Finance Risk Management Project

Federated Mutual Insurance Company

121 East Park Square, Owatonna, Minnesota, United States 55060

AMB #: 000384 NAIC #: 13935 FEIN#: 41-0417460

Phone: 507-455-5200 Fax: 507-446-4664 Website: www.federatedinsurance.com

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Credit Analysis 000384 - Federated Mutual Insurance Company

Federated Mutual Insurance Company Credit Report

Report Release Date: Rating Effective Date:

March 6, 2018 February 15, 2018

Disclosure Information: View A.M. Best’s N/A

Analytical Contacts

A.M. Best Rating Services, Inc.

Samiksha Gupta Robert Raber

Financial Analyst Associate Director

[email protected] [email protected]

+1(908) 439-2200 Ext. 5658 +1(908) 439-2200 Ext. 5696

Ultimate Parent: N/A

A.M. Best Rating Unit: N/A

Best's Credit Ratings: Rating Effective Date: February 15, 2018

Best's Financial Strength Rating: A+ Outlook: Stable Action: Affirmed

Best's Issuer Credit Rating: aa- Outlook: Stable Action: Affirmed

Five Year Credit Rating History:

Best's Financial Strength Ratings Best's Issuer Credit Ratings Date Rating Outlook Action Rating Outlook Action 02/15/2018 A+ Stable Affirmed aa- Stable Affirmed

01/31/2017 A+ Stable Affirmed aa- Stable Affirmed

01/28/2016 A+ Stable Affirmed aa- Stable Affirmed

01/23/2015 A+ Stable Affirmed aa- Stable Affirmed

01/16/2014 A+ Stable Affirmed aa- Stable Affirmed

Corporate Overview:

Federated Mutual Group includes three property/casualty insurers, Federated Mutual Insurance Company and its wholly owned subsidiaries, Federated Service Insurance Company and Federated Reserve Insurance Company. Also under the direct control of the parent are Federated Life Insurance Company, Granite Re, Inc. and an internal agency, Primary Source Insurance Agency, Inc. In addition, the company maintains its investment real estate properties in Federated Development Corporation, also a 100% wholly owned subsidiary.

Corporate Structure

AMB# Company Name Domicile

Percentage Own (%)

000384 Federated Mutual Ins Co MN

006381 Federated Life Ins Co MN 100

020557 Federated Reserve Insurance Co MN 100

004273 Federated Service Ins Co MN 100

011379 Granite Re, Inc OK 100

Rating Rationale: The company's rating reflects its pooling arrangement with other pool members of the Federated Mutual Group (AMB# 004284).

For more detail regarding the Rating Rationale and Best's Credit Report for the Rating Unit, view Federated Mutual Group (AMB# 004284).

Financial Data Notes:

Time Period: Annual - 2016 Status: A.M. Best Quality Cross Checked Data as of: 12/14/2017

Key Financial Indicators:

Key Financial Indicators (000) Year End - December 31

2016 2015 2014 2013 2012

Premiums Written

Direct 1,453,849 1,296,647 1,147,522 1,042,477 926,460

Net 1,460,582 1,301,021 1,183,916 1,083,515 942,273

Pre-tax Operating Income ($000) 258,933 250,395 263,086 143,010 97,977

Net Income 185,374 189,075 187,552 127,901 106,109

Total Admitted Assets 5,456,754 5,076,210 4,783,738 4,523,517 4,233,760

Policyholders' Surplus 3,091,101 2,862,425 2,657,097 2,518,256 2,365,441 Source: Bestlink - Best's Statement File - P/C, US

Key Financial Indicators - A.M. Best Ratios (%) Year End - December 31

2016 2015 2014 2013 2012

Profitability

Combined Ratio 93.1 92.6 90.1 98.9 104.5

Investment Yield 3.7 3.7 3.9 3.8 4.0

Pre-Tax Return on Revenue 18.3 19.7 23.0 14.0 10.8

Leverage

Non-Affiliated Investment Leverage 19.6 13.8 13.3 11.2 10.1

Net Premiums Written to Policyholders' Surplus 0.5 0.5 0.4 0.4 0.4

Net Leverage 1.2 1.2 1.2 1.2 1.2

Liquidity

Overall Liquidity 230.7 229.4 225.0 225.6 226.7

Operating Cash-Flow 118.8 119.1 113.8 117.4 103.8 Source: Bestlink - Best's Statement File - P/C, US

(*) Within several financial tables of this report, this company is compared against the Commercial Casualty Composite. (*) Data reflected within all tables of this report has been compiled from the company-filed statutory statement.

