Mutual Benefit Group

2017 Annual Report

®

From the President

The economic storm clouds began to accumulate in late 2007, and by late 2008 had exploded into a raging financial tempest, washing away half of the stock market’s value and flooding the world economy with a deluge of destructive economic decline and unemployment. In the period between 2010 and 2014, many of you were impacted by very severe weather, ranging from hurricanes and tornados to frigid blizzards and historically damaging hailstorms. Just as you may have been negatively impacted by these historically destructive economic and weather events, so was Mutual Benefit.

This company exists to help you recover from the damage that occurs as a result of a fire, storm, or accident. You count on us to respond to your loss, even when we face similar destructive circumstances. We’ve titled this 2017 annual report “Decade of Progress” to help you understand the progress that Mutual Benefit made financially even as we were responding to the worst financial environment and catastrophic weather events in most of our lifetimes.

As you look at the graphs that document our financial progress during the past decade, illustrated in this report, you can see some amazing results. Your policyholder surplus account grew by 62% regardless of the difficult economy and investment market trends during the first few years of the decade, and the extreme catastrophe events of the middle years. You now have more financial resources supporting your insurance protection needs than ever before. You can see the pattern of consistent surplus growth represented through the years. You can also see the same pattern of progress depicted for assets as well, with our year-end 2017 total approaching a quarter of a billion dollars. In 2017 we achieved a new record of $121 million dollars in premium. This is most rewarding for us, knowing that you have consistently favored us with your business.

I want you to understand that we haven’t achieved our progress alone. Our growing number of independent agent partners are right there with us helping to ensure that you have the appropriate coverage from Mutual Benefit to guarantee your recovery if misfortune occurs. Our independent agent partners are a truly trusted choice when it comes to providing counsel that will help secure your economic well-being and provide you with peace of mind.

As a mutual insurance company, we exist for you. We make careful and prudent decisions through time to guarantee that we’ll be there when you need us. In good years our surplus grows on your behalf to ensure performance in the lean years. We can do this consistently because we have no outside obligations as we would if we had to pay stockholder dividends.

We have been privileged to be your insurance company during these difficult past ten years. Just as we’ve made excellent progress in our effort to become an even stronger insurance partner, we will work just as hard to make the next ten years a new decade of progress.

Steven C. SliverPresident and CEO

Leadership

Timothy I. HaviceChair of the Board

Steven C. SliverPresident Chief Executive Officer

Kevin M. O’BrienChief Operating Officer Senior Vice President - Insurance

Peter M. McManamonSecretary

Robert R. PackerVice Chair of the Board

Joseph L. SloanVice PresidentTreasurerChief Financial Officer

Directors OfficersMark R. CumminsSparta, NJ

Debra A. Goodling-KimeDover, PA Timothy I. HaviceLewistown, PA

Janis HerschkowitzHummelstown, PA

Judy LoyPort Matilda, PA

Peter M. McManamonHuntingdon, PA

Robert R. PackerClymer, PA

Steven C. SliverHuntingdon, PA

Mark R.Cummins

Debra A.Goodling-Kime

Timothy I.Havice

JanisHerschkowitz

JudyLoy

Peter M.McManamon

Robert R.Packer

Steven C.Sliver

FROM CATASTROPHE...Rivaling the harsh economic climate of the past decade was the harsh atmospheric climate; Mutual Benefit saw its policyholders through three of the worst catastrophe storm claim years in the history of the Company. In 2011, Hurricanes Lee and Irene and an unusual October nor’easter wreaked havoc on communities in Pennsylvania and Maryland; in 2012, Superstorm Sandy delivered its considerable punch. And on May 22, 2014, an historic hailstorm hit Eastern Pennsylvania. Hail stones the size of tennis balls pummeled cars, roofs, windows, and aluminum siding for 45 minutes; a second storm rolled in not long afterward, raining down another barrage of icy rocks. For some insurance companies, that single stormy day produced 12 times the number of hail damage claims as they had handled during the entire previous year.

Dave McAfee, claims manager for Gallen Insurance in Shillington, PA, says that hailstorm was certainly one of the largest if not the largest in terms of volume of policyholders affected and claims reported that he’s seen in his 49-year career in insurance.

