UFCS 10-K & 10-Q changes, risk factors and insider trading

We provide readers with the following discussion of risks and uncertainties relevant to our business. These are factors that we believe could cause our actual results to differ materially from our historic or anticipated results. We could also be adversely affected by other factors, in addition to those listed here. These risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could have a material effect on our business, results of operations, financial condition and/or liquidity.

Business StrategyStrategic

We have set a strategy to grow our business.business through six distinct business units. We expect to execute on our strategy, but our success could be impacted by several different risks including but not limited to regulatory changes, economic conditions, technologicaladvancements advancements,in technology, cybersecurity threats, operational risks, intense market competition, and talent risks. We continually monitor these risks and mitigate their potential likelihood and impact. We also adjust our strategy as needed as results are realized or projections indicate any potential weaknesses in the adequacy or execution of our strategic plan. Our efforts to successfully mitigate risks to our strategy are not guaranteed, which could materiallyhave a material impact on our financial condition and the results of our operations.

Our core insurance business is dependent on strong and beneficial relationships with a large network of independent insurance agentsagents. andA notstrain maintainingin these relationships could result in loss of sufficient business opportunities within our expertise and stated risk appetite.

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

We will be at a competitive disadvantage if, over time, our competitors are more effective in pricing their products, development of new product offering, implementation of technology andor data analytics.

We compete with many major U.S. and non-U.S. insurers and smaller regional companies, as well as mutual companies, specialty insurance companies, underwriting agencies, and diversified financial services companies, including banks, mutual funds, broker-dealers and asset-managers. Our competitors may attempt to increase their market share by lowering rates.prices. LosingOur competitors may also develop new products and capabilities that render our offerings less appealing. These situations may hinder our ability to retain existing business to competitors offering similar products at lower prices and/or whoprocure havenew a competitive advantage may adversely affect the results of our operations.business.

We use various actuarial techniques and data analytics to understand our risk exposures such as frequency and severity of different types of insurance claims. The data we rely on for these analytics includes experience data from our own business (e.g., policies written, characteristics, coverages, and details of associated losses) and data attained from third parties, including industry results. We use outputs of predictive models and other analytics to assist in decision making related to underwriting, pricing, claims management (including reserving), and catastrophe risk exposure management. Although underwriting and pricing decisions are informed by these analytics, assumptions are required based on experienced judgment that may be incorrect or fail to contemplate external, unforeseeable factors. This may result in decisions that could result in an adverse impact on our business and financial results.

Emerging technology, including artificial intelligence, offers opportunities to underwrite and price business more efficiently and accurately, thus lowering costs. If we are not able tocannot use technology and data analytics as effectively as our competitors, our competitiveness and ability to write and retain business within our risk appetite will be impacted. This may reduce the profitability of the business we do write orand retain and negatively affect our ability to meet our business objectives.

The risk presented by market conditions presents a unique set of challenges in the property and casualty insurance industry. The property and casualty insurance marketplace is cyclical in nature and has historically been characterized by soft markets (i.e., periods of relatively high levels of price competition, less restrictive underwriting standards and generally low premium rates) followed by hard markets (i.e., periods of capital shortages resulting in a lack of insurance availability, relatively low levels of price competition, more selective underwriting of risks and relatively high premium rates). During soft markets, we may lose business to competitors offering competitive insurance at lower prices. We may reduce our premiums or limit premium increases leading to a reduction in our profit margins and revenues. During hard markets, we may underprice our competition resulting in adverse selection and missed opportunities for higher profit margins.

Underwriting Risks

(2) An increase in plaintiffs targeting property and casualty insurersinsurers, including us, in purported class action litigation regarding claims handling and other practices.

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

We activelymaintain educatean employeesinternal education plan on the risk of social inflation and how best to defend against social inflation tactics.inflation. We endeavor to find ways to keep claims out of litigation and manage downward the length of time that certain claims are open. We also steer our portfolio away from business that is most exposed to these trends, and we target business in our assumed reinsurance operations and other alternative distribution channels that offer shorter tail risks.

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

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

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

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

In addition, as with catastrophe losses generally, it generallycan requires morerequire time for us to determine our ultimate losses associated with a particular catastrophic event. The inability to access portions of the impacted area, the complexity of the losses, legal and regulatory uncertainty, and the nature of the information available for certain catastrophic events may affect our ability to estimate the claims and claim adjustment expense reserves. Such complex factors include,include but are not limited to: determining the cause of the damage, evaluating general liability exposures, estimating additional living expenses, the impact of demand surge, infrastructure disruption, fraud, business interruption costs and reinsurance collectability.

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

Our fixed maturity investments are professionally managed by New England Asset Management ("NEAM") as of February 1, 2024. NEAM'sNEAM’s investment decisions are governed by our management team and in accordance with our investment guidelines approved by our Board of Directors. Investment income is an important component of our net income and overall profitability. We invest premiums received from policyholders and other available cash to generate investment income and capital appreciation, while also maintaining sufficient liquidity to pay covered claims, operating expenses, and dividends. Our investment performance is sensitive to various factors including general economic conditions, changes in financial markets, global disruptions, and other factors beyond our control. Although our guidelines stress diversification in investment grade fixed maturityincome securities, our financial results may be adversely impacted by investment creditworthiness, fluctuations in interest rates, and disruptions in the financial and capital markets.