Credit Analysis: Balance Sheet Strength

Capitalization:

Capital Generation Analysis Year End - December 31

2016 2015 2014 2013 2012

Pre-tax Operating Income ($000) 258,933 250,395 263,086 143,010 97,977

Realized Capital Gains ($000) 5,111 944 2,469 21,702 12,260

Income Taxes ($000) 78,670 62,263 78,004 36,811 4,128

Unrealized Capital Gains ($000) 50,517 33,062 30,133 33,874 24,447

Other Changes ($000) -7,216 -16,810 -78,844 -8,959 -2,329

Change in Policyholders' Surplus ($000)

228,676 205,328 138,841 152,815 128,226

Change in Policyholders' Surplus (%) 8.0 7.7 5.5 6.5 5.7 Source: Bestlink - Best's Statement File - P/C, US

Liquidity Analysis (%) Company Industry Composite

Year End - December 31 Year End - December 31

2016 2015 2014 2013 2012 2016 2015 2014 2013 2012

Quick Liquidity 34.8 25.4 25.1 28.5 22.8 21.0 21.6 24.0 24.0 22.6

Current Liquidity 165.8 170.3 168.9 170.7 171.6 103.7 104.4 108.2 109.0 106.1

Overall Liquidity 230.7 229.4 225.0 225.6 226.7 145.5 146.2 148.1 148.2 147.0 Source: Bestlink - Best's Statement File - P/C, US Industry Composite: Commercial Casualty Composite - Bestlink - Best's Statement File - P/C, US

Asset Liability Management – Investments:

Bond Portfolio - 2016 Bonds Distribution by Maturity (%) Years Years Average

0-1 1-5 5-10 10-20 20+ Maturity

Government 7.1 1.2 1.5 0.8 ... 2.8

Government Agencies and Municipal Bonds 3.4 16.7 26.4 4.7 0.1 6.3

Industrial and Misc. 2.9 11.3 11.3 11.6 1.0 8.4

Total 13.4 29.2 39.2 17.1 1.1 6.7 Source: Bestlink - Best's Statement File - P/C, US

Asset Liability Management – Investments:

Bond Distribution by Issuer Type Year End - December 31

2016 2015 2014 2013 2012

Bonds ($000) 3,250,253 3,317,760 3,161,212 2,989,937 2,851,798

US Government (%) 3.6 3.7 4.0 4.7 4.6

Foreign Government (%) 0.4 0.3 0.3 0.2 0.4

Foreign-All Other (%) 6.2 2.7 2.8 2.0 2.0

State/Special Revenue-US (%) 55.1 59.6 62.3 63.3 65.1

Industrial and Misc-US (%) 34.6 33.6 30.5 29.8 27.9

Credit Tenant Lns-US (%) ... ... ... ... ... Source: Bestlink - Best's Statement File - P/C, US

2016 Bond Distribution By Issuer Type

3.6%

0.4%

6.2%

55.1%

34.6%

US Government (%) Foreign Government (%) Foreign-All Other (%) State/Special Revenue-US (%) Industrial and Misc-US (%)

Source: Bestlink - Best's Statement File - P/C, US

Reserve Adequacy:

Loss and Allocated Loss Adjustment Expense Reserve Development

Year End - December 31

Calendar Year: 2016 2015 2014 2013 2012 Original Loss Reserves ($000) 1,389,525 1,316,401 1,276,340 1,291,005 1,236,233

