FORWARD-LOOKING STATEMENTS
This report may contain forward-looking statements about our operations, anticipated performance and other similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor under the Securities Act of 1933 and the Securities Exchange Act of 1934 for forward-looking statements. The forward-looking statements are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and/or projected. Such forward-looking statements are based on current expectations, estimates, forecasts and projections about our company, the industry in which we operate, and beliefs and assumptions made by management. Words such as "expect(s)," "anticipate(s)," "intend(s)," "plan(s)," "believe(s)," "continue(s)," "seek(s)," "estimate(s)," "goal(s)," "target(s)," "forecast(s)," "project(s)," "predict(s)," "should," "could," "may," "will continue," "might," "hope," "can" and other words and terms of similar meaning or expression in connection with a discussion of future operations, financial performance or financial condition, are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed in such forward-looking statements. Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in Part II Item 1A, "Risk Factors" of this document. Among the factors that could cause our actual outcomes and results to differ are:

• The frequency and severity of claims, including those related to catastrophe losses, and the impact those claims have on our loss reserve adequacy.

• Developments in the domestic and global financial markets that could affect our investment portfolio and financing plans.

• The calculation and recovery of deferred policy acquisition costs ("DAC").

• The valuation of pension and other postretirement benefit obligations.

• Our relationship with our agencies and agents.

• Our relationship with our reinsurers.

• The financial strength rating of our reinsurers.

• Changes in industry trends and significant industry developments.

• Our exposure to international catastrophes through our assumed reinsurance program.

• Governmental actions, policies and regulations, including, but not limited to, domestic health care reform, financial services regulatory reform, corporate governance, new laws or regulations or court decisions interpreting existing laws and regulations or policy provisions.

• NASDAQ policies or regulations relating to corporate governance and the cost to comply.

These are representative of the risks, uncertainties, and assumptions that could cause actual outcomes and results to differ materially from what is expressed in forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report or as of the date they are made. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission, we do not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates are defined as those that are representative of significant judgments and uncertainties and that potentially may result in materially different results under different assumptions and conditions. We base our discussion and analysis of our results of operations and financial condition on the amounts reported in our Consolidated Financial Statements, which we have prepared in accordance with GAAP. As we prepare these Consolidated Financial Statements, we must make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates. Our critical accounting estimates are: the valuation of investments; the valuation of reserves for losses, claims, and loss settlement expenses and the related valuation of reinsurance recoverable on paid and unpaid losses; the valuation of reserves for future policy benefits; the calculation of the deferred policy acquisition costs asset; the recoverability of goodwill and other intangible assets; and the valuation of pension and postretirement benefit obligations. These critical accounting estimates are more fully described in our Management's Discussion and Analysis of Results of Operations and Financial Condition presented in our Annual Report on Form 10-K for the year ended December 31, 2011.

INTRODUCTION

The purpose of the Management's Discussion and Analysis is to provide an understanding of our results of operations and consolidated financial position. Our Management's Discussion and Analysis should be read in conjunction with our consolidated financial statements and related notes, including those in our Annual Report on Form 10-K for the year ended December 31, 2011. When we provide information on a statutory basis, we label it as such, otherwise, all other data is presented in accordance with GAAP.

OUR BUSINESS

Founded in 1946 as United Fire & Casualty Company, we provide insurance protection for individuals and businesses through several regional companies. We are licensed as a property and casualty insurer in 43 states plus the District of Columbia and are represented by approximately 1,200 independent agencies. Our life insurance subsidiary is licensed in 36 states and is represented by more than 900 independent agencies.

Segments

We operate two business segments, each with a wide range of products:

• property and casualty insurance, which includes commercial insurance, personal insurance, surety bonds and assumed insurance; and

• life insurance, which includes deferred and immediate annuities, universal life products and traditional life (primarily single premium whole life insurance) products.

We manage these business segments separately, as they generally do not share the same customer base, and each has different products, pricing, and expense structures.

