{"url_path":"/sec/ufcs/10-k/2026/item-8","section_key":"item-8","section_title":"Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-02-26","source_url":"https://www.sec.gov/Archives/edgar/data/101199/0000101199-26-000015-index.html","accession_number":"0000101199-26-000015","cik":"0000101199","ticker":"UFCS","issuer_name":"UNITED FIRE GROUP INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/101199/0000101199-26-000015-index.html","primary_entity_key":"0000101199","primary_entity_name":"UNITED FIRE GROUP INC"},"word_count":22444,"has_tables":true,"body_markdown":"ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA\n\nUnited Fire Group, Inc.\n\nConsolidated Balance Sheets\n\nDecember 31,\n\n(In thousands, except share data)2025 2024\n\nAssets   \n\nInvestments:   \n\nFixed maturities, available-for-sale, at fair value (amortized cost of $2,239,173 and $1,961,531; allowance for credit losses of $0 and $0)\n$2,205,350  $1,868,331 \n\nMortgage loans (less allowance for credit losses of $286 and $45)\n30,830 40,922 \n\nOther long-term investments228,507  183,741 \n\nShort-term investments—  100 \n\nTotal investments2,464,687  2,093,094 \n\nCash and cash equivalents156,332  200,949 \n\nAccrued investment income18,243  15,795 \n\nPremiums receivable (net of allowance for doubtful accounts of $1,899 and $1,604)\n497,920  450,801 \n\nDeferred policy acquisition costs158,184  147,224 \n\nProperty and equipment at cost (less accumulated depreciation of $85,555 and $75,866)\n132,631  136,021 \n\nReinsurance receivables and recoverables (net of allowance for credit losses of $121 and $103)\n238,508  230,828 \n\nPrepaid reinsurance premiums32,357  44,892 \n\nIntangible assets, net3,197 3,906 \n\nDeferred tax asset, net15,448 23,018 \n\nIncome taxes receivable532 14,181 \n\nOther assets122,750  127,760 \n\nTotal assets$3,840,789  $3,488,469 \n\nLiabilities   \n\nLosses and loss settlement expenses$1,924,826  $1,796,782 \n\nUnearned premium660,210  621,448 \n\nAccrued expenses and other liabilities168,383  171,649 \n\nLong term debt146,200 117,059 \n\nTotal liabilities$2,899,619  $2,706,938 \n\nStockholders' equity   \n\nCommon stock, $0.001 par value; authorized 75,000,000 shares; 25,522,051 and 25,378,291 shares issued and outstanding\n$25 $25 \n\nAdditional paid-in capital223,887 215,851 \n\nRetained earnings722,321 620,436 \n\nAccumulated other comprehensive income (loss), net of tax(5,063)(54,781)\n\nTotal stockholders' equity$941,170  $781,531 \n\nTotal liabilities and stockholders' equity$3,840,789  $3,488,469 \n\nThe Notes to Consolidated Financial Statements are an integral part of these statements.\n\n59\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nUnited Fire Group, Inc.\n\nConsolidated Statements of Income\n\nFor the Years Ended December 31,\n\n(In thousands, except share data)2025 20242023\n\nRevenues   \n\nNet earned premium$1,292,696  $1,176,750 $1,034,587 \n\nNet investment income97,538  81,986 59,606 \n\nNet investment gains (losses)(3,822) (5,429)1,274 \n\nTotal revenues$1,386,412  $1,253,307 $1,095,467 \n\nBenefits, losses and expenses  \n\nLosses and loss settlement expenses$764,402  $744,605 $769,414 \n\nAmortization of deferred policy acquisition costs315,323  281,338 244,991 \n\nOther underwriting expenses 146,609  140,942 115,800 \n\nInterest Expense11,267 7,281 3,260 \n\nOther non-underwriting expenses875 2,107 1,723 \n\nTotal benefits, losses and expenses$1,238,476  $1,176,273 $1,135,188 \n\nIncome (loss) before income taxes$147,936  $77,034 $(39,721)\n\nIncome tax expense (benefit)29,745  15,077 (10,021)\n\nNet income (loss)$118,191  $61,957 $(29,700)\n\nEarnings (loss) per common share:\n\nBasic4.64 2.45 (1.18)\n\nDiluted4.48 2.39 (1.18)\n\nWeighted average common shares outstanding:\n\nBasic25,470,451  25,319,973 25,249,269 \n\nDiluted26,352,913 25,917,760 25,249,269 \n\nThe Notes to Consolidated Financial Statements are an integral part of these statements.\n\n60\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nUnited Fire Group, Inc.\n\nConsolidated Statements of Comprehensive Income\n\nFor the Years Ended December 31,\n\n(In thousands, except share data)2025 20242023\n\nNet income (loss)$118,191  $61,957 $(29,700)\n\nOther comprehensive income (loss)\n\nChange in net unrealized gain (loss) on investments$55,644  $(13,466)$26,373 \n\nChange in net benefit asset plans and obligations1,138 2,089 18,953 \n\nForeign currency translation adjustment2,337 (200)— \n\nOther comprehensive income (loss), before tax and reclassification adjustments59,119 (11,577)45,326 \n\nIncome tax effect(12,420)2,388 (9,518)\n\nOther comprehensive income (loss), after tax, before reclassification adjustments46,699 (9,189)35,808 \n\nReclassification adjustments for:\n\nChange in unrealized (gains) losses on investments included in net investment gains (losses)3,822  6,791 718 \n\nNet benefit asset plans and obligations included in other underwriting expense— — 207 \n\nTotal reclassification adjustments, before tax3,822  6,791 925 \n\nIncome tax effect(803) (1,426)(194)\n\nTotal reclassification adjustments, after tax3,019  5,365 731 \n\nComprehensive income (loss)$167,909  $58,133 $6,839 \n\nThe Notes to Consolidated Financial Statements are an integral part of these statements.\n\n61\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nUnited Fire Group, Inc.\n\nConsolidated Statements of Stockholders' Equity\n\nFor the Years Ended December 31,\n\n(In thousands, except share data)202520242023\n\nCommon stock\n\nBalance, beginning of year$25 $25 $25 \n\nBalance, end of year25 25 25 \n\nAdditional paid-in capital\n\nBalance, beginning of year215,851 209,986 207,030 \n\nStock based compensation8,036 5,865 2,956 \n\nBalance, end of year223,887 215,851 209,986 \n\nRetained earnings\n\nBalance, beginning of year620,436 574,691 620,555 \n\nNet income (loss)118,191 61,957 (29,700)\n\nDividends on common stock ($0.64, $0.64, and $0.64 per share)\n(16,306)(16,212)(16,164)\n\nBalance, end of year722,321 620,436 574,691 \n\nAccumulated other comprehensive income (loss)\n\nBalance, beginning of year(54,781)(50,957)(87,496)\n\nChange in net unrealized investment gain (loss)(1)\n46,973 (5,274)21,402 \n\nChange in liability for underfunded employee benefit plans(2)\n899 1,650 15,137 \n\nForeign currency translation adjustment1,846 (200)— \n\nBalance, end of year(5,063)(54,781)(50,957)\n\nTotal stockholders' equity$941,170 $781,531 $733,745 \n\nCommon stock shares outstanding\n\nBalance, beginning of year25,378,291 25,269,842 25,210,541 \n\nStock based compensation143,760 108,449 59,301 \n\nBalance, end of year25,522,051 25,378,291 25,269,842 \n\n(1)The change in net unrealized gain (loss) is net of reclassification adjustments and income taxes.\n\n(2)The change in liability for underfunded employee benefit plans is net of income taxes.\n\nThe Notes to Consolidated Financial Statements are an integral part of these statements.\n\n62\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nUnited Fire Group, Inc.\n\nConsolidated Statements of Cash Flows\n\nFor the Years Ended December 31,\n\n(In thousands)2025 20242023\n\nCash Flows From Operating Activities   \n\nNet income (loss)$118,191  $61,957 $(29,700)\n\nAdjustments to reconcile net income to net cash provided by operating activities \n\nNet accretion of bond premium1,550  4,531 7,092 \n\nDepreciation and amortization10,770  10,904 10,508 \n\nStock-based compensation expense9,029  5,517 3,246 \n\nNet investment (gains) losses4,281  5,901 (1,547)\n\nNet cash flows from trading investments—  56,381 116,080 \n\nDeferred income tax benefit(5,653) (8,392)(8,308)\n\nChanges in: \n\nAccrued investment income(2,448) 139 (1,454)\n\nPremiums receivable(47,119) 13,990 (99,062)\n\nDeferred policy acquisition costs(10,960) (20,692)(22,307)\n\nReinsurance receivables(7,680) (7,559)(52,316)\n\nPrepaid reinsurance premiums12,535  (17,210)(16,382)\n\nIncome taxes receivable13,649  7,282 9,955 \n\nOther assets5,099  (2,277)(34,403)\n\nLosses, claims and loss settlement expenses128,044  158,027 141,481 \n\nUnearned premium38,762  72,064 74,996 \n\nAccrued expenses and other liabilities(2,128) 1,432 70,956 \n\nOther, net3,821  (1,691)2,901 \n\nNet cash provided by (used in) operating activities$269,743  $340,304 $171,736 \n\nCash Flows From Investing Activities   \n\nProceeds from sale of available-for-sale investments$121,054  $491,771 $77,388 \n\nProceeds from call and maturity of available-for-sale investments258,769  178,805 80,081 \n\nProceeds from short-term and other investments14,628  9,381 4,615 \n\nPurchase of available-for-sale investments(660,233) (872,850)(273,081)\n\nPurchase of mortgage loans— — (8,137)\n\nPurchase of short-term and other investments(53,735) (87,724)(19,866)\n\nNet purchases and sales of property and equipment(6,446) (11,870)(10,886)\n\nNet cash provided by (used in) investing activities$(325,963)$(292,487)$(149,886)\n\nCash Flows From Financing Activities   \n\nDebt note issuance $30,000 $70,000 $— \n\nDebt note issuance costs(1,098)(3,050)— \n\nPayment of cash dividends(16,306) (16,212)(16,164)\n\nIssuance of common stock(993) 348 (290)\n\nNet cash provided by (used in) financing activities$11,603 $51,086 $(16,454)\n\nNet Change in Cash and Cash Equivalents$(44,617) $98,903 $5,396 \n\nCash and Cash Equivalents at Beginning of Year200,949  102,046 96,650 \n\nCash and Cash Equivalents at End of Year$156,332  $200,949 $102,046 \n\nSupplemental disclosures of cash flow information\n\nIncome taxes paid (refunded)$23,551 $16,112 $1,348 \n\nInterest paid$11,267 $7,172 $3,260 \n\nThe Notes to Consolidated Financial Statements are an integral part of these statements.\n\n63\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nIndex of Notes to Consolidated Financial StatementsPage\n\n[Note 1. Summary of Significant Accounting Policies](#i9c41be50b13d4f0186d714192577cffa_151)\n\n[65](#i9c41be50b13d4f0186d714192577cffa_151)\n\n[Note 2. Investments](#i9c41be50b13d4f0186d714192577cffa_157)\n\n[71](#i9c41be50b13d4f0186d714192577cffa_157)\n\n[Note 3. Fair Value of Financial Instruments](#i9c41be50b13d4f0186d714192577cffa_160)\n\n[76](#i9c41be50b13d4f0186d714192577cffa_160)\n\n[Note 4. Reinsurance](#i9c41be50b13d4f0186d714192577cffa_163)\n\n[81](#i9c41be50b13d4f0186d714192577cffa_163)\n\n[Note 5. Reserves for Losses and Loss Settlement Expenses](#i9c41be50b13d4f0186d714192577cffa_166)\n\n[83](#i9c41be50b13d4f0186d714192577cffa_166)\n\n[Note 6. Statutory Reporting, Capital Requirements and Dividends and Retained Earnings Restrictions](#i9c41be50b13d4f0186d714192577cffa_178)\n\n[97](#i9c41be50b13d4f0186d714192577cffa_178)\n\n[Note 7. Income Tax](#i9c41be50b13d4f0186d714192577cffa_181)\n\n[98](#i9c41be50b13d4f0186d714192577cffa_181)\n\n[Note 8. Employee Benefits](#i9c41be50b13d4f0186d714192577cffa_184)\n\n[101](#i9c41be50b13d4f0186d714192577cffa_184)\n\n[Note 9. Stock-Based Compensation](#i9c41be50b13d4f0186d714192577cffa_187)\n\n[109](#i9c41be50b13d4f0186d714192577cffa_187)\n\n[Note 10. Segment Information](#i9c41be50b13d4f0186d714192577cffa_190)\n\n[112](#i9c41be50b13d4f0186d714192577cffa_190)\n\n[Note 11. Earnings Per Common Share](#i9c41be50b13d4f0186d714192577cffa_193)\n\n[112](#i9c41be50b13d4f0186d714192577cffa_193)\n\n[Note 12. Lease Commitments](#i9c41be50b13d4f0186d714192577cffa_196)\n\n[113](#i9c41be50b13d4f0186d714192577cffa_196)\n\n[Note 13. Debt](#i9c41be50b13d4f0186d714192577cffa_199)\n\n[114](#i9c41be50b13d4f0186d714192577cffa_199)\n\n[Note 14. Intangible Assets](#i9c41be50b13d4f0186d714192577cffa_202)\n\n[116](#i9c41be50b13d4f0186d714192577cffa_202)\n\n[Note 15. Accumulated Other Comprehensive Income](#i9c41be50b13d4f0186d714192577cffa_205)\n\n[116](#i9c41be50b13d4f0186d714192577cffa_205)\n\n[Note 16. Property and Equipment](#i9c41be50b13d4f0186d714192577cffa_208)\n\n[118](#i9c41be50b13d4f0186d714192577cffa_208)\n\n[Report of Independent Registered Public Accounting Firm (PCAOB ID:](#i9c41be50b13d4f0186d714192577cffa_211)42[)](#i9c41be50b13d4f0186d714192577cffa_211)\n\n[119](#i9c41be50b13d4f0186d714192577cffa_211)\n\n64\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nUNITED FIRE GROUP, INC.\n\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n\n(Amounts in thousands, except share data unless otherwise noted)\n\nNOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES\n\nBasis of Presentation\n\nThe Consolidated Financial Statements, which include the accounts of United Fire Group, Inc. and its subsidiaries (collectively, \"UFG\", the \"Registrant\", the \"Company\", \"we\", \"us\", or \"our\"), have been prepared on the basis of U.S. generally accepted accounting principles (\"GAAP\"). All significant intercompany transactions and balances have been eliminated.\n\nWe have investments in unconsolidated affiliates that are considered variable interest entities (\"VIEs\") as defined under GAAP. Our involvement with VIEs is primarily to invest in assets that allow us to gain exposure to a broadly diversified portfolio of asset classes. A VIE is an entity that does not have sufficient equity to finance its own activities without additional financial support, where investors lack certain characteristics of a controlling financial interest, or where the entity is structured with non-substantive voting rights. We assess our relationships with VIEs to evaluate if we are the primary beneficiary of the VIE. If we determine we are the primary beneficiary of a VIE, we consolidate the assets and liabilities of the VIE in our Consolidated Financial Statements.\n\nThe 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.\n\nSegment Information\n\nWe operate as one operating segment. Our revenues are primarily derived from premiums earned for property and casualty insurance products issued to customers. For additional information, see Note 10, \"Segment Information\".\n\nPremiums and Unearned Premiums\n\nWritten premium is deferred and recorded as earned premium on a daily pro rata basis over the terms of the respective policies. Unearned premium reserves are established for the portion of written premium applicable to the unexpired term of insurance policies in force. Premiums receivable are presented net of an estimated allowance for doubtful accounts, which is based on a periodic evaluation of the aging and collectability of amounts due from agents and policyholders. Credit risk is partially mitigated by the Company's ability to cancel the policy if the policyholder does not pay the premium.\n\nPremium is reported net of reinsurance ceded. Ceded premium is charged to income over the applicable term of the various reinsurance contracts with third party reinsurers. Prepaid reinsurance premiums represent the unexpired portion of premiums ceded to reinsurers and are reported as ceded unearned premium, an asset on the Consolidated Balance Sheet.\n\nLosses and Loss Settlement Expenses\n\nTo establish losses and loss settlement expense reserves, we make estimates and assumptions about the future development of claims. Actual results could differ materially from those estimates, which are subjective, complex and inherently uncertain. When we establish and adjust reserves, we do so given our knowledge at the time of the circumstances and facts of known claims. To the extent that we have overestimated or underestimated our loss and loss settlement expense reserves, we adjust the reserves in the period in which such adjustment is determined.\n\nLosses and loss settlement expenses are reported net of reinsurance ceded. The estimation of assumed and ceded reinsurance losses and loss settlement expense reserves is subject to the same factors as the estimation of losses and loss settlement expense reserves. In addition to those factors, which give rise to inherent uncertainties in establishing losses and loss settlement expense reserves, there exists a delay in our receipt of reported claims for assumed\n\n65\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nbusiness due to the procedure of having claims first reported through one or more intermediary insurers or reinsurers.\n\nReserves for assumed reinsurance are established using methods and techniques identical to those used for direct lines of business. The additional delay inherent in assumed reinsurance reporting is considered in our reserving process and payment is not problematic. Assumed reinsurance, like every independent line of business, has unique reporting and payment patterns that are reviewed as part of the reserve estimation process.\n\nReinsurance Receivables\n\nAmounts recoverable from reinsurers are estimated in a manner consistent with the associated claim liability. For reinsurance receivables, the Company's model estimates expected credit loss by multiplying the exposure at default by both the probability of default and loss given default (\"LGD\"). The LGD is estimated by the rating of the reinsurer, historical relationship with UFG, existence of letters of credit and known regulation for which the Company may be held accountable. The ultimate LGD percentage is estimated after considering Moody's experience with unsecured year 1 bond recovery rates from 1992-2018. The allowance calculated 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. Refer to Note 4 \"Reinsurance\" for a discussion of our reinsurance.\n\nInvestments\n\nFixed Maturity Securities Available-for-Sale\n\nInvestments in fixed maturity securities includes bonds. Our investments in fixed maturities securities are designated as available-for-sale and recorded at fair value. Changes in unrealized investment gain (loss), with respect to available-for-sale fixed maturities are reported as a component of accumulated other comprehensive income, net of deferred income taxes. We recognize investment income on fixed maturities based on the effective interest method, which results in the recognition of a constant rate of return on the investment equal to the prevailing rate at the time of purchase or at the time of subsequent adjustments of book value. Interest income from these investments is reported in \"Net investment income\" in the accompanying Consolidated Statements of Income. Realized gains and losses on sales of our fixed maturity securities are determined on the first-in first-out cost basis and are reported within \"Net investment gains (losses)\" in the accompanying Consolidated Statements of Income. We record security transactions on a trade date basis.\n\nMortgage Loans\n\nOur investment in mortgage loans consists of commercial mortgage loans on real estate, which are reported at amortized cost, less allowance for expected credit losses. Commercial mortgage loans are continuously monitored by reviewing appraisals, operating statements, rent revenues, annual inspection reports, loan specific credit quality, property characteristics, market trends and other factors. For details on our policy around allowance for expected credit losses on mortgage loans, refer to Note 2 \"Investments\".\n\nCommercial mortgage loans are rated for the purpose of quantifying the level of risk. Loans are placed on a watch list when the debt service coverage ratio falls below certain thresholds and the loan-to-value ratios exceeds certain thresholds. Loans on the watchlist are closely monitored for collateral deficiency or other credit events that may lead to a potential loss of principal or interest.