Shelter Insurance® Ranked by J.D

REFLECTIONS A MESSAGE FROM SHELTER’S BOARD OF DIRECTORS AND PRESIDENT & CEO

The award from J.D. Power featured in this year’s annual report is a tribute to the vision of excellent service Shelter’s founders had when they started our companies more than 70 years ago. While the award itself is impressive, it is the ongoing dedication and hard work of our agents and employees that make our customers willing to share such high praise. On behalf of the Board of Directors, we thank everyone for the excellent results generated in 2016. In this report you’ll learn about our expansion efforts, special events and our newest system updates as well as our financial reports. We remain committed to our promise of sound financial management practices as we look for ways to diversify our risk and invest in our employees and agents. The J.D. Power award is very special and worth celebrating. I am confident the current leadership team, employees and agents are not content to rest on their laurels. They will continue to innovate and grow, Don McCubbin which will enable Shelter to build successfully for the next 70 years and beyond. Chair of Board of Directors

For many years, Shelter Insurance® Even with a rise in weather losses and a challenging interest rate has utilized the twin pillars of financial environment, the Company managed to achieve solid financial strength and conservative management results for the year. Ending policyholders’ surplus remained practices to build a financially sound significantly strong at more than $1.87 billion, allowing us to and highly respected company while at continue investing in growth and modernization. the same time encouraging innovation and diversification and providing Shelter’s diversification efforts took a major leap forward in 2016 exceptional customer service to its when our first policy under the Say Insurance® brand was sold. policyholders. In 2016, those efforts Shelter Reinsurance continued providing reinsurance services were validated when our policyholders around the world. Now in its 30th year, Shelter Reinsurance shared their positive experience with received an upgrade in its issuer credit rating from “a” to “a+” from J.D. Power. Shelter Insurance® was A.M. Best. Our subsidiaries, Haulers and AmShield, continue to Rick L. Means advance despite challenges. President & CEO ranked highest in auto insurance customer satisfaction in the central region in the J.D. Power auto insurance survey. This honor is one I would like to give a special thank you to our policyholders who shared their experiences with J.D. Power and continued their that every Shelter agent, employee and retiree can take great ® pride in because it is directly attributable to their hard work and business relationship with Shelter Insurance . The trust you place commitment to excellence. in our Company is greatly appreciated and never taken for granted. Our employees and agents are also commended for continuing to The J.D. Power honor is not the only reason 2016 was an help us expand and grow as a company. I like to frequently remind excellent year for the Company. Shelter Mutual and Shelter Shelter’s leaders that the results we have experienced in 2016 do not General ended the year with more than $1.5 billion in net happen by accident. It is truly a team effort – a team I am extremely written premiums – an increase of more than five percent. proud of and very humbled to lead. We thank everyone for the excellent results generated in 2016. We remain committed to our promise of sound ﬁ nancial management practices as we look for ways to diversify our risk and invest in our employees and agents.

2016 BOARD OF DIRECTORS Shelter Makes Ingram’s List of Top 25 Brands in Missouri Kansas City based Ingram’s magazine published its second annual list of the Top 25 Brands in Missouri and Shelter Insurance® was chosen as a recipient of this honor. The publication highlighted Shelter’s history and growth as well as the company’s Missouri roots. To make this list, companies have to be headquartered in Missouri. From there, Ingram’s awarded points based on revenues, geographic reach, employment levels and civic engagement. At the time the list was announced, Shelter had $6 billion in assets, operated in 17 states, had 2,000 employees and the civic engagement opportunities continue to grow.

SHELTER INSURANCE® RANKED BY J.D. POWER AND ASSOCIATES Shelter’s commitment to exceptional customer service was honored in 2016 by J.D. Power. More than 44,000 consumers across 11 regions were surveyed between January and March 2016 about their opinions and experiences with their auto insurance provider. Shortly after the survey was completed, J.D. Power announced that Shelter ranked “HIGHEST IN CUSTOMER SATISFACTION AMONG AUTO INSURERS IN THE CENTRAL REGION.” This survey asked customers to rank insurance companies in the categories of overall satisfaction, policy offerings, price, billing, interaction and claims. “We’re thrilled that our customers ranked us so highly in this survey,” said Rick Means, President and CEO of the Shelter Insurance Companies. “We appreciate the hard work of the agents and employees who made this possible and are grateful to our customers for their trust.”