We seek to match the maturities of our investment portfolio with the estimated payment date of our loss and loss adjustment expense reserves to ensure strong liquidity and avoid having to liquidate securities to fund claims. RiskRisks such as inadequate loss and loss adjustment reserves, a large natural catastrophe, or unfavorable trends in litigation could potentially result in the need to sell investments to fund these liabilities. This could result in significant realized losses depending on the conditions of the general market, interest rates and credit profile of individual securities. Further, our investment portfolio is subject to increased valuation uncertainties when investment markets are illiquid. The valuation of investments is more subjective when markets are illiquid, thereby increasing the risk that the estimated fair value (i.e., the carrying amount) of the portion of the investment portfolio that is carried at fair value in our financial statements is not reflective of prices at which actual transactions could occur.

The ratings assigned by A.M. Best are an important factor in marketing our products. Our ratings from A.M. Best affect our ability to retain our existing business, and to attract new business in our insurance operations. Failure to maintain our ratings could motivate current and future independent agents and policyholders to transact their business with higher rated competitors. If A.M. Best further downgrades our ratings or publicly indicates that our ratings are under review, it is possible that we will not be able to compete as effectively, leading to a decrease in premium revenue and earnings. For example, many of our agencies and policyholders have guidelines that require us to have an A.M. Best financial strength rating of "A-" or higher. A reduction of our A.M. Best ratings below "A-" could prevent us from issuing policies to a portion of our current or future policyholders with ratings requirements.

The failure of our insurance company subsidiaries to maintain their current ratings could dissuade a lender or reinsurance company from conducting business with us. A ratings downgrade could also cause some of our existing liabilities to be subject to acceleration, additional collateral support, changes in terms, or creation of additional financial obligations. For more information, refer to the "Financial Strength and Issuer Credit Rating" " section in Part I, Item 1 and Note 13 "Debt" contained in Part II, Item 8.

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

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

Although, to date, we have not identified any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents that have, or are likely to, materially affect us, our business strategy, results of operation or financial condition, the scope and effect of any cyber-attackcyber attack may remain undetected for a period of time. We maintain cyber liability insurance coverage that provides both third-party liability and first-party insurance coverage; however, our insurance may be insufficient to cover all losses and expenses related to a cyber-attack.cyber attack.

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

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

Insurance is a highly regulated industry. We are subject to extensive supervision and regulation by the states in which we operate. As a public company, we are also subject to regulation at the federal level, which is susceptible to changes in the new presidential term.level. Our ability to comply with these laws and regulations and obtain necessary and timely regulatory action is, and will continue to be, critical to our success. Examples of regulations that pose a risk to our ability to earn profits include but are not limited to:

(1)Required licensing (2)Regulation of insurance rates, fees and approval of policy forms (3)Restrictions on cancellation, nonrenewal or withdrawal (4)Risk-based capital and capital adequacy requirements (5)Transactions between insurance companies and their affiliates (6)Required participation in guaranty funds and assigned risk pools (7)Restrictions on the amount, type, nature, and quality of investments (8)Terrorism risk insurance (9)Accounting standards (10)Corporate governance and public disclosure regulation (11)Information privacy regulation (12)•Potential assessments for the provision of funds necessary for settlement of covered claims under certain policies provided by impaired, insolvent or failed insurance companies Compliance with these laws and regulations requires us to incur administrative costs that decrease our profits. These laws and regulations may also prevent or limit our ability to underwrite and price risks accurately;accurately, obtain timely premium rate increases necessary to cover increased costs;costs, discontinue unprofitable relationships; or exit unprofitable markets and otherwise continue to operate our business profitably. In addition, our failure to comply with these laws and regulations could result in actions by state or federal regulators, including the imposition of fines and penalties or, in an extreme case, revocation of our ability to do business in one or more states. Finally, we could face individual, group and class action lawsuits by our policyholders and others for alleged violations of certain state laws and regulations. Each of these regulatory risks could have a negative effect on our profitability.

The market price of our common stock historically has been, and we expect will continue to be, subject to fluctuations. These fluctuations may be due to our operating results or factors specific to our operations (including those discussed withinelsewhere thisin Itemour 1A.risk Risk Factors sectionfactors), changes in securities analysts' estimates of our future financial performance, ratings or recommendations, our results falling below our expectations and analysts' and investors' expectations, the failure of our capital return programs to meet analysts' and investors' expectations, significant catastrophe events, departure of key personnel, cyber-attacks,cyber attacks, or factors largely outside of our control, including those affecting the property and casualty insurance industry. The stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the actual operating performance of listed companies. In addition, our stock is followed by a small number of analysts and the average daily trading volume tends to be low. These factors could adversely affect the price of our common stock.

OurCertain provisions of our articles of incorporation and bylaws,bylaws and stateapplicable provisions of laws governing corporations and insurance companies,companies may discourage potential acquisition proposals, as well as delay, deter or prevent a change of control of the Company, in particular through unsolicited transactions. Recent amendments to our bylaws included certain governance and structural defense enhancements to protect the Company and our shareholders in the event of an activist or takeover situation. However, any such activity,effort to disrupt the Company, regardless of its success, may still adversely affect market prices for our common stock.