Developed Reserves Thru Latest Year End ($000) 1,389,525 1,204,474 1,073,021 1,000,549 926,253

Development to Original (%) ... -8.5 -15.9 -22.5 -25.1

Development to Policyholder Surplus (%) ... -3.9 -7.7 -11.5 -13.1

Developed Reserves to Net Premiums Earned (%) 98.5 94.6 93.8 98.3 102.4

Unpaid Reserves @ Latest Year End ($000) 1,389,525 884,915 624,056 482,833 398,541

Unpaid Reserves to Developed Reserves (%) 100.0 73.5 58.2 48.3 43.0

Year End - December 31

Accident Year: 2016 2015 2014 2013 2012 Original Loss Reserves ($000) 504,610 457,287 429,097 419,741 364,356

Developed Reserves Thru Latest Year End ($000) 504,610 418,291 353,246 317,514 252,987

Development to Original (%) ... -8.5 -17.7 -24.4 -30.6

Unpaid Reserves @ Latest Year End ($000) 504,610 260,859 141,223 84,292 44,513

Accident Year Loss Ratio (%) 76.7 74.2 70.9 71.2 72.8

Accident Year Combined Ratio (%) 101.0 100.0 97.8 100.5 102.7

Source: Bestlink - Schedule P (Loss Reserves) - P/C, US

Operating Performance

Financial Performance Summary (000)

Year End - December 31

2016 2015 2014 2013 2012

Pre-tax Operating Income 258,933 250,395 263,086 143,010 97,977

Net Income 185,374 189,075 187,552 127,901 106,109

Source: Bestlink - Best's Statement File - P/C, US

A.M. Best Ratios (%) Company Industry Composite

Year End - December 31 Year End - December 31

2016 2015 2014 2013 2012 2016 2015 2014 2013 2012

Operating Ratio 81.0 79.9 76.2 84.3 88.0 88.1 85.2 84.4 81.6 90.2

Realized Return on Invested Assets 3.8 3.8 3.9 4.4 4.4 4.3 4.2 4.3 6.5 4.7

Pre-Tax Return on Revenue 18.3 19.7 23.0 14.0 10.8 12.1 14.6 15.2 18.5 9.2

Return on Surplus 7.9 8.0 8.4 6.6 5.7 8.1 6.6 11.9 13.3 8.1

Loss & LAE Ratio 68.8 66.8 63.2 69.6 74.6 71.2 68.1 68.2 66.9 75.1

Expense Ratio 23.9 25.4 26.6 29.0 29.7 30.3 30.8 29.7 30.6 30.0

Combined Ratio 93.1 92.6 90.1 98.9 104.5 101.8 99.2 98.2 97.7 105.4

Net Investment Yield 3.7 3.7 3.9 3.8 4.0 3.8 3.8 3.8 4.4 4.1 Source: Bestlink - Best's Statement File - P/C, US Industry Composite: Commercial Casualty Composite - Bestlink - Best's Statement File - P/C, US

Combined Ratio (%)

0

20

40

60

80

100

2012 2013 2014 2015 2016

74.6 69.6

63.2 66.8 68.8

29.7 29.0 26.6 25.4 23.9

104.5 98.9

90.1 92.6 93.1

- Combined Ratio - Loss & LAE Ratio - Expense Ratio

2016 Pure Loss Ratio by Product Line (%)

-25

0

25

50

75

100

Gr ou

p A

& H

W or

ke rs

' C om

p

Co m

m 'l A

ut o

Li ab

Ot h

Li ab

O cc

ur

Au to

P hy

sic al

Co m

'l M ul

tiP er

il

Al lie

d Li

ne s

Fi re

Re in

s- Pr

op er

ty

Ot h

Li ab

C M

Pr od

L iab

O cc

ur

Al l O

th er

89.0

44.5

77.4

51.3 58.9

42.0 44.7 39.1 25.3 21.0

9.7

-10.9

Source: Bestlink - Best's Statement File - P/C, US

Business Profile

The following text is derived from Best's Credit Report on Federated Mutual Group (AMB# 004284):