\n\nInterest on loans is recognized on an accrual basis at the applicable interest rate on the principal amount outstanding. Interest income, amortization of premiums and discounts, prepayment fees, and loan commitment fees are reported in \"Net investment income\" in the accompanying Consolidated Statements of Income.\n\n66\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nInvestments in Unconsolidated Affiliates\n\nOther long-term investments consist primarily of our interests in limited liability partnerships that are recorded on the equity method of accounting. For investments subsequently measured using the equity method (primarily limited partnerships), adjustments to the carrying amount reflect our pro rata ownership percentage of the operating results as indicated by net asset value (\"NAV\") in the unconsolidated affiliates' financial statements. Distributions received from investments measured using the equity method are recorded as a decrease in the investment balance. Recognition of income and adjustments to the carrying amount can be delayed due to the availability of the related financial statements, which are obtained from the general partner or managing member generally on a one to three-month delay. For investments using the equity method, management inquires quarterly with the general partner or managing member to determine whether any credit or other market events have occurred since the prior quarter to ensure material events are properly included in the current quarter valuation and investment income.\n\nShort-term investments\n\nShort-term investments consist of financial instruments with an original maturity of one year or less when purchased and include short-term fixed maturity securities and money market instruments, which are carried at fair value, and short-term loans, which are carried at amortized cost, which approximates fair value.\n\nInterest and investment income\n\nDividends and interest income are recorded in Net investment income and recognized when earned. Income or losses upon call or prepayment of fixed maturity securities are recognized in Net investment income. Amortization of premiums and accretion of discounts on investments in fixed maturity securities are reflected in Net investment income over the contractual terms of the investments, and for callable investments at a premium, based on the earliest call date of the investments, in a manner that produces a constant effective yield.\n\nCredit Losses\n\nThe Company recognizes credit losses for our available-for-sale fixed maturity securities, mortgage loans, reinsurance receivables and premium receivables by setting up allowances which are remeasured each reporting period and recorded in the Consolidated Statements of Income.\n\nFor our available-for-sale fixed maturity securities an allowance for credit losses is recorded as an offset to \"Fixed maturities, available-for-sale\" in the Consolidated Balance Sheets and a corresponding credit loss or gain is reported as \"Net investment gains (losses)\" in the Consolidated Statements of Income. The Company determines if an allowance for credit losses is recorded based on a number of factors including the current economic conditions, management's expectations of future economic conditions and performance indicators, such as market value versus amortized cost, investment spreads widening or contracting, rating actions, payment and default history. For more information on credit losses and the allowance for credit losses for our investments in available-for-sale fixed maturities, see Note 2 \"Investments.\"\n\nAn 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 recorded as an offset to \"Mortgage loans\" in the Consolidated Balance Sheets and a corresponding credit loss or gain is reported as \"Net investment gains (losses)\" in the Consolidated Statements of Income. For more information on credit losses and the allowance for credit losses for our investment in mortgage loans see Note 2 \"Investments.\"\n\nFair Value of Financial Instruments\n\nThe fair values of financial instruments presented in the Consolidated Financial Statements are estimates of the fair values at the balance sheet date using available market information and appropriate valuation methodologies. These estimates are subjective in nature and involve uncertainties and significant judgment in the interpretation of current\n\n67\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nmarket data. For more information on the fair value of financial instruments refer to Note 3 \"Fair Value of Financial Instruments\".\n\nCash and Cash Equivalents\n\nFor purposes of reporting cash flows, cash and cash equivalents include cash, money market accounts and non-negotiable certificates of deposit with original maturities of three months or less.\n\nDeferred Policy Acquisition Costs (\"DAC\")\n\nDAC represents costs that are directly related to the successful acquisition of new and renewal insurance contracts and incremental direct costs of contract acquisition that are incurred in compensation to employees. Such costs primarily include commissions, premium taxes and certain underwriting and policy issuance costs.\n\nAcquisition costs related to property and casualty business are deferred and amortized ratably over the period the related premium is earned. Deferred acquisition costs are reviewed on a quarterly basis to determine if they are recoverable from remaining unearned premium, and if not, are charged to expense.\n\nTo calculate the premium deficiency charge by line of business, we estimate an expected loss and loss settlement expense ratio which is based on our best estimate of future losses for each line of business. The premium deficiency calculation is aggregated by line of business in a manner consistent with how the policies are currently being marketed and managed. Expected losses and loss settlement expenses ratios are the only assumptions we utilize in our premium deficiency calculation. The Company does not consider anticipated investment income in determining if a premium deficiency exists. Adjustments, if necessary, are recorded as a reduction in the DAC asset and as other underwriting expenses in the current period results of operations.\n\nProperty, Equipment and Depreciation\n\nProperty and equipment used in operations, including certain costs incurred to develop computer software for internal use, is presented at cost less accumulated depreciation. We periodically review these assets for impairment whenever events or changes in business circumstances indicate that the carrying value of the underlying asset may not be recoverable. A loss would be recognized if the estimated fair value of the asset were less than its carrying value. Expenditures for maintenance and repairs on property and equipment are generally expensed as incurred. Depreciation is computed primarily by the straight-line method.\n\nIntangible Assets\n\nOur other intangible assets, which consist of agency relationships, trade names, and state insurance licenses are being amortized by the straight-line method over 15 years, with the exception of state insurance licenses, which are indefinite-lived and not amortized. For more information on intangible assets refer to Note 14 \"Intangible Assets.\"\n\nLong Term Debt\n\nDebt instruments are carried at the principal amount borrowed, net of any issuance costs. Costs incurred in the issuance of debt are capitalized and amortized over the life of the non-cancellable period of the debt. Interest payments are included in \"Accrued expenses and other liabilities\" in the Consolidated Balance Sheets and as \"Interest expense\" in the Consolidated Statements of Income. For more information on long-term debt refer to Note 13 \"Debt.\"\n\nIncome Taxes\n\nWe recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities and expected benefits of utilizing net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We evaluate the\n\n68\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nlikelihood of realizing the benefit of our deferred tax assets and may record a valuation allowance if, based on all available evidence, we determine that it is more likely than not that some portion of the tax benefit will not be realized. We adjust the valuation allowance if, based on our evaluation, there is a change in the amount of deferred income tax assets that are deemed more-likely-than-not to be realized. The impact on deferred taxes of changes in tax rates and laws, if any, is applied to the years during which temporary differences are expected to be settled and reflected in the financial statements in the period enacted. For more information on income taxes refer to Note 7 \"Income Tax\".\n\nLeases\n\nThe 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 within \"Accrued expenses and other liabilities\" on the Consolidated Balance Sheets and as a lease right-of-use asset within \"Other assets\" on the Consolidated Balance Sheets. The lease right-of-use asset represents the Company's right to use each underlying asset for the lease term and the lease obligation liability represents the Company's obligation over the lease term. The Company's lease obligation is recorded at the present value of the lease payments based on the term of the applied lease. The collateralized discount rate used to calculate the present value of future minimum lease payments is based, where appropriate, on current industry borrowing rates for financial companies with similar ratings. The Company excludes options to extend or terminate a lease from our recognition as part of our right-of-use assets and lease liabilities until those options are known and/or executed, as the Company typically does not exercise options to purchase the underlying leased asset. As an accounting policy election, the Company has elected the practical expedient of not separating lease components from non-lease components to each major asset class. 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. For more information on leases refer to Note 12 \"Lease Commitments.\"\n\nStock-Based Compensation\n\nWe currently have two equity compensation plans. One plan allows us to grant restricted and unrestricted stock (Restricted Stock Units (RSUs) and Performance Stock Units (PSUs)), stock appreciation rights, incentive stock options, and non-qualified stock options to employees. The other plan allows us to grant RSUs and restricted and non-qualified stock options to non-employee directors.\n\nWe utilize the Black-Scholes option pricing method to establish the fair value of non-qualified stock options granted under our equity compensation plans. Our determination of the fair value of stock options on the date of grant using this option-pricing model is affected by our stock price, as well as assumptions regarding a number of complex and subjective variables, which include the expected volatility in our stock price, the expected term of the award, the expected dividends to be paid over the term of the award and the expected risk-free interest rate. Any changes in these assumptions may materially affect the estimated fair value of the award. For our restricted and unrestricted stock awards, we utilize the fair value of our common stock on the date of grant to establish the fair value of the award. The fair value of RSU and PSU awards is valued using the stock price at the grant date. Compensation expense related to all stock-based compensation awards is amortized over the applicable vesting period and reflects changes in outstanding awards during the vesting period.\n\nFor more information on stock based compensation, refer to Note 9 \"Stock-Based Compensation\".\n\nComprehensive Income\n\nWe report comprehensive income (loss) in accordance with GAAP on the Consolidated Statements of Comprehensive Income. Comprehensive income includes all changes in stockholders' equity during a period except those resulting from investments by and dividends to stockholders. While total comprehensive income (loss) is largely driven by net income (loss) during the period, accumulated other comprehensive income or loss represents the cumulative balance of other comprehensive income, net of tax, as of the balance sheet date. Amounts reclassified to net income relate to the realized gains (losses) on investments and employee benefit costs which are included in \"Net investment gains (losses)\" and \"Other underwriting expenses\", respectively, on the Consolidated Statements of Income.\n\n69\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nSubsequent Events\n\nIn 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.\n\nRecently Issued Accounting Standards\n\nAccounting Standards Adopted in 2025\n\nIn December 2023, the Financial Accounting Standards Board (\"FASB\") issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update enhance the transparency of the income tax disclosures by expanding on the disclosures required annually. The amendments require entities to disclose in their rate reconciliation table additional categories of information about federal, state, and foreign income taxes, in addition to providing details about the reconciling items in some categories if above a quantitative threshold. Additionally, the amendments require annual disclosure of income taxes paid (net of refunds received) disaggregated by jurisdiction based on a quantitative threshold. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2024. See Note 7 \"Income Tax\" in the accompanying notes to the Consolidated Financial Statements for further details.\n\nPronouncements Not Yet Adopted\n\nIn November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This update requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Early adoption is permitted. We do not expect to early adopt this standard and are in the process of assessing its impact on our disclosures upon adoption.\n\nIn September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40). The amendments in this ASU remove all references to prescriptive and sequential software development stages (referred to as \"project stages\") throughout Subtopic 350-40. Therefore, an entity is required to start capitalizing software costs when both of the following occur: (1) Management has authorized and committed to funding the software project, (2) It is probable that the project will be completed and the software will be used to perform the function intended (referred to as the \"probable-to-complete recognition threshold\"). Further, the ASU specifies that the disclosures in Subtopic 360-10, Property, Plant, and Equipment-Overall, are required for all capitalized internal-use software costs, regardless of how those costs are presented in the financial statements. Additionally, the ASU clarifies that the intangibles disclosures in paragraphs 350-30-50-1 through 50-3 are not required for capitalized internal-use software costs. This ASU supersedes the website development costs guidance and incorporates the recognition requirements for website-specific development costs from Subtopic 350-50 into Subtopic 350-40. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods. Early adoption is permitted. The amendment can be applied using the prospective, retrospective or modified transition approach. Early adoption is permitted. We do not expect to early adopt this standard and are in the process of assessing its impact on our disclosures upon adoption.\n\nIn December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The amendments in this update clarify interim disclosure requirements and the applicability of Topic 270. This ASU requires a comprehensive list of interim disclosures to provide clarity about the current requirements, and includes a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The ASU further clarifies the applicability of Topic 270, the types of interim reporting, and the form and content of interim financial statements in accordance with GAAP. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. The amendment can be applied using the prospective or retrospective transition approach for any or all prior periods presented in the financial statements. Early adoption is permitted. We do not expect to early adopt this standard and are in the process of assessing its impact on our disclosures upon adoption.\n\n70\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nIn December 2025, the FASB issued ASU 2025-12, Codification Improvements. Thirty-three issues are addressed in this ASU covering technical corrections, unintended application of the Codification, clarifications, and other minor improvements. This ASU is effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. If an entity adopts the ASU in an interim period, it must adopt them as of the beginning of the annual reporting period that includes that interim reporting period. An entity may elect to early adopt the amendments on an issue-by-issue basis. The amendment can be applied using the prospective or retrospective transition approach for any or all prior periods presented in the financial statements and an entity may elect the transition method on an issue-by-issue basis. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. We do not expect to early adopt this standard and are in the process of assessing its impact on our disclosures upon adoption.\n\nNOTE 2. INVESTMENTS\n\nFair Value of Investments\n\nA reconciliation of the amortized cost to fair value of our investments in available-for-sale fixed maturity securities, presented on a consolidated basis, as of December 31, 2025 and 2024.\n\nDecember 31, 2025\n\nType of InvestmentAmortized CostGross Unrealized GainGross Unrealized LossAllowance for Credit LossesFair Value\n\nUS Treasury and government agencies$109,358 $482 $5,736 $— $104,104 \n\nStates, municipalities and political subdivisions261,711 1,598 1,575 — 261,734 \n\nCorporate797,892 9,186 23,924 — 783,154 \n\nResidential mortgage-backed732,452 8,991 25,846 — 715,597 \n\nCommercial mortgage-backed143,009 2,405 7 — 145,407 \n\nOther asset-backed194,751 1,238 635 — 195,354 \n\nTotal Available-for-Sale $2,239,173 $23,900 $57,723 $— $2,205,350 \n\nDecember 31, 2024\n\nType of InvestmentAmortized CostGross Unrealized GainGross Unrealized LossAllowance for Credit LossesFair Value\n\nUS Treasury and government agencies$126,402 $153 $9,255 $— $117,301 \n\nStates, municipalities and political subdivisions252,936 52 5,084 — 247,904 \n\nCorporate728,662 1,35440,633 — 689,382 \n\nResidential mortgage-backed623,431 864 40,884 — 583,411 \n\nCommercial mortgage-backed102,975 624 44 — 103,554 \n\nOther asset-backed127,125 593 940 — 126,779 \n\nTotal Available-for-Sale$1,961,531 $3,640 $96,840 $— $1,868,331 \n\nMaturities\n\nThe amortized cost and fair value of available-for-sale fixed maturity securities at December 31, 2025, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Asset-backed securities, mortgage-backed securities and collateralized mortgage obligations may be subject to prepayment risk and are therefore not categorized by contractual maturity.