Shelter Insurance® received the highest numerical score among 15 providers in Central Region in the J.D. Power 2016 U.S. Auto Insurance Study, based on 44,681 total responses, measuring the experiences and perceptions of consumers with their auto insurer, surveyed January-March 2016. Your experiences may vary. Visit jdpower.com Shelter Insurance® Receives PCI Award for Insurance Legislative Advocacy In the last few years, Shelter has strategically enhanced its focus on their role as industry leaders in the world of political engagement. making our voice heard with legislators and regulators, working PCI chose Shelter for exemplary efforts, dedicated work and to block proposed laws that would be detrimental to insurance leadership in both state and federal political engagement. consumers, and writing and supporting the passage of laws that will benefit policyholders. Rick Means, President and CEO, Randa In particular, Shelter played a central role in PCI’s federal efforts Rawlins, Senior Vice President, General Counsel and Secretary, and Brian to pass international insurance standards legislation in 2016 by Waller, Vice President of Government Relations, have been increasingly consistently working with Congressman Blaine Luetkemeyer of engaged with legislative issues on the state and federal level, Missouri, Chair of the House Subcommittee on Insurance, to and their efforts were recognized by Property Casualty Insurers pass his bill, H.R. 5143, the “Transparent Insurance Standards Association of America (PCI). Act of 2016.” Mr. Means also wrote an op-ed that was published in the Columbia Tribune on the need for Congress to pass this In October, PCI President David Sampson presented Shelter legislation. Mr. Waller has been actively involved with issues with the 2016 President’s Award for Leadership in Advocacy at in several of Shelter’s operating states, working on both the PCI’s Annual Meeting in Dallas. This award recognizes member legislative and regulatory fronts. companies for their strong support of PCI’s advocacy efforts and NEW COMMERCIALS DEBUTED IN 2016 Shelter launched new Shelter Agents. In one of the commercials, a young boy exclaims commercials in 2016 that his Dad has “the coolest job ever!” In another, a young girl is and a new business drawing a comic book which features her Mom saving customers partner based in after an accident. In the third commercial, a boy tells his friend Columbia, Missouri that his Mom is a superhero, leaving his friend awestruck when helped save time she arrives to pick him up from school. and money without compromising quality. The ONLY A 30-SECOND COMMERCIAL.” production company, Chiameric, used “The production team brought us several concepts,” said Anna advanced cameras Hargis, Director of Advertising. “The superhero idea really and other equipment to produce the same high-end production jumped out at us considering how popular they are in our quality a production company in Hollywood would provide. entertainment today. We’ve put a lot of work into bringing these to life and I believe it’s going to be a campaign that catches It was cost-effective to film the new commercials in Columbia. people’s attention both on television and in our digital marketing This cost savings enabled Shelter to film a commercial launching efforts online.” the new roadside assistance service in May. In this commercial, the production company created rain on a dry evening. The Although it costs less to film the commercials closer to home, commercial features a mother stranded in her vehicle on the the amount of time and effort is the same. Each commercial side of the road with her baby. However, help arrived when she takes about a day to film and the crew is on the set from early called Shelter’s number for roadside assistance. in the morning until late at night. “I’m amazed at the number of people and the amount of equipment that goes into making A new set of commercials was completed in November based on thirty second commercials,” said Frank Thompson, Vice a superhero theme. The three commercials feature school aged President of Marketing. “It really is movie magic even if it’s only children’s impression of what they believe their parents do as a 30-second commercial.”

Roadside Service Addition Increases the Value of Shelter Auto Policies Most insurance companies offer some type of roadside assistance as an optional coverage to their customers. Shelter previously offered a product called Emergency Road Service (ERS). ERS was an auto coverage purchased by approximately 20% of auto customers. In 2016, Shelter’s leaders made the decision to replace the ERS coverage and provide roadside assistance coverage for no additional charge on personal auto policies. Shelter’s new roadside assistance service is provided by Road America and provides policyholders with up to $100 of coverage per incident. Additional coverage can be purchased up to $500 depending on the type of auto. Services include towing, fuel assistance, lockout service, flat tire service and battery jump start. As of December 31, 2016, the program had been used 17,995 times. REACHING THE SUMMIT! SBMI & INFORMATION SERVICES IMPLEMENT WORKDAY® Ask any member of Shelter Benefits Management Inc (SBMI) what their biggest initiative was in 2016 and the likely response will be the implementation of Workday® ERP application. This replaces many processes that were previously handled through Vista or required completion of paper forms. In 2014, Shelter implemented Workday® Financials for back-office functions. SBMI, Information Services (IS) and various business partners spent much of 2016 preparing for the transition of many HR functions and traditional paper forms to Workday®, a phased rollout was finalized and began on November 1, 2016. Phase I gave employees the ability to review their benefits and complete open enrollment for 2017. Phase I also enabled employees to review and update HR/employee information and add emergency contacts. Workday® will help eliminate more than 350 manual processes currently performed in Shelter’s benefits, payroll, human resource data management, and personnel management areas. Recruiting was also implemented in Phase I, which allows anyone to review and apply for open positions. To prepare employees for the transition to Workday®, SBMI and the Training Department held informational meetings to demonstrate many of the HR tasks that would be available. In addition, open labs were held to help employees walk through the Workday® system on a one-on-one basis. Phase II was implemented on January 1, 2017 and included payroll, time tracking and absence tracking. SHELTER REINSURANCE COMPANY CELEBRATES 30 YEARS In 2016, Shelter Reinsurance Company celebrated its 30th companies around the globe is why they received an “a+” year in business. Originally formed in 1986 to help diversify issuer credit rating from A.M. Best. Prompt claim payments, Shelter Mutual’s book of business, Shelter Re has grown into an exceptional customer service, financial stability and professional international reinsurance company, partnering with hundreds of staff are other important qualities that enhance their business companies around the world. and will help contribute to future success. Their long-term commitment of nurturing business The Shelter Re team planned several events throughout the year relationships and underwriting discipline has enabled them to to commemorate the anniversary, including planting a tree on remain financially strong. This strength, along with strategic the Shelter grounds. planning and partnering with sound, like-minded insurance

