2006 ANNUAL REPORT




SAFE.   SOUND.   SECURE.®
Ward Financial Group Ranks Auto-Owners
rating also acknowledges Auto-Owners strong market                                 ...
FINANCIAL REPORT


                                                                      Property & Casualty
 ASSETS      ...
SUMMARY OF COMBINED ASSETS


                                                                            Combined Assets a...
YEAR IN REVIEW

                                                                                                          ...
AUTO-OWNERS                         HOME-OWNERS                              AUTO-OWNERS LIFE
               INSURANCE COM...
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auto owners 2006_annual_report

  1. 1. 2006 ANNUAL REPORT SAFE. SOUND. SECURE.®
  2. 2. Ward Financial Group Ranks Auto-Owners rating also acknowledges Auto-Owners strong market assisted by associates located in the company’s Among Its Top 50 presence as one of the 20 largest property casualty Westminster, Colorado, regional office. At year-end COMMENTS FROM R. L. LOOYENGA, CHAIRMAN & CEO,named Auto-Owners Insurance Group was AUTO-OWNERS INSURANCE GROUP 2006, 16 local independent agencies represented insurance organizations in the United States with to the 2006 Ward’s 50 Benchmark Group for Auto-Owners and premium writings for the Group more than $4.3 billion achieving outstanding financial results over the Companies exceeded $1 million. in net written premium past five years (2001 - 2005). Auto-Owners is as of year-end 2005.” In NEW FACILITIES OPENED IN 2006 they of onlylike,companiesrespect, to bothis why one know, 10 trust and named which the A.M. “2006 opinion, Best’s was a year The foundation of Auto-Owners is its 10 core Two New Offices Opened property and casualty and the life/health Ward’s of accomplishment and values: Honesty, Hard Work, success, andLoyalty, Due to continued growth, Prudence, to better companies in the A++ and we believe independent agents provide the best 50 Benchmark Groups, and one of only seven A+ classifications—their serve its customers, Auto-Owners Insurance Group celebration for the The Team, Our Relationships, Opportunities method of marketing the property and casualty our products. Our financial companies named to highest classifications— opened two additional offices. The new Missouri strength50 Benchmark Group for 16 consecutive Ward’s allows us to offer a wide array of Auto-Owners Insurance for Associates, The Customer, Stability and have a superior ability to regional office, located in Columbia, opened in years. The objectives ofat competitive prices. the analysis are to Group. We were ranked Consistency, and Profit.facility” branch office houses August 2006. This “full It is upon these values products and protection meet ongoing obligations recognize the 50 companies that have excelled at that our business hasand marketing has been for underwriting, claims, grown, trust operations to policyholders. number 426 in the balancing safety, consistency for our success. There are many reasons and performance the company’s Missouri region. Fortune 500 rankings, earned, and relationships thrive.” Leading the wayand to then benchmark their the over five years, are the people who make up In July 2006, Auto-Owners opened a claims Auto-Owners Companies Earn Position On Auto-Ownerswith the industry overall.associates performance family: Our 3,300-plus branch in Louisville, Kentucky. And effective our fourth straight year in the listing. And on TheStreet.com Recommended List Ward Financial Group is a Cincinnati-based September 1, 2006, the Lakeland regional office was July 1 we celebrated our 90th anniversary. Auto- and the nearly 35,000 independent agents who of Companies divided into the East Florida and West Florida regions. management consulting and investment banking Owners has grown from first-year written and Auto-Owners Insurance Company premium represent us. Weather-related losses were kind firm specializing in the insurance industry, and R.L. Looyenga, chairman & CEO New Construction of $174.25 to over $4.56 billion during that each Home-Owners Insurance Company were span. is us and our by Fortune magazine, the New to recognized policyholders—who rely on Auto- In June 2006, an 18,150-square-foot newly York Times, Reuters news service and others Owners for ‘No Problem’ claim service—in as ratedThroughout our 90 years, Auto-Owners has A Excellent by TheStreet.com (formerly constructed regional branch office in Columbia, an authoritative source for insurance industry Weiss Ratings, Inc.). Owners Insurance South Carolina, opened, replacing a leased facility. remained dedicated to the independent agency 2006, and our Safe. Sound. Secure.