\n\n71\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\n Available-For-Sale\n\nDecember 31, 2025 Amortized Cost Fair Value\n\nDue in one year or less $61,856  $61,675 \n\nDue after one year through five years 311,486  311,006 \n\nDue after five years through 10 years 530,617  524,842 \n\nDue after 10 years 265,002  251,469 \n\nAsset-backed securities1,070,212 1,056,358 \n\n  $2,239,173  $2,205,350 \n\nAllowance for Credit Loss\n\nWe regularly review available-for-sale securities for declines in fair value that we determine to be credit-related. For our fixed maturity securities, we generally consider the following in determining whether our unrealized losses are credit-related, and if so, the magnitude of the credit loss:\n\n•The extent to which the fair value is less than the amortized cost basis;\n\n•The reasons for the decline in value (credit event, currency or interest-rate related, including general credit spread widening);\n\n•The financial condition of and near-term prospects of the issuer (including issuer's current credit rating and the probability of full recovery of principal based upon the issuer's financial strength);\n\n•Current delinquencies and nonperforming assets of underlying collateral;\n\n•Expected future default rates;\n\n•Collateral value by vintage, geographic region, industry concentration or property type;\n\n•Subordination levels or other credit enhancements as of the balance sheet date as compared to origination; and\n\n•Contractual and regulatory cash obligations and the issuer's plans to meet such obligations.\n\nWe recognize an allowance for credit losses on fixed maturity securities in an unrealized loss position when it is determined, using the factors discussed above, a component of the unrealized loss is related to credit. We recognize the credit losses in \"Net investment gains (losses)\" in the Consolidated Statements of Income, with an offset for the amount of non-credit impairments recognized in accumulated other comprehensive income. We do not measure an allowance for credit losses on accrued investment income because we write-off accrued interest through Net investment income when collectability concerns arise.\n\nWe consider the following in determining whether write-offs of a security's amortized cost are necessary:\n\n•We believe amounts related to securities have become uncollectible;\n\n•We intend to sell a security; or\n\n•It is more likely than not that we will be required to sell a security prior to recovery.\n\nIf we intend to sell a fixed maturity security or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis and the fair value of the security is below amortized cost, we will write down the security to current fair value, with a corresponding charge, net of any amount previously recognized as an allowance for credit losses, to \"Net investment gains (losses)\" in the Consolidated Statements of Income. If we do not intend to sell a fixed maturity security or it is more likely than not that we will not be required to sell a fixed maturity security before recovery of its amortized cost basis but believe amounts related to a security are uncollectible, an impairment is deemed to have occurred and the amortized cost is written down to the estimated recovery value with a corresponding charge, net of any amount previously recognized as an allowance for credit losses, to \"Net investment gains (losses)\" in the Consolidated Statements of Income. The remainder of unrealized loss is held in \"Accumulated other comprehensive income (loss)\" in the Consolidated Statements of Stockholders' Equity.\n\n72\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nAs of December 31, 2025, we had no allowance for credit losses for the available-for-sale fixed maturity securities portfolio.\n\nUnrealized Gain and Loss\n\nChanges in unrealized gains and losses on available-for-sale fixed maturity securities do not affect net income and earnings per share but do impact comprehensive income, stockholders' equity and book value per share. A summary of changes in net unrealized investment gain (loss), net of taxes, for the years ended December 31, 2025, 2024 and 2023, is as follows:\n\n2025 20242023\n\nChange in net unrealized investment gain (loss)   \n\nAvailable-for-sale fixed maturities(1)\n$59,466 $(6,675)$27,091 \n\nIncome tax effect(12,493) 1,402 (5,689)\n\nTotal change in net unrealized investment gain (loss), net of tax$46,973  $(5,273)$21,402 \n\n(1) As a member of Lloyd's, the Company participates in the syndicate results which include unrealized gains and losses on investments. The change in net unrealized gains and losses on Lloyd's syndicate investments included above was $0.1 million as of December 31, 2025.\n\nThe following tables summarize our available-for-sale fixed maturity securities that were in an unrealized loss position reported on a consolidated basis at December 31, 2025 and 2024. The securities are presented by the length of time they have been continuously in an unrealized loss position.\n\nDecember 31, 2025Less than 12 months12 months or longerTotal\n\nType of InvestmentNumber of IssuesFair\nValueGross Unrealized\nLossNumber of IssuesFair\nValueGross Unrealized LossFair\nValueGross Unrealized Loss\n\nUS Treasury and government agencies3$1,743 $3 25$72,773 $5,733 $74,516 $5,736 \n\nStates, municipalities and political subdivisions3960,660 478 52104,732 1,097 165,392 1,575 \n\nCorporate52156,734 866 83226,071 23,058 382,805 23,924 \n\nResidential mortgage-backed34121,159 398 103148,711 25,448 269,870 25,846 \n\nCommercial mortgage-backed27,986 7 0— — 7,986 7 \n\nOther asset-backed1970,050 223 47,575 412 77,625 635 \n\nTotal Available-for-Sale149$418,332 $1,975 267$559,862 $55,748 $978,194 $57,723 \n\nDecember 31, 2024Less than 12 months12 months or longerTotal\n\nType of InvestmentNumber of IssuesFair\nValueGross Unrealized\nLossNumber of IssuesFair\nValueGross Unrealized LossFair\nValueGross Unrealized Loss\n\nUS Treasury and government agencies5$16,006 $67 28$83,386 $9,188 $99,392 $9,255 \n\nStates, municipalities and political subdivisions6792,003 1,159 72135,350 3,925 227,353 5,084 \n\nCorporate73203,142 4,474 154370,211 36,159 573,352 40,633 \n\nResidential mortgage-backed— 318,810 4,549 — 151,879 36,335 470,689 40,884 \n\nCommercial mortgage-backed48,198 44 0— — 8,198 44 \n\nOther asset-backed1432,645 804 23,915 136 36,560 940 \n\nTotal Available-for-Sale242$670,804 $11,097 387$744,741 $85,743 $1,415,544 $96,840 \n\nWe believe that any unrealized losses on our available-for-sale fixed maturity securities at December 31, 2025 are temporary based upon our current analysis of the issuers of the securities that we hold and current market conditions.\n\n73\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nWe invest in high quality assets to provide protection from future credit quality issues. 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.\n\nIncluded in investments at December 31, 2025 and 2024, are securities on deposit with, or available to, various regulatory authorities as required by law and collateral for reinsurance agreements with fair values of $136,523 and $110,335 respectively.\n\nMortgage Loans\n\nThe mortgage loan portfolio consists entirely of commercial mortgage loans. We did not acquire new loans during the years ended December 31, 2025 or 2024. The following tables present the carrying value of our commercial mortgage loans at December 31, 2025 and 2024:\n\nCommercial Mortgage Loans\n\nLoan-to-valueDecember 31, 2025December 31, 2024\n\nLess than 65%$22,846 32,499 \n\n65%-75%8,270 8,468 \n\nMortgage loans, amortized cost$31,116 $40,967 \n\nAllowance for mortgage loan credit losses(286)(45)\n\nMortgage loans, net $30,830 $40,922 \n\nMortgage Loans by Region\n\nDecember 31, 2025December 31, 2024\n\nCarrying ValuePercent of TotalCarrying ValuePercent of Total\n\nU.S. Region\n\nEast North Central$3,162 10.2 %$3,218 7.9 %\n\nSouthern Atlantic14,206 45.7 17,021 41.4 \n\nEast South Central6,977 22.4 7,257 17.7 \n\nNew England— — 6,588 16.1 \n\nMiddle Atlantic2,028 6.5 2,078 5.1 \n\nMountain1,992 6.4 1,992 4.9 \n\nWest North Central2,751 8.8 2,813 6.9 \n\nTotal mortgage loans at amortized cost$31,116 100.0 %$40,967 100.0 %\n\nMortgage Loans by Property Type\n\nDecember 31, 2025December 31, 2024\n\nCarrying ValuePercent of TotalCarrying ValuePercent of Total\n\nProperty Type   \n\nMultifamily$8,184 26.3 %$8,362 20.4 %\n\nOffice7,703 24.8 10,615 25.9 \n\nIndustrial3,248 10.4 9,912 24.2 \n\nRetail9,953 32.0 10,000 24.4 \n\nMixed use/Other2,028 6.5 2,078 5.1 \n\nTotal mortgage loans at amortized cost$31,116 100.0 %$40,967 100.0 %\n\n74\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nMortgage loans are evaluated on a quarterly basis for impairment on an individual basis through a monitoring process and review of key credit indicators, such as economic trends, delinquency rates, property valuations, occupancy and rental rates and loan-to-value ratios. A loan is considered impaired when the Company believes it will not collect the principal and interest set forth in the contractual terms of the loan. An internal grade is assigned to each mortgage loan, with a grade of 1 being the highest and least likely for an impairment and a grade of 7 being the lowest and most likely for an impairment. An allowance for mortgage loan losses is established on each loan for those amounts we believe will not be collected according to the contractual terms of the respective loan agreement. The table below shows mortgage loans by year of origination as of December 31, 2025.\n\nAmortized Cost Basis by Year of Origination and Credit Quality Indicator\n\n20232022202020192018Total\n\nRisk Rating\n\n1-2 internal grade$8,085 $96 $4,935 $7,472 $10,528 $31,116 \n\nTotal commercial mortgage loans$8,085 $96 $4,935 $7,472 $10,528 $31,116 \n\nAs of December 31, 2025, the Company had a credit loss allowance of $286, summarized in the following rollforward:\n\nBeginning balance, January 1, 2025$45 \n\nCurrent-period provision for credit losses241 \n\nWrite-off charged against the allowance, if any— \n\nRecoveries of amounts previously written off, if any— \n\nEnding balance, December 31, 2025$286 \n\nThe Company recorded a $2.6 million impairment loss related to one commercial office mortgage loan during the year ended December 31, 2025 as interest payments were past due and terms of the mortgage loan agreement were restructured to avoid foreclosure.\n\nAccrued interest of $129 has been excluded from commercial mortgage loans carrying value and is reported within \"Accrued Investment Income\" on the accompanying Consolidated Balance Sheets.\n\nOther than the commercial office mortgage loan noted above, all other loan receivables were current, with no delinquencies, as of December 31, 2025.\n\nNet Investment Gains and Losses\n\nDetails of net investment gains (losses) reported on the accompanying Consolidated Statements of Income for the years ended December 31, 2025, 2024 and 2023 are as follows:\n\n2025 20242023\n\nFixed maturity, available-for-sale securities:\n\nNet realized gains (losses) on fixed maturity, available-for-sale securities$(1,404)$(7,274)$(442)\n\nChange in allowance for credit losses— 1 1 \n\nEquity securities:\n\nNet realized gains (losses) on equity securities sold— 1,362 150 \n\nUnrealized gains (losses) on equity securities still held at reporting date— — 1,842 \n\nNet gains (losses) recognized on equity securities— 1,362 1,992 \n\nNet realized gains (losses) on mortgage loans(2,864)10 (5)\n\nNet realized gains (losses) on other long-term assets446  472 (319)\n\nNet realized gains (losses) on real estate— — 47 \n\n   Total net investment gains (losses)$(3,822)$(5,429)$1,274 \n\n75\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nThe proceeds and gross realized gains (losses) on the sale of available-for-sale fixed maturity securities for the years ended December 31, 2025, 2024 and 2023 are as follows:\n\n2025 20242023\n\nProceeds from sales$121,054  $491,771 $77,388 \n\nGross realized gains101  2,127 265 \n\nGross realized losses(1,505) 9,401 707 \n\nNet Investment Income\n\nNet investment income for the years ended December 31, 2025, 2024 and 2023, is comprised of the following:\n\nYears Ended December 31,2025 20242023\n\nInvestment income:\n\nInterest on fixed maturities$87,642 $69,703 $56,243 \n\nDividends on equity securities— 341 3,548 \n\nIncome on other long-term investments\n\nInvestment income8,426 6,492 2,833 \n\nChange in value (1)\n(1,482)1,447 (2,864)\n\nInterest on mortgage loans1,698 1,852 1,889 \n\nInterest on short-term investments1,985 3,048 1,068 \n\nInterest on cash and cash equivalents6,925 5,045 2,228 \n\nOther4,515 5,006 4,139 \n\nTotal investment income$109,709 $92,934 $69,084 \n\nLess investment expenses12,171 10,948 9,478 \n\nNet investment income$97,538 $81,986 $59,606 \n\n(1)Represents the change in value of our interests in limited liability partnerships that are recorded on the equity method of accounting.\n\nFunding Commitments\n\nPursuant to agreements related to our limited liability partnership investments, we are contractually committed through 2030 to make capital contributions upon request of the partnerships. The timing of these additional contributions is unknown and based upon the timing of when investments and agreements are executed or signed compared to when the actual commitments are funded or closed. Our remaining potential contractual obligation was $15.9 million at December 31, 2025.\n\nNOTE 3. FAIR VALUE OF FINANCIAL INSTRUMENTS\n\nCurrent 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). Financial instruments recorded at fair value are categorized in the fair value hierarchy as follows:\n\n•Level 1: Valuations are based on unadjusted quoted prices for identical financial instruments in active markets that we have the ability to access at the measurement date.\n\n76\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\n•Level 2: Valuations are based on quoted prices for similar financial instruments in active markets, in markets that are not active or on inputs that are observable either directly or indirectly for the full term of the financial instrument.\n\n•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.\n\nIf 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. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. 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.\n\nWhen a determination is made to classify an asset or liability within Level 3 of the fair value hierarchy, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. Because certain securities trade in less liquid or illiquid markets with limited or no pricing information, the determination of fair value for these securities is inherently more difficult. In addition to the unobservable inputs, Level 3 fair value investments may include observable components, which are components that are actively quoted or can be validated to market-based sources.\n\nThe following tables present the categorization for our financial instruments measured at fair value on a recurring basis at December 31, 2025 and 2024:\n\nDecember 31, 2025Fair Value Measurements\n\nDescriptionTotalLevel 1Level 2Level 3\n\nFixed Maturity, Available-for-Sale:\n\nUS Treasury and government agencies$104,104 $26,568 $77,536 $— \n\nStates, municipalities and political subdivisions261,734 — 261,734 — \n\nCorporate783,154 — 783,154 — \n\nResidential mortgage-backed715,597 — 715,597 — \n\nCommercial mortgage-backed145,407 — 145,407 — \n\nAsset-backed securities195,354 — 195,354 — \n\nTotal Fixed Maturity, Available-for-Sale 2,205,350 26,568 2,178,782 — \n\nMoney Market Accounts44,751 44,751 — — \n\nCorporate-Owned Life Insurance13,462 — 13,462 — \n\nTotal Financial Assets Measured at Fair Value$2,263,563 $71,319 $2,192,244 $— \n\n77\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nDecember 31, 2024Fair Value Measurements\n\nDescriptionTotalLevel 1Level 2Level 3\n\nFixed Maturity, Available-for-Sale:\n\nUS Treasury and government agencies$117,301 $30,914 $86,387 $— \n\nStates, municipalities and political subdivisions247,904 — 247,904 — \n\nCorporate689,382 689,382 — \n\nResidential mortgage-backed583,411 — 583,411 — \n\nCommercial mortgage-backed103,554 — 103,554 — \n\nAsset-backed securities126,779 126,779 — \n\nTotal Fixed Maturity, Available-for-Sale1,868,331 30,914 1,837,417 — \n\nShort-Term Investments100 100 — — \n\nMoney Market Accounts23,098 23,098 — — \n\nCorporate-Owned Life Insurance13,003 — 13,003 — \n\nTotal Financial Assets Measured at Fair Value$1,904,532 $54,112 $1,850,420 $— \n\nThe Company receives updated pricing information from a third-party on a monthly basis to determine the fair value for the majority of our investments. The third party obtains pricing information from independent pricing services and brokers on a monthly basis and validates for reasonableness prior to use for reporting purposes. At least annually, we review the methodologies and assumptions used by our third-party and verify they are reasonable and representative of the fair value of the underlying securities held in the investment portfolio. In our opinion, the pricing information obtained as of December 31, 2025 and December 31, 2024 was reasonable.\n\nWe use quoted market prices when available to determine the fair value of fixed maturities, equity securities and short-term investments. When quoted market prices do not exist, we base estimates of fair value on market information obtained from our third-party. Such inputs may reflect management's own assumptions about the assumptions a market participant would use in pricing the financial instrument. The most appropriate valuation methodology is selected based on the specific characteristics of the fixed maturity, equity security or short-term investment and we consistently apply the valuation methodology to measure the security's fair value.\n\nThe fair value of securities categorized as Level 1 is based on quoted market prices that are readily and regularly available.\n\nWe use a market-based approach for valuing all of our Level 2 securities and submit them primarily to a third-party valuation service provider. Any of these securities not valued by this service provider are submitted to another third-party valuation service provider. Both service providers use a market approach to find pricing of similar financial instruments. The market inputs our service providers normally use to value our securities include the following: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. The method and inputs for securities classified as Level 2 are the same regardless of industry category, credit quality, duration, geographical concentration or economic characteristics. For our mortgage-backed securities, collateralized mortgage obligations and asset-backed securities, our service providers use additional market inputs to value these securities, including the following: new issue data, periodic payment information, monthly payment information, collateral performance and real estate analysis from third parties. Our service providers prioritize inputs based on market conditions, and not all inputs listed are available for use in the valuation process for each security on any given day.