Shelter’s newest brand Say Insurance® is live in Illinois to create a new brand to better reach customers who want to buy online,” said President and CEO Rick Means. “I truly appreciate the effort of hundreds of Shelter’s employees who brought Say to life.” SAY’S MISSION IS TO PROVIDE AN INSURANCE EXPERIENCE THAT IS TRANSPARENT, CLEAR, RESPECTFUL AND USEFUL. By mid-September 2016, Say began marketing the brand to the Chicago area and even participated in some World Series advertising, which helped boost brand awareness. With the marketing strategy ® Shelter General Insurance made its debut into the digital focused on tech-savvy, online shoppers, Say Insurance advertising is realm of auto insurance in August 2016 when it launched Say primarily featured in the digital world across multiple devices. ® Insurance , its new, direct-to-consumer brand. Aimed to serve With simplified language and a customer-centric focus, Say’s drivers who prefer buying and handling their insurance online, mission is to provide an insurance experience that is transparent, Say currently offers auto insurance in Illinois, with plans to clear, respectful and useful. That means every interaction with expand to Colorado, Missouri and Tennessee in 2017. Say includes a layer of knowledge and empowerment, so drivers “Our research has shown that customers have a clear preference in can feel good about knowing what they’re paying for and why. how they choose to buy auto insurance, and it became necessary Simple and clear, that’s the Say difference. EPN Continues to Grow in 2016 As part of a diversity initiative in 2013, Shelter created the Emerging Professionals Network (EPN). EPN is an avenue employees have to connect with each other across departments. It also provides opportunities for personal and professional growth and development, leadership, education and community service. EPN is now beginning its fourth year and going strong. In 2016, the group continued with Lunch & Learns, webinars and an annual Development Seminar. Members also volunteered in the community in a variety of ways including working at the Food Bank, participating in Cleanup Columbia, helping serve Lunch in the Park, volunteering as Player Buddies for Daniel Boone Little League’s Challenger Division, playing in Job Point’s “Company Feud” fundraiser, sponsoring an Angel Tree and much more. Other networking opportunities included the popular Color Run, the Poker Walk, bowling and laser tag at Lazer Lanes, a night at Paint the Town, a trip to Hermann, Missouri for AmShield - Oktoberfest, and helping with Goblins in the Garden. Expanding Shelter’s Options As of December 31, 2016, there were 320 members at the AmShield Insurance® is Shelter’s newest subsidiary and home office and 305 field members of EPN. was established to further diversify risk. AmShield plans to begin selling policies through independent agents starting in the western United States. Product offerings include auto, homeowners, renters, condo and more. The first state targeted for this is effort is Arizona. AmShield received a financial strength rating of “A” for Excellent from A.M. Best and is well positioned to grow in the coming years. MARKETING CONFERENCE AWARDS TO THE RIGHT: COMPANY AGENT OF THE YEAR WINNER, TIM BREWER AGENCY

Each year, Shelter Insurance® holds its Conference of Champions Besides the Company Agent of the Year, agents who won other to recognize the top-performing agents in various areas during a awards were recognized, including State Agents of the year, qualifying period. The 2016 Conference of Champions was held in District Sales Manager of the Year, Rookie of the Year, President’s Los Cabos, Mexico at the Grand Fiesta Americana Resort and Spa. Plaque and Life Star. The Cargile Agency received the President’s Champions were recognized for their achievements during the Plaque and Life Star awards. Lauren Hahs-Gilchrist and Sandra Award Gala on the second night. The evening was capped off with Hahs (Affiliate) in Memphis, Tennessee received the Rookie of the announcement of the Company Agent of the Year, Tim Brewer the Year award. Joe Howard and Jami Ward (Affiliate) in Broken of Heber Springs, Arkansas. Champions closed out the Conference Arrow, Oklahoma were the runners up. The District Sales with a seaside dinner and dance with the setting sun as a backdrop Manager of the Year was Wayne Lawson of Jonesboro, Arkansas. to the evening.

PRESIDENT’S PLAQUE ROOKIE OF THE YEAR AWARD DISTRICT SALES MANAGER OF THE YEAR CARGILE AGENCY LAUREN HAHS-GILCHRIST & SANDRA HAHS WAYNE LAWSON State Agent of the Year Award BRANCH OF EXCELLENCE Each year, the Claims department honors its three top branch offices with Tim Brewer Agency Arkansas Branch of Excellence Awards. The awards are based on goals created from Joe Yamen Agency Iowa Shelter’s Four-Legged Stool Motto: Darin Potts Colorado Mike Coleman Illinois Brad Hancock Indiana HELP OUR COMMUNITIES. Trevor Harris Kansas SERVE OUR CUSTOMERS. Angela Craig Kentucky DO THE RIGHT THING. Dustin Goynes Louisiana WE Jason Rustin Mississippi While all the branches do an outstanding job, the three that received Branch of Geff Dunn East Missouri Excellence Awards for 2016 were the Lincoln, Nebraska, Jonesboro, Arkansas and Springfield, Missouri branches. Derek Thomason West Missouri Brent Custer Nebraska Aaron Ruiz Oklahoma Jay Norman Tennessee

Life Star Award Derek Thomason Missouri Joe Yamen Iowa Heather Wright (Affiliate) Iowa Springﬁ eld Robert Murry Arkansas The Springfield, Missouri Branch once again demonstrated excellent customer service in 2016 with a 95.97% “Recommend to a Friend” rating and a “Claims Jay Norman Tennessee to Complaint” ratio of 505 to 1. They also exemplified outstanding community Angie Vaughan Missouri service while participating in community activities, including helping the United Brian McPherson Oklahoma Way, Leukemia and Lymphoma Society, Cherish Kids, Child Advocacy Center, and many more. Tim Brewer Arkansas Monica McClure (Affiliate) Arkansas The branch had seven employees who earned industry designations, showing their commitment to ongoing education and development. In addition, the Gary Richardson Louisiana branch collected over $2 million in net subrogation. This included nine adjusters Jason Rustin Mississippi each collecting over $100,000 in collision recoveries, with five of these topping over $200,000. They had four adjusters with 50 or more collision subrogation recoveries and 27 total property recoveries. The Springfield Branch has won the Central Region Branch of Excellence Award five out of the last 10 years, showing this is truly a team effort and continuing their commitment to excellence. Lincoln Excellent customer service demonstrated by a “Claims to Complaint” ratio of 370 to 1, along with outstanding cycle times on auto and property claims helped the Lincoln, Nebraska co- workers earn a 2016 Branch of Excellence Award. The Lincoln Branch handled claims covering over 133,626 square miles across two states, Nebraska and Iowa. They were also one of the most accurate branches in reserving losses, a critical element in the claims handling process. While working diligently to achieve these goals, they also Jonesboro volunteered their time supporting their communities in many charitable efforts. In fact, on the day they received this award, The Jonesboro, Arkansas Branch demonstrated excellent the entire branch was planning to spend several hours of their service in 2016, achieving an 89.17% “Recommend to a Friend” afternoon supporting the People’s City Mission in Lincoln. This rating—the best in their region. They improved their “Claims is the second time in the last four years that Lincoln has earned to Complaint” ratio by 71% over 2015. In addition, the branch the Western Region Branch of Excellence. recovered over $1.6 million in net subrogation. This included eight adjusters who collected over $100,000 in Collision recoveries each, and one adjuster who topped $200,000. For Property subrogation, seven adjusters made property recoveries with one adjuster collecting over $200,000. Outside of the stats, the branch participated in more than a dozen different and diverse fundraising campaigns, showing a very heartfelt compassion for their community. The Jonesboro achievement was truly a team effort. Their focus and collective contributions to the values that exemplify the Branch of Excellence is what set them apart. 2016 United Way Campaign Made it Easy! Employee Contribution The theme for the 2016 United Way campaign at Shelter was “Make It Easy” and $161,435 the co-chairs of this year’s campaign, Priyanka Coats of Training, Lesley Hane of Accounting, and Lance Cox of Underwriting, not only made it easy—they also made it fun. They started with a preliminary Lip Sync battle featuring nine contestants and concluded with three finalists who competed during the closing ceremony. This set the tone for the year’s campaign. The traditional activities continued—an ice cream social, sale of casual day passes, parking spot raffle and online auction. This year also brought new ways to contribute with Laid Back Family Feud, Easy Does It Days, an Easy Street Raffle and a Change is Easy challenge. Kudos to the co-chairs and to Mike Trammell of Home Office Claims who served as the Companies’ loaned executive to the Heart of America United Way, and to Ruth Meentemeyer of Accounting who served as accounting representative for the campaign. Total Campaign: $243,638

