ANNUAL REPORT 2015 Shelter Insurance Companies BUILT ON STRENGTH BUILDING FORTOMORROW ® Contents 2 A Word to Our Policyholders 4 Company News 12 Dedication to Our Communities 19 Company Overview 32 Directors & Officers Mission Statement Shelter Insurance® will be a dynamic group of Companies focused on providing financially secure insurance protection and services to individuals and businesses, a quality working environment, emphasis on easy-to-use services, a commitment to continuous improvement, and a passion for pleasing our customers. 2015 ANNUAL REPORT SHELTER INSURANCE COMPANIES 1 Reflections from the Chair of Shelter’s Board of Directors The theme of this year’s Annual Report is Built on Strength…Building for Tomorrow. I believe this theme is perfect for a year that included significant physical changes to Shelter’s facilities as well as the continued building of new brands and Companies within our group. The commitment to innovation within our Companies is only possible because of the strong financial foundation Shelter enjoys today. On behalf of the Board of Directors, we applaud the spirit of innovation building in our agents and employees, led by our Management Team. In this report you’ll learn more about our foray into the world of Agile development processes from an IT perspective. We’re updating and improving our facilities, providing employees a more modern Don McCubbin, Chairman of the workspace that improves energy efficiencies and ergonomics. The Companies and brands Board of Directors, retired from we’re building will improve our geographic expansion efforts and our new product Shelter in 2012 as an Executive distribution opportunities will expand growth potential significantly. Best of all, we’re Vice President. He had 45 years of managing these new initiatives while achieving the best levels of customer service we service in various roles with Shelter have ever provided, as well as continuing our tradition of outstanding financial results. and has served on the Board of Directors since 2003. We will continue to build upon the hard work started nearly 70 years ago. I’m confident the current Management Team, employees and agents will build on that foundation of strength for many years to come. Don McCubbin Chair of Shelter's Board of Directors 2015 Board of Directors Retirees J. Donald Duello Barry L. McKuin Chair and Director Vice Chair and Director Don Duello retired after more than Barry McKuin retired after more 17 years of service on Shelter's Board than 15 years of service on Shelter's of Directors. After more than 32 years Board of Directors. as an employee, Don Duello retired as Chief Executive Office in 2007. 2 SHELTER INSURANCE COMPANIES 2015 ANNUAL REPORT MessageMessage from from President President and and CEO CEO Rick Rick Means Means: The Shelter Insurance Companies continued I continue to communicate our vision statement to employees and to enjoy unprecedented growth and financial agents, using the analogy of a four-legged stool – with each leg stability in 2015. We are building on our foundation representing a core value. The four legs of the stool include: of financial strength and a tradition of sound 1. First and foremost, we sell insurance. management practices as we encourage innovative 2. We are a service organization. Day in and day out we ideas for our future. It’s truly an exciting time to be provide top notch service. part of the Shelter team. 3. We support the communities we live in by being a good corporate citizen. 4. Our most important value is to do the right thing. The growth in policy count in 2015 combined with a moderate storm season and better than expected catastrophe results has Our communication efforts with this message are resonating and led us to one of the strongest financial positions we’ve ever I hear references to it frequently in meetings, presentations and experienced. We ended the year with more than $1.4 billion even individual conversations. in Shelter Mutual and General direct written premium – an increase of more than four percent. Our system of establishing Two members of our Board of Directors retired from the Board voluntary catastrophe reserves is still unique in our industry and in 2015 – Don Duello and Barry McKuin. Their leadership the combination of our severe weather and earthquake reserves through the years has helped Shelter through the best and worst provides more than $180 million of surplus set aside in the event of times. They have earned a respected place in the history of of major disasters. Shelter policyholders can rest assured that our our Company. We also welcome our newest board members surplus is extremely strong with almost $1.8 billion. Even in an H. Baker Kurrus and Matt Moore and congratulate our newly interest rate environment that remains low and negatively impacts elected Board Chair Don McCubbin. our investment efforts, we have managed exceptionally strong financial results. I’d like to thank our