair value,
while held to maturity fixed income securities are carried at amortized cost

Investments

    The Company's investments, comprised primarily of fixed income securities,
increased $127,804,000, or 9%, between December 31, 2000 and September 30, 2001.
Of this growth, $34,334,000 was attributable to changes in the market prices of
the Company's securities classified as available-for-sale and other invested
assets, both of which are reported at market value. The unrealized appreciation
from these investments is reported net of tax in a separate component of
stockholders' equity. At September 30, 2001, $1,116,634,000, or 81%, of the
fixed income security portfolio was classified as available-for-sale, compared
to $928,947,000, or 77%, at December 31, 2000. The Company has the ability and
the intent to hold a majority of its fixed income securities to maturity, but
has moved towards a larger concentration of available-for-sale fixed income
securities to be able to take advantage of the constantly changing market
conditions. The Company's remaining fixed income securities are classified as
held-to-maturity and are reported at amortized cost. The Company did not have
securities classified as trading at September 30, 2001 or December 31, 2000.

Other assets

    Commissions and other costs of underwriting insurance, which vary with and
are primarily related to the production of business, are deferred and
capitalized to the extent recoverable. The resulting asset is referred to as
deferred acquisition costs (DAC), and constitutes the Company's second largest
asset, after investments. The DAC asset is amortized over the life of the
insurance policies written to attain a matching of revenue to expense. Growth in
premiums written will typically result in an increase of the DAC asset. However,
the DAC asset is limited by unprofitability in individual lines of insurance;
therefore, if a line of business is unprofitable, an insurer is limited in the
underwriting expenses (if any) that may be capitalized and amortized for that
line of business. The Company's property and casualty segment's DAC asset
increased to $28,081,000 at September 30, 2001, an increase of $4,696,000 (20%)
from the DAC asset at December 31, 2000.

                                       13



UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

    The life segment's DAC asset decreased between December 31, 2000 and
September 30, 2001 by $11,721,000 (16%). One component of a life company's
estimate of the DAC asset related to universal life and annuity business is the
impact of unrealized gains and losses resulting from certain available for sale
securities in its investment portfolio. Through the first nine months of 2001,
the unrealized loss component of the Company's life segment DAC calculation
contributed a decrease of $17,474,000 in the reported DAC asset. This unrealized
loss component of DAC was partially offset by an increase in the life segment's
net deferred expenses of $5,753,000.

    Accounts receivable, which consist of amounts due from property and casualty
insurance agents and brokers, increased by $21,750,000 (34%) to $85,705,000
between December 31, 2000 and September 30, 2001. This increase was due
primarily to an increase in property and casualty premiums written and an
increase in the utilization of the Company's payment plans - as more premiums
were deferred, the balance in the accounts receivable increased.

    The Company's other assets are composed primarily of accrued investment
income, property and equipment (primarily land and buildings), and reinsurance
receivables (amounts due from the Company's reinsurers for losses and expenses).

Liabilities

    The Company's largest liability is future policy benefits, which relate
exclusively to the life segment and are established to provide for the future
payment of benefits on life insurance policies in force. As of September 30,
2001, future policy benefits grew by $103,730,000 (13%) to $925,888,000 from
December 31, 2000. An increase in deposits and interest credited from annuities
and universal life products (less certain policy charges) has resulted in the
increase in future policy benefits. Through the first nine months of 2001,
annuity and universal life deposits totaled $130,705,000, and interest credited
to policyholder accounts totaled $35,496,000.

    The property and casualty segment's reserves for direct and assumed losses
and expenses increased by $10,972,000 (3%) to $369,004,000 between December 31,
2000 and September 30, 2001.

    Accrued expenses and other liabilities decreased from $34,303,000 at
December 31, 2000 to $29,750,000 at September 30, 2001. Included in the December
31, 2000 accrued expenses and other liabilities was a negative cash balance of
$9,307,000, which primarily represented amounts which have been issued for
claims that have not yet cleared the banking system. Short-term investments are
available for the Company's cash needs. See "Cash flow and liquidity".

    Deferred income taxes have increased by $4,628,000 (38%) to $16,873,000, due
in part to net unrealized appreciation on investment securities. Federal income
taxes on net unrealized appreciation are deferred until the securities are sold.

    The Company has had limited involvement with derivative financial
instruments and does not engage in the derivative market for hedging purposes.
The Company has, at times, written covered call options to generate additional
portfolio income. There were no open covered call options at September 30, 2001
and December 31, 2000.