\n\nSecurities categorized as Level 3 include securities for which an active market does not currently exist. The fair value of Level 3 securities is determined by unobservable inputs reflecting assumptions market participants would use, including assumptions about risk. There is inherent uncertainty of the fair value measurement of Level 3 securities due to the use of significant unobservable inputs. A change in significant unobservable inputs may result in a significantly higher or lower fair value measurement as of the reporting date.\n\n78\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nThe 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. The cash surrender value of the COLI policies is equal to the fair value measured using Level 2 inputs, based on the underlying assets of the COLI policies, and is included in the \"Other assets\" line in the Consolidated Balance Sheets.\n\nFor each of the twelve-month periods ended December 31, 2025 and 2024, the change in our available-for-sale fixed maturity securities categorized as Level 1 and Level 2 was the result of investment purchases that were made using funds held in our money market accounts, disposals, funds from debt issuance proceeds, and the change in unrealized gains.\n\nThe fair value of financial instruments that are not carried at fair value on a recurring basis in the financial statements at December 31, 2025 and 2024 are summarized below:\n\nDecember 31, 2025\n\nDescriptionFair Value TotalLevel 1Level 2Level 3Net Asset Value\n\nFinancial assets:\n\nCash and cash equivalents$111,581 $111,581 $— $— $— \n\nOther Long Term Investments(1)\n228,507 — 1,409 — 227,098 \n\nMortgage Loans30,127 — — 30,127 — \n\nTotal $370,215 $111,581 $1,409 $30,127 $227,098 \n\nFinancial Liabilities:\n\nLong Term Debt142,319 — 142,319 — — \n\nTotal $142,319 $— $142,319 $— $— \n\n(1) As a member of Lloyd's, the Company participates in the Syndicate results which include the fair value of the investments. As of December 31, 2024, these investments are included in other long-term investments. The fair value of Lloyd's syndicate investments included in other long-term investments was $127.9 million as of December 31, 2025. Also included in our \"Other long-term investments\" on the Consolidated Balance Sheets is our interest in limited liability partnerships with a current fair value of $99.2 million at December 31, 2025.\n\nDecember 31, 2024\n\nDescriptionFair Value TotalLevel 1Level 2Level 3Net Asset Value\n\nFinancial assets:\n\nCash and cash equivalents$177,851 $177,851 $— $— $— \n\nOther Long Term Investments183,741 — 1,277 — 182,464 \n\nMortgage Loans38,879 — — 38,879 — \n\nTotal$400,471 $177,851 $1,277 $38,879 $182,464 \n\nFinancial Liabilities:\n\nLong Term Debt108,353 — 108,353 — — \n\nTotal$108,353 $— $108,353 $— $— \n\nFor cash and cash equivalents, carrying value is a reasonable estimate of fair value due to the short-term nature of these financial instruments.\n\n79\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nOur other long-term investments consist primarily of interests in limited liability partnerships that are recorded on the equity method of accounting and investments related to our participation in Lloyd's of London (\"Lloyd's\") syndicates which are measured at fair value. The fair value of the limited liability partnerships is obtained from the fund managers, which is based on the fair value of the underlying investments held in the limited liability partnerships. The fair value of the Lloyd's syndicate investments is based on the fair value of the investments held for each syndicate and the Company's respective participation percentage. 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 or fair value provided by the Lloyd's syndicates.\n\nThe 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.\n\nThe 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 flow analysis.\n\nThe Company did not have financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy as of December 31, 2025 or 2024. The following table summarizes changes to the Company's financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the year ended December 31, 2024. The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.\n\nYear ended December 31, 2024\n\nCorporate bondsAsset-backed securitiesTotal\n\nBeginning Balance - January 1, 2024$4,892 $5,692 $10,584 \n\nRealized gains (losses) (1)\n— — — \n\nUnrealized gains (losses) (1)\n— (869)(869)\n\nPurchases— — — \n\nDisposals— — — \n\nAmortization— — — \n\nTransfers in— — — \n\nTransfers out(4,892)(4,823)(9,715)\n\nEnding Balance - December 31, 2024$— $— $— \n\n(1) Unrealized gains (losses) are recorded as a component of comprehensive income.\n\nDuring the twelve-month period ended December 31, 2024, there were two securities transferred out of Level 3.\n\n80\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nNOTE 4. REINSURANCE\n\nWe account for premium, written and earned, and losses and loss settlement expenses incurred net of reinsurance ceded. The ceding of insurance does not legally discharge us from the primary liability under our policies, and we must pay the loss if the reinsurer fails to meet its obligation.\n\nWe also assume both property and casualty insurance from other insurance or reinsurance companies. We do not engage in any reinsurance transactions classified as finite risk reinsurance.\n\nThe effects of reinsurance on net written premium, earned premium and loss and loss settlement expenses are presented in the following table:\n\nYear ended December 31, 202520242023\n\nWritten premium(1):\n\nDirect 1,308,916 1,177,511 1,061,358 \n\nAssumed199,942 217,904 159,335 \n\nCeded(162,639)(163,945)(153,792)\n\nNet written premium1,346,219 1,231,470 1,066,901 \n\nEarned premium:\n\nDirect 1,259,966 1,109,903 1,017,917 \n\nAssumed206,708 214,043 161,628 \n\nCeded(173,978)(147,196)(144,958)\n\nNet earned premium1,292,696 1,176,750 1,034,587 \n\nLoss and loss settlement expenses:\n\nDirect 696,706 641,410 763,609 \n\nAssumed142,931 155,022 102,408 \n\nCeded(75,235)(51,827)(96,603)\n\nNet loss and loss settlement expense764,402 744,605 769,414 \n\n(1) See Part II, Item 7, \"Management's Discussion and Analysis of Financial Condition and Results of Operations\" for definition of Net written premium.\n\nWe periodically monitor the financial condition of our reinsurers to confirm that they are financially stable. We believe all of our reinsurers are in an acceptable financial condition and there were no reinsurance balances at December 31, 2025 for which collection is at risk that would result in a material impact on our Consolidated Financial Statements. The amount of reinsurance recoverable on paid losses totaled $14,192 and $20,811 at December 31, 2025 and 2024, respectively.\n\nThe following table provides a roll forward of the allowance for credit losses in our reinsurance recoverable balance at December 31, 2025:\n\nBeginning balance, January 1, 2025\n$103 \n\nCurrent-period provision for credit losses18\n\nEnding balance, December 31, 2025\n$121 \n\nCeded Reinsurance Programs and Retentions\n\nWe elect to cede parts of our business into various treaties, which allows us to increase our underwriting capacity, manage our risk profile, and protect us from a single large event, series of events, or a catastrophic event. The majority of our treaties are excess of loss, meaning we retain a portion of the loss prior to ceding to reinsurers. We place some treaties on a proportional basis, meaning we cede a portion of losses beginning with the first dollar of loss. Through each of our treaties, we cede a portion of each risk in exchange for a portion of the premium on those policies. Our treaties cover us from individual risk losses as well as a loss to more than one risk.\n\n81\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nWe generally work with reinsurance brokers to facilitate our reinsurance treaty procurement.\n\nWe have several programs that provide reinsurance coverage. The following tables provide a summary of our primary reinsurance programs. Retention amounts reflect the accumulated retentions and co-participation of all layers within a program. Reinsurance coverage limits the risk of loss that we retain by reinsuring direct risks in excess of our retention limits or proportionally from ground up. New reinsurance programs beginning in 2025 include the professional liability delegated underwriting authority (\"DUA\") excess of loss and specialty property quota share. We also discontinued our marine liability DUA quota share.\n\n2025 Reinsurance Programs\n\nType of ReinsuranceStated RetentionExhaustion PointPlacement and Limit\n\nCasualty Excess of Loss$3,000 $60,000 100 %of$57,000 \n\nProperty Excess of Loss3,000 50,000 100 %of$47,000 \n\nProperty Semi-automatic Quota Share50,000 75,000 100 %of$25,000 \n\nSurety Excess of Loss5,000 50,000 100 %of$45,000 \n\nProfessional Liability DUA Excess of Loss500 3,000 32 %of$2,500 \n\nProfessional Liability DUA Quota ShareN/A5,000 24 %of$5,000 \n\nSpecialty Casualty Quota ShareN/A5,000 75 %of$5,000 \n\nSpecialty Property Quota ShareN/A5,000 100 %of$5,000 \n\nProperty Catastrophe Excess of Loss20,000 130,000 100 %of$110,000 \n\nEarthquake DUA Catastrophe Excess of Loss10,000 140,000 100 %of$130,000 \n\nCyber Quota ShareN/A1,000 100 %of$1,000 \n\nBoiler and Machinery Quota ShareN/A100,000 100 %of$100,000 \n\nPillar Occurrence Excess of Loss5,000 15,000 50 %$10,000 \n\nNew reinsurance programs that began in 2024 included the property semi-automatic quota share. In 2024, we also transitioned our earthquake DUA quota share into an excess of loss treaty.\n\n2024 Reinsurance Programs\n\nType of ReinsuranceStated RetentionGround Up LimitsCoverage\n\nCasualty Excess of Loss$3,000 $60,000 100 %of$57,000 \n\nProperty Excess of Loss3,000 25,000 100 %of$22,000 \n\nProperty Semi-automatic Quota Share25,000 50,000 100 %of$25,000 \n\nSurety Excess of Loss5,000 50,000 100 %of$45,000 \n\nMarine Liability DUA Quota ShareN/A10,000 70 %of$10,000 \n\nProfessional Liability DUA Quota ShareN/A5,000 55 %of$5,000 \n\nSpecialty Casualty Variable Quota ShareN/A10,000 50 %of$10,000 \n\nProperty Catastrophe Excess of Loss20,000 130,000 100 %of$110,000 \n\nEarthquake DUA Catastrophe Excess of Loss10,000 170,000 100 %of$160,000 \n\nCyber Quota ShareN/A1,000 100 %of$1,000 \n\nBoiler and Machinery Quota ShareN/A100,000 100 %of$100,000 \n\nPillar Occurrence Excess of Loss5,000 15,000 42 %of$10,000 \n\n82\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nNew reinsurance programs that began in 2023 included our marine liability DUA quota share and our specialty variable quota share.\n\n2023 Reinsurance Programs\n\nType of ReinsuranceStated RetentionGround Up LimitsCoverage\n\nCasualty Excess of Loss$3,000 $60,000 100 %of$57,000 \n\nProperty Excess of Loss3,000 25,000 100 %of$22,000 \n\nSurety Excess of Loss2,000 50,000 100 %of$48,000 \n\nMarine Liability DUA Quota ShareN/A5,000 70 %of$5,000 \n\nProfessional Liability DUA Quota ShareN/A5,000 70 %of$5,000 \n\nSpecialty Casualty Variable Quota ShareN/A5,000 70 %of$5,000 \n\nProperty Catastrophe Excess of Loss20,000 200,000 100 %of$163,150 \n\nCyber Quota ShareN/A1,000 100 %of$1,000 \n\nBoiler and Machinery Quota ShareN/A100,000 100 %of$100,000 \n\nPillar Occurrence Excess of Loss6,000 16,000 90 %of$10,000 \n\nEarthquake DUA Quota ShareN/A170,000 100 %of$56,525 \n\nIf we incur property catastrophe losses and loss settlement expenses that exceed the stated retention amounts, our property catastrophe program provides one guaranteed reinstatement. In such an instance, we are required to pay the reinsurers a reinstatement premium equal to the full amount of the original premium, which will reinstate the full amount of reinsurance available under the property catastrophe program.\n\nNOTE 5. RESERVES FOR LOSSES AND LOSS SETTLEMENT EXPENSES\n\nProperty insurance indemnifies an insured with an interest in physical property for loss of, or damage to, such property or the loss of its income-producing abilities. Casualty insurance is primarily concerned with losses caused by injuries to persons and legal liability imposed on the insured for such injury or for damage to property of others. In most cases, casualty insurance also obligates the insurance company to provide a defense for the insured in litigation, arising out of events covered by the policy.\n\nLiabilities for losses and loss settlement expenses reflect management's best estimates at a given point in time of what we expect to pay for claims that have been reported and those that have been incurred but not reported (\"IBNR\"), based on known facts, circumstances, and historical trends. Because property and casualty insurance reserves are estimates of the unpaid portions of incurred losses that have been reported to us, as well as losses that have been IBNR, the establishment of appropriate reserves, including reserves for catastrophes, is an inherently uncertain and complex process. The ultimate cost of losses and related loss settlement expenses may vary materially from recorded amounts. We regularly update our reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in prior year reserve estimates, which may be material, are reported as a component of losses and loss settlement expenses incurred in the period such changes are determined.\n\nThe determination of reserves (particularly those relating to liability lines of insurance that have relatively longer lag in claim reporting) requires significant estimates to reasonably project expected future claim reporting and payment patterns. If, during the course of our regular monitoring of reserves, we determine that coverages previously written are incurring higher than expected losses, we will evaluate an appropriate response that may include, among other things, increasing the related reserves. Any adjustments we make to reserves are reflected in operating results in the year in which we make those adjustments. In addition to our internal process, we engage a third-party firm to provide an independent and unbiased assessment of our reserves to assist in establishing appropriate reserves.\n\nOn a quarterly basis, we perform a detailed review of IBNR reserves. There are two fundamental types or sources of IBNR reserves. We record IBNR reserves for \"normal\" types of claims and also specific IBNR reserves related to unique circumstances or events. A major hurricane is an example of an event that might necessitate establishing specific IBNR reserves because an analysis of existing historical data would not provide an appropriate estimate.\n\n83\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nWe do not discount loss reserves based on the time value of money. \n\nThe following table provides an analysis of changes in our property and casualty losses and loss settlement expense reserves (net of reinsurance) for the years ended December 31, 2025, 2024 and 2023:\n\n   \n\nYears Ended December 31,202520242023\n\nGross liability for losses and loss settlement expenses\nat beginning of year$1,796,782 $1,638,755 $1,497,274 \n\nCeded losses and loss settlement expenses(198,083)(191,640)(146,875)\n\nNet liability for losses and loss settlement expenses\nat beginning of year$1,598,699 $1,447,115 $1,350,399 \n\nLosses and loss settlement expenses incurred\nfor claims occurring during\n\n   Current year$778,480 $745,813 $701,664 \n\n   Prior years(14,078)(1,208)67,750 \n\nTotal incurred$764,402 $744,605 $769,414 \n\nLosses and loss settlement expense payments\nfor claims occurring during\n\n   Current year$194,149 $186,322 $191,899 \n\n   Prior years457,759 406,699 480,800 \n\nTotal paid$651,908 $593,021 $672,699 \n\nNet liability for losses and loss settlement expenses\nat end of year$1,711,193 $1,598,699 $1,447,115 \n\nCeded losses and loss settlement expenses213,633 198,083 191,640 \n\nGross liability for losses and loss settlement expenses\nat end of year$1,924,826 $1,796,782 $1,638,755 \n\nGenerally, we base case reserves for each claim on the estimated ultimate exposure for that claim. However, due to the uncertainty associated with the ultimate claim settlement values and additional claims not yet reported, we believe that it is appropriate and reasonable to establish a best estimate for reserves within a range of reasonable estimates, especially when we are reserving for claims for bodily injury, disabilities and similar claims, for which settlements and verdicts can vary widely. We believe our approach produces recorded reserves that are consistent as to their relative position within a range of reasonable reserves from year-to-year. However, conditions and trends that have affected the reserve development for a given year do change. Therefore, such development cannot be used to project future reserve redundancies or deficiencies.\n\nOur IBNR methodologies and assumptions are reviewed periodically for appropriateness and reasonability. Items reviewed and revised include development factors for paid and reported loss, paid development factors for allocated LAE, expected loss and LAE ratios, as well as selected frequency and severity trend factors.\n\nBecause of the type of property coverage we write, we have potential exposure to environmental pollution, mold and asbestos claims. Our underwriters are aware of these exposures and use riders or endorsements to limit exposure. We are not aware of any significant contingent liabilities related to environmental issues.\n\n84\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nReserve Development\n\nPrior year development for non-catastrophe was favorable $5.2 million for the year ended December 31, 2025. This compares to neutral development recorded in 2024. Favorable results in several lines were largely offset by increases in other liability reserves exposed to potential future uncertainty associated with social inflation influences prevalent across the industry.\n\nPrior year development for the year ended December 31, 2024 improved over 2023 with neutral development recorded in 2024 as favorable results in several lines were offset by increases in other liability reserves exposed to potential future uncertainty associated with social inflation influences prevalent across the industry.\n\nThe significant drivers of the adverse reserve development for the year ended December 31, 2023 were the commercial other liability and commercial automobile lines of business. The adverse development in commercial other liability was primarily in our excess and surplus lines excess casualty book along with some adverse development in standard umbrella and construction defect due to increasing severity pressures. The increases on these longer tailed lines, especially in accident years 2016-2019, related to social and economic inflation. The commercial automobile line of business also experienced adverse development related to increasing severity largely in post-COVID-19 accident years. The remaining lines experienced small amounts of reserve development.