The ability of our subsidiaries to pay dividends to UFG may affect our liquidity and ability to paymeet dividendsour to shareholders.obligations.

As aan insurance holding company, we have no significant independent operations of our own. Our principal sources of funds are dividends and other payments received from our subsidiaries. We rely on those subsidiaries' dividends for our liquidity, including payment of dividends to common shareholders and interest on long-term debt, and to make share repurchases. Dividends from those subsidiaries depend on their statutory surplus, earnings and regulatory restrictions.

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

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

•CoreOur core insurance business is dependent on strong and beneficial relationships with a large network of independent insurance agentsagents. andA notstrain maintainingin these relationships could result in loss of sufficient business opportunities within our expertise and stated risk appetite;

•We will be at a competitive disadvantage if, over time, our competitors are more effective in pricing their products, development of new product offering, implementation of technology andor data analytics;

•ReservesOur reserves for property and casualty insurance losses and loss settlement expenses are based on estimates and may be inadequate, adversely impacting our financial results;

•We insure property that is exposed to various natural perils that can give rise to significant claims costcosts;

•Unauthorized data access, cyber-attackscyber attacks and other security breaches could have an adverse impact on our business and reputation;

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

•The ability of our subsidiaries to pay dividends to UFG may affect our liquidity and ability to paymeet dividendsour to shareholders.obligations.

We review and report our results using lines of business. The following table shows the principleprincipal types of property and casualty insurance policies we write and issue, and in which lines of business they are reported in:

(1) Treaty Reinsurance is split between proportional reinsurance (P) and non-proportional reinsurance (NP) Commercial other liability - primarily business insurance covering bodily injury and property damage including construction defect, excess and surplus lines excess casualty, and standard umbrella. Proportional assumed reinsurance on these lines and professional liability coverage managed by an MGA partner.

Fidelity and suretySurety - contract and commercial surety bond coverage which guarantees performance and payment by our bonded principals, protects owners from failure to perform on the part of our principals, and protects material suppliers and subcontractors from nonpayment by our contractors. Proportional reinsurance on these lines is also included.

Commercial othermiscellaneous - commercial theft coverage, boiler and machinery and ocean marine business managed by an MGA partner.

Personal - fire and allied lines includesprimarily proportional assumed reinsurance for homeownerspersonal multi-peril coverage.lines.

The Company is a member of Lloyd's through its insurance subsidiary McIntyre Cedar Corporate Member LLP. Lloyd’s operates as an insurance marketplace whereby members join syndicates to underwrite property and casualty and reinsurance business through a managing agent in return for receiving premiums. The Company participates in Syndicate 1492, Syndicate 1729, Syndicate 1969, Syndicate 1971, Syndicate 4747, Syndicate 2988, Syndicate 1699, Syndicate 56235623, Syndicate 2358, Syndicate 1955 and Syndicate 2358.1609. The Company is required to maintain capital at Lloyd's, referred to as Funds at Lloyd's ("FAL"), to support the participation in these syndicates.

For the year ended December 31, 2024,2025, 47.148.5 percent of our property and casualty premiums were written in Texas, California, Iowa, Missouri,New Jersey, and Louisiana.Missouri.

In 2024, 2023 and 2022 the directDirect statutory premiumswritten writtenpremium by our property and casualty insurance operations were distributed as follows for the years ended December 31, 2025, 2024 and 2023:

Reserves for losses and loss settlement expenses are reported using our best estimate of the ultimate liability for claims that occurred prior to the end of any given reporting period but have not yet been paid. Before credit for reinsurance recoverables, these reserves were $1.8$1.9 billion and $1.6$1.8 billion at December 31, 20242025 and 2023,2024, respectively. We purchase reinsurance to mitigate the impact of large losses and catastrophic events. Loss and loss settlement expense reserves ceded to reinsurers were $198.1$213.6 million and $191.6$198.1 million at December 31, 20242025 and 2023,2024, respectively. Our reserves, before credit for reinsurance recoverables, by line of business as of December 31, 2024, were as follows:

Adjustments to the reserves could be recorded in one year or multiple years, depending on when they are identified. This would also affect our financial position in thatas our equity would be adjusted by an amount equivalentequal to the net income impact. Any deficiency that would be recognized in our loss and loss settlement expense reserves usually does not have a material effect on our liquidity because the claims have not been paid. Conversely, if our estimates of ultimate unpaid loss and loss settlement expense reserves prove to be redundant, our future earnings and financial position would be improved. We believe our approach produces recorded reserves that are reasonable as to their relative position within a range of reasonable reserves from year-to-year.

In 2024, we changed the model used to review a portion of the LAE reserves. The reserves related to expenses not associated with individual claims (adjusting and other) are now reviewed using a projected claim count model. The methodologies relied upon for the remainder of the reserves were not altered but additional considerations were added to our models to aid in selecting key assumptions. In estimating our 20242025 loss and loss settlement expense reserves, we did not anticipate future events or conditions that were inconsistent with past development patterns.