The group provides a range of commercial and personal property/casualty coverages as well as life insurance (written through a wholly owned subsidiary, Federated Life Insurance Company) and disability lines throughout most of the continental United States. Federated exited the Group Health line on December 31, 2017. While a large portion of business is generated in the Midwest, the group has increased its expansion efforts in the New England states while increasing market share in the southeastern and western states. The mix of business is approximately 64% general commercial lines, with the remainder comprised almost exclusively of group accident and health and a small amount of personal lines business. Personal lines production is currently focused exclusively in the state of Minnesota.

Federated Mutual benefits from a comprehensive marketing and operational structure developed for both the property/casualty and life/health operations. Components of its business plan include the following: specialized multi-line products, niche marketing achieved through increased penetration of affinity groups, disciplined underwriting and claims, and a direct distribution system focused on integrated implementation plans. The group continues its commitment to assisting clients in controlling workers' compensation and automotive losses by providing employer-directed risk management plans. In addition, loss control services specifically tailored to help address the insured's other inherent property and casualty exposures are also offered. Business is retained through a considerable emphasis on disciplined client service standards, inclusive of multiple client interactions throughout the year.

The group's business plan, which combines a specifically trained and directed marketing force with extensive affinity group recommendations, gives it an advantageous market position. The number of associations giving exclusive recommendations to the Federated Mutual Group has grown considerably in recent years, expanding the group's potential market base. The business diversity within the associations provides a natural hedge. Management believes that the addition of a self-insured

retention (aggregate deductible) product is unique to the group's niche market segments and, along with new loss-sensitive plans, is designed to attract larger premium clients. Management also believes that, combined with the group's loss control service, the SIR program may be of great interest to business owners who are focused on controlling insurance costs. The group offers a workers' compensation (SIR) product and monoline worker's compensation coverage for selected risks. In 2014, the company sponsored the formation of a member-owned captive that is managed by Federated and used to provide expanded alternative risk transfer services to qualifying customers.

Underwriters support a distribution network consisting of a direct sales force of roughly 550 highly trained employees and over 35 selected independent agents. In most geographic areas, Federated Mutual continues to focus on eight major markets: petroleum marketers (e.g., convenience stores), equipment dealers, automobile dealers, trade contractors, selected retailers and wholesalers, other automobile-related businesses (e.g., tire and parts dealers and repair garages), machine and print shops and a variety of miscellaneous operations. The group also writes funeral directors, retail jewelers, cabinet makers and petroleum truckers.

Working with a select network of attorneys, the group's distribution system facilitates business succession and estate planning programs for business owners. This strategic initiative enhances the group's risk management offerings and more deeply interconnects the customer with the company.

In 2016, Federated Reserve Insurance Company was formed. It is a wholly owned subsidiary of Federated Mutual. The new company is meant to complement the two existing PC companies and will provide Federated with pricing flexibility. It began producing direct business as of January 1, 2017 in selected states.

In 2017, Federated acquired Granite Re, an Oklahoma domiciled contract surety company. This will help Federated complement its contractor offerings with a surety product.

Federated Mutual Insurance Company and Federated Service Insurance Company have historically operated through an intercompany pooling arrangement. In 2017, Federated Reserve was added to the arrangement.

The group also operates through an assumed reinsurance agreement with Sompo (formerly Edurance Re), currently assuming 8.5% of Endurance Re's property only business. On January 1, 2013, the group entered into an assumed reinsurance transaction with Hiscox Re at a participation of 5%, which increased to 9.25% in 2017. In 2015, Federated entered into an assumed reinsurance agreement with Chubb Re (formerly ACE) at a participation of 1.5%. In 2016, Federated entered into an assumed reinsurance agreement with Endurance Global Specialties at a participation of 5% which increased to 10% in 2017.