For the nine-month period ended September 30, 2012, property and casualty business accounted for 90.9 percent of our net premiums earned, of which 89.8 percent was generated from commercial lines. Life insurance business made up 9.1 percent of our net premiums earned, of which 70.7 percent was generated from traditional life insurance products.

Pooling Arrangement

All of our property and casualty insurance subsidiaries, with the exception of Texas General Indemnity Company,

are members of an intercompany reinsurance pooling arrangement. The insurance entities of Mercer Insurance Group participated in their own pooling arrangement in 2011, which was in place when we acquired Mercer Insurance Group on March 28, 2011. Effective January 1, 2012, one pooling arrangement covers all participating insurance subsidiaries of United Fire Group, Inc. Pooling arrangements permit the participating companies to rely on the capacity of the entire pool's capital and surplus, rather than being limited to policy exposures of a size commensurate with each participant's own surplus level.

Geographic Concentration

For the nine-month period ended September 30, 2012, premium revenues for our property and casualty insurance segment were generated from approximately 90 percent commercial lines business and 10 percent personal lines business. Our top five states for direct premiums written were Texas, Iowa, California, New Jersey and Missouri. In our life insurance company, according to statutory financial measures that include annuities as premium income, our top five states for business were Iowa, Minnesota, Illinois, Wisconsin and Nebraska, for the nine months ended September 30, 2012.

Segment Revenue and Expense

We evaluate segment profit or loss based upon operating and investment results. Segment profit or loss described in the following sections of the Management's Discussion and Analysis is reported on a pre-tax basis. Additional segment information is presented in Part I, Item 1, Note 6 "Segment Information" to the unaudited Consolidated Financial Statements.
Our primary sources of revenue are premiums and investment income. Major categories of expenses include losses and loss settlement expenses, future policy benefits, underwriting and other operating expenses and interest on policyholders' accounts.
Profit Factors
The profitability of our company is influenced by many factors, including price, competition, economic conditions, interest rates, catastrophic events and other natural disasters, man-made disasters, state regulations, court decisions, and changes in the law. Unless a connection between future increased extreme weather events and climate change is ultimately proven true, management believes that climate change considerations will not have a material impact on our profitability.
To manage these risks and uncertainties, we seek to achieve consistent profitability through strong agency relationships, exceptional customer service, fair and prompt claims handling, disciplined underwriting, superior loss control services, and effective and efficient use of technology.

CONSOLIDATED FINANCIAL HIGHLIGHTS
                                Three Months Ended September 30,               Nine Months Ended September 30,
(In Thousands)                  2012              2011           %             2012           2011(1)         %
Revenues
Net premiums earned      $    176,531          $ 158,704        11.2  %   $    508,124      $ 425,118        19.5  %
Investment income, net
of investment expenses         28,665             26,926         6.5            86,560         81,730         5.9
Net realized investment
gains
Other-than-temporary
impairment charges                  -                  -           -                (4 )            -           -
All other net realized
gains                           1,300              1,219         6.6             4,662          4,996        (6.7 )
                                1,300              1,219         6.6             4,658          4,996        (6.8 )
Other income                       85                725       (88.3 )             584          1,610       (63.7 )
                         $    206,581          $ 187,574        10.1  %   $    599,926      $ 513,454        16.8  %

Benefits, Losses and
Expenses
Losses and loss
settlement expenses      $    119,756          $ 120,861        (0.9 )%   $    318,006      $ 332,854        (4.5 )%
Future policy benefits          9,815              9,167         7.1            28,309         25,229        12.2
Amortization of deferred
policy acquisition costs       36,167             43,022       (15.9 )         104,897        112,800        (7.0 )
Other underwriting
expenses                       20,496             14,101        45.4            63,031         44,878        40.4
Interest on
policyholders' accounts        10,327             10,897        (5.2 )          31,610         32,224        (1.9 )
                         $    196,561          $ 198,048        (0.8 )%   $    545,853      $ 547,985        (0.4 )%

Income (loss) before
income taxes             $     10,020          $ (10,474 )     NM(2)      $     54,073      $ (34,531 )     NM(2)
Federal income tax
expense (benefit)               1,290             (5,698 )     122.6            11,443        (17,651 )     164.8  %
Net income (Loss)        $      8,730          $  (4,776 )     NM(2)      $     42,630      $ (16,880 )     NM(2)

(1) The information presented for 2011 includes Mercer Insurance Group's results after the March 28, 2011 acquisition date.
(2) Not meaningful.