Included in the commercial other liability and assumed reinsurance lines of business are reserves for asbestos and other environmental lossesloss and loss settlement expenses. The estimation of loss reserves for environmental claims and claims related to long-term exposure to asbestos and other substances is one of the most difficult aspects of establishing reserves, especially given the inherent uncertainties surrounding such claims and the likelihood that these uncertainties will not be resolved for many years. Although weWe record our best estimate of loss and loss settlement expense reserves, but the ultimate amounts paid upon settlement of such claims may be more or less than the amount of the reserves.reserves given the inherent uncertainties surrounding such claims and the likelihood these uncertainties will not be resolved for many years. At December 31, 20242025 and 2023,2024, we had $0.7$0.8 million and $0.8$0.7 million, respectively, in direct and assumed asbestos and other environmental loss and loss settlement expense reserves.

Catastrophe losses are inherent risks of the property and casualty insurance business. Catastrophic events include, without limitation, hurricanes, tornadoes, earthquakes, hailstorms, wildfires, high winds, winter storms and other natural disasters, along with man-made exposures to losses resulting from, without limitation,from acts of terrorism and political instability. Some types of catastrophes are more likely to occur at certain times within the year than others, which adds an element of seasonality to our property and casualty insurance claims. The frequency and severity of catastrophic events are difficult to accurately predict in any year. However, some geographic locations are more susceptible to these events than others.

We control our direct insurance exposures in regions that are prone to naturally occurring catastrophic events through a combination of geographic diversification, restrictions on the amount and location of new business production in such regions, and reinsurance. We regularly assess our concentration of risk in natural catastrophe exposed areas and consider the impacts of climate change and the unpredictability of future trends in adjusting our geographic concentrations. We have strategies and underwriting standards to manage these exposures through individual risk selection, subject to regulatory constraints, and through the purchase of catastrophe reinsurance coverage. We use catastrophe modeling and a risk concentration management tool to monitor and control our accumulations of potential losses in natural catastrophe exposed areas, such as the Gulf Coast and East Coast, as well as in areas of exposure in other countries where we are exposed to a portion of an insurer's underwriting risk under our assumed reinsurance contracts. Despite our efforts to manage our catastrophe exposure, the extent of losses from a catastrophe is a function of both the total amount of insured exposure in an area affected by the event and the severity of the event. The occurrence of one or more severe natural catastrophic events in heavily populated areas could have a material effect on our results of operations, financial condition or liquidity.

We recognized a favorable development in our net reserves for prior accident years totaling $14.1 million and $1.2 million for the years ended December 31, 2025 and 2024, respectively, and adverse development of $67.8 million for the year ended December 31, 2024 and adverse development of $67.8 million and $12.9 million for the years ended December 31, 2023 and 2022, respectively.2023.

The following table details the pre-tax impact on our property and casualty insurance business' financial results and financial condition of reasonably likely reserve development. Our lines of business that have historically been most susceptible to significant volatility in reserve development have been shown separately and utilize hypothetical levels of volatility of 5.0 percent and 10.0 percent. Our other, less volatile, lines of business have been aggregated and utilize hypothetical levels of volatility of 3.0 percent and 5.0 percent.

The Company terminated the engagement with Regnier Consulting Group, Inc. ("Regnier") as its appointed actuary for the year ended December 31, 2024. Beginning with the 2024 reporting period, the Company's Vice President of Actuarial Reserving will serveserves as the appointed actuary, approved by the Board of Directors. The Company has engaged a third party firm to provide an independent and unbiased assessment of the Company's reserves. We do not rely on the external consulting actuary's assessment to determine our recorded reserves; however, we review and discuss its observations on trends, key assumptions, and actuarial methodologies, and consider these items when determining our recorded reserves.

A change in any one or more of these assumptions is likely to result in an ultimate liability different from the original actuarial estimate. Such changes in estimates may be material. For example, a 100 basis point decrease in our estimated discount rate would increase the pension benefit obligation at December 31, 20242025 by $22.1$20.9 million while a 100 basis point increase in the rate would decrease the pension benefit obligation by $18.2$17.3 million, for the same period.

Underlying loss ratio represents the net loss ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The underlying combined ratio represents the combined ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The Company believes that the underlying loss ratio and underlying combined ratio are meaningful measures to understand the underlying trends in the core business in the current accident year, removing the volatility of catastrophes and prior period impacts. Management believes separate discussions on catastrophe losses and prior period reserve development are important to understanding how the Company is managing catastrophe risk and in identifying developments in longer-tailed business. Catastrophe losses is an operational measure that utilizes the designations of the Insurance Services Office ("ISO") and is reported with losses and loss adjustment expense amounts net of reinsurance recoverables, unless specified otherwise. In addition to ISO catastrophes, we also include as catastrophes those events ("non-ISO catastrophes"), which may include U.S. or international losses, that we believe are, or will be, material to our operations, either in amount or in number of claims made. Catastrophes are not predictable and are unique in terms of timing and financial impact. While management estimates catastrophe losses as incurred, due to the inherently unique nature of catastrophe losses, the impact in a reporting period is inclusive of catastrophes that occurred in the reporting period, as well as development on catastrophes that may have occurred in prior periods. Prior period reserve development is the increase (unfavorable) or decrease (favorable) in incurred loss and loss adjustment expense reserves at the valuation dates for losses which occurred in previous calendar years. This measure excludes development on catastrophe losses.

