ANNUAL REPORTM A Y 2 0 2 0

Dear Agency Partners,

I am extremely pleased to report to you that 2019 was the most profitable year in Stonetrust’s 27-year history. And although we are challenged now with the effects of the covid – 19 pandemic, we had a tremendous start this year and continue to make great progress toward achieving our goal of being evaluated as an “A” rated company by A. M. Best.

At year-end 2019, our written premium was $45.1 million with coverage offered in eight states to more than 4,300 policyholders. Last year we wrote more than $9

million in new business premium with almost $3 million written in our newest states, Missouri, Tennessee, and Nebraska. Our underwriting combined ratio was 89.1% with overall net income of $6.4 million and ending surplus of $84.4 million, which represented a total increase in surplus of more than $16 million from the prior year. I am also pleased to report net investment income of $3.7 million with total net admitted assets for the company of $188.5 million at year-end. Although price competition continues to be very challenging, we have done a great job of maintaining our underwriting discipline and have managed our claims extremely well.

As you can see from the attached press release dated April 30, 2020, A. M. Best has affirmed our Financial Strength Rating (FSR) of B ++ (Good) and our Credit Rating Outlook of Stable. In this year’s evaluation, our balance sheet strength assessment was improved from strong to very strong, which is the strongest level of risk-adjusted capitalization measured by Best’s Capital Adequacy Ratio (BCAR). The release also highlights our favorable loss reserving trends, our underwriting discipline, our loss control initiatives, and our cash flow adequacy as primary contributors to the improvement in our balance sheet strength. A M Best also approved our new preferred pricing tier company, Stonetrust Premier Casualty Insurance Company with an initial FSR rating of B ++ (Good) and a Credit Rating Outlook of Stable.

The significant improvements that we have made in our operations and in our overall capital structure have established the strong foundation needed to weather the challenges created by the pandemic. In 2020, we will meet these challenges head-on and continue to make progress on our plans to further diversify our revenue resources and to position the company for continued rating improvement. In August of this year, we will complete a comprehensive technology upgrade of our core policy administration and claims systems. We will also launch Stonetrust Premier Casualty Insurance Company and begin writing business in our 9th and 10th states, Alabama and Kansas. Even though 2020 has presented us with unprecedented challenges, we will continue our focus on profitability, building relationships, and “ease of doing business”, as we continue to pursue our vision of being the “first choice” workers’ compensation carrier in all of our markets.

On behalf of the Stonetrust Board of Directors, our owner Francis Chou, and our great Stonetrust employees, I want to thank you for your commitment and your partnership. We are extremely excited about the future and look forward to writing more workers’ compensation business with you.

Sincerely,

Michael G. Dileo, CPCUPresident and Chief Executive Officer

F I N A N C I A L R E P O R T 2 0 1 9

STATEMENT OF INCOME ($000) 12/31/2019 12/31/2018

Net Premiums Earned 43,753 47,026

Net Underwriting Gain (Loss) 4,749 1,750

Net Investment Gain (Loss) 3,674 3,483

Other Income (Expense) (40) (91)

Net Income (Loss) 6,395 4,537

CAPITAL AND SURPLUS ACCOUNT ($000) 12/31/2019 12/31/2018

Surplus as regards Policyholders, Dec. 31 prior year 68,276 72,060

Net Income (Loss) 6,395 4,537

Change in Non-Admitted Assets (74) 721

Change in net unrealized gains and losses 9,170 (8,137)

Other Changes in Capital and Surplus Account 679 (905)

Total Surplus 84,446 68,276

LIABILITIES AND POLICYHOLDERS’ SURPLUS ($000) 12/31/2019 12/31/2018

Unpaid Loss and Loss Adjustment Expenses 74,075 73,101

Unearned and Advance Premiums 19,708 19,896

Taxes, Licenses and Fees (Ex. Income Tax) 3,576 4,032

Net deferred tax liability 1,584 -

Commissions Payable 1,531 1,502

Other Liabilities 3,545 3,469

Total Liabilities 104,019 102,000

Total Policyholders’ Surplus 84,446 68,276

Total Liabilities and Policyholders’ Surplus 188,465 170,276

ASSETS ($000) 12/31/2019 12/31/2018

Bonds 79,099 55,352

Common Stocks 67,729 47,065

Preferred Stocks 5,664 9,194

Real Estate - -

Cash and Short-Term Investments 17,917 32,807

Other Invested Assets - 444

Receivables for Securities 1,304 4,852

Total Invested Assets 170,410 149,714

Premiums and Considerations 15,191 16,924

Net Deferred Tax Asset - 178

Other Assets - 3,460

Total Assets 188,465 170,276

S T O N E T R U S T C O V E R A G E T E R R I T O R Y

S T O N E T R U S T A V E R A G E M E D I C A L C L A I M C O S T S B Y A C C I D E N T Y E A R5 Y E A R F I N A N C I A L S U M M A R Y

2 0 2 1 - 2 0 2 2 N E W S TAT E E X P A N S I O NIowa, South Dakota, Georgia, Kentucky

5 6 1 5 C O R P O R A T E B L V D | S U I T E 7 0 0B A T O N R O U G E , L A 7 0 8 0 8

8 0 0 . 3 11 . 0 9 9 7 | S T O N E T R U S T I N S U R A N C E . C O M

S T O N E T R U S T S E E K S T O D E V E L O P A W O R K I N G R E L A T I O N S H I P W I T H E A C H P O L I C Y H O L D E R A N D P R O D U C E R T O A C H I E V E O U R M U T U A L G O A L O F W O R K P L A C E S A F E T Y A N D C L A I M S C O S T C O N T A I N M E N T .

- A C T I V E

- E X P A N S I O N

- N E W • 9 / 1 / 2 0 2 0