“We pride ourselves on being here for our insureds. During a storm like this, it is of utmost importance that we provide one-on-one service,” says Dave, whose most vivid memories of that time are the sheer volume of claims and the teamwork shown by the Gallen staff. “Once we realized the magnitude of the storm, everyone worked overtime during the initial phase to ensure that all customers were taken care of. We took the claims, explained the claim process, reported the claims, and for weeks and years - yes, years - thereafter acted as an intermediary, obtaining claim status when requested and aiding in working out disputes that arose during the claim handling/settlement process. The services we provide do not occur other than through the independent agency system.”

Mutual Benefit is proud to provide its coverage only through independent agents like Gallen. When consumers choose to rely on the financial strength of a mutual company, combined with the special brand of advocacy and expertise that only independent agents offer, they can recover from storms of all kinds with confidence.

from economic turmoil to unprecedented stabilityIn March 2008, Alan Greenspan, ex-chairman of the Federal Reserve, stated that the financial crisis in the U.S. at that time would “likely be judged in retrospect as the most wrenching since the end of World War II.” By February 2009, the stock market had plummeted 47% and the nation’s gross domestic product had contracted by 5%, making the Great Recession the most severe and longest-persisting economic downturn since the Great Depression. Some say America is only now recovering.

Despite the difficult financial and investment market trends of the past ten years, Mutual Benefit Group increased its policyholder surplus by 62% during the decade, posting a record-breaking $102 million in surplus by 2017. Surplus is what’s left after an insurance company’s liabilities are subtracted from its assets. The more surplus an insurance company amasses, the better prepared it is to absorb a shock like a severe recession or a devastating storm that could lead to thousands of policyholders filing claims at the same time.

“Our first obligation is to our policyholders, making sure we’re financially stable so we can be there for them when the unexpected happens,” says Mutual Benefit CEO Steve Sliver. “We kept our focus through the rough financial climate, making logical investment decisions, prudently assessing the risk we took on, providing excellent service to our policyholders as cost effectively as possible. Unlike a publicly owned insurance company that has to generate dividends for stockholders, a mutual company like ours is free to focus on the well-being of its policyholders, step by step making those daily decisions that lead to progress, financial strength, and security for those we serve.”

Dow JonesIndustrial

Average

U.S. GDP Growth

Rate

...to new beginnings“The progress Mutual Benefit has made during the past decade is certainly gratifying. But it doesn’t begin to compare with the pleasure we take in working with our agents to help families, businesses, and communities make progress following a loss,” comments Mutual Benefit CEO Steve Sliver. “One of my favorite claim comeback stories involves an historic property just a block from Mutual Benefit’s home offices…the Gage Mansion.”

A Victorian home built in1896 for railroad superintendent Colonel George F. Gage, the Queen Anne structure boasts 16 rooms featuring Italian marble, stained glass windows, and intricately hand-carved woodwork. Thanks to the quick response of volunteer firefighters, the structure survived an electrical blaze in 2010. At the time, the property served as a bed and breakfast and a private residence. The owner at the time had worked with State College insurance agency Central Insurers Group to see that the property’s unique needs as both a business and a home were properly covered; Central Insurers recommended Mutual Benefit’s specialty Bed & Breakfast coverage. Having the right coverage, the advice of an excellent agent, and the responsiveness of a financially strong insurance company made the complicated and delicate restoration a quick, smooth process. The bed & breakfast was back in business in just nine months.

In 2014, John and Angie Thompson, owners of Thomp-son Candle Company in Huntingdon, purchased the mansion. They, too, operate it as a bed & breakfast, but have expanded on the solid base of the 2010 restora-tion. The couple has further renovated the mansion, bringing its splendor into the 21st Century by adding six bathrooms, climate-controlled suites, and wifi. The Thompsons have built a reputation for the mansion as a getaway destination, a base for exploring the history of Huntingdon and the recreational opportunities surround-ing Raystown Lake. They’re bringing additional tourists into the area and partnering with other area businesses to boost the local economy.

...through strength, support, and compassionMutual insurance works because people agree to pool their resources so they can help one another in the event of a loss. It’s all about facing the risk together. That sense of “togetherness” and concern for others has always been part of Mutual Benefit’s corporate culture.

