Fall/Winter Results & Initiative Update

A Message from Stu Henderson, President & CEO

It’s hard to believe that the holidays are already here – it feels like just yesterday we were announcing our 2016 plans! The good news is that, despite how fast the time has flown, we’ve made excellent progress toward accomplishing those plans (and had some good fortune on the weather front, too). While there’s still plenty of work to be done in these remaining weeks of 2016, we can reflect on a positive year that so far has included further growth, industry recognition (Ward’s 50 and an upgrade to “Positive” for our current A “Excellent” rating with A.M. Best), and a continued focus on the customer experience for the benefit of our agency partners and mutual policyholders.

Let’s take a quick look at the numbers (not including affiliate Michigan Millers and recently acquired Nevada General): Through October 31, written premium was at $482.3 million – behind goal, but we’re moving in the right direction and expect to be right on our $567 million (+9.1%) target. Our Group’s loss ratio was at 54.8% (vs. goal of 55.9%), our loss adjustment expense ratio was at 9.8% (vs. goal of 9.9%), and our underwriting expense ratio was at 27.0% (vs. goal of 26.2% and due to increased healthcare costs, IT projects/investments, and writing more business in higher commission lines) – adding up to a combined ratio of 91.6%. With the continued hard work of our employees and quality production and field underwriting from our agency partners throughout the rest of 2016, we’ll remain generally on track to meet our goals.

Beyond the numbers, our primary focus continues to be on enhancing the first-class experience our customers receive from Western National. To help support this strategy, we have recognized the importance of upgrading the back-end system we use to manage claims. We’ve recently selected a new system, and while it’s in the early stages of development, it will ultimately provide improved and more timely information to allow our claims professionals to better serve our customers. In addition, we’ve recently completed a project that will pull up customers’ policy information directly on our screens when they call our Customer Relationship Center and our system recognizes the phone number. We’re excited about these updates and look forward to the positive impact they will have on the overall experience for our policyholder and agency partners going forward.

As always, thank you for your partnership in the service of our mutual policyholders. I look forward to reporting on a successful

year-end in the weeks ahead, and I wish you and your families a happy holiday season.

~ Stu Henderson