ANNUAL REPORT - Western Reserve Group

2012
ANNUAL
REPORT

TAbLE Of cONTENTs
President’s Message 2
About Western Reserve Group 3
Financial Highlights 4
Selected Financial Data 5
Combined Statutory Statements of Income 6
Combined Statutory Statements of
Admitted Assets, Liabilities and Surplus 7
Directors and Officers 8
10 1

PREsidENT’s mEssAgE
At Western Reserve Group (Group) our mission has been to meet and exceed the expectations of our policyholders and
customers in their time of need. For over 106 years the Group has provided the highest quality property/casualty insurance
products. This, combined with sound financial decisions and embracing change by adapting our processes to ever-changing
technology, enhances our policyholders’ and customers’ experiences.
2012 was a year of milestones, challenges, successes and achievements. In early 2012 a significant milestone occurred as John Murphy, the Group’s
long-time President and CEO, announced his retirement. John successfully served as President and CEO since 1985. Over that time, the Group
increased its gross written premiums from $42 million to $188 million, increased its policyholders’ surplus from $38 million to $229 million and ended
with record assets of $402 million. Led by John’s passion and vision, the Group expanded its geographic footprint into Indiana and solidified its
commitment to independent agents through investment in technology. John will continue to provide valuable guidance and counsel as a member of the
Group’s Board of Directors.
A challenge that again appeared in 2012 was the continuation of severe weather events. Ohio experienced one of the worst weather loss years in
its history. The June 2012 “Derecho” was one of the most destructive and fast-moving severe thunderstorm complexes in North American history, and
approximately two-thirds of Ohio experienced widespread power outages. In Indiana significant wind and tornado events in March 2012 tore apart
towns and caused widespread damage and destruction. These and other weather events throughout 2012 impacted the Group, resulting in posting
record net weather losses and the second highest combined ratio in the Group’s history.
However, despite record weather losses, the Group achieved financial success in several areas. The financial condition and capital adequacy
continued to outperform the industry as evidenced by a superior premium to surplus ratio. Policyholders’ surplus ended the year at $229.0 million, a
decrease of only $0.2 million or 0.1%, despite record underwriting losses. Additionally, strong stock market returns resulted in total assets finishing
2012 at a record $402.3 million. Though the core insurance business was challenging in 2012, the security and safety you depend upon from the
Group remained strong.
In addition to the Group’s capital strength resilience, direct written premium reached a record high of $188.3 million, a 7.7% rate of growth. Over
the last five years, policy count has grown 9.0%, including commercial lines at 14.7%, farm at 10.8% and personal lines at 8.0%. We have
now experienced 17 straight quarters of premium growth, and this success could not have been achieved without the strong relationships with our
independent agents.
Our team is proud of our long-term history of financial strength and stability. As we enter 2013 with an optimistic outlook for our future, I want to thank
our agents and associates for their loyalty and trust in the Group.
2

AbOUT ThE WEsTERN REsERvE gROUP
For 106 years, Western Reserve Group (Group), working with professional independent agents, has
provided the highest quality property/casualty insurance products, competitive pricing, and exemplary
service to hundreds of thousands of policyholders.
Headquartered in Wooster, Ohio, with a regional claims office in Lebanon, Indiana, the Group is
supported by 262 employees and over 2,500 licensed agents from over 600 locations.
The Group consists of Western Reserve Mutual Casualty Company, Lightning Rod Mutual Insurance
Company, and Sonnenberg Mutual Insurance Company, three Ohio-domiciled property/casualty
insurance companies.
As a regional carrier doing business exclusively in Ohio and Indiana, the Group has developed
extensive expertise and understands the unique needs that exist for our customers. Whether it be for
auto, home, business, or farm, we have programs to protect them all.
visiT OUR WEbsiTE AT
WWW.WRg-iNs.cOm
10 3

