AM Best Maintains Strong Ratings for United Fire Group
AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) for the property/casualty (P/C) insurance subsidiaries of United Fire Group, Inc. (UFG) [NASDAQ: UFCS]. The companies collectively operate as United Fire & Casualty Group under an intercompany pooling agreement led by United Fire & Casualty Company.
At the same time, AM Best affirmed UFG’s Long-Term ICR of “bbb-” (Good) and its Long-Term Issue Credit Rating of “bbb-” (Good) on the company’s $100 million, 9% senior unsecured notes due in 2039. The outlooks for all of the affirmed ratings are stable.
United Fire Group and its insurance subsidiaries are headquartered in Cedar Rapids, Iowa. The ratings assessment reflects the group’s financial position, operating performance, market presence and risk management framework as evaluated by AM Best.
The affirmation comes as United Fire & Casualty Group continues efforts to strengthen underwriting profitability, maintain capital adequacy and build a more durable operating platform capable of performing across different insurance market cycles.
Very Strong Balance Sheet Strength
A central factor supporting the ratings is United Fire & Casualty Group’s balance sheet strength, which AM Best assesses as very strong.
The group’s risk-adjusted capitalization has improved in recent years. Several factors have contributed to the strengthening of the capital position, including capital contributions from the holding company and organic growth in surplus.
Organic surplus growth has been supported by pre-tax operating earnings, while stabilization in the group’s carried reserve position has contributed to favorable reserve development when viewed on an aggregate basis.
For an insurance organization, balance sheet strength is an important component of financial resilience. Adequate capital provides insurers with capacity to absorb unexpected claims, catastrophe losses and other financial pressures while continuing to meet policyholder obligations.
The improvement in United Fire & Casualty Group’s risk-adjusted capitalization provides a stronger foundation for its ongoing insurance operations. The capital position also remains an important element of UFG’s overall credit profile and the ratings assigned to its operating subsidiaries.
Return to Underwriting Profitability
United Fire & Casualty Group’s operating performance has shown improvement, with the organization returning to underwriting income in 2025.
The improvement follows management initiatives implemented over recent years with the objective of restoring profitability and establishing a more sustainable underwriting platform.
Underwriting profitability is particularly important for property/casualty insurers because it reflects the relationship between premiums earned and the costs associated with claims and insurance operations, before considering investment income and other financial factors.
Management has focused on improving the underlying quality and sustainability of underwriting performance rather than relying solely on favorable external market conditions.
Recent results have also benefited from natural catastrophe losses occurring at lower-than-historical averages. Catastrophe activity can have a significant effect on P/C insurers, particularly those with exposure across regions vulnerable to severe weather and other natural events.
In addition to relatively favorable catastrophe experience, prudent rate actions have contributed to the group’s recent performance.
The combination of underwriting initiatives, pricing actions, capital support and reserve stabilization has helped improve the group’s financial results.
Building a More Durable Underwriting Platform
The recent improvement in operating performance reflects efforts by management to develop a more durable underwriting platform.
Insurance companies operate in markets that can change significantly from year to year. Claims trends, inflation, catastrophe activity, competition, pricing conditions and reinsurance costs can all affect underwriting results.
For this reason, maintaining profitability across multiple market cycles can be more challenging than achieving strong results during a single favorable period.
The management initiatives cited in the ratings assessment have focused on creating an underwriting platform capable of sustaining performance under varying market conditions.
The return to underwriting income in 2025 represents an important development in that effort. Continued performance will remain relevant to the group’s overall financial profile and to its ability to maintain capital strength over time.
AM Best’s stable outlooks indicate that the rating agency expects the group’s operating performance and balance sheet strength metrics over the near term to remain generally consistent with recently reported results.
Established Position in Core Insurance Markets
The ratings also recognize United Fire & Casualty Group’s established position in its core markets.
The group maintains a regional franchise supported by local market knowledge and long-standing relationships with insurance agencies. These relationships provide an established distribution network and support the group’s ability to serve customers across its target markets.
The company’s commercial lines operations also provide diversification through different product offerings.
Product and geographic diversification can help insurers manage the effect of individual loss events or changes in specific market segments. While diversification does not eliminate underwriting risk, it can provide a broader platform from which an insurance organization can manage its portfolio.
United Fire & Casualty Group’s regional market presence, combined with its established agency relationships, represents an important part of its business profile.
AM Best characterizes the group’s business profile as neutral, reflecting the characteristics of its market position, product mix and competitive environment.
Exposure to Natural Catastrophe Risk
Despite recent favorable catastrophe experience, the group continues to face exposure to natural catastrophe events.
Property/casualty insurers can face significant claims following hurricanes, severe storms, tornadoes, wildfires, floods and other catastrophic events. The geographic distribution of an insurer’s insured properties can therefore have an important effect on its financial results.
United Fire & Casualty Group’s insured footprint remains exposed to natural catastrophe events. The favorable catastrophe experience of recent years cannot necessarily be assumed to continue indefinitely.