policyholders for their continued trust. We understand the significance of that responsibility. I also thank Our agents and employees remain our greatest asset and their our retirees for the foundation they’ve given us with their years hard work is the reason Shelter is strong and growing for the of service. We must also thank the employees and agents for their future. We continue to retain exceptional individuals not only ongoing efforts and commitment to innovation. As we build due to our innovative new projects, but also to our exceptional together upon the foundation we’ve been given, we will see an benefits programs. In addition to the many financial reports even stronger future emerge. shown here, you’ll also see how Shelter teams across our operating territory gave back to the communities they live in. I am overwhelmed by their generous spirits. Rick Means President & CEO 2015 ANNUAL REPORT SHELTER INSURANCE COMPANIES 3 Shelter Develops Say Insurance™ for Direct- AmShield Insurance™ - to-Consumer Auto Insurance Building a New Company Shelter Insurance® began work in 2014 on a new auto AmShield Insurance™ insurance product to be offered through an online site and continued to build a call center. In 2015 a name and other branding materials upon the foundation were prepared as well as the many systems that will support started in 2014 for this the sale and service of insurance when it is launched in new Shelter Company. 2016. The new brand will do business under the name AmShield will sell policies through Say Insurance™ and is designed to appeal to a specific target market that prefers to do independent agents starting in the business directly with insurance carriers. western United States. Product offerings include auto, homeowners, renters, An interdepartmental Shelter team made significant progress in 2015 on an interactive condo and more. Coverage will be sold website for product sales and self-service. Major technological upgrades currently in using ISO policy forms and a new policy progress to Shelter’s customer service center will enhance our ability for direct sales administration system is being built to as well. Cutting-edge customer service and marketing software were reviewed and support the business. purchased and are being implemented for the launch. Team members from Actuarial, Underwriting, Claims, Accounting, Marketing and other departments are all working An interdepartmental Shelter team on the new project. Several new positions were created and hired in 2015 including a continues adapting the policy Marketing Manager, a Marketing Production Coordinator and others. These positions administration system, billing processes, claims handling, marketing, independent are specifically dedicated to the Say Insurance™ team. agent recruitment, training and much more. A.M. Best rated AmShield A Shelter continues to work with advertising agency, Barkley, based in Kansas City, on for Excellent so the Company is well marketing and innovation ideas for the new product. The Barkley team provided the positioned to grow in the coming years. Say Insurance™ logo, branding and style guidelines, as well as several key research pieces related to the consumer’s journey through sales and service. True Media, based in Columbia, is a current vendor for a portion of Shelter’s current external media buys and was chosen as the media buying agency for Say Insurance.™ The new product launch is targeted for Fall 2016 in Illinois. ` 2015: A Year of Change for Customer Services New technology, new surroundings, new numbers and new ideas were the story for Customer Services in 2015. In February, Interactive Voice Response (IVR) was implemented, which resulted in reduced call handling time. In April, the department moved to the lower level of the home office. The new space is state-of-the-art and will allow for business continuity if there are tornado warnings in the area. Other interesting facts for 2015: In addition to IVR, technology was used for a variety • We had 17,675 self-service calls - of other things, such as: mostly customers making payments. • Analytics to help with call volume forecasting and • Service levels were 90.51%, meaning 90.51% of calls advanced scheduling. were answered within 40 seconds. This is the best it’s • Enhanced scheduling options for CSRs - The CSR ever been. with the best call handling statistics gets to choose • The abandon rate was reduced to 3% from their shifts for the upcoming week. 6%, meaning 16,000 fewer calls were abandoned. • Advanced call recording, MP4 audits and screen • Customer Services Representatives (CSRs) capture help with quality assurance. handled a total of 548,763 calls, 91,000 of which • Speech Analytics – This technology reviews every were policy changes. call to identify key words and phrases. This • Customer Account Representatives wrote $20 enables identification of “champagne moments” million in annual premiums. and alert notifications for case management.