During the past decade, Mutual Benefit has been named to the list of Best Places to Work in Pennsylvania seven times. We believe that’s because we employ some of the best people around; compassionate, responsive people who care about policyholders’ concerns as if they were their own. Comments from agents and customers bear that out. One agent says he loves working with us because we always take the high road. A policyholder wrote to us after reporting her teenager’s car accident to tell us how touched she was that the first question out of our claim adjuster’s mouth was, “Is your son all right?”

We employ people who care. In turn, we let them know how much we appreciate and care for them. That attitude cascades into our customer service and support of agents. As our employees commented on Best Places to Work surveys this past decade: “We work in an environment that brings a sense of value to each of us”... “Everyone genuinely cares about everyone else”... “There’s a true sense of family working here”... “I’m seen as a multi-faceted person who has something to contribute, not just a cog in a corporate wheel.”

Our employees are one of the biggest reasons Mutual Benefit can look back on the past ten years as a decade of progress. With their strong work ethic, mutual support, and compassion for those they serve, we are confident the progress can only continue.

Gage Mansion 2010 - Photo by Huntingdon Regional Fire and Rescue Department

Gage Mansion owners John and Angie Thompson 2018 - Photo by Gary Miller

189.1 194.2 207.9 214.8

243.7

0

50

100

150

200

250

2009 2011 2013 2015 2017

Assets (millions)

105.4

109.2106.2

112.3

121.0

95

100

105

110

115

120

125

2009 2011 2013 2015 2017

Premium Writings (millions)

189.1 194.2 207.9 214.8

243.7

0

50

100

150

200

250

2009 2011 2013 2015 2017

Assets (millions)

105.4

109.2106.2

112.3

121.0

95

100

105

110

115

120

125

2009 2011 2013 2015 2017

Premium Writings (millions)

61.7 62.3

81.585.5

101.5

0

15

30

45

60

75

90

105

2009 2011 2013 2015 2017

Policyholder Surplus(millions)

Assets (000’s) 2017 2016Cash in Bank $ 3,400 $ 6,556Bonds (Amortized) $160,559 $151,562Stocks (Market) $ 40,518 $ 33,124Real Estate $ 6,550 $ 6,561Accounts Receivable $ 30,187 $ 31,882Reinsurance Recoverable $ 68 $ 473Accrued Interest $ 1,700 $ 1,654All Other Assets $ 720 $ 394

$243,702 $232,206

Liabilities (000’s) 2017 2016Reserve For Unearned Premium

$ 55,133 $ 53,270

Reserve For Loss and Adjusting Expense

$ 71,635 $ 72,571

Reserve For All Other Liabilities

$ 15,393 $ 13,776

Policyholder Surplus $101,541 $ 92,589$243,702 $232,206

61.7 62.3

81.585.5

101.5

0

15

30

45

60

75

90

105

2009 2011 2013 2015 2017

Policyholder Surplus(millions)

Assets (000’s) 2017 2016Cash in Bank $ 3,400 $ 6,556Bonds (Amortized) $160,559 $151,562Stocks (Market) $ 40,518 $ 33,124Real Estate $ 6,550 $ 6,561Accounts Receivable $ 30,187 $ 31,882Reinsurance Recoverable $ 68 $ 473Accrued Interest $ 1,700 $ 1,654All Other Assets $ 720 $ 394

$243,702 $232,206

Liabilities (000’s) 2017 2016Reserve For Unearned Premium

$ 55,133 $ 53,270

Reserve For Loss and Adjusting Expense

$ 71,635 $ 72,571

Reserve For All Other Liabilities

$ 15,393 $ 13,776

Policyholder Surplus $101,541 $ 92,589$243,702 $232,206

Company Overview• Rated A- (Excellent) by A.M. Best Company, the leading independent analyst of the insurance industry. • Represented by 224 independent insurance agents throughout Pennsylvania and Maryland. • Providing prompt, efficient claims service to nearly 75,000 policyholders through full-time staff adjusters and independent adjusting specialists. • Offering a full line of personal and commercial insurance coverages, including homeowners, automobile, commercial package plans, workers’ compensation, inland marine, and umbrella through Mutual Benefit Insurance Company and Select Risk Insurance Company.

409 Penn Street • PO Box 577Huntingdon, Pennsylvania 16652

www.mutualbenefitgroup.com