The stable ratings outlook therefore reflects expectations that the group’s overall financial performance and capital position will remain aligned with recent results while recognizing the risks associated with its operating environment.
Competitive Insurance Market
United Fire & Casualty Group also operates in competitive insurance markets.
Competition can affect premium rates, policy terms, underwriting standards and the ability of insurers to achieve attractive margins. Insurers must balance growth opportunities with disciplined risk selection and appropriate pricing.
The group’s recent underwriting improvements have been supported by prudent rate actions and management efforts focused on restoring profitability.
Maintaining that discipline will remain important as market conditions change.
The group’s established agency relationships and local market knowledge provide an existing platform from which it can compete in its core markets. These characteristics are part of the business profile considered in the ratings assessment.
UFG Holding Company Credit Profile
In addition to affirming the ratings of the insurance subsidiaries, AM Best affirmed United Fire Group’s Long-Term ICR at “bbb-” (Good).
The holding company’s rating recognizes the capital strength of its operating subsidiaries, which are the primary source of the group’s insurance operations and financial resources.
However, financial leverage and interest coverage at the holding company remain modest.
The holding company’s capital structure and debt obligations therefore remain relevant considerations in assessing its overall credit profile.
AM Best also affirmed the Long-Term Issue Credit Rating of “bbb-” (Good) on UFG’s $100 million, 9% senior unsecured notes due in 2039.
The continued ratings on the holding company and its senior unsecured debt provide an assessment of UFG’s credit profile alongside the financial strength ratings assigned to its operating insurance subsidiaries.
Role of Capital Contributions
Capital contributions from the holding company have played a role in strengthening the operating group’s risk-adjusted capitalization.
Capital support can provide insurance subsidiaries with additional resources to absorb volatility, support business activity and maintain financial flexibility.
Combined with organic surplus growth generated through pre-tax operating earnings, these contributions have contributed to the improvement in the group’s capital position.
The stabilization of the carried reserve position has also been significant. Favorable reserve development on an aggregate basis can reduce pressure on capital and improve the overall financial position of an insurer.
Together, these factors have contributed to the very strong balance sheet strength assessment assigned to United Fire & Casualty Group.
Importance of Reserve Performance
Reserve adequacy is a critical consideration for property/casualty insurers because claims may remain outstanding for extended periods after policies are written.
An insurer must estimate the amount required to cover future claims and associated expenses. Changes in these estimates can affect earnings and surplus.
For United Fire & Casualty Group, stabilization in the carried reserve position has resulted in favorable reserve development when viewed in aggregate.
The development of reserves is therefore another factor supporting the group’s recent financial performance.
Maintaining appropriate reserves will remain important as the company manages its portfolio and navigates changing claims conditions.
Stable Outlook Reflects Near-Term Expectations
AM Best’s stable outlooks indicate that the rating agency expects United Fire & Casualty Group’s operating performance and balance sheet strength to remain broadly in line with recent reported results over the near term.
The outlook takes into consideration the group’s improved risk-adjusted capitalization, return to underwriting income, reserve position and established market presence.
At the same time, the group remains exposed to competitive pressures and natural catastrophe risks. These factors can create volatility in future operating results.
The stable outlook therefore reflects the expectation that these risks will be managed without materially changing the group’s current credit profile over the near term.
Ratings Across United Fire & Casualty Group
The FSR of A- (Excellent) and Long-Term ICRs of “a-” (Excellent), each with stable outlooks, have been affirmed for United Fire & Casualty Company and its P/C subsidiaries.
The rated companies include Lafayette Insurance Company, Addison Insurance Company, United Fire & Indemnity Company, United Fire Lloyds, Mercer Insurance Company, Financial Pacific Insurance Company, Mercer Insurance Company of New Jersey, Inc., Franklin Insurance Company and UFG Specialty Insurance Company.
The ratings apply to the operating companies that participate in the intercompany pooling arrangement led by United Fire & Casualty Company.
Continued Focus on Financial Strength
The latest rating affirmation highlights the progress United Fire & Casualty Group has made in strengthening its financial position and improving underwriting performance.
The return to underwriting income in 2025, combined with improved risk-adjusted capitalization and favorable aggregate reserve development, provides important support for the group’s current ratings.
At the same time, the organization continues to operate in a competitive property/casualty insurance environment with exposure to natural catastrophe events.
Going forward, the sustainability of underwriting profitability, maintenance of capital strength and effective management of catastrophe and other insurance risks will remain important elements of the group’s financial profile.
For now, AM Best’s stable outlooks reflect expectations that United Fire & Casualty Group will maintain operating performance and balance sheet strength broadly consistent with recently reported levels.
The affirmation of the A- (Excellent) financial strength ratings for the group’s operating subsidiaries and the “bbb-” (Good) ratings for UFG and its senior unsecured notes provides a continued assessment of the group’s financial capacity, capital position and credit profile as it moves forward.
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