® investment financial analysis. Company and Property-Owners Insurance Land was purchased in Fargo, North Dakota, system. People want to a rating of B+ Good. Company each earned do business with people approach also proved successful. (4.6 acres) and in Lexington, Kentucky, (5.1 acres) for These ratings place our companies on TheStreet. future construction of owned regional branch offices. com Recommended List, an elite group of 106 property and casualty insurance companies. COMPANIES’ REPORTS Home-Owners Insurance Company recorded approximately 34,800 agents in more than 5,900 Auto-Owners Insurance Group enjoyed written premiums of $861.1 million at year-end agencies, and is the Group’s largest insurer. continued asset growth in 2006 and is recognized 2006. This property and casualty stock company for exceptional financial strength and stability Auto-Owners Life Insurance Company experienced writes business in Michigan and Ohio. among the nation’s largest insurers. Comprised another excellent year; over 42,000 applications of five property and casualty companies and one Property-Owners Insurance Company had another were received. The Company recorded $18.5 life/health/annuity insurer, the Group had combined fine year with written premiums of $66.6 million billion of life insurance in force at year-end. In assets of $12,802,024,643 at year-end 2006, up in 2006. This stock insurer writes property and addition, annuity reserves for this stock company $1.1 billion from 2005. Net written premiums casualty products in Indiana and Michigan. increased nearly 10.0 percent to over $1.1 billion. totaled $4,564,273,075. Over 4.3 million personal, Assets were up 9.2 percent to $1.8 billion and Southern-Owners Insurance Company completed commercial, and life insurance policies were in total Life Company written premium was $208.8 its 12th year of operation in 2006, with written force at year-end 2006. Seventy-three underwriting, million. premiums of $140.4 million at year-end. This claims and marketing offices serve customers in the stock insurer writes property and casualty products Group’s 25-state marketing territories. Owners Insurance Company recorded another in Florida. strong year with written premiums of over $1.1 Auto-Owners Insurance Company ranks among billion at year-end 2006. This stock company is the leading property and casualty insurers in the the second largest property and casualty insurer in United States with recorded net written premiums the Auto-Owners Insurance Group and operates in of over $2.5 billion at the end of 2006. This 24 of the 25 states that make up the Auto-Owners mutual insurance company is represented by regional market.
  3. 3. FINANCIAL REPORT Property & Casualty ASSETS NET WRITTEN PREMIUM (SALES) Life Company Consolidated Cash in Banks $ 1,747,242 $ 17,224,047 $4,564,273,075 2006 Accounts Receivable Premiums in Process of Collection 874,365,587 Life Insurance Premium Deferred and Uncollected 22,652,100 Bonds (Amortized Value) 1,511,273,495 8,200,735,968 $2,792,353,087 2001 Stocks (Statement Value) 52,590,028 1,588,860,818 Mortgages - Real Estate First Mortgages 151,701,341 11,321,568 $1,682,740,528 1996 Real Estate Owned 64,173,310 76,770,327 $1,208,164,451 1991 Miscellaneous Assets 36,674,155 395,236,386 $890,399,879 1986 Total Assets $1,840,811,671 $11,164,514,701 LIABILITIES Claim Reserves All Claims in Process of Adjustment 3,673,190,831 8,089,385 COMBINED ASSETS Aggregate Reserve for Life, Accident $12,802,024,643 and Health Policies 1,592,992,612 2006 Reserve for Unearned Premiums 1,950,479,604 Reserve for Miscellaneous Accounts and Taxes Payable 694,819,538 36,747,196 $7,364,292,887 $1,637,829,194 Total Liabilities $6,318,489,973 2001 $4,974,696,399 CAPITAL $ 3,450,000 1996 Contingency Reserve $3,116,981,794 1991 Excess of Assets over Liabilities. Provides 1986 $1,651,701,521 policyholders additional assurance of the Companies’ abilities to withstand 4,846,024,728 catastrophic occurrences. 199,532,477 $ 11,164,514,701 $1,840,811,671 Total Liabilities and Surplus
  4. 4. SUMMARY OF COMBINED ASSETS Combined Assets as of December 31, 2006 Auto-Owners is unwavering in its commitment toward maintaining a high-quality investment portfolio. We remain 1.15% Cash & Short-Term Investments committed to the proven investment principles that have guided us 12.97% U.S. Government Bonds along a steady path throughout the years. 0.2% Non-Investment-Grade Bonds 11.24% Stocks Depicted is a breakdown of the combined assets of the Auto-Owners Insurance Group as of December 31, 2006. The 2.37% Real Estate Owned & Mortgages combination of U.S. Government Bonds and investment-grade bonds represents 74.66 percent of assets. Non-investment-grade bonds represent only 0.2 percent of assets. 61.69% Investment-Grade Bonds “The road to investment success has many potholes. Our adherence to a Safe. Sound. Secure.® investment portfolio helps assure that when you need us the most, Auto-Owners will be there.” Comments from R. L. Looyenga, 10.38% Miscellaneous Assets chairman & CEO, Auto-Owners Insurance Group 100.0% PROFIT & LOSS STATEMENT REVENUE Life Company Property & Casualty Group Net Premiums Written $ 208,830,145 $ 4,355,442,930 Net Premiums Earned 208,830,145 4,336,375,783 Net Investment Income 96,120,394 432,956,210 Total Income Earned $ 304,950,539 $ 4,769,331,993 EXPENSES Claims Related Expenses 251,779,931 2,805,430,746 Operating Expenses 25,407,657 1,130,331,047 Total Expenses $ 277,187,588 $ 3,935,761,793 Net Income Before Income Taxes 27,762,951 833,570,200 Income Taxes 10,905,817 216,137,286 NET INCOME $ 16,857,134 $ 617,432,914