The following is a summary of our financial performance for the three- and nine-month periods ended September 30, 2012:

Consolidated Results of Operations

For the three-month period ended September 30, 2012, net income was $8.7 million, compared to a net loss of $4.8 million for the same period of 2011, driven primarily by growth in property and casualty premium revenue, combined with a reduction in the combined ratio. Consolidated net premiums earned increased to $176.5 million, compared to $158.7 million for the same period of 2011. This increase represents organic growth and is the result of a combination of rate increases across most commercial and personal lines, growth in premium audit collections, and new business writings.

For the nine-month period ended September 30, 2012, net income was $42.6 million, compared to a net loss of $16.9 million for the same period of 2011. Like the quarterly results, the improvement was driven by growth in property and casualty premium revenue and a reduction in the combined ratio. Year to date consolidated net premiums earned increased to $508.1 million, compared to $425.1 million for the same period of 2011 due in part to the acquisition of Mercer Insurance Group in March 2011, which accounted for $34.9 million of additional earned premium. Our organic growth was $48.1 million over the same period of 2011.

Losses and loss settlement expenses remained flat between the third quarter of 2012 compared to the third quarter of 2011, in spite of the growth in premium noted above. This was due to reduced catastrophe loss experience, offset by an increase in severity in the other liability and workers' compensation lines of business. Pre-tax catastrophe losses totaled $8.5 million compared to $23.9 million in the third quarter of 2011. In the third quarter of 2011, we recorded

losses from two storms; a straight-line windstorm known as a derecho hit Iowa, and a wind and hail event affected United Fire policyholders in Western Iowa, South Dakota, Nebraska and Northwest Missouri.

Losses and loss settlement expenses decreased to $318.0 million for the nine-month period ended September 30, 2012, compared to $332.9 million for the same period of 2011. The decrease is due to primarily to reduced catastrophe loss experience. Pre-tax catastrophe losses totaled $34.5 million for the nine-month period ended September 30, 2012, compared to $77.0 million in the same period of 2011. Through September 30, 2011, in addition to the third quarter catastrophe losses, we also experienced severe storm losses that occurred during the second quarter and assumed reinsurance losses related to the New Zealand earthquake and the earthquake and tsunami in Japan that occurred during the first quarter.

Effective January 1, 2012, we adopted the updated accounting guidance that limits the amount of underwriting expenses eligible for deferral on a prospective basis. The adoption of the updated accounting guidance resulted in the recognition of approximately $9.9 million ($8.6 million for our property and casualty insurance segment; $1.3 million for our life insurance segment) of expense in the nine-month period ended September 30, 2012 that we would not have recognized had the accounting guidance remained unchanged. This represents a reduction to net income of $0.25 per share. Refer to the "Deferred Policy Acquisition Costs" under "Note 1 of the Notes to Unaudited Financial Statements" for further discussion of the impact of the updated accounting guidance related to deferred policy acquisition costs on our reported results.

Consolidated Financial Condition

As of September 30, 2012, the book value per share of our common stock was $29.66. We repurchased 35,891 and 137,792 shares in the three- and nine-month periods ended September 30, 2012. Under our share repurchase program, which expires in August 2014, we are authorized to purchase an additional 1,332,087 shares of common stock.

Net unrealized investment gains totaled $149.3 million as of September 30, 2012, an increase of $25.0 million, net of tax, or 20.1 percent since December 31, 2011. The increase in net unrealized gains resulted from an increase in the fair value of both our fixed maturity and equity portfolios.