Corporate Contribution $36,000 Special Events $34,548

REPRESENTED BY A MEMBER OF UPPER MANAGEMENT, LOSING TEAMS OF THE “CHANGE IS EASY” Retirees

CHALLENGE (THOSE WITH THE LOWEST AMOUNT OF CHANGE COLLECTED) WERE REQUIRED $5,855 TOTALS 2016 CONTRIBUTION TO KISS A PIG AT THE CLOSING CEREMONY. PIG-KISSERS INCLUDED BILL TURLEY OF THE LAW Foundation Match DEPARTMENT, SHAWN KNAUTS OF MARKETING, AND BILL GOINGS OF FOOD SERVICES. THE WINNER WAS MARSHA CARTER OF SHELTER LIFE. BILL TURLEY IS PICTURED ABOVE. $5,800 347 hours contributed from the ﬁ eld over 1,210 Shelter Cares 1,972 volunteer 125 total hours hours volunteers from donated the ﬁ eld 164 monthly volunteer 769 hours $ total volunteers

In 2016, Shelter Cares coordinated approximately In addition to the volunteer activities Shelter Cares 1,210 volunteer hours for Central Missouri Food coordinated and communicated, 165 volunteers from Bank, the United Way Day of Caring Project, Cleanup various departments and professional organizations Columbia, the Salvation Army Red Kettle Campaign, within Shelter contributed another 415 volunteer Lunch in the Park, Shelter’s Fountain Celebration hours to various community betterment projects. Games, and Shelter’s Goblins in the Garden Event. SHELTER CARES SHELTER EMPLOYEES DRESSED IN RED, WHITE AND BLUE TO GATHER AROUND THE SHELTER FOUNTAIN FOR A FUNDRAISER TO SEND J’DEN’S FAMILY TO BRAZIL FOR THE OLYMPICS. GIVING BACK TO OUR COMMUNITIES HAS ALWAYS BEEN AN IMPORTANT PART OF SHELTER’S CULTURE. IN FACT, IT’S PART OF OUR VISION.

CHARITY DOESN’T STOP AT THE HOME OFFICE EITHER—OUR FIELD OFFICES PUT IN TIME VOLUNTEERING FOR VARIOUS CAUSES IN THEIR OWN COMMUNITIES. DIVERSITY INITIATIVES CONTINUE IN 2016 Shelter Insurance® values diversity and inclusion, and 2016 brought about new programs to further our Corporate Diversity and Inclusion Strategy. The addition of new programs meant the level of oversight required to ensure continued growth and progress increased. In order to successfully move these efforts forward, a full time Manager of Diversity and Inclusion was hired. Brian Jones was promoted to the position and has provided valuable oversight of several of Shelter’s new efforts and continuation of ongoing diversity initiatives. One of the new programs implemented in 2016 is the Success Grants program. This program is a partnership between Shelter and the City of Columbia to improve neighborhoods that have been identified as needing help with social equality, public safety, economy, infrastructure and operational excellence. These grants provide $1,000, renewable for up to four years, to three eligible students who live in one of the identified neighborhoods, have excellent character, meet the GPA requirements, have an interest in making their neighborhoods safer and more vibrant, are interested in creating a project for the neighborhood that initiates positive interaction while being mentored by the Columbia Police Community Outreach Unit or by a City staff member and are planning to start post-secondary education in the Fall of 2017.

