1874UNION MUTUAL OF

VERMONT COMPANIESUNION MUTUAL OF

VERMONT COMPANIES

2 0 1 1 A N N U A L R E P O R T

R E B U I L D I N G H O M E S & L I V E S

Results that matter with service that is “Second to None”

Reliability &

Integrity

Performance

Helping you rebuild. These three simple words describe the underlying promise Union Mutual has made to its policyholders for nearly 140 years.

That promise was put to the test in 2011, which was a challenging year for

most New England insurance companies. It was a year in which we were regularly reminded of our guiding principle, “Service, Second to None,” as we helped nearly 20,000 of our policyhold-ers rebuild.

The year started with claims resulting from the effects of a severe winter with heavy, accumulating snow. This was fol-lowed a few months later with multiple tornados that struck Western Massachusetts, causing damage not seen in half a cen-tury. Then Hurricane Irene hit, with high winds in southeastern Massachusetts and severe flooding in Vermont. To top it all off, there was a major blizzard on Halloween. It truly was a year of rebuilding.

Within hours of the Massachusetts tornados, our agents and adjusters were in the areas hardest hit, helping our policyhold-ers find food, shelter and clothing. The day after Hurricane Irene, our agents and adjusters hiked countless numbers of miles over washed-out roads, farmers’ fields and in some cases through the woods to reach policyholders who found themselves completely isolated from civilization due to flash flooding. After the Halloween storm, we helped our customers clear downed trees, repair damaged cars and find generators for those who were without power. These were certainly extraordinary circum-stances, but as in more normal years, our mission was the same: helping insureds put their lives together again after a loss.

We began 2011 financially stronger than ever and ended the year with assets just over $183 million, the second highest in our history. Due to the unusual storm activity, however, we reported a sizeable underwriting loss and our surplus decreased to $72.7 million.

I am pleased to report that, despite the busy claims year, we maintained our Strategic Plan to improve service and usefulness to policyholders and agents alike by:• Purchasing and implementing a new policy administration

system to enhance both functionality and speed;• Changing policy forms to the most up-to-date versions avail-

able;• Revising our pricing to differentiate between risks more pre-

cisely, thus allowing us to provide the most competitive price possible.As a regional mutual, we not only work in New England, we

live in New England. We are your neighbors. Our promise remains the same, “Service, Second to None”. Helping you rebuild. Thank you for doing business with us.

Sincerely,

John H. FitzhughPresident & Chief Executive Officer

A Challenging Year

An F-3 tornado hit Western Massachusetts on June 1st devastating this area and causing a total loss for many policyholders. This home required a total reconstruction.

2011 Highlights:• Updated ISO Forms: - Businessowners (2010)

- Homeowners (2011)

- Personal Auto (2005)

- Personal Umbrella (2006)

• Revised Agency Contract

• Home Office System Upgrades

• Expanded Agency Plant

Union Mutual is quick to respond when our policy-holders need us. Shown below is just one of our many satisfied customers.

Left to right: Paul Oldenburg receives a check from his agent, Michael Rzepka and Tripp Robinson of the Union Mutual of Vemont Companies.

Major structural damage required complete demolition and reconstruction, a major undertaking that was completed within six months.

Tornado-force winds blew out the windows, roof and damaged the siding, including interior damage, all while our insured was home. Our insured was unhurt and repairs were completed within five months.

2011Results

OFFICERS

John H. Fitzhugh President & CEO

Michael W. Nobles Senior Vice President, CFO & Treasurer

Robert F. Glass Vice President, Underwriting

Guy W. Graham Vice President, Claims

Carolyn S. Ix Vice President, Marketing

Lisa L. Keysar Vice President, Customer Support & Corporate Secretary

Gary H. Ouellette Vice President, Operations, Technology & Enterprise Risk

Harold L. Robinson, III Regional Vice President

William R. Scrafford Regional Vice President

BOARD OF DIRECTORS

Kathleen H. Davis Partner, Downs Rachlin Martin, PLLC

James H. Douglas Executive in Residence – Middlebury College & Governor of VT (2003-2011)

John H. Fitzhugh President & CEO, Union Mutual

Aaron R. MacAskill Managing Partner & CPA, A.M. Peisch & Company, LLP

Thomas H. MacLeay Chairman, National Life Group

James A. McDonald President & CEO, J.A. McDonald, Inc.