Our stockholders' equity increased to $753.8 million at September 30, 2012, from $696.1 million at December 31, 2011. The increase was primarily attributable to net income of $42.6 million and net unrealized investment gains of $25.0 million, net of tax, less stockholder dividends of $11.5 million.

RESULTS OF OPERATIONS

Property and Casualty Insurance Segment Results
                                      Three Months Ended September 30,            Nine Months Ended September 30,
(In Thousands)                            2012                 2011                  2012                2011(1)
Net premiums written (2)           $       155,433       $       143,412      $       500,303       $       413,165
Net premiums earned                $       161,232       $       144,065      $       461,902       $       384,838
Losses and loss settlement
expenses                                  (114,846 )            (115,127 )           (302,376 )            (316,916 )
Amortization of deferred policy
acquisition costs                          (34,060 )             (40,547 )            (98,355 )            (105,663 )
Other underwriting expenses                (16,332 )             (11,050 )            (50,353 )             (35,576 )
Underwriting gain (loss) (2)       $        (4,006 )     $       (22,659 )    $        10,818       $       (73,317 )

Investment income, net of
investment expenses                         11,051                 8,085               33,409                26,273
Net realized investment gains
(losses)
Other-than-temporary impairment
charges                                          -                     -                   (4 )                   -
All other net realized gains                 1,214                   692                1,769                 2,293
                                             1,214                   692                1,765                 2,293
Other income                                   (19 )                 504                  177                 1,042
Income (loss) before income taxes  $         8,240       $       (13,378 )    $        46,169       $       (43,709 )

GAAP Ratios:
Net loss ratio                                65.9 %                63.3 %               58.0 %                62.4 %
Catastrophes - effect on net loss
ratio                                          5.3                  16.6                  7.5                  20.0
Net loss ratio                                71.2 %                79.9 %               65.5 %                82.4 %
Expense ratio (3)                             31.3                  35.8                 32.2                  36.7
Combined ratio                               102.5 %               115.7 %               97.7 %               119.1 %

(1) The information presented for 2011 includes Mercer Insurance Group's results after the March 28, 2011 acquisition date.
(2) The Measurement of Results section of this report defines data prepared in accordance with statutory accounting practices, which is a comprehensive basis of accounting other than U.S. GAAP.
(3) Includes policyholder dividends.

Net premiums earned increased 12 percent in the third quarter of 2012, compared to the third quarter of 2011, due to organic growth, rate increases and an increase in audit premiums. Audit premiums result from business policies that are audited after the policy period to determine accurate premiums based on sales or payrolls or endorsements. An increase in audit premiums indicates that our commercial customers are increasing their business.

Commercial lines renewal pricing experienced mid-single digit percentage increases for the fourth consecutive quarter. Competitive market conditions continued to ease on renewals, but persisted on new business during the quarter. In addition to the increase in audit premiums, we are also seeing growth in premium from policy changes and a decline in the number of out-of-business policy cancellations. Personal lines pricing has also improved, with upper-single digit percentage increases for homeowners and low-to-mid single-digit percentage increases for personal auto. Policy retention rates dropped slightly due to our rate increases.

The GAAP combined ratio decreased 13.2 percentage points for the three-month period ended September 30, 2012, compared with the same period of 2011. For the nine-month period ended September 30, 2012, our combined ratio decreased by 21.4 percentage points as compared to the same period of 2011. These decreases are attributable to reductions in net loss ratio and expense ratio from 2011.

The net loss ratio, a component of the combined ratio, decreased by 8.7 percentage points and 16.9 percentage points in the three- and nine-month periods ended September 30, 2012, as compared to the same periods in 2011. The decrease is due primarily to reduced catastrophe loss experience. Pre-tax catastrophe losses totaled $8.5 million and $34.5 million for the three- and nine-month periods ended September 30, 2012, as compared to $23.9 million and $77.0 million for the same periods of 2011. Through September 30, 2011, in addition to the third quarter catastrophe

losses, we also experienced severe storm losses that occurred during the second quarter and assumed reinsurance losses related to the New Zealand earthquake and the earthquake and tsunami in Japan that occurred during the first quarter.

