Employee Benefits

12 Months Ended

Dec. 31, 2023

Retirement Benefits [Abstract]

Employee Benefits

EMPLOYEE BENEFITS

We offer various benefits to our employees including a non-contributory cash balance pension plan and an employee health and dental benefit plan.

In September 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 to employees that we would be changing our paid time off ("PTO") policy to a discretionary time off policy as of the end of 2023. As a result, the company will no longer maintain 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 the 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.

Pension and Post-Retirement Benefit Plans

We 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 2024.

In December 2020, the Company made the decision to amend the non-contributory defined benefit pension plan and put in place a non-contributory cash balance pension plan effective July 1, 2021. All benefits under the former non-contributory defined benefit pension plan stopped accruing on June 30, 2021.

We also offer health and dental benefit plans to all of our eligible employees that are self-funded. We previously offered a fully-funded (post-65) retiree health and dental plan (the "post-retirement benefit plan"). In January 2021, the Company changed the post-retirement benefit plan to a voluntary plan funded exclusively by participants, commencing at the start of 2023. The impact of this decision is reflected in the tables in this note, with a one-time adjustment presented in the line "Special event plan closure" and an additional adjustment in the line "Amortization of prior service credit." The amortization of prior service credits continued through the end of 2022 related to these plan changes. As of December 31, 2023, the post-retirement benefit obligation was $0.

Investment Policies and Strategies

Our investment policy and objective for the pension plan is to generate long-term capital growth and income by way of a diversified investment portfolio along with appropriate employer contributions, which is intended to allow us to provide for the pension plan's benefit obligation. We have an internal investment/retirement committee, which includes our Chief Executive Officer, Chief Financial Officer, Chief Investment Officer, Chief Operating Officer, and Chief Claims Officer, all of whom periodically receive information on the value of the pension plan assets and their performance. Quarterly, the 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 September 2023, the investment/retirement committee made a shift in investment strategy to a liability driven investment ("LDI") approach to better match the timing of cash flows between payouts from the plan with cash flows from the asset portfolio, as well as hedge interest rate risk between assets and liabilities. Changing to this approach now, while the plan is overfunded, should also reduce the likelihood of having to make a contribution to the plan in the future.

The investments held by the pension plan at December 31, 2023 include the following asset categories:

•Fixed income securities, which may include bonds, and convertible securities;

•Equity securities, which may include various types of stock, such as large-cap, mid-cap, small-cap, and international stocks;

•Pooled separate accounts, which includes two separate funds, a real estate separate account and a liquid assets separate account;

•A group annuity contract that is administered by United Life, a former subsidiary of United Fire; and

•Cash and cash equivalents, which include money market funds.

As a result of the shift in investment strategy in the second half of 2023, we have reduced the number of external investment managers by which the assets are managed, with most of the portfolio now part of the hedge portfolio.

The following is a summary of the pension plan's actual and target asset allocations at December 31, 2023 and 2022 by asset category:

									Target
Pension Plan Assets	2023		% of Total		2022		% of Total		Allocation
Hedge portfolio:									80	%
Fixed maturity securities - corporate bonds	166,063		62.9		18,102		7.9
Redeemable preferred stock	—		—		2,946		1.3
Pooled separate accounts
Liquid assets separate account fund	4,475		1.7		—		—
Core plus bond separate account fund	—		—		16,768		7.3
Cash and cash equivalents	785		0.3		5,356		2.3
Return seeking portfolio:									20	%
Equity Securities	53,981		20.5		134,663		58.6
Pooled separate account
U.S. property separate account fund	25,407		9.6		28,468		12.4
United Life annuity	13,195		5.0		12,567		5.5
Arbitrage fund	—		—		10,831		4.7
Total plan assets	$	263,906	100.0	%	$	229,701	100.0	%	100.0	%

The LDI investment strategy has shifted the allocation of pension plan assets from prior periods. The portfolio includes a hedge portfolio, targeting 80.0 percent of the pension plan asset balance, largely comprised of highly rated fixed income 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 is the external fund managed by Capital Investment Services. There will be additional portfolio shifts as assets liquidate to achieve these targets.

The availability of assets held in cash and cash equivalents enables the pension plan to mitigate market risk that is 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.

Valuation of Investments

Fixed Maturity and Equity Securities

Investments in equity securities are stated at fair value based upon quoted market prices reported on recognized securities exchanges on the last business day of the year. Purchases and sales of securities are recorded as of the trade date.

The fair value of fixed maturity securities categorized as Level 2 is determined by management based on fair value

information reported in the custodial statements received from Plan's investment managers, which is derived from

recent trading activity of the underlying security in the financial markets. These securities represent various taxable bonds held by the pension plan. These securities categorized as Level 2 are valued in the same manner as described in Note 3 "Fair Value of Financial Instruments" and have the same controls in place.