                                       14



UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Stockholders' equity

    The Company's stockholders' equity increased from $257,429,000 at December
31, 2000, to $274,904,000 at September 30, 2001, an increase of 7%. Increases to
equity included net income of $11,935,000 and net unrealized appreciation of
$10,959,000 (net of tax). Stockholder dividends of $5,419,000 decreased
stockholders' equity. As of September 30, 2001, the Company had authorization
granted by the Board of Directors to repurchase 89,210 shares of its common
stock. During the first nine months of 2001, the company repurchased 580 shares
of its common stock, none of which has been retired.

Cash flow and liquidity

    Cash flow and liquidity is primarily derived from the operating cash flows
of the Company's property and casualty and life insurance operations. Premiums
are invested in assets maturing at regular intervals in order to meet the
Company's obligations to pay policy benefits, claims and claim adjusting
expenses. Net cash provided by the Company's operating activities was
$17,235,000 for the nine-month period ended September 30, 2001, versus
$23,218,000 of cash provided by operating activities for the nine-month period
ended September 30, 2000.

    Funds the Company has available for short-term cash needs are invested
primarily in money market accounts and fixed-income securities. At September 30,
2001, the Company's consolidated invested assets included $33,249,000 of
short-term investments. In addition, the Company maintains a $20 million bank
line of credit. During the nine-month periods ended September 30, 2001 and 2000,
the Company did not utilize the line of credit. Under the terms of the
agreement, interest on outstanding notes is payable at the lender's prevailing
prime rate, minus 1%. Management believes that the Company's liquid assets and
net cash provided by operations will enable it to meet any expected cash
requirements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The Company has exposure to market risk arising from potential losses due to
adverse changes in interest rates and market prices. The Company's primary
market risk exposure is changes in interest rates, although the Company has some
exposure to changes in equity prices and limited exposure to foreign currency
exchange rates.

    The active management of market risk is integral to the Company's
operations. Investment guidelines are in place that define the overall framework
for managing the Company's market and other investment risks, including
accountability and controls. In addition, the Company has for each of its
subsidiaries specific investment policies that delineate the investment limits
and strategies that are appropriate given each entity's liquidity, surplus,
product and regulatory requirements. In response to market risk, the Company may
respond by rebalancing its existing asset portfolio or by changing the character
of future investment purchases.

    Covered call options are written from time to time on common stocks owned by
the Company. Generally, the calls are written on stocks the Company views as
over-priced relative to their market value. Writing of in-the-money calls at
transaction date has not been done, but the Company is not restricted in any way
from doing so. The practice of writing covered calls is considered a
conservative equity strategy by market analysts.

    There have been no material changes in the Company's market risk or market
risk factors from that reported in the Company's 2000 Form 10-K.

                                       15



UNITED FIRE & CASUALTY COMPANY AND SUBSIDIARIES
PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)                    Exhibits

                       3.1     Articles of Incorporation of United Fire &
                               Casualty Company, incorporated by reference from
                               Registrant's form S-8 Registration Statement,
                               filed with the Commission on December 19, 1997.

                       3.2     By Laws of United Fire & Casualty Company, as
                               amended, incorporated by reference from the
                               Registrant's form S-8 Registration Statement,
                               filed with the Commission on December 19, 1997.

                       10.1    United Fire & Casualty Company Nonqualified
                               Employee Stock Option Plan, incorporated by
                               reference from Registrant's form S-8 Registration
                               Statement, filed with the Commission on September
                               9, 1998.

                       10.2    United Fire & Casualty Company Employee Stock
                               Purchase Plan, incorporated by reference from
                               Registrant's form S-8 Registration Statement,
                               filed with the Commission on December 22, 1997.

                       11      Statement re: computation of per share earnings.


(b)                    No reports on Form 8-K were filed during the last quarter
                       of the period covered by this report.







SIGNATURES

Pursuant to the requirements 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 & CASUALTY COMPANY
- ----------------------------------
(Registrant)

October 31, 2001
- ----------------------------------
(Date)


/s/ John A. Rife
- ----------------------------------
John A. Rife
President, Chief Executive Officer

/s/ K.G. Baker
- ----------------------------------
K.G. Baker
Vice President, Chief Financial Officer and Principal Accounting Officer

                                       16