A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of the property/casualty subsidiaries of United Fire Group, Inc. (UFG) [NASDAQ: UFCS] (collectively known as United Fire), which operate under an inter-company pooling agreement led by United Fire and Casualty Company. Concurrently, A.M. Best has affirmed the ICR of “bbb” of UFG. The outlook for these ratings is negative. At the same time, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of “a-” of United Life Insurance Company (United Life), a wholly owned subsidiary of UFG. The outlook for these ratings is stable. All companies are domiciled in Cedar Rapids, IA, except where specified. (See below for a detailed listing of the companies and ratings.) The ratings of United Fire reflect its solid risk-adjusted capitalization, diversified commercial product offerings, historically favorable core reserve levels and the financial flexibility afforded by UFG. United Fire’s ratings also reflect the continued advantages of its long-standing agency relationships and solid regional franchise, which was enhanced by the acquisition of Mercer Insurance Group, Inc. and its property/casualty insurance subsidiaries (Mercer) in March 2011. These positive rating factors are partially offset by the variability in United Fire’s underwriting and operating results in recent years, driven by adverse loss reserve development from Hurricane Katrina-related claims (in 2008 and 2009) and catastrophe and weather-related losses (in 2008 and 2011), the continuing challenging conditions in the organization’s key target markets and execution risk associated with the integration of Mercer into its operations. The rating of UFG recognizes the capital strength of its insurance subsidiaries, its modest financial leverage and adequate interest coverage measures. While A.M. Best believes UFG and United Fire’s ratings are well positioned at their current levels, factors that may lead to negative rating actions include a trend of deteriorating underwriting and operating performance to a level below peers, an erosion of surplus that causes a decline in risk-adjusted capital to a level that no longer supports the current ratings or if the group were to experience any adverse impacts with its ongoing integration of Mercer’s operations. However, factors that may lead to positive rating actions include maintaining strong risk-adjusted capitalization while reporting improved operating and underwriting results and the continued smooth integration of Mercer’s operations.