Pooled Separate Accounts

The pension plan invests in two pooled separate account funds, a U.S. property separate account fund and a liquid assets separate account fund. The fair value of the investments in the U.S. property separate account fund is provided by the administrator of the fund based on the net asset value of the fund. The net asset value 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, vacancy levels, leasing absorption, market cap rates and discount rates. In addition, each property is appraised annually by an independent appraiser. The net asset value is the basis for current transactions and the pooled separate account can be redeemed at net asset value as of the measurement date. The fair value measurement is classified within Level 2 of the fair value hierarchy given the inputs reflect observable market data but are not based on quoted prices in an active market. Investments 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 2 pricing inputs, including quoted prices for similar assets in active or non-active markets. 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. We have adjusted the net asset value provided by the custodian to Level 2 from Level 1 based on inputs and ASC 820 guidance.

United Life Annuity

The United Life group annuity contract, which is a deposit administration contract, is stated at contract value as determined by United Life. Under the group annuity contract, the plan's investment account is credited with compound interest on the average account balance for the year. The interest rate is equivalent to the ratio of net investment income to mean assets of United Life, net of investment expenses.

Cash and Cash Equivalents

Cash and cash equivalents primarily consist of insured cash and money market funds held with various financial institutions. Interest is earned on a daily basis. The fair value of these funds approximates their cost basis due to their short-term nature.

Fair Value Measurement

The following tables present the categorization of the pension plan's assets measured at fair value on a recurring basis at December 31, 2023 and 2022:

			Fair Value Measurements
Description	December 31, 2023		Level 1		Level 2		Level 3
Fixed maturity securities - corporate bonds	$	166,063	$	—	$	166,063	$	—
Equity securities	53,981		53,981		—		—
Pooled separate accounts
Liquid assets separate account fund	4,475		—		4,475		—
U.S. property separate account fund	25,407		—		25,407
Money market funds	772		772		—		—
Total assets measured at fair value	$	250,698	$	54,753	$	195,945	$	—

			Fair Value Measurements
Description	December 31, 2022		Level 1		Level 2		Level 3
Fixed maturity securities - corporate bonds	$	18,102	$	—	$	18,102	$	—
Redeemable preferred stock	2,946		2,946		—		—
Equity securities	134,663		134,663		—		—
Pooled separate accounts
Core plus bond separate account fund	16,768		—		16,768		—
U.S. property separate account fund	28,468		—		—		28,468
Arbitrage fund	10,831		—		10,831		—
Money market funds	5,348		5,348		—		—
Total assets measured at fair value	$	217,126	$	142,957	$	45,701	$	28,468

The fair value of investments categorized as Level 1 is based on quoted market prices that are readily and regularly available.

The fair value of fixed maturity securities categorized as Level 2 is determined by management based on fair value information reported in the custodial statements, which is derived from recent trading activity of the underlying security in the financial markets. These securities represent various taxable bonds held by the pension plan. These securities categorized as Level 2 are valued in the same manner as described in Part II, Item 8, Note 3 "Fair Value of Financial Instruments" and have the same controls in place.

The fair value of the arbitrage fund and bond and mortgage pooled separate account fund are categorized as Level 2 since there are no restrictions as to the pension plan's ability to redeem its investment at the net asset value of the fund as of the reporting date.  

The following tables provide a summary of the changes in fair value of the pension plan's Level 3 securities:

	U.S. property separate account fund
Balance at January 1, 2023	$	28,468
Unrealized gains	(3,061)
Balance at December 31, 2023	$	25,407

	U.S. property separate account fund
Balance at January 1, 2022	$	27,328
Unrealized gains	1,140
Balance at December 31, 2022	$	28,468

Estimates and Assumptions

The 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 the Principal© Pension Discount Rate Curve ("Principal 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 Principal 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 intend to make changes as appropriate.

The Society of Actuaries ("SOA") is an actuarial organization that periodically reviews mortality data and publishes mortality tables and improvement scales. In October 2019, the SOA released the Pri-2012 mortality tables for private sector retirement plans in the United States. The mortality assumptions are based on the Pri-2012 white collar base rate mortality projected generationally using the Principal Mortality Improvement Scale ("Principal 2022 MI"). The Principal 2022 MI scale is based on latest mortality improvement release, the MIM-2021-v3 application tool issued by SOA in October 2022 with a few user-selected assumptions: 2028 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 intend to make changes as appropriate to reflect additional research and our resulting best estimate of future mortality rates.

Assumptions Used to Determine Benefit Obligations

The following actuarial assumptions were used to determine the reported plan benefit obligations at December 31:

Weighted-average assumptions as of	Pension Benefits				Post-retirement Benefits
December 31,	2023		2022		2023	2022
Discount rate	4.93	%	5.15	%	N/A	N/A
Interest crediting rate	4.00		3.50		N/A	N/A
Rate of compensation increase	4.00		3.00		N/A	N/A

Rising interest rates resulted in an increase in the discount rates we use to value our respective plan's benefit obligations at December 31, 2022 compared to December 31, 2021.

