2016ANNUAL REPORT119th Annual Statement to Policyholders

December 31, 2016

The Brethren Mutual Insurance Company is committed to providing value, quality in insurance protection, reliable service, and financial integrity.

A property & casualty company founded in 1897.

CHAIRMAN OF THE BOARDEdward L. Buchanan, IV

COMPANY OFFICERS

Edward L. Buchanan, IV Chairman

Michael W. Brashears Vice Chairman/Chief Executive Officer

Charles H. Flickinger, CPA, CIC, PHR, CPCU, ARe, CLU, RHU, REBC, CASL

President/Chief Operations Officer

Jeffrey Borkowski, CPCU, CIC, ARe Vice President of Underwriting & Marketing

Tammy L. Aaron, CPA, CPP Vice President of Finance/Treasurer/Chief Financial Officer/Chief Risk Officer

Joseph Evelius, CPCU Vice President of Claims

Wanda L. Dorsey Secretary

BOARD OF DIRECTORSDavid C. Beachley

Michael W. BrashearsEdward L Buchanan, IV

Charles E. DelauterDaniel L. Delauter

Charles H. Flickinger

Gregory L. HareKent N. Oliver

Thomas M. Wiles

149 North Edgewood Drive | Hagerstown, MD 21740301.739.0950 | 800.621.4264 | www.bmic.com

Policyholders & FriendsBrethren Mutual’s 2016 financial statement continues to show solid

risk-adjusted capitalization and long-term market presence despite exposure to catastrophic weather related events, as well as regulatory and competitive market pressures.

Brethren Mutual’s first priority is providing its policyholders with quality insurance protection and customer service. The Company continues to write business in three states: Maryland, Pennsylvania, and Virginia. This allows our Company the opportunity to meet your personal, commercial and farm insurance needs while spreading its insurance risk.

We look forward to continued success in 2017 and beyond, and the opportunity to serve you, our valued policyholder.

ASSETS 2016 2015

Bonds (*) 137,865,767 139,957,048 Stocks (**) 53,355,305 48,568,499 Real Estate, net 1,851,340 1,466,694 Cash & Short Term Investments 30,477,389 20,542,161 Uncollected Premium 26,343,202 24,678,578 Reinsurance Recoverable on Paid Losses 525,523 571,717 Electronic Data Processing Equipment, net 660,944 254,396 Accrued Interest Receivable 1,108,852 1,169,981 Deposits in Pools and Associations 31,000 31,000 Deferred Premium Tax Credit 3,084 4,710 Net Deferred Tax Asset 4,059,227 4,278,833 Other Accounts Receivable 5,233 8,421

TOTAL ASSETS 256,286,866 241,532,038

Financials

LIABILITIES 2016 2015

Loss and Loss Adjustment Expense Reserve 51,050,353 45,705,716 Commissions Payable & Other Similar Charges 2,832,801 2,531,605 Accrued Expenses 1,800,206 1,605,410 Taxes, Licenses and Fees 1,226,867 1,003,974 Income Tax Payable 437,623 317,774 Unearned Premium Reserve 62,690,247 59,963,750 Advance Premium 2,194,729 2,603,908 Ceded Reinsurance Premiums 752,520 660,611 Liability for Pension Benefits 3,982,637 3,615,010 Accrued Benefit Cost 1,553,439 1,644,169 Other Liabilities 478,502 517,681

TOTAL LIABILITIES 128,999,924 120,169,608

SURPLUS

Policyholder Unassigned Surplus Funds 127,286,942 121,362,430

TOTAL LIABILITIES AND SURPLUS 256,286,866 241,532,038

Edward L. Buchanan, IV Chairman of the Board

Michael W. BrashearsVice Chairman & CEO