A Message from President and CEO Bill Montgomery

Celina Insurance Group meets challenging marketplace conditions head-on.

Inflation, Midwest storms and a difficult reinsurance market influenced Celina Insurance Group's results and actions throughout 2023. As our project and initiative schedule rapidly shifted in response to these challenges, our ability to adapt in times of change was never more important.

While continuing with insurance-to-value increases and property and physical damage rate increases, we also began implementing numerous product changes to better position our offerings in the market. Although 2023 was a challenging year and Celina's results were not at the high level we expect, we are confident that these actions have set the Company up for profitable growth in the future.

Celina was not immune to the drastic shift in marketplace conditions that affected the entire insurance industry, and the Company reported a net combined ratio after fee income of 114.5%. Impacted by ongoing inflation, elevated reinsurance retention levels and severe weather, this result fell well below the high bar set by our prior five-year average of 95.9%. A net loss of $15.3 million was the first net loss posted by the Company since 2017. Fortunately, Celina's success in recent years enabled us to withstand a year like 2023. Buoyed by a robust investment portfolio and stock market gains, the Company's decrease in surplus was only 7.6%, and our gain in surplus since 2018 is 39% (from $99.5 million to $138.0 million).

“...our commitment to our policyholders and agency partners is to return to operating profitability and position the company for future growth.”

Benefiting from aggressive rate increases, direct written premium increased by 9.7% to $189.0 million, exceeding the original forecast by 9.1%. Our decision to exit the state of Iowa in 2022, while difficult, was, in hindsight, clearly the correct decision. As we nonrenewed many Iowa policies throughout 2023, Celina's five other states more than made up for the lost premium, posting direct written premium growth of 17.4%. Through needed rate increases, we anticipate strong premium growth in 2024, even as we complete the Iowa nonrenewal process in the first quarter.

Our focus remains on growing farm and commercial lines faster than personal lines, but our plan targets growth in all three. The Company's 2023 results reflect this commitment. Commercial lines written premium for the year grew by 16%, farm by 10% and personal lines by 6% over the prior year. As rate increases took hold, average premiums continued to climb. While the overall policy count was down by 3% due to Iowa nonrenewals, the policy count was up by 2% in Celina's five other states.

We were busy making product changes in 2023 that will lessen the impact of weather on the Company's results, and that work will continue this year. We also introduced Workers' Compensation as a new line of business in Tennessee, added a new Commercial Auto Farm enhancement endorsement in all states and implemented several expense-saving measures.

---

Celina continues to advance customer experience initiatives.

Our efforts were recognized by Datos Insights with an Insurance Technology Impact Award in the IT Practice category.

---

The confluence of three significant factors in 2023 (inflation, weather and reinsurance) was something never before experienced. Celina's leadership team continues to take the necessary steps to build an insurance organization that not only endures but prevails during tough times. With firm resolve, our commitment to our policyholders and agency partners is to return to operating profitability and position the company for future growth.

William W. Montgomery

Chairman, President and Chief Executive Officer