2016 DIVERSITY INTERNS PARTICIPATE IN THE WEST MIDDLE SCHOOL STUDENT COUNCIL JAY MACLELLAN HANDS SCHOLARSHIP TO DIVERSITY INTERNSHIP WORKSHOP MEMBERS RAISE THE PARTNERS IN ED FLAG RECIPIENT MARISSA KRAUS Programs Continuing Other Happenings to Grow and Thrive Springdale Claims team held its first Diversity Open House to connect with the community The Reverse Mentoring Program continued with two sessions in 2016. This program helps increase relationship Two “Let’s Talk” sessions were held to help those in attendance building and knowledge sharing within Shelter and promotes understand social issues occurring both locally and globally in an continued professional development. effort to stop hate and help heal The Supplier Diversity program implemented last year was A new employee resource group called SWAG (Shelter Women’s reviewed and showed that many key existing partnerships are Advocacy Group) is in development. The group plans to with certified diversity vendors, including a relationship with provide professional development, personal enrichment, and two investment vendors which affected more than $1 billion of networking. SWAG is open to all Shelter employees, both men Shelter’s trades. and women. The Diversity Internship program continued. One of the interns introduced a new look to the Diversity website section and created a video for the Diversity Internship page on ShelterInsurance.com. 2016 - $935,500 2015 - $860,500 SCHOLARSHIPS AWARDED SHELTER FOUNDATION SETS NEW RECORD FOR SCHOLARSHIPS 2016 was a record year for scholarship awards from Shelter. Each year, the Shelter Insurance Foundation awards a wide variety of scholarships to students throughout our operating region. In 2016, a total of $935,500 in scholarship money was awarded to 448 deserving students. This is the most scholarship money the Shelter Foundation has awarded in its 32 year history. Agent Scholarship Program Shelter’s largest program is the Scholarship Program for Agents, Other Scholarships which is funded by agents and the Shelter Foundation. It is offered • B.M. SEAMAN SCHOLARSHIPS to graduating high school seniors in the agent’s local community. These $2,000 scholarships are awarded annually to In 2016, 401 students each received a $2,000 scholarship through two LaPlata, MO High School seniors. this program, for a total of $802,000. This is an 8.7% increase over the 2015 total of $742,000, due primarily to the generosity • LANG AWARD of our agents. 273 agents participated in 2016, which was 91 A $500 scholarship was awarded this year to an more since 2011. outstanding vocational education graduate of Missouri School for the Deaf in Fulton, MO. • WEST MIDDLE SCHOOL SCHOLARSHIPS Scholarship Program for Children Two 8th grade students at West Middle School of Shelter Employees and Agents are awarded a $2,000 scholarship each year. The The Shelter Foundation also sponsors a scholarship program for scholarships are scheduled for payment in the fall children of Shelter employees and agents. In 2016, 41 scholarships semester immediately following the student’s high were awarded through this program valued at $3,000 each, for school graduation. West Middle School is Shelter’s a total of $123,000. This was the 15th year Shelter offered this Partner in Education. scholarship. An Independent Selection Committee appointed by the • MAC SCHOLARS SCHOLARSHIP Shelter Foundation selected the winners in a random drawing held This was the third year for the Shelter Insurance at the Home Office on April 15, 2016. Foundation to award a $2,000 scholarship to one Columbia Public Schools high school graduate who is an active member of the Multicultural Achievement Committee (MAC) Scholars Program. MAC Scholars is Shelter’s Partner In Education. SHELTER PARTNERS WITH BOONE ELECTRIC FOR COMMUNITY SOLAR PROJECT On April 20, 2016, Boone Electric Cooperative be willing to pay more to receive their energy through held a ceremonial groundbreaking for their solar.” Many people can’t install solar panels on their 400-panel Community Solar Farm. Shelter is a homes for fi nancial reasons, but this project offers tax equity investor in the project, and Dogwood an alternative way for members to use solar power Solar installed the panels. Representatives from without installing the panels on their own homes. both Shelter and Dogwood Solar were on hand for the ribbon cutting ceremony. The Community Solar Farm was completed in August. The panels were installed on the north side Boone Electric Cooperative has been looking at of Boone Electric’s offi ces and are able to supply renewable energy sources for its members for power to about 14 homes. To learn more about years. One of the options they researched was this project, visit booneelectric.coop/content/ the addition of a solar panel project. Joel Bullard, community-solar-project. This partnership is part of president of Boone Electric’s board of directors Shelter’s ongoing effort to conserve resources and said, “30% of our members indicated they would help Columbia be more environmentally-friendly. SHELTER TRADITIONS CONTINUE Each year, Shelter holds events that are open to the community as well as some just for employees and their families. Events include the Annual Fountain Celebration in the spring, Shelter Gardens Concert Series during the summer, Goblins in the Garden in the fall, Shelter Christmas Tree lighting in early December, and the Symphony of Toys at the end of the year. COMMITMENT TO MANAGEMENT EXCELLENCE Shelter Insurance Companies are governed by a nine-member Board of Directors empowered to provide policy decisions and general oversight of the Companies’ operations. Key responsibilities include reviewing corporate strategy and business plans and appointing offi cers. Three directors are elected annually by policyholders at the annual policyholders’ meeting. Each director is elected for a three- year term. In addition, the Board appoints four committees to directly assist the Board in fulfi lling its responsibilities: the Investment Committee, the Executive and Compensation Committee, the Corporate Governance Committee and the Audit Committee.

While all four committees are important, the Audit Committee in particular is charged with performing three functions: serving as an objective party to monitor Shelter’s ﬁ nancial reporting process and internal control system; appointing, reviewing, and assessing the independent audit ﬁ rm; and providing an avenue of open communication among the independent auditors, internal auditors, senior management and the Board.

Other senior management committees are established according to critical management issues. These committees are overseen by executive management. The goal of the Board and other committees is to ensure a management structure that provides effective oversight and is responsive to key issues on behalf of the employees, agents and customers of the Shelter Insurance Companies. 2016BOARD OF DIRECTORS

DON A. MCCUBBIN RICK L. MEANS ANDRÉS JIMÉNEZ Chair and Director Vice Chair and Director Director

J. DAVID MOORE DEBORAH L. DOUGLAS DAVID R. MONDAY Director Director Director

STEPHEN E. ERDEL H. BAKER KURRUS MADISON “MATT” MOORE Director Director Director SHELTER SHELTER GENERAL MUTUAL INSURANCE SHELTER INSURANCE COMPANY LIFE COMPANY INSURANCE COMPANY

AMSHIELD SHELTER INSURANCE ENTERPRISES, COMPANY LLC SHELTER INSURANCE® SHELTER SHELTER INVESTMENTS, GROUP OF REINSURANCE LLC OPERATING COMPANY COMPANIES In Gold - All rate “A” Excellent as determined by A.M. Best DANIEL As of December 31, 2016 HAULERS BOONE INSURANCE AGENCY, COMPANY LLC INC.