\n\n85\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nThe following tables provide information about incurred and paid losses and loss settlement expense development as of December 31, 2025, net of reinsurance, as well as cumulative development, cumulative claim frequency and IBNR liabilities.\n\nThe cumulative number of reported claims, for calendar years 2025, 2024 and 2023, are counted for all lines of business on a per claimant per coverage basis and a single event may result in multiple claims due to the involvement of multiple individual claimants and/or multiple independent coverages. Claim counts for calendar years 2016 and prior are counted on a per claim and per coverage basis. Claim counts include open claims, claims that have been paid and closed, and reported claims that have been closed without the need for any payment.\n\nLine of business: Commercial other liability\n\nIncurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2025\n\nFor the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims\n\nAccident Year2016201720182019202020212022202320242025\n\n(Unaudited)\n\n2016$139,144 $130,041 $136,275 $142,397 $140,784 $148,324 $153,490 $159,284 $164,989 $171,819 $9,488 32,675 8,613 \n\n2017139,602 139,032 152,547 156,369 159,653 173,091 174,013 176,073 183,879 14,517 44,277 10,270 \n\n2018163,059 172,894 176,496 187,841 197,696 207,501 213,536 221,615 18,694 58,556 9,588 \n\n2019149,173 169,344 183,918 179,667 186,205 187,539 193,998 21,822 44,825 9,194 \n\n2020171,013 158,022 162,471 179,080 181,687 183,575 32,978 12,562 8,608 \n\n2021145,822 162,359 162,879 176,770 175,956 43,852 30,134 6,492 \n\n2022161,826 175,579 181,924 189,588 42,104 27,762 3,590 \n\n2023172,398 173,529 178,568 65,882 6,170 3,209 \n\n2024215,235 202,111 126,954 (13,124)2,588 \n\n2025228,026 186,005 1,451 \n\nTotal$1,929,135 \n\n86\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nLine of business: Commercial other liability\n\nCumulative paid losses and allocated loss settlement expenses, net of reinsurance\n\nFor the years ended December 31,\n\nAccident Year2016201720182019202020212022202320242025\n\n(Unaudited)\n\n2016$13,782 $38,184 $63,526 $88,885 $102,757 $115,107 $126,561 $136,400 $141,445 $157,582 \n\n201717,716 43,172 70,500 91,984 111,085 128,430 138,127 148,295 159,008 \n\n201816,200 44,772 79,168 105,515 130,942 158,851 179,469 191,737 \n\n201918,221 46,986 72,179 102,510 127,650 138,236 159,813 \n\n202017,011 43,596 60,114 98,592 110,931 130,020 \n\n202112,434 33,642 59,278 90,607 111,221 \n\n202210,468 42,168 69,896 112,472 \n\n20239,335 41,847 70,767 \n\n202410,732 30,442 \n\n202510,271 \n\nTotal$1,133,333 \n\nAll outstanding liabilities for unpaid losses and loss settlement expenses before 2016, net of reinsurance15,406 \n\nLiabilities for unpaid losses and loss settlement expenses, net of reinsurance$811,208 \n\n87\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nLine of business: Commercial fire and allied\n\nIncurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2025\n\nFor the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims\n\nAccident Year2016201720182019202020212022202320242025\n\n(Unaudited)\n\n2016$147,473 $144,208 $143,721 $143,724 $143,108 $144,109 $145,351 $142,644 $142,814 $142,574 $336 (4,899)7,604 \n\n2017155,139 160,240 160,945 161,693 161,232 161,456 161,611 161,051 161,091 533 5,952 9,889 \n\n2018143,280 146,950 146,378 146,010 147,356 147,058 147,085 146,947 679 3,667 13,548 \n\n2019164,030 155,482 158,475 157,667 155,850 155,114 155,306 743 (8,724)10,821 \n\n2020207,207 201,391 202,929 207,256 209,588 209,344 1,079 2,137 11,266 \n\n2021156,794 169,669 157,905 157,534 158,798 (18,686)2,004 14,678 \n\n2022161,776 170,594 171,958 173,023 8,832 11,247 5,397 \n\n2023164,526 147,904 146,384 11,545 (18,142)4,457 \n\n2024124,467 109,389 22,029 (15,078)4,115 \n\n2025112,017 41,229 4,474 \n\nTotal$1,514,873 \n\n88\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nLine of business: Commercial fire and allied\n\nCumulative paid losses and allocated loss settlement expenses, net of reinsurance\n\nFor the years ended December 31,\n\nAccident Year2016201720182019202020212022202320242025\n\n(Unaudited)\n\n2016$92,895 $125,962 $132,429 $137,907 $139,353 $141,104 $142,248 $141,008 $142,038 $142,044 \n\n201799,484 137,058 145,900 152,219 157,512 159,286 159,456 160,487 160,543 \n\n201892,770 123,559 133,703 137,794 141,841 145,021 145,954 146,015 \n\n2019100,980 136,084 142,342 150,196 151,739 153,893 154,217 \n\n2020128,704 173,055 192,902 197,602 205,357 207,336 \n\n202197,451 140,406 154,242 161,705 169,172 \n\n202296,160 138,479 150,710 158,616 \n\n202375,304 106,083 119,537 \n\n202458,228 74,052 \n\n202553,340 \n\nTotal$1,384,872 \n\nAll outstanding liabilities for unpaid losses and loss settlement expenses before 2016, net of reinsurance890 \n\nLiabilities for unpaid losses and loss settlement expenses, net of reinsurance$130,890 \n\n89\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nLine of business: Commercial automobile\n\nIncurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2025\n\nFor the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims\n\nAccident Year2016201720182019202020212022202320242025\n\n(Unaudited)\n\n2016$174,018 $175,357 $174,337 $175,658 $173,823 $174,588 $175,016 $175,387 $173,858 $173,760 $72 (258)20,092 \n\n2017227,919 224,553 235,110 233,159 233,007 233,535 234,229 231,093 230,174 245 2,255 27,325 \n\n2018236,629 245,173 253,045 255,017 255,409 255,198 252,642 251,687 542 15,058 32,919 \n\n2019279,229 291,139 289,929 282,155 282,680 276,095 273,186 427 (6,043)34,526 \n\n2020243,360 216,951 196,412 194,162 188,556 187,245 702 (56,115)34,792 \n\n2021179,880 172,599 173,708 169,172 165,608 512 (14,272)24,254 \n\n2022157,165 161,672 160,303 155,585 5,790 (1,580)12,435 \n\n2023153,502 146,433 145,295 9,688 (8,207)10,472 \n\n2024156,028 147,877 22,743 (8,151)11,270 \n\n2025172,715 67,055 14,725 \n\nTotal$1,903,132 \n\n90\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nLine of business: Commercial automobile\n\nCumulative paid losses and allocated loss settlement expenses, net of reinsurance\n\nFor the years ended December 31,\n\nAccident Year2016201720182019202020212022202320242025\n\n(Unaudited)\n\n2016$66,013 $103,528 $128,156 $148,224 $164,341 $168,950 $171,380 $172,928 $173,661 $173,673 \n\n201781,311 126,644 166,170 197,893 212,947 223,076 228,749 228,129 229,444 \n\n201881,572 138,092 187,405 211,123 235,519 244,284 249,009 250,815 \n\n201991,919 153,244 205,614 246,801 264,151 268,355 270,603 \n\n202067,660 109,686 138,158 161,798 174,175 181,079 \n\n202164,381 99,116 128,283 146,436 160,062 \n\n202262,477 95,785 124,853 139,429 \n\n202356,175 85,483 110,254 \n\n202451,283 81,488 \n\n202550,660 \n\nTotal$1,647,507 \n\nAll outstanding liabilities for unpaid losses and loss settlement expenses before 2016, net of reinsurance628 \n\nLiabilities for unpaid losses and loss settlement expenses, net of reinsurance$256,254 \n\n91\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nLine of business: Workers' compensation\n\nIncurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2025\n\nFor the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims\n\nAccident Year2016201720182019202020212022202320242025\n\n(Unaudited)\n\n2016$70,419 $66,575 $61,648 $55,168 $53,964 $52,870 $53,090 $53,617 $53,574 $53,430 $955 (16,989)5,696 \n\n201776,184 69,528 55,982 51,874 49,362 47,801 48,074 47,943 47,709 1,164 (28,475)7,988 \n\n201871,972 67,883 59,192 56,109 53,813 54,783 54,238 53,818 987 (18,154)8,250 \n\n201952,136 49,189 49,336 48,945 49,084 49,807 50,749 127 (1,387)8,109 \n\n202045,365 46,612 43,724 46,624 45,524 45,598 (506)233 7,453 \n\n202145,177 42,283 39,649 40,287 40,390 132 (4,787)4,599 \n\n202229,597 26,721 27,398 27,743 1,379 (1,854)1,916 \n\n202329,262 28,742 26,389 1,588 (2,873)1,508 \n\n202432,202 31,328 1,075 (874)1,764 \n\n202540,944 6,816 2,431 \n\nTotal$418,098 \n\n92\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nLine of business: Workers' compensation\n\nCumulative paid losses and allocated loss settlement expenses, net of reinsurance\n\nFor the years ended December 31,\n\nAccident Year2016201720182019202020212022202320242025\n\n(Unaudited)\n\n2016$14,413 $32,345 $40,680 $45,743 $47,082 $48,277 $50,127 $51,023 $51,126 $51,344 \n\n201714,647 31,309 38,082 41,672 43,833 45,508 45,742 46,154 46,202 \n\n201816,949 35,369 43,189 47,173 48,807 49,964 50,031 50,381 \n\n201913,582 29,668 38,382 43,044 46,101 47,308 48,263 \n\n202017,603 29,605 35,542 39,479 42,052 42,992 \n\n202117,949 29,453 34,074 36,512 37,598 \n\n20229,434 17,851 21,033 23,585 \n\n202310,227 18,085 21,458 \n\n202410,277 21,504 \n\n202516,053 \n\nTotal$359,380 \n\nAll outstanding liabilities for unpaid losses and loss settlement expenses before 2016, net of reinsurance15,289 \n\nLiabilities for unpaid losses and loss settlement expenses, net of reinsurance$74,006 \n\n93\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nLine of business: Personal\n\nIncurred losses and allocated loss settlement expenses, net of reinsuranceAs of December 31, 2025\n\nFor the years ended December 31,Total of incurred but not reported liabilities plus expected development on reported claimsCumulative developmentCumulative number of reported claims\n\nAccident Year2016201720182019202020212022202320242025\n\n(Unaudited)\n\n2016$48,072 $45,840 $45,379 $45,961 $45,113 $45,297 $45,199 $45,179 $45,185 $45,180 $21 (2,892)9,553 \n\n201760,330 59,342 58,695 58,544 59,023 58,790 58,863 58,788 58,626 29 (1,704)11,906 \n\n201851,639 51,721 52,715 52,062 51,457 51,115 51,216 51,150 45 (489)14,721 \n\n201959,548 58,378 58,745 57,929 57,630 57,559 57,628 (392)(1,920)13,706 \n\n202081,206 73,761 73,204 72,531 72,174 71,770 326 (9,436)13,614 \n\n202128,537 26,489 26,372 26,338 26,184 130 (2,353)17,128 \n\n20221,493 2,287 3,127 3,056 125 1,563 2,588 \n\n20232,391 2,374 2,367 (2,842)(24)63 \n\n20248,648 5,423 1,282 (3,225)12 \n\n202511,200 7,844 4 \n\nTotal$332,584 \n\n94\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nLine of business: Personal\n\nCumulative paid losses and allocated loss settlement expenses, net of reinsurance\n\nFor the years ended December 31,\n\nAccident Year2016201720182019202020212022202320242025\n\n(Unaudited)\n\n2016$32,999 $40,910 $42,660 $44,046 $44,618 $44,737 $44,828 $44,827 $45,159 $45,160 \n\n201742,135 53,111 55,982 57,169 57,824 58,206 58,377 58,597 58,597 \n\n201837,410 47,433 49,464 50,185 50,661 50,852 51,101 51,103 \n\n201940,544 52,390 54,935 56,658 56,852 56,971 57,510 \n\n202054,181 68,124 70,543 71,416 71,394 71,385 \n\n202120,298 23,829 24,889 25,764 25,822 \n\n2022551 2,128 2,792 2,828 \n\n2023297 3,089 4,598 \n\n2024617 2,672 \n\n20253,276 \n\nTotal$322,951 \n\nAll outstanding liabilities for unpaid losses and loss settlement expenses before 2016, net of reinsurance234 \n\nLiabilities for unpaid losses and loss settlement expenses, net of reinsurance$9,866 \n\n95\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nThe reconciliation of the net incurred and loss development tables to the liability for unpaid losses and loss settlement expenses in the consolidated statement of financial position is as follows:\n\nDecember 31, 2025\n\nNet outstanding liabilities for unpaid losses and allocated loss settlement expenses:\n\nCommercial other liability$811,208 \n\nCommercial fire and allied130,890 \n\nCommercial automobile256,254 \n\nCommercial workers' compensation74,006 \n\nPersonal9,866 \n\nAll other lines330,342 \n\nNet outstanding liabilities for unpaid losses and allocated loss settlement expenses1,612,566 \n\nNet outstanding liabilities for unpaid unallocated loss settlement expenses98,627 \n\nLiabilities for unpaid losses and loss settlement expenses, net of reinsurance1,711,193 \n\nReinsurance recoverable on unpaid losses and allocated loss settlement expenses:\n\nCommercial other liability109,118 \n\nCommercial fire and allied9,043 \n\nCommercial automobile(816)\n\nCommercial workers' compensation26,624 \n\nAll other lines69,664 \n\nReinsurance recoverable on unpaid losses and allocated loss settlement expenses213,633 \n\nTotal gross liability for unpaid losses and loss settlement expenses$1,924,826 \n\nThe following is supplementary information about average historical claims duration as of December 31, 2025.\n\nAverage annual percentage payout of incurred claims by age, net of reinsurance\n\nYear 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10\n\n(Unaudited)\n\nCommercial other liability7.1 %14.1 %14.1 %16.5 %10.2 %9.0 %8.1 %5.6 %4.4 %9.4 %\n\nCommercial fire and allied58.6 %22.0 %6.9 %3.9 %2.7 %1.4 %0.4 %— %0.4 %— %\n\nCommercial automobile35.7 %21.3 %17.3 %11.8 %7.8 %3.2 %1.6 %0.4 %0.5 %— %\n\nCommercial workers' compensation34.4 %31.7 %13.8 %8.2 %4.1 %2.5 %1.5 %1.1 %0.1 %0.4 %\n\nPersonal51.3 %35.2 %13.8 %2.2 %0.6 %0.3 %0.5 %0.1 %0.4 %— %\n\n96\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nNOTE 6. STATUTORY REPORTING, CAPITAL REQUIREMENTS AND DIVIDENDS AND RETAINED EARNINGS RESTRICTIONS\n\nOur insurance subsidiaries file statutory-basis financial statements with state insurance regulatory authorities prepared in accordance with Statutory Accounting Principles (\"SAP\") prescribed or permitted by such authorities, which may vary materially from GAAP. Prescribed SAP includes the Accounting Practices and Procedures Manual of the National Association of Insurance Commissioners (\"NAIC\") as well as state laws, regulations and administrative rules. Permitted SAP encompasses all accounting practices not so prescribed. The principal differences between SAP financial statements and financial statements prepared in accordance with GAAP in that policy acquisition costs are charged to expense as incurred, goodwill is amortized, and the values reported for investments, pension obligations and deferred taxes are established on a different basis. Accordingly, SAP operating results and SAP capital and surplus may differ substantially from amounts reported in the GAAP basis financial statements for comparable items.\n\nNo material permitted accounting practices were used to prepare our statutory-basis financial statements during the years ended December 31, 2025, 2024 and 2023.\n\nWe are directed by the state insurance departments' solvency regulations to calculate a required minimum level of statutory capital and surplus based on insurance risk factors. The risk-based capital results are used by the NAIC and state insurance departments to identify companies that merit regulatory attention or the initiation of regulatory action. Statutory capital and surplus in regards to policyholders at December 31, 2025, 2024 and 2023 and statutory net income (loss) for the years then ended are as follows:\n\n202520242023\n\nStatutory Capital and Surplus$859,779 $723,366 $635,474 \n\nStatutory Net Income (Loss)$106,454 $49,491 $(13,251)\n\nUF&C and its property and casualty insurance subsidiaries had statutory capital and surplus in regards to policyholders in excess of their required levels at December 31, 2025.\n\nState laws and regulations generally limit the amount of funds that an insurance company may distribute to a parent as a dividend without commissioner approval. As an insurance holding company with no significant independent operations of our own, United Fire Group, Inc. relies on dividends received from its insurance company subsidiaries in order to meet its obligations, including payment of dividends to its common shareholders and interest on long-term debt. Dividends payable by our insurance subsidiaries are governed by the laws in the states in which they are domiciled. In all cases, these state laws permit the payment of dividends only from earned surplus arising from business operations. For example, under Iowa law, the maximum dividend or distribution that may be paid within a 12-month period without prior approval of the Iowa Insurance Commissioner is generally restricted to the greater of 10 percent of statutory surplus as of the preceding December 31 less any dividends paid in the previous 12 months, or net income of the preceding calendar year on a statutory basis less any dividends paid in the previous 12 months, not greater than earned statutory surplus. Other states in which our insurance company subsidiaries are domiciled may impose similar restrictions on dividends and distributions. Based on these restrictions, at December 31, 2025 UF&C is able to make a maximum of $50.6 million in dividend payments without prior regulatory approval. At December 31, 2025, we were in compliance with applicable state laws and regulations.\n\nState insurance holding company laws and regulations generally require approval from the insurer's domicile state insurance commissioner for any material transaction. For property and casualty insurers, a material transaction is defined as any sale, loan, exchange, transfer or guarantee with an affiliate where the aggregate value of the transaction exceeds 25 percent of the insurer's policyholders' surplus or three percent of its admitted assets (measured at December 31 of the preceding year), whichever is less.\n\nIn 2025, 2024 and 2023, UF&C paid dividends to United Fire Group, Inc. totaling $21,700, $22,800 and $13,200, respectively.\n\n97\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nNOTE 7. INCOME TAX\n\nIncome tax expense (benefit) is composed of the following:\n\n   \n\nYears Ended December 31,202520242023\n\nCurrent$35,398 $23,469 $(2,217)\n\nDeferred(5,653)(8,392)(7,803)\n\nIncome tax expense (benefit)$29,745 $15,077 $(10,021)\n\nA reconciliation of tax calculated at the U.S. federal statutory tax rate to that calculated at the effective tax rate for the year ended December 31, 2025 is as follows:\n\n2025\n\nAmount%\n\nU.S. federal statutory tax rate$31,067 21.00 %\n\nState and local income taxes, net of federal income tax effect(1)\n1,438 0.97 \n\nForeign tax effects\n\nUnited Kingdom\n\nForeign tax withheld2,881 1.95 \n\nEffect of changes in tax laws or rates enacted in the current period— — \n\nEffect of cross-border tax laws1,028 0.69 \n\nTax credits\n\nForeign tax credit(4,448)(3.01)\n\nOther tax credits(40)(0.03)\n\nChanges in valuation allowances— — \n\nNontaxable or nondeductible items(141)(0.10)\n\nChanges in unrecognized tax benefits— — \n\nOther adjustments\n\nInterest income on refunds(2,581)(1.74)\n\nOther adjustments541 0.37 \n\nEffective tax rate$29,745 20.10 %\n\n(1) State taxes in Illinois made up the majority (greater than 50 percent) of the tax effect in this category.