Assumptions Used to Determine Net Periodic Benefit Cost

The following actuarial assumptions were used at January 1 to determine our reported net periodic benefit costs for the year ended December 31:

Weighted-average assumptions as of	Pension Benefits						Post-retirement Benefits
January 1,	2023		2022		2021		2023	2022		2021
Discount rate	5.15	%	2.84	%	2.58	%	N/A	0.48	%	2.58	%
Expected long-term rate of return on plan assets	6.70		6.70		6.70		N/A	N/A		N/A
Rate of compensation increase	3.00		3.00		2.75		N/A	N/A		N/A

Assumed Health Care Cost Trend Rates

	Health Care Benefits		Dental Claims
Years Ended December 31,	2023	2022	2023	2022
Health care cost trend rates assumed for next year	N/A	N/A	N/A	N/A
Rate to which the health care trend rate is assumed to decline (ultimate trend rate)	N/A	N/A	N/A	N/A
Year that the rate reaches the ultimate trend rate	N/A	N/A	N/A	N/A

Benefit Obligation and Funded Status

The following table provides a reconciliation of benefit obligations, plan assets and funded status of our plans:

	Pension Benefits				Post-retirement Benefits
Years Ended December 31,	2023		2022		2023		2022
Reconciliation of benefit obligation
Benefit obligation at beginning of year	$	201,676	$	276,587	$	—	$	960
Service cost	3,817		4,481		—		—
Interest cost	10,106		7,730		—		2
Actuarial loss (gain)	3,112		(79,303)		—		(122)
Adjustment for plan amendment			—		—		—
Special event plan closure	—		—		—		—
Benefit payments	(8,831)		(7,819)		—		(840)
Benefit obligation at end of year (1)	$	209,880	$	201,676	$	—	$	—
Reconciliation of fair value of plan assets
Fair value of plan assets at beginning of year	$	229,701	$	283,940	$	—	$	—
Actual return on plan assets	43,036		(50,420)		—
Employer contributions	—		4,000		—		840
Benefit payments	(8,831)		(7,819)		—		(840)
Fair value of plan assets at end of year	$	263,906	$	229,701	$	—	$	—
Funded status at end of year	$	54,026	$	28,025	$	—	$	—

(1)For the pension plan, the benefit obligation is the projected benefit obligation. For the post-retirement benefit plan, the benefit obligation is the accumulated post-retirement benefit obligation.

Our accumulated pension benefit obligation was $209,867 and $201,669 at December 31, 2023 and 2022, respectively.

The following table displays the effect that the unrecognized prior service cost and unrecognized actuarial loss of our plans had on accumulated other comprehensive income ("AOCI"), as reported in the accompanying Consolidated Balance Sheets:

	Pension Benefits				Post-retirement Benefits
Years Ended December 31	2023		2022		2023		2022
Amounts recognized in AOCI
Unrecognized prior service cost	$	(20,119)	$	(26,066)	$	—	$	—
Unrecognized actuarial (gain) loss	(146)		24,961		—		—
Total amounts recognized in AOCI	$	(20,265)	$	(1,105)	$	—	$	—

We anticipate amortization of the net actuarial losses for our pension plan in 2024 to be $0.

Net Periodic Benefit Cost

The components of the net periodic benefit cost for our pension and post-retirement benefit plans are as follows:

	Pension Plan						Post-retirement Benefit Plan
Years Ended December 31,	2023		2022		2021		2023		2022		2021
Net periodic benefit cost
Service cost	$	3,817	$	4,481	$	12,082	$	—	$	—	$	148
Interest cost	10,106		7,730		6,911		—		2		72
Expected return on plan assets	(15,025)		(18,891)		(16,807)		—		—		—
Amortization of prior service cost	(3,280)		(3,280)		(3,237)		—		(15,085)		(14,490)
Effect of partial curtailment	(2,666)						—		(26)		(20,177)
Amortization of net loss	207		777		3,995		—		2,824		2,607
Net periodic benefit cost	$	(6,841)	$	(9,183)	$	2,944	$	—	$	(12,285)	$	(31,840)

The expected 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") November 2023. 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. 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.

The 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 service cost component of net periodic pension and postretirement benefit costs are capitalized and amortized as part of deferred acquisition costs and is included in the income statement line titled "amortization of deferred policy acquisition costs." The portion not related to the compensation and the other components of net periodic pension and postretirement benefit costs are included in the income statement line titled "other underwriting expenses."

Projected Benefit Payments

The following table summarizes the expected benefits to be paid from our plans over the next 10 years:

	2024		2025		2026		2027		2028		2029-3033
Pension benefits	$	17,570	$	13,950	$	14,310	$	14,880	$	15,100	$	80,050