ANNUAL REPORT

2018

LETTER FROM THE PRESIDENTSEAN KENNEDY

President & CEO2014 - PRESENT

MISSIONTo be a financially sound organization, providing a stable market for our independent agents and worry-free financial security for our customers.

VISIONBe the Company of Choice by providing an extraordinary and worry-free experience for our agents, customers and employees.

2018 will be remembered for many assorted happenings. Chief among them were the ample opportunities for IMT to fulfill our promise to our independent agents and policyholders. We sell a promise to be there when our partners call upon us. In 2018, we were there for the tornadoes in Marshalltown, we were there for the fire in downtown Vinton and for the family that lost their house to a fire in Princeton; we were on the roofs in Laurens after the hail; and we will be there for our policyholders and agents in the future.

The winds blew, the rains came, the hail fell, and the fires raged. In a nutshell, that explains the claims of 2018; there were many and they varied. The 2018 claim activity provided IMT the opportunity to showcase our talented

and engaged Claim Department. The Claim Department indemnified 6,242 policyholders hit by storms and handled over 31,800 losses for our policyholders. When a policyholder was at their lowest, we were at our best and brightened their day.

This storm season was unique. While most storm seasons run from mid-April through June, in 2018 the Midwest hail and tornadoes began in February and continued until an Illinois tornado in December. Storm losses added 17.6 points to our Net Loss Ratio. Net storm losses were greater than $43 million, while gross storm losses were over $52.5 million.

Personal and Commercial Auto Liability trends continued to impact profitability

PILLARS OF EXCELLENCECreate high-touch, efficient services. Develop and grow agents/partnerships. Expand product and markets. Focus on the employee experience.

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“Volunteers do not necessarily have the time; they just have the heart.”– Elizabeth Andrew

continued >>

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INSURANCE OPERATIONS: Change (%)Policyholder Surplus $154,940,305 . . . . . . . (14.4%)

Admitted Assets $412,821,943 . . . . . . . 2.9%

Liabilities $257,881,639 . . . . . . . 17.1%

Direct Written Premium $278,454,460 . . . . . . . 8.4%

Net Written Premium $254,967,219 . . . . . . . 9.6%

Combined Ratio 111.1%

Net Loss Ratio 70.9%

Loss Adjusting Expense Ratio 10.6%

Net Expense Ratio 29.6%

COMPUTER SERVICES:Revenue $5,058,741 . . . . . . . . . 4.1%

Shareholder’s Equity $1,772,646 . . . . . . . . . 24.0%

FINANCIAL HIGHLIGHTS

in 2018. The change in vehicle complexity with sensors, cameras and aluminum are impacting loss costs and will continue until all vehicles on the road have the new technologies. The legal environment around auto liability continued to be a challenge in 2018. Attorney advertising, inexperienced plaintiff attorneys, cultural changes, and litigation funding are driving higher claim costs. These combined trends are driving losses and will lead to higher premiums.

The combination of these loss events drove the Net Loss Ratio to a 10-year high of 70.9%.

The claims of 2018 do not define the whole year for IMT Insurance. Many amazing things also occurred.

IMT continued to grow organically with Direct Written Premium growing 8.4%, to over $278 million. This is attributed to our great relationship with our agency partners. The Expense Ratio was down for the second year in a row, with the lowest Expense Ratio in the last 10 years.

Profitability is always important to the long-term success of any company. A few initiatives to improve the profitability of the book of business began last year. A Personal Auto reunderwriting program led to many policies being cancelled,

deductibles raised, and policies put on watch. Agency Review was more aggressive this past year. Agency Review led to 61 agencies being cancelled, which accounted for about $8.5 million in premium annually; this business produced a six-year loss ratio of 92%, including a 105% Loss Ratio for 2018.

IMT Computer Services enjoyed an eventful year, exceeding $5 million in revenue for the first time. That is a quintupling of revenue in seven years; 2011 was the year that Computer Services exceeded $1 million in revenue. Four additional mutual insurance companies converted to our core software, bringing the total number of customers to 405. The major driver of revenue growth came in the form of onboarding of additional products; Imaging added 27 new customers, Navigator added 26, Vector added 10, and the new claim system added 65.