\n\n98\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nA reconciliation of income tax expense (benefit) computed at the applicable federal tax rate of 21.0 percent for the years ended December 31, 2024 and 2023 to the amount recorded in the accompanying Consolidated Statements of Income is as follows:\n\n  \n\nYears Ended December 31,20242023\n\nIncome (loss) before taxes$77,034 $(39,721)\n\nFederal statutory rate21 %21 %\n\nExpected income tax expense (benefit)$16,177 $(8,339)\n\nTax-exempt municipal bond interest income(1,881)(2,763)\n\nNontaxable dividend income(27)(269)\n\nCompensation1,228 596 \n\nResearch & development credit(16)540 \n\nOther, net(404)215 \n\nIncome tax expense (benefit)$15,077 $(10,021)\n\nWe measure certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is 21.0 percent. The significant components of deferred tax assets and liabilities consist of the following at December 31, 2025 and 2024:\n\n  \n\nDecember 31,20252024\n\nDeferred tax assets\n\nFinancial statement reserves in excess of income tax reserves$26,388 $23,203 \n\nUnearned premium adjustment24,888 22,700 \n\nEmployee profit sharing5,008 3,112 \n\nOther-than-temporary impairment of investments597 14 \n\nCompensation expense related to stock options2,138 1,410 \n\nNonqualified deferred compensation2,564 2,400 \n\nNet unrealized gain (loss) - all other securities7,103 19,572 \n\nOther4,758 3,639 \n\nGross deferred tax asset73,444 76,050 \n\nValuation allowance— — \n\nDeferred tax asset73,444 76,050 \n\nDeferred tax liabilities\n\nDeferred policy acquisition costs32,293 30,459 \n\nInvestments in partnerships2,270 1,938 \n\nOver funded pension benefit4,933 4,694 \n\nPrepaid pension cost8,832 8,086 \n\nNet bond discount accretion1,213 705 \n\nDepreciation2,614 3,085 \n\nIdentifiable intangible assets (1)945 945 \n\nCapitalized Software2,614 534 \n\nOther2,282 2,586 \n\nGross deferred tax liability57,996 53,032 \n\nNet deferred tax asset (liability)$15,448 $23,018 \n\n(1) Related to our acquisition of Mercer Insurance Group, Inc.\n\n99\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nAs of December 31, 2025 and 2024, the Company has recorded no valuation allowance as we believe it is more likely than not that all deferred tax assets will be realized. Our determination was based on evidence of taxable income in the carryback and carryforward periods and our tax planning strategy of holding debt securities with unrealized losses to recovery.\n\nIncome taxes paid (net of refunds received) disaggregated by domestic and foreign jurisdiction in 2025 were as follows:\n\n2025\n\nU.S. federal income taxes paid (refunded)$19,490 \n\nU.S. state income taxes paid (refunded)(1)\n1,180 \n\nForeign income taxes paid (refunded)\n\nUnited Kingdom2,881 \n\nIncome taxes paid (refunded)$23,551 \n\n(1) No individual jurisdiction met the 5% threshold for individual disclosure.\n\nIn 2024 and 2023 we made cash payments for income taxes of $16,112 and $1,348, respectively. We made no interest payments in 2025, 2024 and 2023.\n\nIn 2024 and 2023 we received federal tax refunds of $0 and $14,017, respectively, which resulted from the utilization of our net operating losses and net capital loss carryforwards and carrybacks. We have no loss carryforwards and no tax credit carryforwards as of December 31, 2025.\n\nDomestic and foreign income (loss) before income tax expense (benefit) for the year ended December 31, 2025 is as follows:\n\n2025\n\nU.S. income (loss)$137,596 \n\nForeign income (loss)10,340 \n\nIncome (loss) before income taxes$147,936 \n\nTotal income tax expense (benefit) disaggregated by domestic and foreign jurisdiction for the year ended December 31, 2025 is as follows:\n\n2025\n\nU.S. federal income tax expense (benefit)$25,043 \n\nU.S. state income tax expense (benefit)(1)\n1,821 \n\nForeign income tax expense (benefit)\n\nUnited Kingdom2,881 \n\nIncome tax expense (benefit)$29,745 \n\n(1) No individual jurisdiction met the 5% threshold for individual disclosure.\n\nAs of December 31, 2025, we had no alternative minimum tax credit carryforwards.\n\nWe file a consolidated federal income tax return and file income tax returns in various state jurisdictions. The U.S. Federal income tax returns of the Company for years prior to 2022 are no longer subject to examination by the taxing authorities. The Company does not have any unrecognized tax benefits (\"UTBs\") at December 31, 2025 or December 31, 2024. In the event the Company has UTBs, interest and penalties related to uncertain tax positions would be recorded as part of income tax expense in the financial statements. The Company regularly assesses the likelihood of additional tax assessments by jurisdiction and, if necessary, adjusts its tax reserves based on new information or developments.\n\n100\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nEnactment of the One Big Beautiful Bill Act of 2025\n\nOn July 4, 2025, the One Big Beautiful Bill Act of 2025 (the \"Tax Act\") was signed into law, which includes both tax and non-tax provisions. Changes in tax law are recorded in the period of enactment. The changes resulting from the tax provisions in the Tax Act did not have a material impact on the Company's financial statements.\n\nNOTE 8. EMPLOYEE BENEFITS\n\nWe offer various benefits to our employees including a non-contributory cash balance pension plan and an employee health and dental benefit plan.\n\nIn 2023, we offered an Early Retirement Package (\"ERP\") as a voluntary program for a select group of eligible employees to consider retiring earlier than planned. Employees that accepted the offering received a one-time separation package. At the same time, we announced a change to our paid time off (\"PTO\") policy to a discretionary time off policy as of December 31, 2023. As a result, the Company no longer maintains an accrued liability on the balance sheet for PTO. The expense of the severance benefits offered with the ERP largely offset the benefit of the liability released with the change in time off policy in the financial statements. A partial plan curtailment was triggered during that period due to the reduction in active lives resulting from the ERP reduction in force, providing the benefit shown in the table for the Net Periodic Benefit Cost below.\n\nPension Plan\n\nWe offer a non-contributory cash balance pension plan in which all of our employees are eligible to participate after they have completed one year of service, attained 21 years of age and have met the hourly service requirements. Retirement benefits under our cash balance pension plan are based on the number of years of service and level of compensation. Our policy to fund the pension plan on a current basis to not less than the minimum amounts required by the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended, is designed to ensure that plan assets will be adequate to provide retirement benefits. We are not required to make a contribution to the pension plan in 2026.\n\nAs a result of the ERP offered in 2023, any retiree or terminated employees were offered the opportunity to take a lump sum distribution out of the plan post-retirement. About 25% of retirees elected to take a lump sum payment, which in total was $17.8 million, and as a result, a settlement gain of $0, $0.5 million, and $2.7 million was recorded during the years ended December 31, 2025, 2024 and 2023, respectively.\n\nInvestment Policies and Strategies\n\nThe investment objective of the plan is to seek the highest rate of return consistent with its asset mix. The plan seeks to ensure reasonable costs and places a high priority on benefit security and satisfying its benefit obligations. The plan's investment objectives include, but are not limited to: maximization of return within reasonable and prudent levels of risk; provision of returns comparable to returns for similar investment options; control administrative and management costs; provision of appropriate diversification within investment vehicles. The plan's investment strategy will utilize several different asset classes with varying risk/return characteristics. The returns of the asset classes are not expected to move in tandem, which will allow the plan to take part in different parts of the global economic cycle.\n\nWe have an internal retirement committee, which includes our Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Human Resources Officer, Chief Legal Officer, and Chief Claims Officer, all of whom periodically receive information on the value of the pension plan assets and their performance. Quarterly, the retirement committee meets to review and discuss the performance of the pension plan assets as well as the allocation of investments within the pension plan in accordance with the Investment Policy.\n\nThe plan's liability driven investment (\"LDI\") strategy is designed to match the timing of cash outflows related to payouts from the plan with cash inflows from the plan's investment portfolio, as well as hedge interest rate risk\n\n101\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nbetween assets and liabilities. The portfolio includes a hedge portfolio, targeting 80.0 percent of the pension plan asset balance, largely comprised of highly rated fixed maturity securities and designed to match the assets and liabilities and maintain a fully funded position while hedging interest rate, yield curve and credit spread risks. The remaining 20.0 percent target of the asset balance is return seeking, with the objective to account for liability growth and to maintain a healthy surplus position. The largest fund in the return seeking portfolio is the LargeCap S&P 500 Index Separate Account fund, comprising 66.5% of the return seeking portfolio and 13.8% of the overall portfolio. We have not identified any significant concentrations of risk as a result of the LDI investment strategy.\n\nThe investments held by the pension plan at December 31, 2025 include the following asset categories:\n\n•Fixed maturity securities, which are income-oriented investments including low, medium, and high quality bond funds with short, intermediate, and/or long term durations;\n\n•Equity securities, which may include various types of stock (foreign and domestic), such as large-cap, mid-cap, small-cap, with value, blend, and growth investment objectives;\n\n•Alternatives/other investments, which include commingled trusts, insurance company separate accounts through a group annuity contract, and mutual funds;\n\n•Pooled separate accounts, which includes seven separate funds, including three S&P index separate accounts, an international equity index separate account, a short-term income separate account, a liquid assets separate account, and a US property separate account;\n\n•Cash and cash equivalents, which include money market funds, stable value, and guaranteed interest accounts.\n\nWe have one external investment manager as of December 31, 2025 and 2024.\n\nThe following is a summary of the pension plan's actual and target asset allocations at December 31, 2025 and 2024 by asset category:\n\nTarget\n\nPension plan assets2025% of Total2024% of TotalAllocation\n\nHedge portfolio:79.2 %77.6 %80 %\n\nFixed maturity securities:\n\nCorporate bonds$153,149 63.3 %$147,336 61.1 %\n\nForeign bonds18,265 7.5 15,960 6.6 \n\nFederal agency4,578 1.9 5,185 2.1 \n\nU.S. Treasury bonds285 0.1 — — \n\nPrivate placement2,423 1.0 3,319 1.4 \n\nMortgage/asset backed securities724 0.3 732 0.3 \n\nMoney market funds1,480 0.6 546 0.2 \n\nPooled separate accounts:\n\nLiquid assets separate account fund5,274 2.2 8,872 3.7 \n\nShort-term income separate account fund5,584 2.3 5,169 2.1 \n\nReturn seeking portfolio:20.8 %22.4 %20 %\n\nPooled separate accounts:\n\nU.S. property separate account fund— — 6,688 2.8 \n\nLargeCap S&P 500 index33,397 13.8 31,968 13.3 \n\nMidCap S&P 400 index6,699 2.8 6,227 2.6 \n\nSmallCap S&P 600 index4,421 1.8 4,163 1.7 \n\nInternational equity index5,705 2.4 5,017 2.1 \n\nTotal plan assets$241,984 100.0 %$241,182 100.0 %100.0 %\n\n102\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nAssets held in cash and cash equivalents enable the pension plan to mitigate market risk associated with other types of investments and allows the pension plan to maintain liquidity both for the purpose of making future benefit payments to participants and their beneficiaries and for future investment opportunities.\n\nValuation of Investments and Fair Value Measurement\n\nFair value measurement for the plan, including the application of the fair value hierarchy, is consistent with the methodology outlined in Part II, Item 8, Note 3 \"Fair Value of Financial Instruments\".\n\nThe following tables present the categorization of the pension plan's assets measured at fair value on a recurring basis at December 31, 2025 and 2024:\n\n Fair Value Measurements\n\nDescriptionDecember 31, 2025Level 1Level 2Level 3\n\nFixed maturity securities\n\nCorporate bonds$153,149 $— $153,149 $— \n\nForeign bonds18,265 — 18,265 — \n\nFederal agency4,578 — 4,578 — \n\nU.S. Treasury bonds285 — 285 — \n\nPrivate placement2,423 — 2,423 — \n\nMortgage/asset backed securities724 — 724 — \n\nMoney market funds1,480 1,480 — — \n\nPooled separate accounts:\n\nLiquid assets separate account fund5,274 — 5,274 — \n\nShort-term income separate account fund5,584 5,584 — — \n\nLargeCap S&P 500 index33,397 33,397 — — \n\nMidCap S&P 400 index6,699 6,699 — — \n\nSmallCap S&P 600 index4,421 4,421 — — \n\nInternational equity index5,705 5,705 — — \n\nTotal assets measured at fair value$241,984 $57,286 $184,698 $— \n\n103\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nFair Value Measurements\n\nDescriptionDecember 31, 2024Level 1Level 2Level 3\n\nFixed maturity securities\n\nCorporate bonds$147,336 $— $147,336 $— \n\nForeign bonds15,960 — 15,960 — \n\nFederal agency5,185 — 5,185 — \n\nPrivate placement3,319 — 3,319 — \n\nMortgage/asset backed securities732 — 732 — \n\nMoney market Funds546 546 — — \n\nPooled separate accounts\n\nLiquid assets separate account fund8,872 — 8,872 — \n\nShort-term income separate account fund5,169 5,169 — — \n\nU.S. property separate account fund6,688 — — 6,688 \n\nLargeCap S&P 500 index31,968 31,968 — — \n\nMidCap S&P 400 index6,227 6,227 — — \n\nSmallCap S&P 600 index4,163 4,163 — — \n\nInternational equity index5,017 5,017 — — \n\nTotal assets measured at fair value$241,182 $53,090 $181,404 $6,688 \n\nThe fair value of the majority of the plan's investments is determined based on prices obtained from the plan's investment manager who obtain prices from independent pricing services. One price is obtained for each security, which is evaluated for reasonableness prior to its use for reporting purposes.\n\nFixed Maturity Securities (\"LDI Portfolio\")\n\nThe LDI portfolio is comprised of individual investments in cash equivalents, bonds and notes, and options and contracts.\n\nCash and cash equivalents within the portfolio consist of interest-bearing cash and money market funds. The fair value of money market funds approximates their cost basis due to their liquidity and short-term nature and are classified within Level 1 of the fair value hierarchy.\n\nBonds and notes consist of corporate bonds (domestic and foreign), private placement debt instruments, federal agency and US Treasury government bonds, and mortgage backed obligations. Valuation is determined by the fund administrator's investment manager primarily utilizing Intercontinental Exchange (\"ICE\") institutional bond pricing and ICE CMO pricing applications and models. For federal agency government bonds, evaluators may also utilize yield curves constructed from dealer contracts and live data sources. For CMOs, evaluators may apply a volatility-driven, multi-dimensional single cash flow stream model or option-adjusted spread model. For ABS and CMBS issuances, a single cash flow stream model is utilized. Input information is from market and dealer sources, integrated with credit information, observed market movements, and other sector news. Market sources generally include public information about the issuer of the bond. Credit information pertains to information on how well the issuing company pays debts. Observed market movements relates to information about the issuer's publicly traded stock. Sector news includes other public information about corporations similar to the issuer. As the inputs utilized are either directly or indirectly observable, bonds and notes are classified within Level 2 of the fair value hierarchy.\n\nOptions and contracts consist of futures contracts which utilize pricing provided by issuers, investment managers, fund accountants, clients, and others. Default pricing may also be used if not provided. As there are significant unobservable inputs utilized for these holdings, they are classified within Level 3 of the fair value hierarchy. The plan's reported value of these holdings is zero as of December 31, 2025.\n\n104\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nPooled Separate Accounts\n\nThe pension plan invests in six pooled separate account funds: (1) Large Cap S&P 500 Index separate account; (2) Mid Cap S&P 400 Index separate account; (3) Small Cap S&P 600 Index separate account; (4) International Equity Index separate account; (5) Short-Term Income separate account; and (6) Liquid Assets separate account. The pension plan also invested in the US Property separate account during the year ended December 31, 2024, but had no investment holdings in this separate account as of December 31, 2025.\n\nThe Large Cap S&P 500 Index, MidCap S&P 400 Index, and SmallCap S&P 600 Index separate account funds are stated at fair value as provided by the fund administrator based on the fair value of the underlying holdings of the funds. These pooled separate accounts invest mainly in domestic stocks composing the S&P 500 Index, S&P MidCap 400 Index, and S&P SmallCap 600 Index, respectively, which have observable Level 1 quoted pricing inputs. The NAV of each fund is the basis for current transactions and the pooled separate accounts can be redeemed at NAV as of the measurement date. Most of the security prices were obtained from a pricing service, Interactive Data Corporation (\"IDC\"), for each fund. The fair value measurement for each fund is classified within Level 1 of the fair value hierarchy as the inputs reflect observable market data and quoted prices.\n\nThe International Equity Index separate account fund is stated at fair value as provided by the fund administrator based on the fair value of the underlying holdings of the fund. This pooled separate account invests in a single mutual fund with underlying holdings primary in non-US stocks. The fair value of the mutual fund is a publicly quoted pricing input used in determining the NAV of the pooled separate account. The NAV of the pooled separate account is not publicly quoted but is available to current investors. The fair value of the underlying mutual fund is based on third-party pricing vendors and utilizes observable market information. The NAV is the basis for current transactions and the pooled separate account can be redeemed at NAV as of the measurement date. The fair value measurement is classified within Level 1 of the fair value hierarchy as the underlying inputs reflect observable public market data from an active market.