Leverage Analysis Company Industry Composite

Year End - December 31 Year End - December 31

A.M. Best Ratios (%) 2016 2015 2014 2013 2012 2016 2015 2014 2013 2012

Business Retention 95.3 95.2 96.0 95.9 95.9 76.2 77.8 80.2 78.8 80.4

Net Premiums Written to Policyholders' Surplus

0.5 0.5 0.4 0.4 0.4 0.7 0.7 0.7 0.7 0.7

Source: Bestlink - Best's Statement File - P/C, US Industry Composite: Commercial Casualty Composite - Bestlink - Best's Statement File - P/C, US

2016 Top Product Lines of Business (Net Premiums Written)

30.0%

16.7%

13.0%

12.5%

5.4%

4.7%

4.0%

3.5% 3.2%

2.1%

2.1%

2.8%

Group A & H Workers' Comp Comm'l Auto Liab Oth Liab Occur Auto Physical Com'l MultiPeril Allied Lines Fire Reins-Property Oth Liab CM Prod Liab Occur All Other

Source: Bestlink - Best's Statement File - P/C, US

2016 By-Line Business

Product Line

Direct Premiums Written

Reinsurance Premiums Assumed

Reinsurance Premiums Ceded

Net Premiums Written Business

Retention (%)($000) (%) ($000) (%) ($000) (%) ($000) (%)

Group A & H 486,387 33.5 ... ... 48,639 21.5 437,749 30.0 90.0

Workers' Comp 250,110 17.2 26,306 11.3 32,382 14.3 244,035 16.7 97.6

Comm'l Auto Liab 171,934 11.8 41,814 17.9 24,239 10.7 189,509 13.0 98.3

Oth Liab Occur 175,180 12.0 30,256 13.0 22,612 10.0 182,824 12.5 98.8

Auto Physical 67,890 4.7 20,158 8.6 9,188 4.1 78,860 5.4 99.5

Com'l MultiPeril 76,757 5.3 ... ... 8,403 3.7 68,354 4.7 89.1

Allied Lines 55,934 3.8 10,482 4.5 7,418 3.3 58,998 4.0 98.6

Fire 49,574 3.4 8,250 3.5 6,018 2.7 51,806 3.5 99.5

Reins-Property ... ... 66,871 28.7 20,819 9.2 46,052 3.2 68.9

Oth Liab CM 27,946 1.9 6,000 2.6 3,395 1.5 30,551 2.1 100.0

Prod Liab Occur 30,170 2.1 3,573 1.5 3,374 1.5 30,368 2.1 100.0

All Other 61,968 4.3 19,444 8.3 39,935 17.6 41,476 2.8 54.0

Total 1,453,849 100.0 233,154 100.0 226,421 100.0 1,460,582 100.0 95.3

Source: Bestlink - Best's Statement File - P/C, US

Geographical Breakdown By Direct Premium Writings

2016 2015 2014 2013 2012

Minnesota 116,527 106,802 113,424 105,469 100,698

Texas 110,223 101,256 91,007 81,042 67,505

Michigan 91,337 82,241 64,205 55,127 46,988

California 85,978 74,137 66,002 62,521 54,815

Indiana 85,727 79,069 66,505 62,897 59,994

Missouri 85,428 76,860 63,103 53,988 45,099

Illinois 69,794 64,427 60,386 57,195 53,057

North Carolina 60,082 49,105 40,999 35,579 28,592

Pennsylvania 55,142 46,991 33,737 29,966 26,295

Georgia 50,579 42,304 33,664 28,975 24,878

All Other 643,033 573,455 514,490 469,717 418,539

Total 1,453,849 1,296,647 1,147,522 1,042,477 926,460 Source: Bestlink - Best's Statement File - P/C, US

Financial Statements:

Balance Sheet:

Balance Sheet:

Admitted Assets Year End - December 31

2016 ($000) 2015 ($000) 2016 (%) 2015 (%)

Bonds 3,250,253 3,317,760 59.6 65.4

Preferred Stock ... ... ... ...

Common Stock 418,738 311,748 7.7 6.1

Cash and Short-term Invest 213,328 100,379 3.9 2.0

Real estate, investment ... ... ... ...

