Debt

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Debt

DEBT

Long Term Debt

The Company executed a private placement debt transaction on December 15, 2020 between UF&C, and Federated Mutual and Federated Life.

UF&C sold an aggregate principal amount of $50,000 of notes due 2040 to the Note Purchasers. One note with a principal amount of $35,000 was issued to Federated Mutual and one note with a principal amount of $15,000 was issued to Federated Life subject to the terms of their respective notes.

Interest payments under the long term debt 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 United Fire & Casualty Pooled Group as of the applicable Interest Payment Date, as set forth in the table below. For the nine-month period ended September 30, 2023, interest expense totaled $2,391. Payment of interest is subject to approval by the Iowa Insurance Division. On August 18, 2023, the Company received a downgrade from AM Best on the Financial Strength Rating (FSR) to A- (Excellent) from A (Excellent). As a result of this downgrade, the interest rate on the long term debt will increase to 6.875%, beginning with the December 15, 2023 payment, in accordance with the table below.

A.M. Best Co. Financial Strength Rating	Applicable Interest Rate
A+	5.875%
A	6.375%
A-	6.875%
B++ (or lower)	7.375%

Credit Facilities

On March 31, 2020, UF&C, a wholly owned subsidiary of the Company, entered into a credit agreement (the "Credit Agreement") with Wells Fargo Bank, National Association ("Wells Fargo"), as administrative agent, issuing lender, swing-line lender and lender, and the other lenders from time to time party thereto (collectively with Wells Fargo, the "Lenders"), providing for a $50,000 revolving credit facility, which includes a $20,000 letter of credit sub-facility and a $5,000 swing-line loan for working capital and other general corporate purposes. The Credit Agreement is provided by the Lenders on an unsecured basis, and UF&C has the option to increase the Credit Agreement by $100,000 if agreed to by the Lenders providing such incremental facility.

The Credit Agreement includes customary events of default, including default in payments of principals, default in payment of other indebtedness, change of control and voluntary and involuntary insolvency proceedings, the occurrence of which would allow the Lenders to accelerate payment of all amounts outstanding thereunder and terminate any further commitments to lend.

There was no outstanding balance on the Credit Agreement at September 30, 2023 and 2022, respectively and the Company has not utilized this facility since its inception. For the nine-month periods ended September 30, 2023 and 2022, we did not incur any interest expense related to the credit facility.

As of June 30, 2023, the Company was not in compliance with the minimum net worth covenant in the Credit Agreement. On August 7, 2023, Wells Fargo and the Company entered into an amended agreement and waiver which revised the minimum net worth covenant to reduce the requirements through the maturity of the agreement on March 31, 2024. As of September 30, 2023, the Company was in compliance with all covenants in the Credit Agreement.