Culture is the way your company differentiates itself from others. All companies have a culture, not all cultures fit all types of people. IMT’s culture is focused on giving back to our communities, building upon relationships, providing service above and beyond, and having fun.

(continued)

IMT celebrated our first IMT Day of Caring. During this time, the entire company volunteered during the morning at charities across central Iowa. Volunteers were at Habitat for Humanity ReStore, Meals from the Heartland, Blank Park Zoo, and making blankets at the home office.

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In an extraordinary show of caring, volunteers from IMT gave their time and backs to help those in need after the tornadoes in Marshalltown. It did not matter if you were an IMT insured or not, the three groups of volunteers helped wherever they were needed. IMT also had 120 Employees spend a total of 746 hours volunteering in the communities we serve, beyond the IMT Day of Caring. There is nothing stronger than a heart of a volunteer and we have many strong hearts.

IMT donated to 98 charities and not-for-profits in 2018. IMT continued to be the Title Sponsor for the IMT Des Moines Marathon and the Golden Apple award. We are also the only corporate sponsor to be involved with Blank Children’s Hospital's Festival of Trees all 35 years, including designing our own Christmas Tree the past three years. IMT continued to support Team Run Free with a new running cart. Team Run Free is an organization setup by one of IMT’s own employees to bring the thrill of running to those that are not able to run.

We had some big things going on at IMT during the second half of 2018. In October, IMT rolled out our brand refresh. This branding refresh focused on our new logo and one brand. The new logo is a refreshed version of our iconic red diamond. The one brand will allow us to focus on one branding effort instead of two. We are branding as IMT Insurance with two underwriting companies. This will allow IMT to be focused and purposeful in our marketing strategies.

In December, IMT moved into its new corporate home office at 7825 Mills Civic Parkway in West Des Moines. With the help of the city of West Des Moines,

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Hurd Real Estate, Shive-Hattery, Weitz Construction and a multitude of others, the project was completed on time and on budget. With the amenities, location and design, this new home office is a representation of IMT and the IMT Culture.

Over the summer of 2018, IMT was again involved in the Des Moines Corporate Games. Except this year, IMT would scale the podium all the way to the top. Yes, IMT finished first place in the Des Moines Corporate Games for 2018. Winning many track and field events, women’s bowling, basketball shooting, men’s and women’s 3-on-3 basketball, sand volleyball,ultimate frisbee and the blood drive.Congratulations to all that participated.

Professional Development continues to be an important focus of our “Employee Experience” pillar of excellence. In 2018, our CPCU Club grew to 74 employees; 22% of the IMT team have the CPCU designation. We also had 14 employees working toward either a Bachelor's or Master’s degree. Professional Development allows us to continue to develop skills to be more efficient and effective, ultimately strengthening the backbone of our company.

IMT was awarded with being a Top 10 Workplace in Iowa. This marks the sixth consecutive year for IMT to receive this distinction. This truly is a reflection of the IMT Culture.

It was not all fun and games at IMT in 2018. The development teams were hard at work implementing the

Commercial Auto System, Commercial Property Quick Quote and Cyber Liability. Additionally, many hours were spent implementing a new billing system and development of Red Belvedere, our new platform for developing policy systems. The year began with 75 projects in our portfolio, we added 21 projects and cancelled 11, to leave the 2018 portfolio with 85 projects and over 45,000 hours on project development.

IMT remains committed to our Vision and Pillars of Excellence of providing high-touch, innovative services, in building strong partnerships, and building a worry-free future. IMT has a rich history of success and commitment to our independent agents, policyholders, and customers. Which is why the IMT Vision is to be the “Company of Choice”.

– SEAN KENNEDY

“IMT was awarded with being a Top 10 Workplace in Iowa. This marks the sixth consecutive year for IMT to receive this distinction.”

While the year 2018 was yet another with record-setting storm activity, the IMT Claim Department was able to accomplish an admirable level of customer service to both our policyholders and Independent Agents. We are committed to strengthening our relationships while developing trust through open and ongoing communication throughout the claim process.

We continue in our efforts and dedication to advance the overall claims experience with the technology available today and in the future. Opportunities to improve efficiency and accuracy, while boosting the customer experience, remains a crucial component of our transforming claims process.

It is our priority to provide a distinct and positive claims experience by implementing accessiblity, transparency, and efficiency into our claim processes, as well as delivering high-touch customer service in the field with our knowledgeable and experienced claim staff.