SHELTER SHELTER FINANCIAL BENEFITS SERVICES, MANAGEMENT INC. INC. SHELTER INSURANCE FINANCIAL STATEMENT For more than 70 years, Shelter has provided a variety of insurance products and services to our customers. Shelter has grown to be one of the nation’s most successful and finacially sound regional insurance groups.

($ IN THOUSANDS) 2012 2013 2014 2015 2016 P&C POLICY COUNT 1,939,305 1,965,949 2,002,413 2,049,378 2,083,700 P&C NET EARNED PREMIUM $ 1,346,540 1,406,110 1,463,936 1,529,383 1,616,765 LIFE EARNED PREMIUM $ 129,227 114,071 115,289 119,900 126,697 LIFE INSURANCE IN FORCE $ 21.8 billion 22.6 billion 23.7 billion 24.8 billion 26.0 billion POLICYHOLDERS EQUITY $ 1,397,888 1,566,904 1,682,712 1,787,842 1,877,141 EMPLOYEE & AGENTS 3,752 3,807 3,881 3,914 3,954

ASSETS UNDER MANAGEMENT COMBINED INCOME BEFORE TAX *Includes Shelter Retirement Plan and Shelter Foundation

$4.4 Billion 2012 $114 Million

$4.6 Billion 2013 $136 Million

$4.9 Billion 2014 $138 Million

$5.0 Billion 2015 $181 Million

$5.2 Billion 2016 $138 Million MUTUAL AND GENERAL OPERATIONS Net direct written premiums before voluntary reinsurance assumptions increased 5.1% compared to 2015 and were $1.504 IN IA billion. Premiums have continued to rise as a result of rate increases IL 3% 2% during the past years with the 2016 rate of change on average 2% premium per policy increasing by 3.3%. During the year, there CO

were 360,648 newly issued policies and ending policy count was 4%

up 33,071 policies for the year. As of December 31, 2016, Shelter KS 7 % Mutual and General reported over two million total policies K Y outstanding. Retention dropped slightly from 86.6% to 86.2%. 6%

L Incurred weather losses during 2016 were more significant when A 6 compared to 2015. For 2016, such losses were $281 million, %

representing 19% of earned premiums versus 15% last year. % M Non-weather losses had a greater impact to underwriting due 8 1 S

to a 7% increase in severity year over year on a similar number 6 R

% of reported claims. Ending non-weather losses were around A MUTUAL & GENERAL $698 million, up $40 million from 2015.

WRITTEN PREMIUM These entities added $26 million to the voluntary pre-event T BY STATE reserves, which adds 1.9% to the combined ratio. Without such N reserves, the combined ratio was 101%. In total, a balance of 6 % $112 million in the earthquake reserve and $97 million in the weather reserve is available to offset significant losses in future % 6 periods. Five years of consecutive additions to the weather O 2 K O 1 M reserve has allowed it to build up quite substantially. NV 2% 0% Underwriting expenses of 26.7% of written premiums were reasonable for the year. The total underwriting loss was $53.5 million, representing a 102.9% combined ratio. After the application of investment and other income the companies NE returned net income before tax of $71 million. This resulted in five 2% consecutive years of positive net income for these core operations.

Shelter Mutual and Shelter General Property and Casualty Products Shelter’s exclusive agents offer the following property and casualty products: AUTO PROPERTY LIABILITY BUSINESS Private Passenger Auto Homeowners Personal Umbrella Business Owners Commercial Auto Mobile Homeowners General Liability Commercial Fire Motorcycle Farmowners Comprehensive Farm Liability Commercial Inland Marine Recreational Vehicle Dwelling Fire Cargo Farm Fire Apartment Owners Personal Inland Marine Boatowners Property and Casualty Net Earned Premium and Policy Count Mutual and General ($ IN THOUSANDS) 2012 2013 2014 2015 2016 Net Earned Premium $1,216,150 $1,275,422 $1,327,683 $1,395,653 $1,465,584 Percent Change 3.95% 4.87% 4.10% 5.12% 5.01%

Policy Count 1,905,000 1,931,000 1,967,000 2,013,000 2,046,000 Percent Change 0.52% 1.32% 1.86% 2.35% 1.64%

NetAssets Income Under Management Before Taxes (in(in Billions) Millions)

$128.0$128 NET $103.3$103 WRITTEN $89.4$89 $81.7$82 $71.4$71 PREMIUM 3% 2% 2%

2012 2013 2014 2015 2016 AUTO FARMOWNERS HOMEOWNERS COMMERCIAL MULTI PERIL OTHER PROPERTY OTHER

Surplus As Regards Policyholders Pre-Event Castastrophe Reserves AssetsShelter Under MutualManagement Assets Under Management Surplus as Regards Policyholders (in(in Billions) Millions) (in(in Billions) Millions) (in Millions) $1,877 Earthquake $1,778 Weather $1,683 $1,567 $97 $76 $1,398 $55 $36 $17

$112 $91 $97 $102 $107

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 SHELTER MUTUAL INSURANCE COMPANY Statements of Admitted Assets, Liabilities, and Surplus (Statutory Basis) YEAR ENDED DECEMBER 31

(IN THOUSANDS) 2016 2015 ADMITTED ASSETS BONDS $ 1,754,717 $ 1,572,115 INVESTMENTS IN AFFILIATES 735,025 697,118 COMMON STOCKS, UNAFFILIATED 306,115 318,708 OTHER INVESTED ASSETS 296,900 274,445 REAL ESTATE 33,350 33,844 CASH AND SHORT-TERM INVESTMENTS (53,010) (20,301) TOTAL CASH AND INVESTED ASSETS 3,073,097 2,875,929