Net Written PremiumsPremium

Net written premiumspremium is the amount charged for insurance policy contracts issued and recognized on an annualized basis at the effective date of the policy. Net written premiumspremium is frequently used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies. Management believes net written premiumspremium is a meaningful measure for evaluating insurance company sales performance and geographical expansion efforts. Net written premiumspremium for an insurance company consists of direct written premiumspremium and assumed premiums,premium, less ceded premiums.premium. The following shows our written premiumspremium for the years ended December 31, 2024,2025, 20232024 and 20222023:

Net earned premiumspremium areis calculated on a pro-rata basis over the terms of the respective policies. Unearned premium reserves are established for the portion of written premiumspremium applicable to the unexpired terms of the insurance policies in force. The difference between net earned premiumspremium and net written premiumspremium is the change in unearned premiumspremium and the change in prepaid reinsurance premiums.premium. Direct earned premiumspremium areis recognized ratably over the life of a policy and differdiffers from direct written premiums,premium, which areis recognized on the effective date of the policy. The following shows our earned premiumspremium for the years ended December 31, 2024,2025, 20232024 and 20222023:

Direct PremiumsPremium

Direct premiumspremium areis the total policy premiums,premium, net of cancellations, associated with policies issued and underwritten by our property and casualty insurance business. Direct premiumspremium increased $150.1 million in 2025 as compared to 2024 and increased $92.0 million in 2024 as compared to 2023 and increased $75.9 million in 2023 as compared to 2022 primarily due to growth in our core commercial lines resulting from rateimproved renewalretention, increases,increased pricing and substantial new business production and stable retention.production.

Assumed PremiumsPremium

Assumed premiumspremium areis the total premiumspremium associated with the insurance risk transferred to us by other insurance and reinsurance companies pursuant to reinsurance contracts. Assumed premiumspremium decreased $7.3 million in 2025 as compared to 2024 due to targeted management actions of exiting certain reinsurance programs, while assumed premium increased $52.4 million in 2024 as compared to 2023 due to the addition of new programs and cedant growth, while assumed premiums increased $50.3 million in 2023 as compared to 2022 due primarily to increased reinsurance rates.growth.

Ceded PremiumsPremium

Ceded premiumspremium is the portion of direct premiumspremium that we cede to our reinsurers under our reinsurance contracts. TheCeded premium increased $26.8 million in 2025 due to growth in the subject premium base and ceded reinsurance premium adjustments. For 2024, the ratio of ceded premiumspremium to direct premiumspremium remained flat for 2024 as compared to 20232023, due to rate decreases in property offsetting rate increases in casualty. Ceded premiums increased $2.2 million in 2024 due to growth in the subject premium base. For 2023, the ratio of ceded premiums to direct premiums increased as compared to 2022, due to significant reinsurance rate increases.

Net investment income was $82.0 million for the year ended December 31, 2024, an increase of $22.4 million or 37.5% from the year ended December 31, 2023. InterestThe onincrease was primarily from our fixed maturitiesincome increasedportfolio increase of $13.5 million or 23.9%, as a result of portfolio management actions, including investing at higher rates and the strategic re-allocation of equity securities into fixed maturity securities. This strategic re-allocation of equity securities resulted in a decrease in dividend income of $3.2 million. Income on other long-term investments was $8.0 million for 2024, compared to zero in 2023, as the valuation of the investments in limited liability partnerships varies from period to period due to the current market conditions. Interest on short-term investments, and cash and cash equivalents increased $4.8 million due primarily to an increase in money market funds resulting from the timing of investment sales and purchases.

The following table details our annualizednet yieldinvestment on average invested assetsincome for the years ended December 31, 2025, 2024, 2023, and 20222023:

Net investment gainslosses were $1.3$3.8 million for the year ended December 31, 20232025 as compared to net investment losses of $15.9$5.4 million for the year ended December 31, 2022.2024. The primary reason for the change was attributablerelates to management actions within the increaseCompany's infixed marketincome value of investments in equity securities throughout 2023 as comparedportfolio to reinvest at higher rates for the decreaseyear inended marketDecember value31, of2024 investmentsand inan equityimpairment securitiesloss throughrecognized 2022.on a commercial mortgage loan for the year ended December 31, 2025.

Our business is subject to a number of risks, including those identified in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on February 26, 2026. These risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also have a material effect on our business, results of operations, financial condition and/or liquidity. There have been no material changes to the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025.

The Company is a member of Lloyd's through its insurance subsidiary, McIntyre Cedar Corporate Member LLP. Lloyd's operates as an insurance marketplace whereby members join syndicates to underwrite property and casualty and reinsurance business through a managing agent in return for receiving premiums. The Company participates in 1314 syndicates as of MarchJune 31,30, 2026. The Company is required to maintain capital at Lloyd's, referred to as Funds at Lloyd's ("FAL"), to support participation in these syndicates.

For the three-monthsix-month period ended MarchJune 31,30, 2026, approximately 50 percent of our property and casualty premiums were written in Texas, California, New Jersey, Iowa, and Missouri.

Underlying loss ratio represents the net loss ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The underlying combined ratio represents the combined ratio less the impacts of catastrophes and non-catastrophe prior period reserve development. The Company believes that the underlying loss ratio and underlying combined ratio are meaningful measures to understand the underlying trends in the core business in the current accident year, removing the volatility of catastrophes and prior period impacts. Management believes separate discussions on catastrophe losses and prior period reserve development are important to understanding how the Company is managing catastrophe risk and in identifying reserve developments in longer-tailed business.