  5. 5. YEAR IN REVIEW Auto-Owners Life Insurance Company Intro- Auto-Owners Property Casualty Group Auto-Owners Companies Earn A.M. Best duces 30 Year Level Premium Term Product Companies Earn Top Marks from Superior Ratings Auto-Owners Life Insurance Company Demotech, Inc. Auto-Owners property and casualty introduced a 30 Year Term product in 2006. This Auto-Owners Insurance Company, Owners companies are rated A++ (Superior) by A.M. Best product complements the other term offerings, Insurance Company, Property-Owners Insurance Company, a nationally recognized independent which already featured 1, 5, 10 and 20 Year Term Company, Home-Owners Insurance Company insurance company rating organization. products. The Life Company also revised Whole and Southern-Owners Insurance Company earned Auto-Owners Life Insurance Company is rated Life rates, and added two underwriting rate Demotech’s Financial Stability Rating® A” A+ (Superior) categories for preferred non-smoker and premier (Unsurpassed) for 2006. The A” rating recognizes by A.M. Best. non-tobacco. Also, the Long Term Care policy unsurpassed financial stability, achieved by only According to now offers (in most states) an optional 3 percent the top companies evaluated. Demotech, Inc. is inflation rider, giving customers three choices in A.M. Best a financial analysis and actuarial services firm selecting how a benefit level is calculated. Company, whose Statements of Actuarial Opinion meet or “The [Auto-Owners] Group achieved strong Auto-Owners Insurance Company Enters exceed the professional actuarial requirements operating results due to its well-established Idaho Market established by the National Association of independent agency relationships, competitive Auto-Owners Insurance Company began Insurance Commissioners. expense structure, diversified product offering and writing business in Idaho, its 25th state, in adherence to strict underwriting fundamentals. The July 2006. Idaho policyholders and agents are Ward Financial Group Ranks Auto-Owners rating also acknowledges Auto-Owners strong market assisted by associates located in the company’s Among Its Top 50 presence as one of the 20 largest property casualty Westminster, Colorado, regional office. At year-end Auto-Owners Insurance Group was named 2006, 16 local independent agencies represented insurance organizations in the United States with to the 2006 Ward’s 50 Benchmark Group for Auto-Owners and premium writings for the Group more than $4.3 billion in net written premium as of achieving outstanding financial results over the Companies exceeded $1 million. year-end 2005.” In A.M. Best’s opinion, companies past five years (2001 - 2005). Auto-Owners is in the A++ and A+ classifications—their highest NEW FACILITIES OPENED IN 2006 one of only 10 companies named to both the classifications—have a superior ability to meet Two New Offices Opened property and casualty and ongoing obligations to policyholders. Due to continued growth, success, and to better the life/health Ward’s 50 serve its customers, Auto-Owners Insurance Group Benchmark Groups, and one of Auto-Owners Companies Earn Position On opened two additional offices. The new Missouri only seven companies named regional office, located in Columbia, opened in TheStreet.com Recommended List to the property and casualty August 2006. This “full facility” branch office houses of Companies Ward’s 50 Benchmark Group underwriting, claims, and marketing operations for for 16 consecutive years. The Auto-Owners Insurance Company and the company’s Missouri region. objectives of the analysis are to recognize the 50 Home-Owners Insurance Company were each In July 2006, Auto-Owners opened a claims companies that have excelled at balancing safety, rated A Excellent by TheStreet.com (formerly branch in Louisville, Kentucky. And effective consistency and performance over five years, and Weiss Ratings, Inc.). Owners Insurance September 1, 2006, the Lakeland regional office was divided into the East Florida and West Florida regions. to then benchmark their performance with the Company and Property-Owners Insurance industry overall. Company each earned a rating of B+ Good. New Construction Ward Financial Group is a Cincinnati-based These ratings place our companies on TheStreet. In June 2006, an 18,150-square-foot newly management consulting and investment banking com Recommended List, an elite group of 106 constructed regional branch office in Columbia, firm specializing in the insurance industry, and property and casualty insurance companies. South Carolina, opened, replacing a leased facility. is recognized by Fortune magazine, the New Auto-Owners Life Insurance Company also Land was purchased in Fargo, North Dakota, York Times, Reuters news service and others as received an A Excellent rating. According to (4.6 acres) and in Lexington, Kentucky, (5.1 acres) for an authoritative source for insurance industry TheStreet.com, companies in these categories future construction of owned regional branch offices. financial analysis. offer “excellent financial security.”
  6. 6. AUTO-OWNERS HOME-OWNERS AUTO-OWNERS LIFE INSURANCE COMPANY INSURANCE COMPANY INSURANCE COMPANY Lansing, Michigan Lansing, Michigan Lansing, Michigan PROPERTY-OWNERS OWNERS SOUTHERN-OWNERS INSURANCE COMPANY INSURANCE COMPANY INSURANCE COMPANY Marion, Indiana Lima, Ohio Lakeland, Florida Administrative offices of all companies are located at 6101 Anacapri Blvd., Lansing, MI 48917 WWW.AUTO-OWNERS.COM 12131 (4-07)

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