\n\nThe Short-Term Income separate account fund is stated at fair value as provided by the fund administrator based on the fair value of the underlying holdings of the fund. The fund invests in a single mutual fund. The underlying investments of this mutual fund are primarily in high quality short-term bonds and other fixed-income securities that, at the time of purchase, are rated BBB- or higher by S&P Global or Baa3 or higher by Moody's. The fair value of the mutual fund is a publicly quoted pricing input used in determining the NAV of the pooled separate account. The NAV of the pooled separate account is not publicly quoted but is available to current investors. The fair value of the underlying mutual fund is based on third-party pricing vendors and utilizes observable market information. The NAV is the basis for current transactions and the pooled separate account can be redeemed at NAV as of the measurement date. The fair value measurement is classified within Level 1 of the fair value hierarchy as the underlying inputs reflect observable public market data from an active market.\n\nInvestments in the liquid assets separate account fund are stated at fair value as provided by the administrator of the fund based on the fair value of the underlying assets owned by the fund. This pooled separate account invests mainly in short term securities such as commercial paper. The majority of the underlying securities have observable Level 1 or Level 2 pricing inputs, including quoted prices for similar assets in active or non-active markets. Most of the security prices were obtained from IDC. The NAV is the basis for current transactions and the pooled separate account can be redeemed at NAV as of the measurement date. The fair value measurement is classified within Level 2 of the fair value hierarchy as the inputs reflect observable market data and quoted prices for similar assets, but in some instances, quoted prices are in markets that are not active.\n\nThe fair value of the investments in the U.S. property separate account fund is provided by the administrator of the fund based on the NAV of the fund. The NAV is based on the fair value of the underlying properties included in the fund as this pooled separate account invests mainly in commercial real estate and includes mortgage loans which are backed by the associated properties. The fair value of the underlying real estate is estimated using discounted cash flow valuation models that utilize public real estate market data inputs such as transaction prices, market rents and growth rates, vacancy levels, leasing absorption, loan-to-value ratios, market cap rates, market interest rates, and discount rates. In addition, each property is appraised annually by an independent appraiser. The NAV is the basis for current transactions and the pooled separate account can be redeemed at net asset value as of the measurement\n\n105\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\ndate. The fair value measurement is classified within Level 3 of the fair value hierarchy given the inputs reflect significant unobservable inputs. There are no restrictions as to the plan's ability to redeem its investment at the net asset value of the fund as of the reported date. The net asset value provided by the custodian has not been adjusted.\n\nThe following tables provide a summary of the changes in fair value of the pension plan's Level 3 securities:\n\nU.S. property separate account fund\n\nBalance at January 1, 2025$6,688 \n\nRealized gains32 \n\nTransfers out(6,720)\n\nBalance at December 31, 2025$— \n\nU.S. property separate account fund\n\nBalance at January 1, 2024$25,407 \n\nUnrealized losses(564)\n\nExpenses(54)\n\nTransfers out(18,101)\n\nBalance at December 31, 2024$6,688 \n\nEstimates and Assumptions\n\nThe preparation of financial statements in conformity with GAAP requires us to make various estimates and assumptions that affect the reporting of net periodic benefit cost, plan assets and plan obligations for each plan at the date of the financial statements. Actual results could differ from these estimates. One significant estimate relates to the calculation of the benefit obligation for each plan. The discount rate assumption uses a published discount yield curve (\"Discount Yield Curve\") and reflects the expected future benefit discounted cash flows to determine the present value of the plan benefit obligations as of December 31. The Discount Yield Curve uses pricing and yield information for high quality corporate bonds. We have reviewed the updated curve and materials provided by our external actuaries with regard to the assumptions used in the curve. We will continue to monitor this curve and will make changes, as appropriate.\n\nThe Society of Actuaries (\"SOA\") is an actuarial organization that periodically reviews mortality data and publishes mortality tables and improvement scales. The mortality assumptions are based on the SOA's Pri-2012 white collar base rate mortality projected generationally using a published mortality improvement scale (\"2024 MI\"). The 2024 MI scale is based on latest mortality improvement release, the MIM-2021-v4 application tool issued by the SOA in October 2023 with a few user-selected assumptions: 2030 as the ultimate year for age/cohort transition and long-term rate assumptions using sex-distinct and age based rated developed from the latest Social Security Trustee Reports. We have reviewed these updated tables and have updated the mortality assumptions based on this information and also based on research provided by our external actuaries. We will continue to monitor mortality assumptions and will make changes, as appropriate, to reflect additional research and our resulting best estimate of future mortality rates.\n\nAssumptions Used to Determine Benefit Obligations\n\nThe following actuarial assumptions were used to determine the reported plan benefit obligations at December 31:\n\n106\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nPension Benefits\n\nWeighted-average assumptions as of December 3120252024\n\nDiscount rate5.46 %5.54 %\n\nInterest crediting rate4.00 4.00 \n\nRate of compensation increase4.00 4.00 \n\nDeclining interest rates resulted in a decrease in the discount rates we use to value our respective plan's benefit obligations at December 31, 2025 compared to December 31, 2024.\n\nAssumptions Used to Determine Net Periodic Benefit Cost\n\nThe following actuarial assumptions were used at January 1 to determine our reported net periodic benefit costs for the year ended December 31:\n\nPension Benefits\n\nJanuary 1,202520242023\n\nDiscount rate5.54 %4.93 %5.15 %\n\nExpected long-term rate of return on plan assets5.90 5.70 6.70 \n\nRate of compensation increase4.00 4.00 3.00 \n\nBenefit Obligation and Funded Status\n\nThe following table provides a reconciliation of benefit obligations, plan assets and funded status of our plans:\n\nPension Benefits\n\nYears Ended December 31,20252024\n\nReconciliation of benefit obligation\n\nBenefit obligation at beginning of year (2)\n$180,324 $209,867 \n\nService cost3,340 3,287 \n\nInterest cost9,586 9,913 \n\nActuarial loss (gain)2,708 (15,634)\n\nBenefit payments(19,387)(9,350)\n\nSettlement - lump sums paid— (17,759)\n\nBenefit obligation at end of year (1)\n$176,571 $180,324 \n\nReconciliation of fair value of plan assets\n\nFair value of plan assets at beginning of year (2)\n$241,182 $263,893 \n\nActual return on plan assets20,189 4,398 \n\nBenefit payments(19,387)(9,350)\n\nSettlement - lump sums paid— (17,759)\n\nFair value of plan assets at end of year$241,984 $241,182 \n\nFunded status at end of year$65,413 $60,858 \n\n(1)For the pension plan, the benefit obligation is the projected benefit obligation.\n\n(2)For end of year 2023 benefit obligation and fair value, an adjustment of 13 (thousand) was made reflecting an estimate provided to the current sole-custodian of the fund assets from a separate third-party managed custodian. The beginning of year 2024 balances were updated to reflect actual valuation as there is now only one custodian of fund assets.\n\nOur accumulated pension benefit obligation was $176,571 and $180,324 at December 31, 2025 and 2024, respectively. Actuarial loss during 2025 was driven by actuarial assumption changes, primarily a decrease in the discount rate, and participant experience. Actuarial gain during 2024 was driven by actuarial assumption changes, primarily an increase in discount rate, and participant experience.\n\n107\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nThe following table displays the effect that the unrecognized prior service cost and unrecognized actuarial loss of our plan had on accumulated other comprehensive income (\"AOCI\"), as reported in the accompanying Consolidated Balance Sheets:\n\nPension Benefits\n\nYears Ended December 3120252024\n\nAmounts recognized in AOCI\n\nUnrecognized prior service cost$(14,328)$(17,224)\n\nUnrecognized actuarial (gain) loss(9,164)(5,131)\n\nTotal amounts recognized in AOCI$(23,492)$(22,354)\n\nWe anticipate amortization of the net actuarial gains for our pension plan in 2026 to be $2,708.\n\nNet Periodic Benefit Cost\n\nThe components of the net periodic benefit cost for our pension plan are as follows:\n\nPension Plan\n\nYears Ended December 31,202520242023\n\nNet periodic benefit cost\n\nService cost$3,340 $3,287 $3,817 \n\nInterest cost9,586 9,913 10,106 \n\nExpected return on plan assets(13,585)(14,541)(15,025)\n\nAmortization of prior service cost(2,896)(2,896)(3,280)\n\nEffect of partial curtailment— (506)(2,666)\n\nAmortization of net loss— — 207 \n\nNet periodic benefit cost$(3,555)$(4,743)$(6,841)\n\nThe expected long-term return on plan assets is determined using a calculated value. The expected long-term return on plan assets assumption was developed as a weighted average rate based on the target asset allocation of the plan and the Long-Term Capital Market Assumptions (\"CMA\") October 2025. The capital market assumptions were developed with a primary focus on forward-looking valuation models and market indicators. The key fundamental economic inputs for these models are future inflation, economic growth, and interest rate environment. Due to the long-term nature of the pension obligations, the investment horizon for the CMA is 20 years. In addition to forward-looking models, historical analysis of market data and trends was reflected, as well as the outlook of recognized economists, organizations and consensus CMA from other credible studies.\n\nThe Corridor Approach is used to amortize actuarial gains and losses. An allowable 10% corridor is utilized under this approach. The period of amortization of such gains and losses is the average future service of members expected to receive benefits. A portion of the prior service cost component of net periodic pension benefit costs are capitalized and amortized straight-line as part of deferred acquisition costs and is included in \"Amortization of deferred policy acquisition costs\" within the Consolidated Statements of Income. The portion not related to the compensation and the other components of net periodic pension benefit costs are included in \"Other underwriting expenses\" within the Consolidated Statements of Income.\n\nProjected Benefit Payments\n\nThe following table summarizes the expected benefits to be paid from our plan over the next 10 years:\n\n202620272028202920302031-2035\n\nPension benefits$14,750 $13,260 $13,700 $13,930 $14,500 $74,030 \n\n108\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nNOTE 9. STOCK-BASED COMPENSATION\n\nNon-Qualified Employee Stock Award Plan\n\nThe United Fire Group, Inc. 2021 Stock Plan (the \"Stock Plan\") authorized the issuance of restricted and unrestricted stock awards, stock appreciation rights, incentive stock options, and non-qualified stock options for up to 4,050,000 shares of UFG common stock to employees. At December 31, 2025, there were 1,001,520 authorized shares remaining available for future issuance. The Stock Plan is administered by the Board of Directors, which determines those employees who will receive awards, when awards will be granted, and the terms and conditions of the awards. The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Stock Plan. Pursuant to the Stock Plan, the Board of Directors may, at its sole discretion, grant awards to our employees who are in positions of substantial responsibility with UFG. Further, the Board of Directors, in its discretion, has delegated authority to grant a limited number of restricted stock units in situations where the Company is seeking to recruit or retain an individual.\n\nOptions granted pursuant to the Stock Plan are granted to buy shares of UFG's common stock at the market value of the stock on the date of grant. Options granted prior to March 2017 vest and are exercisable in installments of 20.0 percent of the number of shares covered by the option award each year from the grant date, unless the Board of Directors authorizes the acceleration of vesting. Options granted after March 2017 vest and are exercisable in installments of 33.3 percent of the number of shares covered by the option award each year from the grant date, unless the Board of Directors authorizes the acceleration of vesting. To the extent not exercised, vested option awards accumulate and are exercisable by the awardee, in whole or in part, in any subsequent year included in the option period, but not later than 10 years from the grant date. Restricted and unrestricted stock awards granted pursuant to the Stock Plan are granted at the market value of our common stock on the date of the grant. Restricted stock awards fully vest after three years or five years from the date of issuance, unless accelerated upon the approval of the Board of Directors, at which time UFG common stock will be issued to the awardee. All awards are generally granted free of charge to the eligible employees of UFG as designated by the Board of Directors. Forfeitures of awards under the plan are recognized as they occur.\n\nThe activity in the Stock Plan is displayed in the following table:\n\nYear Ended\n\nAuthorized Shares Available for Future Award GrantsDecember 31, 2025\n\nBeginning balance1,335,589 \n\nAdditional shares authorized— \n\nNumber of awards granted(394,027)\n\nNumber of awards forfeited or expired146,286 \n\nPerformance-based adjustments(86,328)\n\nEnding balance1,001,520 \n\nNumber of option awards exercised15,363 \n\nNumber of restricted stock awards vested93,020 \n\nNon-Qualified Non-Employee Director Stock Option and Restricted Stock Plan\n\nThe United Fire Group, Inc. Non-Employee Director Stock Plan (the \"Director Stock Plan\") authorizes the issuance of restricted stock awards and non-qualified stock options to purchase shares of UFG's common stock to non-employee directors. The total number of shares available under the Director Stock Plan is 450,000 and the expiration date is December 31, 2029. At December 31, 2025, the Company had 34,886 authorized shares available for future issuance.\n\nThe Board of Directors has the authority to determine which non-employee directors receive awards, when options and restricted stock awards will be granted, the option price, the option expiration date, the date of grant, the vesting schedule of options or whether the options shall be immediately vested, the terms and conditions of options and restricted stock (other than those terms and conditions set forth in the plan) and the number of shares of common stock to be issued pursuant to an option agreement or restricted stock agreement (subject to limits set forth in the\n\n109\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nplan). The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Director Stock Plan. Forfeitures of awards under the plan are recognized as they occur.\n\nThe activity in the Director Stock Plan is displayed in the following table:\n\nYear Ended\n\nAuthorized Shares Available for Future Award GrantsDecember 31, 2025\n\nBeginning balance71,410 \n\nAdditional authorization— \n\nNumber of awards granted(36,524)\n\nNumber of awards forfeited or expired— \n\nEnding balance34,886 \n\nNumber of option awards exercised— \n\nNumber of restricted stock awards vested32,190 \n\nStock-Based Compensation Expense\n\nIn 2025, 2024 and 2023, the Company recognized stock-based compensation expense of $9,029, $5,517 and $3,246, respectively. Stock-based compensation expense is recognized over the vesting period of the stock options.\n\nAs of December 31, 2025, we had $10,650 in stock-based compensation expense that has yet to be recognized through our results of operations. We expect this compensation to be recognized in subsequent years according to the following table, except with respect to awards that are accelerated by the Board of Directors, in which case we will recognize any remaining compensation expense in the period in which the awards are accelerated.\n\n2026$6,875 \n\n20273,360 \n\n2028415 \n\nTotal$10,650 \n\nAnalysis of Award Activity\n\nThe analysis below details the option award activity for 2025 and the awards outstanding at December 31, 2025, for both of our plans and ad hoc options, which were granted prior to the adoption of the other plans:\n\nOptionsSharesWeighted-Average Exercise Price\nWeighted-Average Remaining Life (in years)\nAggregate Intrinsic Value\n\nOutstanding at January 1, 2025226,127 $32.91 \n\nGranted— — \n\nExercised(15,363)29.12 \n\nCancelled/Forfeited(29,164)42.34 \n\nExpired(12,737)29.12 \n\nOutstanding at December 31, 2025168,863 $31.91 5.67$1,044 \n\nExercisable at December 31, 2025138,907 $32.75 5.35$793 \n\nIntrinsic value is the difference between our share price on the last day of trading (i.e., December 31, 2025) and the price of the options when granted and represents the value that would have been received by option holders had they exercised their options on that date. These values change based on the fair market value of our shares. The intrinsic value of options exercised totaled $33, $28 and $18 in 2025, 2024 and 2023, respectively.\n\n110\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nThe analysis below details the award activity for the restricted stock, restricted stock unit, and performance stock unit awards outstanding at December 31, 2025:\n\nRestricted stock awardsSharesWeighted-Average Grant Date Fair Value\n\nNon-vested at January 1, 2025596,787 $23.67 \n\nGranted430,551 26.12 \n\nVested(169,612)24.13 \n\nForfeited(87,685)25.91 \n\nPSU projected performance adjustment112,421 24.09 \n\nNon-vested at December 31, 2025882,462 $24.74 \n\nIn 2025, 2024 and 2023 we recognized $8,659, $4,992 and $2,637, respectively, in compensation expense related to the restricted stock, restricted stock unit, and performance stock unit awards. At December 31, 2025, we had $10,596 in compensation expense that has yet to be recognized through our results of operations related to the restricted stock, restricted stock unit, and performance stock unit awards. The intrinsic value of the non-vested restricted stock, restricted stock unit, and performance stock unit awards outstanding totaled $32,077 and $16,931 at December 31, 2025 and 2024, respectively.\n\nAssumptions\n\nThe weighted-average grant-date fair value of the options granted under our plans has been estimated using the Black-Scholes option pricing model with the following weighted-average assumptions. There were no option grants during the years ended December 31, 2025 and 2024.