BULLETIN

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January 18, 2023

Western National Insurance Group 2023 Business Plan

For the prior two years, we’ve begun our Group’s annual Business Plan statement by addressing the COVID-19 pandemic and its disruptive impact on our employees, customers, and business. While the pandemic may not yet be officially declared “over”, as we begin 2023, it does seem likely that the worst is now behind us – albeit with some lasting impacts, including to the health and wellbeing of some and to the hybrid manner in which many across our Group complete their work. For all the challenges of the past three years, I can emphatically state that the resilience of our people and of our companies is a tremendous source of pride and strength upon which to renew our resolutions for the year ahead, and beyond.

Looking forward, our 2023 Business Plan is built on the following foundations:

Our strength as a mutual insurer derives from a distinct focus on our policyholders, for whom our business exists. We also value and renew our commitment to the Independent Agency distribution channel, which both provides our policyholders with expert counsel and choice, and helps our Group sustain its profitable growth. The cornerstone of being The Relationship Company® is being available and responsive to both our agents and policyholders, leading with “Nice” when they need us most.

We continue to witness more extreme and frequent weather events. These events, including wildfires, tornadoes, and severe thunderstorms are not historically accounted for in the weather models used by our reinsurers, who are vital stakeholders to help us manage volatility to protect our high surplus-to-premium ratio. To structure and afford reinsurance programs that account for these unmodeled risks going forward, our growth strategies must demonstrate responsible and diversified geographic spread of risk.

In recent years, we have absorbed the impact of elevated economic inflation and supply chain disruptions. We anticipate these influences will normalize in the relative near term. There is little to suggest the impact of social inflation won’t loom as people expect insurance to respond for purposes for which it was never designed. Courts and legislatures continue to render decisions and enact laws predicated on who can pay, rather than who should pay. Our product and pricing strategies need to maintain the momentum necessary to address these headwinds.

Before sharing the 2023 Performance measures, I will lead with the high-level People and Product initiatives which support our “Why” and “How”. In 2023, we will:

People

1. Reflect our deeply held Core Values (Connectiveness, Empowerment, and Accountability) in all our decisions and interactions with each other and with our customers.
2. Be deliberate about celebrating success often with both individuals and groups, and for milestone organizational accomplishments.
3. Expand learning initiatives, starting with a more robust and immersive onboarding experience for new employees.

Product

1. Launch our new home products and the balance of new personal lines products in 2023.
2. Restart our commercial lines systems transformation and define the roll-out timeline for all products and states.
3. Select a new General Ledger system for the enterprise.
4. Optimize both existing and additional technology solutions to improve resiliency, prevent/mitigate malicious attacks, and manage technical debt.

Performance

2023 financial performance targets:

1. Cirect Written Premium Growth = 10% over year-end 2022 DWP (including Commercial Lines at 11.5% and Personal Lines at 5.4%)
2. Underwriting Gain = $26.6M
3. Combined Ratio = 94.6%
4. Net Income = $63.6M
5. Surplus at Year-End 2023 = $835M
6. Maintain our standing as a Ward’s 50 Company for a 15th consecutive year
7. Maintain our A.M. Best A+ Superior Rating

We will continue to afford the flexibility of a hybrid work environment, combining the benefits of remote work with those of in-person presence as the needs of the organization require. We will continue to recruit top talent and find more ways to invest in our employees as people first by providing more reasons for them to stay over the long term. We will always hold ourselves accountable to achieve sustained, superior financial results. We will equally value how those results are achieved.

I am excited to share the journey ahead to achieve the ambitious goals we set for ourselves, all while navigating the challenges we can foreshadow and responding to those we know will be cast out of a clear blue sky.

Happy New Year!

Rick Long, President & CEO