CLAIM HIGHLIGHTS

REPORTED CLAIMS

31,800

CLAIMSCLOSED33,179

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“Katy, thank you for such a quick response! Record time in my ten years here.”

– Body Shop Employee

“Mark, I just wanted to thank you and let you know we are very happy and impressed how our claim was handled.”

– IMT Insurance Insured

“Greg, I appreciate all of your help with this claim. Your professionalism on handling this claim is much appreciated.”

– IMT Insurance Insured

“You guys rock! Thank you for the prompt attention to our clients, neighbors, and friends.”

– IMT Insurance IndependentAgent (after an Illinois tornado)

“I was at an Agency this morning and they were raving about how wonderful our IMT Claim Department is… they said the service to them and insureds has been excellent and beyond!”

– IMT Marketing Representative

CLAIMS SATISFACTION92%

NEW FACES IN THE CLAIM DEPARTMENT

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“We are being flooded with calls from our mutual clients stating that they couldn’t be happier with the way their IMT claims are being handled.”

– IMT InsuranceIndependent Agent

(during storms in Iowa)

Personal Lines Direct Written Premium was $198.7 million in 2018. This is an increase of $16.2 million (8.9%) over 2017. This compares to an increase of $12.1 million (7.1%) for 2017. We increased premiums in all our writing states, with Iowa ($6 million), Minnesota ($4 million) and South Dakota ($2.1 million) experiencing the largest dollar increases. 2018 Personal Lines Written Premium as a percentage of total IMT written premium ended the year at 71.3%.

Net policy count grew from 198,412 to 207,340 (4.5%). 2018 marked the twelfth consecutive year of policy count gains. Each of our writing states added to policy count in 2018. We had 83,836 Personal Auto policies and 69,963 Homeowners policies as of year-end. In 2018, our retention ratio was nearly identical to that of the prior year.

Personal Auto Direct Written Premium was up 9.4%. Homeowners was up 8.5%. The impact of rate changes contributed considerably to Direct Written Premium growth as the

average Personal Auto premium per policy increased by 5.9% (2.6% in 2017), while the average Homeowners premium per policy increased by 3.3% (1.1% in 2017). Newly issued policies were down 1.2% compared to 2017.

From an underwriting perspective, Personal Lines performed poorly in 2018. The Net Loss Ratio of 76.1% was 2.5 points higher than 2017 and was 13.1 points higher than the most recent ten-year average. The Personal Auto line, which is 44.3% of company net earned premium, experienced a Net Loss Ratio of 79.4%. This marks the second consecutive year of a substantial spike to the Loss Ratio. The 2018 Homeowners Net Loss Ratio of 76.3% was the highest since 2011 and was 14.2 points higher than the most recent 10-year average.

In 2018, property storm losses were unusual (a September tornado in Minnesota and a December tornado in Illinois) and above expectation. Storm events negatively impacted the Homeowners Property Loss Ratio and Personal Auto Comprehensive

Loss Ratio. An unusual number of large fire losses contributed to the elevated Homeowner’s Loss Ratio. Medical inflation and social inflation (claimants with legal representation) pushed personal auto liability loss costs higher. Physical damage loss costs continue to trend upward as a result of increased costs of repair related to technology enhancements on newer vehicles. Distracted driving, congested driving and higher speed limits have all had a negative impact on personal auto frequency and severity. Lastly, IBNR (Incurred But Not Reported) increased again in 2018 due to unfavorable Personal Auto loss reserve development.

Restoring Personal Lines profitability will be top priority in 2019. Research and Development, Marketing and Underwriting will work closely to preserve our financial strength and reach our goal of realizing an underwriting profit. At the same time, we will continue to find ways to enhance a high-quality, high-touch customer service experience for all our customers.

PERSONAL LINES HIGHLIGHTS

COMMERCIAL HIGHLIGHTS

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UNDERWRITING

FARMPREMIUM AUDIT

OUT OF9 10 Department history of completing 9 out of

10 audits in house by department staff. IMT Premium Audit staff helps maintain policyholder engagement, relationships and trust.

Production held steady and reaped another profitable harvest with a 34.35% loss ratio for 2018.