S. John Osha Chairman, Union Mutual, Dairy Farmer & Chairman, Randolph National Bank

Mark S. Young President & CEO, The First National Bank of Orwell

ADVISORY COUNCIL MEMBERS

Frederic H. Bertrand Former CEO, National Life Group

David R. Coates Former Managing Partner, KPMG

John E. Corning Former Sr. Vice President, Union Mutual

F. Ray Keyser, Jr. Of Counsel, Keyser & Crowley, & Governor of VT (1961-1963)

Allen Martin Retired Chairman, WICOR Americas

Lawrence H. Reilly Former President & CEO, Union Mutual

Thomas P. Salmon Former President, UVM & Governor of VT (1973-1977)

Union MUtUal Fire insUrance coMpany & new england

gUaranty insUrance coMpany, inc.139 State Street, P.O. Box 158 Montpelier, VT 05601-0158

Phone: 802-223-5261 • Fax: 802-229-5580www.unionmutual.com

Union Mutual of Vermont carries the Trusted Choice® designation by the Independent Insurance Agencies and Brokers of America.

BOARD OF DIRECTORS

Valerie A. Davis Vice President & Secretary, Eastern Mutual

Robert E. Flagler Chairman, Retired Assistant Controller - Dime Savings Bank

Elizabeth J. Friedland Retired Manager, Schoharie & Schenectady Mutual Insurance Association

Scott T. Jeffers President, Sauquoit Valley Insurance Company

Kent L. Johnson Associate Director IT Infrastructure, Rensselaer Polytechnic Institute

William R. Scrafford President & Treasurer, Eastern Mutual

Allyn P. Wright Vice Chairman, Independent Forestry Consultant

Fred S. Zeitler, CPA Public Accountant

Alan P. Zuk Retired Transportation Coordinator, Berne Knox- Westerlo School District

OFFICERS

William R. Scrafford President & Treasurer

Valerie A. Davis Vice President & Secretary

John H. Fitzhugh Chief Executive Officer

Leslie A. Hallenbeck Vice President, Marketing & Underwriting

Arlene K. Ingalls Assistant Secretary

Michael W. Nobles Chief Financial Officer

Gary H. Ouellette Vice President, Information Systems

eastern MUtUal insUrance coMpany

6504 State Route 32, P.O. Box 40Greenville, NY 12083

Phone: 518-966-4491 • Fax: 518-966-5022www.easternmutual.com

Union Mutual of Vermont CompaniesUnion MUtUal Fire insUrance coMpany*Assets:Bonds .............................................................. $92,138,000Stocks ................................................................ 18,829,000Cash & Equivalents ............................................ 8,464,000Premiums Receivable ....................................... 20,401,000Other Assets ...................................................... 25,341,000

$165,173,000Liabilities:Unearned Premiums ............................................. $52,443,000Loss & LAE Reserves................................................. 40,437,000Other Liabilities .......................................................... 9,843,000Policyholders’ Surplus............................................. 62,450,000

$165,173,000

eastern MUtUal insUrance coMpany**Assets:Bonds .............................................................. $13,373,000Stocks .................................................................. 1,351,000Cash & Equivalents ............................................ 1,362,000Premiums Receivable ......................................... 1,213,000Other Assets ........................................................ 1,049,000

$18,348,000Liabilities:Unearned Premiums ............................................... $3,601,000Loss & LAE Reserves................................................... 3,899,000Other Liabilities ............................................................. 558,000Policyholders’ Surplus............................................. 10,290,000

$18,348,000

* Union Mutual contains activity from New England Guaranty, its wholly-owned subsidiary.

** Eastern Mutual Insurance Company is a New York domestic company which is affiliated by contract with Union Mutual Fire Insurance Company.

1874UNION MUTUAL OF

VERMONT COMPANIESUNION MUTUAL OF

VERMONT COMPANIES66964 MK9164(0212)

Union MUtUal oF VerMont coMpanies

Old-Fashioned Values of Fairness, Integrity and Respect

Operating through an extensive network of inde-pendent insurance agents throughout New England and New York, we take great pride in focusing on outstanding service and treating others as we would like to be treated. The Union Mutual of Vermont Companies’ overall business philosophy and culture is one that strives to treat all of our business partners, be they policyholders, agents or vendors, with the highest level of fairness, integrity and respect.

A letter from Bridgeport, CT expresses not only gratitude, but confirms the service provided by the Union Mutual of Vermont Companies is truly “Second to None.”

Assets: Bonds .......................................................... $105,511,000Stocks .............................................................. 20,180,000Cash & Equivalents .......................................... 9,826,000Premiums Receivable ..................................... 21,497,000Other Assets .................................................... 26,383,000

$183,397,000Liabilities:Unearned Premiums .................................... $56,044,000Loss & LAE Reserves........................................ 44,336,000Other Liabilities ............................................... 10,276,000Policyholders’ Surplus ..................................... 72,741,000

$183,397,000

coMbined balance sheetDecember 31, 2011

A.M. Best Rating of “A- (Excellent)” has been assigned to all of the Union Mutual of Vermont Companies