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

The following table includes the consolidated results of our operations for the three-monththree- and six-month periods ended MarchJune 31,30, 2026 and 2025, with more detailed components and discussion in the sections that follow. Discussions of the components of net income are presented on a pre-tax basis, unless otherwise noted.

Net written premium is the amount charged for insurance policy contracts issued and recognized on an annualized basis at the effective date of the policy. Net written premium is frequently used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies. Management believes net written premium is a meaningful measure for evaluating insurance company sales performance and geographical expansion efforts. Net written premium for an insurance company consists of direct written premium and assumed premiums, less ceded premiums. The following shows our written premium for the three-monththree- and six-month periods ended MarchJune 31,30, 2026 and 2025.

Net written premium increased by 12.4%9.0% and 10.6% in the three-monththree- periodand six-month periods ended MarchJune 31,30, 20262026, respectively, as compared to the same periodperiods in 2025. CoreFor the three-month period ended June 30, 2026, core commercial lines net written premium increased 11.4% due to increases in new business, retention and average renewal pricing. Overall, average renewal premiums increased 6.0%4.6% with rates increasing 4.3%2.9% and exposure changes of 1.7%. Excluding the workers' compensation line of business, the overall average increase in renewal premiums was 6.5%,5.0%, with 4.8%3.5% from rate increases and 1.6%1.5% from exposure changes.

Net earned premium is calculated on a 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 terms of the insurance policies in force. The difference between net earned premium and net written premium is the change in unearned premium and the change in prepaid reinsurance premiums. Direct earned premium is recognized ratably over the life of a policy and differs from direct written premium, which is recognized on the effective date of the policy. The following shows our earned premium for the three-monththree- and six-month periods ended MarchJune 31,30, 2026 and 2025.

Net earned premium increased by 11.2%12.5% and 11.9% in the three-monththree- periodand six-month periods ended MarchJune 31,30, 20262026, respectively, as compared to the same periodperiods in 2025. This increase in net earned premium was consistent with the trend in net written premium.

Net investment income was $27.0$28.9 million for the three-month period ended MarchJune 31,30, 2026, an increase of $3.6$7.3 million compared to the same period in 2025. The increase was primarily from our fixed income portfolio increase of $3.8$5.0 million as a result of portfolio growth and reinvestment at higher yields. The pre-tax average yield on fixed income securities was 4.43%4.57% as of MarchJune 31,30, 2026 compared to 4.34%4.32% for the same period in 2025. Income on other long-term investments increased $2.2 million due to an increase in valuation of the underlying investments.

Net investment losses were $0.3$0.4 million and $0.7 million for the three-monththree- periodand six-month periods ended MarchJune 31,30, 20262026, respectively, as compared to net investment losses of $0.8$1.0 million and $1.8 million for the same periodperiods in 2025. The primary reason for the change relates to opportunistic trading within the fixed maturity portfolio.

The following is a summary of losses and loss settlement expenses for the three-monththree- and six-month periods ended MarchJune 31,30, 2026 and 2025:

For the three-month period ended MarchJune 31,30, 2026, our loss and loss settlement expenses were $18.4$18.5 million, or 9.7%,9.6%, higher than the same period in 2025, and our net loss ratio improved 0.81.6 points compared to the same period in 2025. This loss ratio improvement was driven by improvementimprovements in the underlying loss ratio and catastrophe ratio, partially offset by aneutral slightlyprior higheryear underlyingreserve lossdevelopment ratio.in 2026 as compared to favorable reserve development in 2025. The underlying loss ratio increaseand wascatastrophe loss ratio improvements were driven by assumed business tempered some by improvementimprovements in the core commercial.commercial lines.

The Company experienced neutral prior year reserve development, excluding catastrophe losses, during the three-monththree- periodand six-month periods ended MarchJune 31,30, 2026.

In the three-monththree- periodand six-month periods ended MarchJune 31,30, 2026, our pre-tax catastrophe losses weredecreased $12.7by $7.8 million and $10.6 million, a decrease of $2.8 millionrespectively, compared to the same periodperiods in 2025. Catastrophe losses in the three-monththree- periodand six-month periods ended MarchJune 31,30, 2026 added 3.72.7 and 3.2 points to the combined ratio, respectively, which is below our five-year and 10-year historical averages. Our catastrophe losses included 2120 new events in the three-month period ended MarchJune 31,30, 2026.

DAC is amortized over the period the related premiums are earned. Amortization expense increased for the three-monththree- periodand six-month periods ended MarchJune 31,30, 2026, primarily reflecting an increase in deferred underwriting costs associated with continued premium expansion.

The following tables display our net loss ratio for the three-monththree- and six-month periods ended MarchJune 31,30, 2026 and 2025:

The net loss ratio in our commercial lines of business was 58.7%59.5% for the three-month period ended MarchJune 31,30, 2026, compared to 60.7%61.9% for the same period in 2025. This result was driven by improvement in the underlying loss ratio and favorable catastrophe experience.experience, partially offset by less favorable prior year reserve development in 2026 compared to 2025.