AGENT TRUST CONTINUES WITH IMT = INCREASED

NUMBER OF LARGE ACCOUNTS

REVVED UP IMPLEMENTATION OF A NEW COMMERCIAL

AUTO SYSTEM 87.8%7.4%RETENTION OF BUSINESSGROWTH

UMBRELLA POLICIES UP

17.5%

FOOTPRINT OF WRITTEN PREMIUM AS A % OF TOTAL PREMIUM GREW IN MN, NE, SD AND WI38%

HOME RUN! INCREASED HIT RATIO TO

62% LOSS RATIO –

STORM ACCOUNTED FOR 15%

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LOSS CONTROL

2018

11.5%GROWTH

2017

31.5% GROWTH

Listening, observing, and talking safety since 2008. Value-added services that increase retention.

Underwriting decisions are made locally, without delay. We can turn around new submissions in hours, if necessary, and we will do all of the work for you.

BOND

TAKING SAFETY TO NEW HEIGHTS WITH ENHANCED TECHNOLOGY AND A PERSONAL TOUCH

6.34% LOSS RATIO

0% LOSS RATIO

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MARKETING HIGHLIGHTS

One positive note is we had another year of growth as we sustained an 8.4% increase in our written premiums. IMT has now over $278 million in premium and will soon be over the $300 million mark. The growth, along with storms, caused us to end the year with a 70.9% Loss Ratio and a Combined Ratio of 111.1%, a slight increase from the previous year. In 2018, all of our states showed positive growth with Minnesota leading the way with a growth percentage of 32%. All of our Districts also showed positive growth and 8 of 12 Districts showed growth rates in excess of their budgeted goal.

During 2018, we signed 18 new agencies to contracts, which brings our total number of agency contracts to 961. It was also a busy year as we hosted 13 Agent outings/events that included over 500 agents and that does not include the CEC classes or Ladies Career Development Days.

Perhaps the biggest undertaking of the year was the rebranding of IMT. The old logo was put in place in 1959 and it was time for a refresh. It all went well and is a project that will go on in 2019.

In summary, it was a busy and eventful year for IMT, and we look forward to the challenges of 2019 and beyond. We are all part of Team IMT and we are proud of our employees and our IMT agency force.

The year of 2018 could be labeled “The Good, The Bad and The Ugly”. The Good is the fact we moved into a beautiful new building located at 7825 Mills Civic Parkway in West Des Moines. The Bad is the fact we had a lot of fires and one that essentially wiped out a city block in an Iowa town. The Ugly is the hail and tornadoes that damaged or destroyed several towns in our writing territory. However, during the year we still worked at solidifying our relationships with our agents, employees and communities where we do business. It is one of our core values and one we work on constantly.

OLD NEW

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DONATED TO

DIFFERENT ORGANIZATIONS

98

MANAGERS ATTENDED THE IMT MUTUAL

MANAGERS MEETING IN AUGUST

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AGENCY PARTNERS RAN CO-OP ADS

67AGENT EVENTS

AND CONVENTIONS IN ALL SIX STATES

ATTENDED

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AGENCIES RECEIVED CONTINGENCY BONUSES198

ADDITIONAL HIGHLIGHTSHosted the 2018 Gem Trip at 1 Hotel South Beach in Miami Beach, Florida for 84 agencies that qualified in 2017

Sponsored IMT Des Moines Marathon for the 14th consecutive year

• Over 9,000 runnersfrom all over the world

Title sponsor of the Golden Apple Awards, which are given out monthly to outstanding teachers in Iowa

460 women attended four Ladies Career Development Days sessions

Donated to 58 communities through the annual IMT Community Contest

294 Agents attended three IMT Continuing Education Classes

43 blog posts, 28 more than 2017

10,796 Worry Free app users, an increase of 2,100 over the previous year

Continued to spread our risk as Iowa’s percentage of the total premium dropped from 51% to 49.7%

Achieved 8.4% growth in written premium

5 of our top 6 lines of business showed positive growth

512 Agents attended 13 Agent outings and events

Almost 7,000 Facebook followers

Partnered with InsuranceSocial.Media to offer a Social Media Pilot Program for IMT Agencies

AGENCIES PARTICIPATED IN THE CALENDAR

PROGRAM

CALENDARS WERE PRINTED

180

26,000

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