4
fiNANciAL highLighTs
Thanks to strong financial performance, loyal independent agents, and dedicated employees,
Western Reserve Group is poised to deliver on its promise of protection while also investing in the future.
• 2012 -­‐ $402.3
• 2011 -­‐ $389.7
• 2010 -­‐ $383.9
• 2009 -­‐ $372.9
• 2008 -­‐ $357.4
• 2012 -­‐ 111.7%
• 2011 -­‐ 108.5%
• 2010 -­‐ 106.0%
• 2009 -­‐ 106.7%
• 2008 -­‐ 106.7%
Total
Assets
(in millions)
Combined
RaKo
Surplus
(in millions)
Direct
WriEen
Premium
(in millions)
• 2012 -­‐ $229.0
• 2011 -­‐ $229.2
• 2010 -­‐ $229.6
• 2009 -­‐ $224.8
• 2008 -­‐ $213.7
• 2012 -­‐ $188.3
• 2011 -­‐ $174.8
• 2010 -­‐ $163.2
• 2009 -­‐ $152.7
• 2008 -­‐ $147.8

WRG
sELEcTEd fiNANciAL dATA
(IN THOUSANDS)
Years ended December 31
2012 2011 2010 2009 2008
Operating Data
Direct written premium 188,279 174,754 163,215 152,712 147,833
Net written premium 174,652 163,600 155,829 144,880 140,219
Premiums earned 167,951 157,699 150,466 141,462 140,058
Net underwriting gain (loss) (21,704) (15,352) (10,984) (10,786) (9,489)
Investment income, net 9,074 9,297 9,123 8,854 10,101
Realized impairment losses* - - - - (12,467)
Realized investment gains (losses), net 986 2,652 1,725 1,255 1,003
Net income, pre-tax (9,061) (818) 2,055 1,509 (8,709)
Net income (8,553) 638 2,695 4,435 (9,152)
* The Group recorded $12.5 million of impairment losses in December 2008 required by statutory accounting as a result of the significant decline in the equity
markets. Absent the impairment losses, the Group had capital gains of $1.0 million and net income of $3.1 million.
As of December 31
2012 2011 2010 2009 2008
Balance Sheet Data
Cash and invested assets 351,126 344,597 343,149 333,741 317,212
Total assets 402,331 389,671 383,889 372,893 357,439
Surplus as regards policyholders 229,041 229,208 229,551 224,756 213,706
Years ended December 31
2012 2011 2010 2009 2008
Ratios
Loss ratio 68.0 65.3 60.7 60.4 61.9
Loss adjustment expense 10.7 9.3 9.8 10.4 11.4
Underwriting expense 33.0 33.9 35.5 35.9 33.4
Combined ratio 111.7 % 108.5 % 106.0 % 106.7 % 106.7%
10 5

6
WRG
cOmbiNEd sTATUTORy
sTATEmENTs Of iNcOmE
(IN THOUSANDS)
Years ended December 31
2012 2011
Underwriting gain (loss):
Net written premium $174,652 $163,600
(Increase) decrease in unearned premiums (6,701) (5,901)
Premiums earned 167,951 157,699
Losses and expenses incurred:
Losses 114,127 102,934
Loss adjustment expenses 17,942 14,738
Underwriting expenses 57,586 55,379
Losses and expenses incurred 189,655 173,051
Net underwriting gain (loss) (21,704) (15,352)
Investment income:
Interest 7,942 8,198
Dividends 3,571 3,365
Real estate income (primarily rent for own occupancy) 900 900
Realized gains on investments, net 986 2,652
Total investment income 13,399 15,115
Less: Investment expenses 3,339 3,166
Net investment income 10,060 11,949
Net income:
Other income, net 2,583 2,585
Income (loss) before federal income taxes (9,061) (818)
Federal income tax benefit 508 1,456
Net income (loss) $(8,553) $638