\n\nDecember 31,202520242023\n\nRisk-free interest rateN/AN/A4.09 %\n\nExpected volatility (historical)\nN/AN/A41.85 %\n\nExpected option life (in years)\nN/AN/A7\n\nExpected dividends (in dollars)\nN/AN/A$0.64 \n\nWeighted-average grant-date fair value of options granted during the year (in dollars)\nN/AN/A$10.95 \n\nThe following table summarizes information regarding the stock options outstanding and exercisable at December 31, 2025:\n\n Options OutstandingOptions Exercisable\n\nRange of Exercise Prices\nNumber Outstanding (in shares)\n\nWeighted-Average Remaining Contractual Life (in years)\nWeighted-Average Exercise Price\nNumber Exercisable (in shares)\nWeighted-Average Exercise Price\n\n$— 20.00— 0$— — $— \n\n20.01 30.00130,361 6.7728.34 100,405 28.45 \n\n30.01 40.0010,069 0.1439.91 10,069 39.91 \n\n40.01 50.0023,613 2.5043.60 23,613 43.60 \n\n50.01 60.004,820 3.1354.26 4,820 54.26 \n\n$20.01 60.00168,863 5.67$31.91 138,907 $32.75 \n\n111\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nNOTE 10. SEGMENT INFORMATION\n\nThe Company operates as one operating segment. The Company's chief operating decision maker (\"CODM\") is its CEO, who reviews financial information presented on a consolidated basis. The CODM uses consolidated net income to assess financial performance and allocate resources. This financial metric is used by the CODM to make key operating decisions, such as determination of which products to market and sell; determination of distribution networks with insurance agents; and allocation of budgets between sales and marketing, technology, and general and administrative expenses.\n\nSee the Consolidated Financial Statements for financial information regarding the Company's operating segment.\n\nRevenues from external customers, with the exception of Lloyd's, are fully attributed to the Company's country of domicile. Lloyd's syndicate business is conducted in the United Kingdom as part of Lloyd's insurance market. Risks can be attributed to the United Kingdom or be globally underwritten using Lloyd's licenses in different countries. As a result, it is impracticable for the Company to accurately report specific geographic concentration of global revenues for Lloyd's business.\n\nAll long-lived assets are attributed to the Company's country of domicile.\n\nThe Company does not have revenue from transactions with a single customer amounting to 10 percent or more of its revenues.\n\nNOTE 11. EARNINGS PER COMMON SHARE\n\nThe following table sets forth the computation of basic and diluted earnings per share:\n\n Years Ended December 31,\n\n202520242023\n\n(In Thousands Except Share and Per Share Data)BasicDilutedBasicDilutedBasicDiluted\n\nNet income (loss)$118,191 $118,191 $61,957 $61,957 $(29,700)$(29,700)\n\nWeighted-average common shares outstanding25,470,451 25,470,451 25,319,973 25,319,973 25,249,269 25,249,269 \n\nAdd dilutive effect of restricted stock awards— 882,462 — 597,787 — — \n\nAdd dilutive effect of stock options— — — — — — \n\nWeighted-average common shares25,470,451 26,352,913 25,319,973 25,917,760 25,249,269 25,249,269 \n\nEarnings (loss) per common share$4.64 $4.48 $2.45 $2.39 $(1.18)$(1.18)\n\nAwards excluded from diluted calculation(1)\n— 38,502 — 222,186 — 791,735 \n\n(1)Outstanding awards that are not \"in-the-money\" are excluded from the diluted earnings per share calculation because the effect of including them would have inherently been anti-dilutive.\n\nBasic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share gives effect to all dilutive common shares outstanding during the reporting period. The dilutive shares we consider in our diluted earnings per share calculation relate to our outstanding stock options, restricted stock awards, restricted stock unit awards, and performance stock unit awards.\n\nWe determine the dilutive effect of our outstanding stock options using the \"treasury stock\" method. Under this method, we assume the exercise of all of the outstanding stock options whose exercise price is less than the weighted-average market value of our common stock during the reporting period. This method also assumes that the proceeds from the hypothetical stock option exercises are used to repurchase shares of our common stock at the\n\n112\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nweighted-average market value of the stock during the reporting period. The net of the assumed stock options exercised and assumed common shares repurchased represents the number of dilutive common shares, which we add to the denominator of the earnings per share calculation.\n\nUnder applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our net loss for the year ended December 31, 2023, we were required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share, as the inclusion of 282,515 restricted shares would have been antidilutive to the calculation. If we had not incurred a net loss for the year ended December 31, 2023, diluted weighted-average common shares would have been 25,531,784.\n\nNOTE 12. LEASE COMMITMENTS\n\nThe Company has operating leases consisting of office space, vehicle leases, computer equipment, and office equipment. Lease terms and options vary in the Company's operating leases dependent upon the underlying leased asset. As of December 31, 2025, the Company has leases with remaining terms of one year to five years, some of which may include no options for renewal and others with options to extend the lease terms from six months to five years.\n\nAs of December 31, 2025, the Company is the lessor for five lease agreements related to office space and parking. The remaining terms of the leases vary depending on the property and range from one year to eight years, which may include options for renewal or to extend lease terms or no options for renewal. Lessor income and sublease income are included in net income in the statement of comprehensive income.\n\nThe components of our operating leases were as follows for the years ended December 31, 2025 and 2024:\n\n20252024\n\nOperating lease expense$8,905 $9,436 \n\n   Less: Lessor income584 581 \n\n   Less: Sublease income532 532 \n\nNet lease expense$7,789 $8,323 \n\nCash flows information related to leases:\n\nOperating cash outflow from operating leases$7,906 $8,365 \n\nThe following table provides supplemental information regarding our operating leases as of December 31, 2025 and 2024:\n\n20252024\n\nOperating lease right-of-use assets (\"Other assets\" on Consolidated Balance Sheets)$12,794 $21,412 \n\nOperating lease liabilities (\"Accrued expenses and other liabilities\" on Consolidated Balance Sheets)$13,155 $21,867 \n\nRight-of-use assets obtained in exchange for new operating lease liabilities$13 $635 \n\nWeighted average remaining lease term 2.32 years2.98 years\n\nWeighted average discount rate4.65 %4.37 %\n\n113\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nThe maturities of our lease liabilities as of December 31, 2025 and 2024:\n\n20252024\n\n2026$7,612 $9,168 \n\n20273,713 7,919 \n\n20281,800 3,765 \n\n2029418 1,800 \n\n2030394 418 \n\nThereafter34 427 \n\nTotal lease payments13,971 23,497 \n\nLess: Imputed interest(816)(1,630)\n\nLease liability$13,155 $21,867 \n\nThe maturities of our lease receivables as of December 31, 2025 and 2024:\n\n20252024\n\n2026$1,150 $1,066 \n\n20271,084 1,124 \n\n2028578 1,092 \n\n2029582 584 \n\n2030585 582 \n\nThereafter1,524 2,109 \n\nTotal lease payments receivable$5,503 $6,557 \n\nThere have been no allowances for credit losses recorded or write-offs against our receivables related to our lessor agreements because, due to the nature of the operating leases and history of collectability, there is no expectation of credit quality concerns.\n\nNOTE 13. DEBT\n\nLong Term Debt\n\nDecember 2020 Private Placement\n\nOn December 15, 2020, UF&C issued $50,000 of notes due 2040 (\"UF&C Notes\") at par value. The UF&C Notes are senior, unsecured unsubordinated obligations of UF&C and are fully and unconditionally guaranteed on an unsecured, unsubordinated basis by each of UF&C's subsidiaries. The UF&C Notes mature on December 15, 2040. The UF&C Notes may be redeemed by UF&C, in whole or in part, at par, at any time following the tenth (10th) anniversary of the issuance date, but subject to the payment restrictions, including the prior approval of the Iowa Insurance Commissioner.\n\nInterest payments will be paid quarterly on March 15, June 15, September 15 and December 15 of each year (each such date, an \"Interest Payment Date\"). The interest rate will equal the rate that corresponds to the A.M. Best Co. (or its successor's) financial strength rating for members of the UF&C Pooled Group as of the applicable Interest Payment Date, as set forth in the table below. For the twelve-month period ended December 31, 2025, interest expense totaled $3,438. Payment of interest is subject to approval by the Iowa Insurance Division.\n\n114\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nA.M. Best Co. Financial Strength RatingApplicable Interest Rate\n\nA+5.875%\n\nA6.375%\n\nA-6.875%\n\nB++ (or lower)7.375%\n\nMay 2024 and July 2025 Private Placements\n\nThe Company issued $70,000 aggregate principal on May 31, 2024 (\"Series A\") and $30,000 aggregate principal on July 10, 2025 (\"Series B\") of its 9% senior unsecured notes due 2039 (collectively, the \"UFG Notes\") at par value. The UFG Notes mature on May 31, 2039. The UFG Notes may be redeemed by the Company, in whole or in part, at par, at any time on or after May 31, 2034. Prior to May 31, 2034, the UFG Notes may not be redeemed except for a change in control offer or upon an event of default.\n\nInterest payments will be paid quarterly on February 28, May 31, August 31 and November 30 of each year. Costs incurred of $3,050 and $1,098 for the issuance of the Series A and Series B notes, respectively, were capitalized and will be amortized over the life of the non-cancellable period of the debt. The capitalization of such debt issuance costs are included as an offset to the \"Long term debt\" in the Consolidated Balance Sheets and the related amortization is included in \"Interest expense\" in the Consolidated Statements of Income. For the twelve-month period ended December 31, 2025, interest expense totaled $7,829.\n\nThe Company is required to maintain an investment grade rating for each series of the UFG Notes from a rating agency. The UFG Notes also require and impose certain operating restrictions, financial restrictions, and financial covenants on the Company, including:\n\n•incurring or assuming additional indebtedness, including guarantees;\n\n•incurring or assuming liens;\n\n•engaging in mergers or consolidations;\n\n•conveying, transferring, leasing or disposing of assets;\n\n•making certain investments\n\n•entering into transactions with affiliates;\n\n•declaring or making dividend payments or distributions or repurchasing capital stock or other equity interests;\n\n•changing the nature of our business materially; and\n\n•making changes in accounting treatment or reporting practices that affect the calculation of financial covenants, or changing our fiscal year.\n\nAs of December 31, 2025, we were in compliance with all covenants.\n\nCredit Facilities\n\nIn December 2023, UF&C became a member of the Federal Home Loan Bank of Des Moines (\"FHLB Des Moines\"). As part of the FHLB Des Moines application process and in connection with its membership in FHLB Des Moines, UF&C entered into FHLB Des Moines' standard Advances, Pledge and Security Agreement (the \"Advances Agreement\"). The Advances Agreement governs the terms and conditions under which UF&C may borrow and FHLB Des Moines may make loans or advances from time to time. The Advances Agreement requires UF&C to pledge certain collateral, including the capital stock in FHLB Des Moines owned by UF&C and such other assets (including mortgage-related securities, loans, and stock in UF&C) as agreed by UF&C and FHLB Des Moines in connection with any such loans or advances.\n\nMembership in FHLB Des Moines provides UF&C with access to FHLB Des Moines' product line of financial services, including funding agreements, general asset/liability management, and collateralized advances that can be used for liquidity management. As a member, UF&C has an aggregate borrowing capacity of up to 20.0 percent of\n\n115\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\ntotal assets of UF&C. As of December 31, 2025, UF&C has FHLB Des Moines borrowing capacity up to $500 million, subject to investments available as collateral, if an immediate liquidity need would arise. UF&C had no outstanding balance as of December 31, 2025 and 2024 related to these lines of credit.\n\nNOTE 14. INTANGIBLE ASSETS\n\nOur major classes of intangible assets are presented in the following table:\n\nYear Ended December 31,\n\n20252024\n\nAgency relationships, cost$10,338 $10,338 \n\nAccumulated amortization(10,194)(9,617)\n\nAgency relationships, carrying value$144 $721 \n\nTrade names, cost$1,978 $1,978 \n\nAccumulated amortization(1,945)(1,813)\n\nTrade names, carrying value$33 $165 \n\nState insurance licenses(1)\n$3,020 $3,020 \n\nNet intangible assets$3,197 $3,906 \n\n(1) The intangible asset for licenses has an indefinite life and therefore is not amortized.\n\nThe estimated useful lives assigned to our major classes of amortizable intangible assets are as follows:\n\nUseful Life\n\nAgency relationshipsFifteen years\n\nTrade namesFifteen years\n\nAggregate amortization expense for intangible assets totaled $709 for each of the years ended December 31, 2025, 2024, and 2023. The last year of remaining estimated aggregate amortization expense of $177 is 2026. In 2025 and 2024 we performed a qualitative impairment assessment of our indefinite lived intangible assets. There have been no impairment losses recorded relating to intangible assets for the years ended December 31, 2025 and 2024. There is no expected significant residual value relating to our intangible assets.\n\n116\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nNOTE 15. ACCUMULATED OTHER COMPREHENSIVE INCOME\n\nThe following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the years ended December 31, 2025, 2024 and 2023:\n\nNet benefitForeign\n\nNet unrealizedplan assetscurrency\n\ngain (loss)andtranslation\n\non investmentsobligationsadjustmentTotal\n\nBalance as of January 1, 2023$(88,369)$873 $— $(87,496)\n\nChange in accumulated other comprehensive income before reclassifications20,835 14,973 — 35,808 \n\nReclassification adjustments from accumulated other comprehensive income (loss)567 164 — 731 \n\nBalance as of December 31, 2023$(66,967)$16,010 $— $(50,957)\n\nChange in accumulated other comprehensive income before reclassifications(10,639)1,650 (200)(9,189)\n\nReclassification adjustments from accumulated other comprehensive income5,365 — — 5,365 \n\nBalance as of December 31, 2024$(72,241)$17,660 $(200)$(54,781)\n\nChange in accumulated other comprehensive income before reclassifications43,954 899 1,846 46,699 \n\nReclassification adjustments from accumulated other comprehensive income3,019 — — 3,019 \n\nBalance as of December 31, 2025$(25,268)$18,559 $1,646 $(5,063)\n\nIncome tax effects are released from accumulated other comprehensive income (loss) for unrealized gains or losses when the gains or losses are realized.\n\n117\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nNOTE 16. PROPERTY AND EQUIPMENT\n\nThe following table is a summary of the components of the property and equipment that are reported in the accompanying Consolidated Financial Statements as of December 31, 2025 and 2024.\n\n20252024\n\nReal estate:\n\nBuildings$75,895 $76,420 \n\nLand1,202 1,202 \n\nFurniture and fixtures2,339 3,555 \n\nInternally developed software52,301 54,377 \n\nOther computer equipment and software894 467 \n\nTotal property and equipment$132,631 $136,021 \n\nDepreciation is computed primarily by the straight-line method over the following estimated useful lives:\n\nUseful Life\n\nComputer equipment and softwareThree years\n\nFurniture and fixturesSeven years\n\nInternally developed softwareTen years\n\nLeasehold improvementsShorter of the lease term or useful life of the asset\n\nReal estate\nSeven years to thirty-nine years\n\nDepreciation expense totaled $9,822, $10,086 and $9,799 for 2025, 2024 and 2023, respectively.\n\n118\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nReport of Independent Registered Public Accounting Firm\n\nTo the Stockholders and the Board of Directors of United Fire Group, Inc.\n\nOpinion on the Financial Statements\n\nWe have audited the accompanying consolidated balance sheets of United Fire Group, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and financial statement schedules listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.\n\nWe also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 26, 2026 expressed an unqualified opinion thereon.\n\nBasis for Opinion\n\nThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\n\nWe conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.\n\nCritical Audit Matter\n\nThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.\n\n    \n\n119\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)\n\nValuation of reserves for property and casualty losses and loss settlement expenses\n\nDescription of the Matter\nAt December 31, 2025, the Company’s reserves for losses and loss settlement expenses was $1.92 billion, of which $962.4 million related to Incurred But Not Reported (IBNR) reserves. As described in Note 5 to the consolidated financial statements, liability for losses and loss settlement expenses reflect management's best estimates at a given point in time of what is expected to be paid for claims that have been reported and those that have been incurred but not reported, based on known facts, circumstances, and historical trends. There is significant uncertainty and subjectivity inherent in determining management’s best estimates of the ultimate cost of losses, which is used to determine IBNR reserves.\n\nAuditing management’s estimate of IBNR reserves was complex due to the highly judgmental nature of management’s selection of methods and assumptions used to develop those estimates. In particular, the estimates are sensitive to assumptions and the weighting of methodologies that are used to project the ultimate cost of losses.\n\nHow We Addressed the Matter in Our Audit\nWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the reserving process, including, among others, the review and approval processes that management has in place for the methods and assumptions used in estimating the reserves.\n\nTo test the estimated IBNR reserves we, including our actuarial specialists, performed audit procedures that included, among others, evaluating management’s selection and weighting of actuarial methods and assumptions by comparing to those used in prior periods and those used in the industry. We compared management’s best estimate of reserves to our independently calculated range of reasonable reserve estimates.\n\n /s/ Ernst & Young LLP   \n\n Ernst & Young LLP  \n\nWe have served as the Company's auditor since 2002.\n\nDes Moines, Iowa\n\nFebruary 26, 2026\n\n120\n\n[Table of Contents](#i9c41be50b13d4f0186d714192577cffa_4)"}