Derivatives ... ... ... ...

Other Non-Affil Inv Asset 149,731 69,861 2.7 1.4

Investments in Affiliates 739,792 647,078 13.6 12.7

Real Estate, Offices 56,012 56,086 1.0 1.1

Total Invested Assets 4,827,854 4,502,913 88.5 88.7

Premium Balances 441,230 404,059 8.1 8.0

Accrued Interest 40,025 39,385 0.7 0.8

All Other Assets 147,646 129,853 2.7 2.6

Total Assets 5,456,754 5,076,210 100.0 100.0

Liabilities & Surplus Year End - December 31

2016 ($000) 2015 ($000) 2016 (%) 2015 (%)

Loss and LAE Reserves 1,451,896 1,376,353 26.6 27.1

Unearned Premiums 494,528 445,998 9.1 8.8

Derivatives ... ... ... ...

Conditional Reserve Funds 791 1,142 ... ...

All Other Liabilities 418,439 390,292 7.7 7.7

Total Liabilities 2,365,654 2,213,785 43.4 43.6

Surplus notes ... ... ... ...

Capital and Assigned Surplus 1,500 8,160 ... 0.2

Unassigned Surplus 3,089,601 2,854,265 56.6 56.2

Total Policyholders' Surplus 3,091,101 2,862,425 56.6 56.4

Total Liabilities and Surplus 5,456,754 5,076,210 100.0 100.0

Source: Bestlink - Best's Statement File - P/C, US

Summary of Operations and Operating Cash Flow:

Summary of Operations (000)

Year End - December 31

Statement of Income 2016 Net Operating Cash Flow 2016

Premiums earned 1,411,313 Premiums collected 1,417,830

Losses incurred 851,044 Benefit & loss-related pmts 782,587

LAE incurred 120,133

Undwr expenses incurred 351,487 LAE & undwr expenses paid 462,876

Other expenses incurred -1,800 Other income / expense ...

Dividends to policyholders 4,511 Dividends to policyholders 4,331

Net underwriting income 85,938 Underwriting cash flow 168,036

Net transfer ...

Net investment income 170,330 Investment income 179,613

Other income/expense 2,665 Other income/expense 2,665

Pre-tax operating income 258,933 Pre-tax cash operations 350,314

Realized capital gains 5,111

Income taxes incurred 78,670 Income taxes pd (recov) 96,684

Net income 185,374 Net oper cash flow 253,629

Source: Bestlink - Best's Statement File - P/C, US

Company Information 000384 - Federated Mutual Insurance Company

Federated Mutual Insurance Company Report Revision Date: September 12, 2018

Company Attributes:

Industry: Insurance Business Type: Property/Casualty Entity Type: Operating Company Organization Type: Mutual Business Status: In Business - Actively Underwriting Marketing Type: Exclusive/Captive Agent Financial Size: XV ($2 Billion or greater)

Company History:

Date Incorporated: 08/01/1904 Date Commenced: 08/01/1904 Domicile: United States: Minnesota

This company, incorporated under the laws of Minnesota, began business in August 1904 under the title Retail Implement Dealers Mutual Fire Insurance Company. The name was changed in 1913 to the Minnesota Implement Mutual Fire Insurance Company; in 1942 to Mutual Implement and Hardware Insurance Company; in 1950 to Federated Mutual Implement and Hardware Insurance Company; and on April 21, 1970, to its present form.

Company Operations:

Licensed Territory: (Current since 12/20/2011).The company is licensed in the District of Columbia, AL, AK, AZ, AR, CA, CO, CT, DE, FL, GA, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VT, VA, WA, WV, WI and WY.