WRG
cOmbiNEd sTATUTORy sTATEmENTs Of
AdmiTTEd AssETs, LiAbiLiTiEs ANd sURPLUs
2012
(IN THOUSANDS)
As of December 31
2011
Admitted Assets
Bonds, at amortized cost
Stocks:
Preferred, at market
$194,691 $196,238
(cost $3,154 and $3,154, respectively)
Common, at market
4,312 3,398
(cost $72,431 and $66,416, respectively)
Real estate, at cost less accumulated
116,218 105,218
depreciation of $4,962 and $4,530, respectively 13,558 14,002
Cash and short-term investments 12,977 16,547
Other invested assets 9,370 9,194
Total cash and invested assets 351,126 344,597
Premiums in course of collection, net 41,193 38,228
Accrued investment income 2,046 2,146
Reinsurance recoverable on paid losses 3,069 1,753
Federal income tax recoverable - 34
Deferred tax assets 4,356 2,464
Other assets 541 449
Total admitted assets $402,331 $389,671
Liabilities and Surplus
Loss and loss adjustment expense $65,207 $60,641
Unearned premiums 82,736 76,035
Ceded reinsurance balances payable 1,422 548
Amounts withheld for others 10,258 11,263
Commissions payable 5,062 4,147
Accrued expenses and taxes, other than income tax 6,796 6,429
Other liabilities 1,809 1,400
Total Liabilities 173,290 160,463
Surplus 229,041 229,208
Total Liabilities and Surplus $402,331 $389,671
10 7

diREcTORs ANd OfficERs
(L to R) Robert P. Bogner, Eddie L. Steiner,
Kenneth L. Vagnini, Kevin W. Day,
Ronald E. Holtman, C. Michael Reardon,
John P. Murphy
(L to R): Gary W. Gwinn, Greg A. Brunn,
Kevin W. Day, Michael A. Shutt, Gregory J. Owen
8
DIRECTORS:
Robert P. Bogner
Retired (formerly Secretary and Treasurer of Bogner
Construction Company)
Eddie L. Steiner
President and CEO, CSB Bancorp Inc.
Kenneth L. Vagnini
National Accounts Manager, PSC Metals Inc.
Kevin W. Day
President & CEO of Western Reserve Group
Ronald E. Holtman
Partner in law firm of Logee, Hostetler,
Stutzman & Lehman, Chairman of the Board of Western
Reserve Group
C. Michael Reardon
Chairman and President, United Titanium
John P. Murphy
Retired (formerly President/CEO and Secretary of
Western Reserve Group)
EXECUTIVE LEADERSHIP:
Gary W. Gwinn
Vice President, Claims
Greg A. Brunn
Vice President, Marketing and Underwriting
Kevin W. Day
President & CEO
Michael A. Shutt
Vice President, Finance, Chief Financial Officer,
and Treasurer
Gregory J. Owen
Vice President, Information Technology
ASSISTANT VICE PRESIDENTS:
Adrian Besancon
Assistant Vice President, Investments
Dave Chandler
Assistant Vice President, Claims Casualty
Randy Donnamiller
Assistant Vice President, Commercial/Farm Underwriting
Jim Geopfert
Assistant Vice President, IT Application Services
Dave Jarrett
Assistant Vice President, Legal Counsel
Dennis Manzella
Assistant Vice President, Marketing
Brooke McVay
Assistant Vice President, Controller
Fritz Raab
Assistant Vice President, Human Resources
Terry Rhodes
Assistant Vice President, Personal Lines Underwriting
Kay Risner
Assistant Vice President, Product Development
Woody Vogel
Assistant Vice President, Claims Property
Michele Young
Assistant Vice President, Business Operations

OuR MISSIOn
Western Reserve Mutual Casualty Company
Lightning Rod Mutual Insurance Company
Sonnenberg Mutual Insurance Company
To provide the best insurance products, protection and
service to our policyholders, delivered by a quality agency
force, backed by enthusiastic and service-oriented
employees, sound investments and financial strength.