The net loss ratio improved 6.613.0 and 9.9 points in the three-monththree- periodand six-month periods ended MarchJune 31,30, 20262026, respectively, as compared to the same periodperiods in 2025. The result was driven by less unfavorable prior year reserve development and an improvement in the underlying loss ratio in 2026 compared to 2025. Prior year development in 2026 was neutral.

The net loss ratio deterioratedimproved 2.47.5 and 2.5 points in the three-monththree- periodand six-month periods ended MarchJune 31,30, 20262026, respectively, as compared to the same periodperiods in 2025. The result was driven by less favorable prior year development and a higherlower catastrophe ratio,ratio partially offset byand improvement in the underlying loss ratioratio, drivenpartially offset by rate attainment versus trends. The 2025 catastrophe ratio was impacted byless favorable prior year development.reserve development in 2026 compared to 2025.

The net loss ratio improveddeteriorated 7.27.6 and 0.4 points in the three-monththree- periodand six-month periods ended MarchJune 31,30, 20262026, respectively, as compared to the same periodperiods in 2025. The result was driven by less favorable prior year reserve development and a higher catastrophe ratio, partially offset by an improved underlying loss ratio in 2026 compared to 2025, which was neutral, and favorable catastrophe results compared to 2025.

The net loss ratio deteriorated 1.415.0 and 8.4 points in the three-monththree- periodand six-month periods ended MarchJune 31,30, 20262026, respectively, as compared to the same periodperiods in 2025. The result was driven by less favorable prior year reserve development in 2026 compared to 2025, partially offset by a favorable underlying result.loss ratio.

The net loss ratio deteriorated 16.53.0 and 9.8 points in the three-monththree- periodand six-month periods ended MarchJune 31,30, 20262026, respectively, as compared to the same periodperiods in 2025. When surety losses occur, our loss is determined by estimating the cost to complete the remaining work and to pay the contractor's unpaid bills, offset by contract funds due to the contractor, reinsurance, and the value of any collateral to which we may have access. The change in loss ratio was driven by adverse prior year reserve development in 2026 compared to favorable prior year reserve development in 2025. The net deterioration in 2026 was driven by ceded development on large losses from accident year 2023. This was partially offset by improvement in the underlying loss ratio in 2026 compared to 2025.

The net loss ratio deteriorated 8.04.1 and 5.9 points in the three-monththree- periodand six-month periods ended MarchJune 31,30, 20262026, respectively, as compared to the same periodperiods in 2025. The result was driven overall by higher pricing ratios on several accounts andaccounts, changes in mix within the assumed book.book, and adverse prior period development compared to 2025. This was partially offset by improvement in the catastrophe loss ratio in 2026 compared to 2025.

The expense ratio improvedincreased 3.00.5 points and decreased 1.3 points in the three-monththree- periodand six-month periods ended MarchJune 31,30, 20262026, respectively, as compared to the same periodperiods in 2025. The decreaseincrease in expense ratio in the second quarter of 2026 was partially driven by actions to reduce our real estate footprint and future expense ratio along with other normal variability. The decrease in the six-month period ended June 30, 2026 was driven by business growth and non-recurring expenses in the prior period associated with the final stages of development of a new policy administration system.

Our long term debt obligations include $50.0 million of private placement notes issued in December 2020 and $70.0 million and $30.0 million of senior unsecured notes issued in May 2024 and July 2025, respectively. Interest expense increased for the three-monththree- periodand six-month periods ended MarchJune 31,30, 2026 due to the issuance of the senior unsecured notes. Refer to Note 87 "Debt" in Part I, Item 1 for more information on our long term debt.

The Company's effective tax rate for the three-monththree- and six-month periods ended MarchJune 31,30, 2026 and 2025 is different than the federal statutory rate of 21 percent, due primarily to the net effect of tax-exempt municipal bond interest income.income and tax adjustments related to equity-based compensation.

Adjusted operating income increased in the three-month period ended MarchJune 31,30, 2026, primarily due to an increase in net earned premium of $34.6$39.3 million, combined with the catastrophe loss ratio improvement of 1.32.8 points toand 3.7%, slightly offset with thean underlying loss ratio improvement of 0.4 points. This was partially offset by an increase in the underwriting expense ratio of 0.5 points toand 57.0%.less favorable prior year reserve development. In addition, net investment income increased by $3.6$7.3 million, driven by portfolio growth and reinvestment at higher yields. The underwriting expense ratio improved 3.0 points to 34.9%.

Our invested assets increased to $2.49$2.53 billion at MarchJune 31,30, 2026 from $2.46 billion at December 31, 2025. We utilize a conservative investment philosophy, investing in a diversified portfolio of high-quality, intermediate-term taxable corporate bonds, taxable U.S. government and government agency bonds and tax-exempt U.S. municipal bonds. The composition of our investment portfolio at MarchJune 31,30, 2026 is presented at carrying value in the following table:

(2) As a member of Lloyd's, the Company participates in the syndicate results which include the fair value of the investments. The fair value of Lloyd's syndicate investments included in other long-term investments was $137.4 million at March 31, 2026. Also included in our "Other long-term investments" on the Consolidated Balance Sheets was $116.0 million at June 30, 2026. Also included in "Other long-term investments" is our interest in limited liability partnerships with a current fair value of $100.1$103.4 million at MarchJune 31,30, 2026.