Non-catastrophe loss severity declined in the second quarter compared to the first quarter of 2012. In the third quarter, however, we experienced an increase in the number and severity of losses in our other liability and workers' compensation lines of business losses that were within our retained limits.

The expense ratio, a component of the combined ratio, decreased 4.5 percentage points for both the three- and nine-month periods ended September 30, 2012, as compared to the same periods in 2011. The expenses associated with the acquisition of the Mercer Insurance Group increased the expense ratio reported for 2011.

As explained in "Deferred Policy Acquisition Costs" under "Note 1 of the Notes to Unaudited Financial Statements", we adopted new accounting guidance that limits the amount of underwriting expenses eligible for deferral, effective January 1, 2012. The adoption of the updated accounting guidance resulted in the recognition of approximately $1.4 million and $8.6 million of additional expense for the three- and nine- month periods ended September 30, 2012 in our property and casualty insurance segment.

The impact of the new accounting guidance on our results for the full year will be influenced by a number of factors including: the volume of premiums written; our assessment of successful acquisition efforts; the profitability of our lines of property and casualty business, which impacts the level of premium deficiency charge recorded; and the normal amortization pattern of these deferred policy acquisition costs, which is generally over one year. The greatest impact will be experienced in the most current quarter as the recorded deferred policy acquisitions costs would amortize to expense in succeeding quarters to offset a portion of the initial impact when assessed on an annual basis. Accordingly, the impact of the new accounting guidance on our results reported for the three- and nine-month periods ended September 30, 2012 should not be considered to be representative of the impact for the full year.

For a detailed discussion of our consolidated investment results, refer to the "Investment Portfolio" section of this item.

The following tables display our premiums earned, losses and loss settlement expenses and loss ratio by line of business:

Three Months Ended September

30,
                                      2012                                      2011(4)
                                      Losses                                     Losses
                                     and Loss                                   and Loss
                        Net         Settlement                      Net        Settlement
(In Thousands)       Premiums        Expenses         Loss       Premiums       Expenses        Loss
Unaudited             Earned         Incurred        Ratio        Earned        Incurred        Ratio
Commercial lines
Other liability (1) $  50,887     $     28,579         56.2 %   $  43,692     $   18,114         41.5  %
Fire and allied
lines (2)              33,574           24,637         73.4        31,556         37,710        119.5
Automobile             34,087           24,703         72.5        30,999         26,364         85.0
Workers'
compensation           17,606           16,933         96.2        14,257         11,572         81.2
Fidelity and surety     4,365            1,962         44.9         4,375            925         21.1
Miscellaneous             258              214         82.9           216           (134 )      (62.0 )
Total commercial
lines               $ 140,777     $     97,028         68.9 %   $ 125,095     $   94,551         75.6  %

Personal lines
Fire and allied
lines (3)           $  10,247     $     11,758        114.7 %   $  10,009     $   10,962        109.5  %
Automobile              5,711            3,562         62.4         5,012          5,025        100.3
Miscellaneous             235               42         17.9           226             90         39.8
Total personal
lines               $  16,193     $     15,362         94.9 %   $  15,247     $   16,077        105.4  %
Reinsurance assumed $   4,262     $      2,456         57.6 %   $   3,723     $    4,499        120.8  %
Total               $ 161,232     $    114,846         71.2 %   $ 144,065     $  115,127         79.9  %

(1) "Other liability" is business insurance covering bodily injury and property damage arising from general business operations, accidents on the insured's premises, and products manufactured or sold.
(2) "Fire and allied lines" includes fire, allied lines, commercial multiple peril, and inland marine.
(3) "Fire and allied lines" includes fire, allied lines, homeowners, and inland marine.
(4) The Form 10-Q we filed on November 7, 2011, contained a misclassification between two lines of business for net premiums earned and losses and loss . . .