PREMIUMS RECEIVABLE 140,351 129,809 DEFERRED INCOME TAX ASSET 52,638 56,033 OTHER ASSETS 22,479 25,760 ACCRUED INVESTMENT INCOME 16,255 15,427 INCOME TAX RECOVERABLE 693 17,049 TOTAL ADMITTED ASSETS $ 3,305,513 $ 3,119,977

LIABILITIES AND SURPLUS UNEARNED AND ADVANCE PREMIUMS $ 553,768 $ 531,389 UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES 521,562 491,269 CATASTROPHE RESERVES 206,878 181,162 ACCRUED EXPENSES 71,405 86,676 OTHER LIABILITIES 51,615 33,933 BORROWED FUNDS 23,144 17,327 TOTAL LIABILITIES 1,428,372 1,341,756

TOTAL POLICYHOLDERS’ SURPLUS 1,877,141 1,778,221

TOTAL LIABILITIES AND SURPLUS $ $3,305,513 $ 3,119,977 SHELTER GENERAL INSURANCE COMPANY Statements of Admitted Assets, Liabilities, and Net Worth (Statutory Basis) YEAR ENDED DECEMBER 31

(IN THOUSANDS) 2016 2015 ADMITTED ASSETS BONDS $ 106,691 $ 111,875 INVESTMENTS IN AFFILIATES 13,843 13,301 OTHER INVESTED ASSETS 3,477 3,343 CASH AND SHORT-TERM INVESTMENTS 691 (773) TOTAL CASH AND INVESTED ASSETS 124,702 127,746

PREMIUMS RECEIVABLE 5,053 4,506 OTHER ASSETS 2,225 1,993 INCOME TAX RECOVERABLE 950 1,125 TOTAL ADMITTED ASSETS $ 132,930 $ 135,370

LIABILITIES AND NET WORTH UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES $ 45,101 $ 47,530 UNEARNED AND ADVANCED PREMIUMS 13,832 12,944 OTHER LIABILITIES 3,815 3,806 CASTASTROPHE RESERVES 2,024 1,812 ACCRUED EXPENSES 1,268 1,308 TOTAL LIABILITIES 66,040 67,400

NET WORTH 66,890 67,970

TOTAL LIABILITIES AND NET WORTH $ 132,930 $ 135,370 HAULERS INSURANCE COMPANY, INC. (HICI) HICI recorded over $39 million of direct written premium, an increase of 6.2% from the previous year, with net earned premium increasing 3.7% to more than $37 million as a result of continued geographic expansion and diversification into South Carolina, Georgia and Alabama. During 2016, the Company’s product offering expanded to writing motorcycle insurance in Tennessee, Alabama, Missouri and Indiana. Policies in force overall grew 3.6% to 37,406. Incurred losses of $25 million were down slightly from 2015 due to lower severity and frequency. This resulted in an underwriting loss for the year of $2.3 million, an improvement of almost $2 million from the previous year. The Company ended the year with net income before tax of $1.5 million, up from break even last year. Over the past five years HICI has consistently grown its written premium, surplus and asset levels. HICI received a financial strength rating of A (Excellent) by AM Best. The Company’s premium to surplus ratio was a respectable 96.8%, a strong position for a predominately auto insurance writer.

IL IN

VA MO Earned Premium (in Millions) TN SC

AL $37.3 GA $34.6 $36.0 $32.0 $29.2

HICI OPERATING TERRITORY 2012 2013 2014 2015 2016 HAULERS INSURANCE COMPANY, INC. Statements of Admitted Assets, Liabilities, and Net Worth (Statutory Basis) YEAR ENDED DECEMBER 31

(IN THOUSANDS) 2016 2015 ADMITTED ASSETS BONDS $ 61,640 $ 62,285 CASH AND SHORT-TERM INVESTMENTS 2,229 2,082 REAL ESTATE 876 893 TOTAL CASH AND INVESTED ASSETS 64,745 65,260

PREMIUMS RECEIVABLE 8,437 7,532 ACCRUED INVESTMENT INCOME 540 564 OTHER ASSETS 503 634 TOTAL ADMITTED ASSETS $ 74,225 $ 73,990

LIABILITIES AND NET WORTH UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES $ 21,410 $ 23,521 UNEARNED AND ADVANCED PREMIUMS 12,856 12,081 OTHER LIABILITIES 889 446 TOTAL LIABILITIES 35,155 36,048

NET WORTH 39,070 37,942

TOTAL LIABILITIES AND NET WORTH $ 74,225 $ 73,990

Total Assets Net Worth (in Millions) (in Millions) $74 $74 $71 $39.1 $37.6 $37.9 $66 $35.3 $35.8 $58

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 SHELTER LIFE INSURANCE COMPANY Premium and annuity considerations for Shelter Life increased In total, the Company ended the year with over $24 million of 5.3% over the previous year to almost $127 million. Policy count net income before tax and net worth of $196 million. Shelter increased by over 12,000, ending the year with almost 304,000 Life continues to hold a financial strength rating of A (Excellent) life policies in force. The Company added $1.2 billion to life by A.M. Best. This rating provides further evidence of the insurance in force for a total of $26 billion. strength and stability of Shelter Life Insurance Company. Even though asset balances have grown almost 15% since 2012 due to good cash flows, the continued low interest Products Offered - Life rate environment has negatively impacted overall yields to 20-Pay Whole Life the investment portfolio and hence net investment income EZ Term® was similar to last year and was reported at $42 million. The Junior Special continued low interest rate environment also drove the previous Level Term to Age 100 (10, 20, 30 years) need for the Company to establish asset adequacy reserves in ® 2014 and 2015 of $14.5 million and $7 million, respectively. Platinum Shield IV Universal Life No additional reserve was compulsory for 2016. As a result, the Secure Whole Life increase in aggregate reserves for life and accident and health Shelter Express Term® contracts decreased by $7.2 million from the previous year, Whole Life allowing the financial results to return to more of an normal Yearly Renewable Term level for the Company.