2017 Rank Top 5 Lines of Business by NPW 1 Group A & H 26.5% 2 Workers' Comp 16.8% 3 Comm'l Auto Liab 14.1% 4 Oth Liab Occur 13.1% 5 Auto Physical 6.2%

2017 Rank Top 5 Geographic Distribution by DPW 1 United States: TX 8.2% 2 United States: MN 7.9% 3 United States: CA 6.1% 4 United States: MI 6.0% 5 United States: MO 5.3%

Source: Bestlink - Best's Statement File - P/C, US

Company Management:

Last significant update on 02/21/2018

Company Information 000384 - Federated Mutual Insurance Company

Page 14 of 16 Print Date: September 12, 2018

Company Management:

Operations are directed by prominent insurance underwriters. Under the same general management are three wholly owned domestic subsidiaries: Federated Service Insurance Company (licensed in 1972), Federated Life Insurance Company (formed in late 1958) and Federated Reserve Insurance Company (formed in 2016). In addition, the company completed a stock purchase acquisition of Granite Re Insurance Company (closed 1/3/2017).The carriers maintain joint administrative offices. Jeffrey E. Fetters serves as chairman of the board of all carriers. Jeffrey Fetters has served as chief executive officer since January 2009 and Chairman of the Board since November 2012. He has been with the company since 1980. Michael G. Kerr was named President of all companies in December 2017. He has been COO since September 2016. He has been with the company since 1981.

Officers

Chairman of the Board and CEO: Jeffrey E. Fetters President and COO: Michael G. Kerr EVP, Secretary, Treasurer and CFO: Paul F. Dröher EVP: Patric K. Cooper EVP: Mark D. Heyne EVP: Michael N. Keller EVP: Sean G. Pick EVP: Mark D. Scharmer EVP: James A. Thon SVP: Rebecca J. Dawley SVP: Jonathan R. Hanson SVP: Elizabeth A. Hyland SVP: Nicholas R. Lower

Directors

David M. Adcox Paul F. Dröher Jeffrey E. Fetters (Chairman) David P. Frame James R. Giesler Lester H. Killebrew James H. Lipscomb III John P. McEleney Sarah B. Person

Regulatory:

Auditor: PricewaterhouseCoopers, LLP

An examination of the financial condition is being made as of December 31, 2017, by the insurance department of Minnesota. The 2017 annual independent audit of the company was conducted by PricewaterhouseCoopers, LLP. The annual statement of actuarial opinion is provided by William J. Fogarty, FCAS, MAAA, Managing Actuary.

Additional Resources:

Related News

Company Information 000384 - Federated Mutual Insurance Company

Page 15 of 16 Print Date: September 12, 2018

Additional Resources:

Rating Activity and Announcements

Company Overview

Archived Best's Credit Report

Corporate Changes & Retirements

Recent M&A transactions

Recent Best’s State Rate Filings (P/C Only)

BestAlert Service

Best's Credit Ratings Mobile Application

A Best's Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance obligations. The ratings are not assigned to specific insurance policies or contracts and do not address any other risk, including, but not limited to, an insurer's claims-payment policies or procedures; the ability of the insurer to dispute or deny claims payment on grounds of misrepresentation or fraud; or any specific liability contractually borne by the policy or contract holder. A Financial Strength Rating is not a recommendation to purchase, hold or terminate any insurance policy, contract or any other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser.

A Best's Issue/Issuer Credit Rating is an opinion regarding the relative future credit risk of an entity, a credit commitment or a debt or debt-like security.

Credit risk is the risk that an entity may not meet its contractual, financial obligations as they come due. These credit ratings do not address any other risk, including but not limited to liquidity risk, market value risk or price volatility of rated securities. The rating is not a recommendation to buy, sell or hold any securities, insurance policies, contracts or any other financial obligations, nor does it address the suitability of any particular financial obligation for a specific purpose or purchaser.

In arriving at a rating decision, A.M. Best relies on third-party audited financial data and/or other information provided to it. While this information is believed to be reliable, A.M. Best does not independently verify the accuracy or reliability of the information. Any and all ratings, opinions and information contained herein are provided "as is," without any express or implied warranty.

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Company Information 000384 - Federated Mutual Insurance Company

Page 16 of 16 Print Date: September 12, 2018