The following table shows the composition of fixed maturity securities by credit rating at MarchJune 31,30, 2026 and December 31, 2025. Information contained in the table is generally based upon the issued credit ratings provided by external rating agencies.

As of MarchJune 31,30, 2026 and December 31, 2025, we did not have direct exposure to investments in subprime mortgages or other credit enhancement vehicles.

The weighted average effective duration of our portfolio of fixed maturity securities was 4.44.2 years at MarchJune 31,30, 2026 compared to 4.3 years at December 31, 2025. Refer to Note 2 "Investments" in Part I, Item 1 for more information on maturities.

As of MarchJune 31,30, 2026, net unrealized investment losses, after tax, totaled $39.9$43.7 million compared to net unrealized losses, after tax, of $25.3 million as of December 31, 2025. The net unrealized investment loss position deteriorated from December 31, 2025 due to the increase in bond market interest rates during the three-monthsix-month period ended MarchJune 31,30, 2026.

Refer to Note 2 "Investments" in Part I, Item 1 for more information on net investment unrealized gains and losses.

At MarchJune 31,30, 2026, our fixed maturity watch list included four fixed maturity securities in an unrealized loss position with an amortized cost of $12.1 million, no allowance for credit losses, unrealized losses of $0.6 million and a fair value of $11.5 million.

At MarchJune 31,30, 2026, our mortgage loan watch list included one commercial mortgage loan with a carrying value of $4.0 million. We have an allowance for future credit loss allowances of $0.3 million on our mortgage loan portfolio.

The following table displays a consolidated summary of cash sources and uses for the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025:

At MarchJune 31,30, 2026, our cash and cash equivalents included $68.6$24.1 million related to money market accounts, compared to $44.8 million at December 31, 2025.

Net cash flows provided by operating activities were $56.6$90.9 million and $35.7$89.1 million for the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025, respectively. The primary cash inflows from operating activities include insurance premiums and net investment income. The primary cash outflows from operating activities are comprised of payment of losses and loss settlement expenses, taxes and operating expenses. Our cash flows from operating activities were sufficient to meet our liquidity needs for the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025.

Net cash flows used in investing activities were $43.4$95.3 million and $48.2$78.5 million for the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025, respectively. For the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025, we had cash inflows from scheduled and unscheduled investment maturities, redemptions, prepayments, and sales of investments of $148.6$307.4 million and $77.3$141.6 million, respectively. Our cash outflows for investment purchases were $191.6$401.8 million for the three-monthsix-month period ended MarchJune 31,30, 2026, compared to $122.9$215.9 million for the same period of 2025.

Net cash flows used in financing activities were $7.6$12.5 million and $4.8$9.4 million for the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025, respectively. The net cash flows used in financing activities for the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025 are primarily related to the payment of cash dividends of $5.1$10.3 million and $4.1$8.1 million, respectively.

UF&C is a member of FHLB Des Moines. Membership allows access to loans or advances pursuant to the terms of FHLB Des Moines' standard Advances, Pledge and Security Agreement (the "Advances Agreement"). As of MarchJune 31,30, 2026, there were no advances outstanding under the Advances Agreement. For further information regarding the agreement with FHLB Des Moines, see Note 87 "Debt" contained in Part I, Item 1.

Dividends paid to shareholders totaled $5.1$10.3 million and $4.1$8.1 million in each of the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025, respectively. Payments of any future dividends and the amounts of such dividends will depend upon factors such as net income, financial condition, capital requirements, and general business conditions. We will only pay dividends if declared by our Board of Directors out of legally available funds.

As a holding company with no independent operations of its own, UFG relies on dividends received from its insurance company subsidiaries in order to pay dividends to its common shareholders. Dividends payable by our insurance subsidiaries are governed by the laws in the states in which they are domiciled. In all cases, these state laws permit the payment of dividends only from earned surplus arising from business operations. For example, under Iowa law, the maximum dividend or distribution that may be paid within a 12-month period without prior approval of the Iowa Insurance Commissioner is generally restricted to the greater of 10 percent of statutory surplus as of the preceding December 31 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 MarchJune 31,30, 2026, UFG's sole direct insurance company subsidiary, UF&C, is able to make a maximum of $66.4$67.8 million in dividend payments without prior regulatory approval. These restrictions are not expected to have a material impact in meeting our cash obligations.

Pursuant to agreements with 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 $15.3$11.0 million at MarchJune 31,30, 2026.

Stockholders' equity increased to $950.6$977.3 million at MarchJune 31,30, 2026, from $941.2 million at December 31, 2025. The Company's book value per share was $37.06,$38.02, which is an increase of $0.18$1.14 per share, or 0.53.1 percent, from December 31, 2025. The increase is primarily attributable to net income of $30.1$63.4 million, partially offset by an increase in net unrealized losseslosses, net of $14.6tax, of $18.4 million on fixed maturity securities and shareholder dividends of $5.1$10.4 million during the first threesix months of 2026.

Information specific to accounting standards we adopted for the three-monthsix-month period ended MarchJune 31,30, 2026 or pending accounting standards we expect to adopt in the future is incorporated by reference from Note 1 "Summary of Significant Accounting Policies" contained in Part I, Item 1.