Total Assets Life Insurance in Force (in Millions) (in Billions) $26.0$26.0 $24.8$24.8 $23.7$23.7 $22.6$22.6 $1,199 $21.8$21.8 $1,118 $1,157 $1,045 $1,078

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Premium and Annuity Considerations Net Income Before Taxes (in Millions) (in Millions) $104.2 $98.5 $104.1 $24.3 $90.6 $94.9 $22.2 $19.8

$12.2

$24.2 $22.4 $20.4 $21.4 $22.6 $0.4

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 First Year Renewal SHELTER LIFE INSURANCE COMPANY Statements of Admitted Assets, Liabilities, and Net Worth (Statutory Basis) YEAR ENDED DECEMBER 31

(IN THOUSANDS) 2016 2015 ADMITTED ASSETS BONDS $ 1,038,583 $ 992,314 OTHER INVESTED ASSETS 49,115 47,185 POLICY LOANS 23,260 24,505 INVESTMENTS IN AFFILIATES 12,584 12,092 MORTGAGE LOANS ON REAL ESTATE, AFFILIATED 8,854 9,792 CASH AND SHORT-TERM INVESTMENTS 2,009 5,775 TOTAL CASH AND INVESTED ASSETS 1,134,405 1,091,663

DEFFERED AND UNCOLLECTED PREMIUMS 38,052 35,929 DEFERRED TAX ASSETS 10,497 13,953 ACCRUED INVESTMENT INCOME 10,049 10,635 OTHER ASSETS 5,929 5,219 TOTAL ADMITTED ASSETS $ 1,198,932 $ 1,157,399

LIABILITIES AND NET WORTH AGGREGATE RESERVES $ 909,886 $ 885,674 LIABILITY FOR DEPOSIT TYPE CONTRACTS 58,508 56,154 ASSET VALUATION RESERVE 10,782 9,237 POLICY AND CONTRACT CLAIMS 6,842 6,441 DUE TO AFFILIATED COMPANIES 2,967 3,453 OTHER LIABILITIES 13,943 12,309 TOTAL LIABILITIES 1,002,928 973,268

NET WORTH 196,004 184,131

TOTAL LIABILITIES AND NET WORTH $ 1,198,932 $ 1,157,399 SHELTER REINSURANCE COMPANY Shelter Reinsurance contributes to the Shelter Insurance® group in the areas of growth, diversification and excellent financial results. The CANADA Company has provided strong net underwriting gains in each of the 4.9% past five years. Net written premiums at $114 million were up 10% over 2015, due to the addition of new contracts or programs and an increased share on existing relationships. The total cost of losses and loss adjustment expenses incurred were $50 million resulting from several major events in 2016 including BERMUDA the Fort McMurray wildfire, with an estimated total incurred loss of 3.5% $9.3 million, followed by estimated losses of $8 million for Hurricane UNITED Matthew. Offsetting current year additions, the 2015 Chilean STATES earthquake event resulted in minimal losses and reserves were 24.6% reduced by $11 million. Shelter Reinsurance experiences changes in foreign currency valuations on both its balance sheet and statement of operations. Reserve balances CENTRAL benefited by over $1 million as a result. Overall, currency rates have AMERICA been decreasing over time for most of the major currencies. The 1.2% Company reported almost $33 million of underwriting gains and more than $45 million of net income before tax. For the past five years, the underwriting gains have totaled $137 million and represent an average of almost $27 million a year. These positive results have directly led to both increasing investment asset balances and net worth, along with continuing to strengthen Shelter Reinsurance’s strong, long-term presence in the marketplace. Potential new territories, clients and products are closely analyzed for acceptability and diversification. The Company’s continued reputation for prompt claims payment, exceptional customer service, professional staff and solid financial strength enables it to continue to diversify and support Shelter Insurance. Underwriting Gain Net Written Premium & Net Income (in Millions) (in Millions)

$114 $43 $45 $39 $102 $103 $103 $38 $98 $31 $32 $33 $26 $26 $20

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Net Underwriting Gain (Loss) Net Income (Loss) Before Taxes DISTRIBUTION OF SIGNED PREMIUM

UNITED KINGDOM 6.1%

EUROPE 27.9%

ASIA 5.6%

CARIBBEAN 10.8%

ISRAEL OCEANIA 12.1% 2.6%

SOUTH AFRICA 0.7%

Net Worth (in Millions) $326.8$327 Total Assets $296.7 $297 (in Millions) $447 $271.0$271 $422 $406 $245.4$245 $383

$322 $165.2$165

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 SHELTER REINSURANCE COMPANY Statements of Admitted Assets, Liabilities, and Net Worth (Statutory Basis) YEAR ENDED DECEMBER 31

(IN THOUSANDS) 2016 2015 ADMITTED ASSETS BONDS $ 398,510 $ 391,976 COMMON STOCKS 12,750 — CASH AND SHORT-TERM INVESTMENTS 8,636 9,045 OTHER EQUITY INVESTMENTS, AFFILIATED 699 677 TOTAL CASH AND INVESTED ASSETS $ 420,595 $ 401,698

FUNDS HELD ON REINSURANCE 17,921 11,149 ACCURED INVESTMENT INCOME 3,487 3,520 DEFERRED TAX ASSET 2,620 2,517 PREMIUMS RECEIVABLE 2,547 1,930 OTHER ASSETS 132 1,451 TOTAL ADMITTED ASSETS $ 447,302 $ 422,265

LIABILITIES AND NET WORTH UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES $ 94,482 $ 100,586 UNEARNED PREMIUM 21,452 22,310 OTHER LIABILITIES 4,582 2,690 TOTAL LIABILITIES 120,516 125,586

NET WORTH 326,786 296,679

TOTAL LIABILITIES AND NET WORTH $ 447,302 $ 422,265