2023 Annual Report

TMESSAGE FROM JOHN

F. DONOHUE

he P&C insurance market faced complex challenges in 2023. It was also an especially difficult year for our customers. Insurers raised premiums tooffset skyrocketing claims costs impacted by inflation, climate change, and the rising cost of repairs. Companies worked hard to mitigate increases and achieve profitability. Those that fared best—and will continue to do so—were prepared throughdisciplined underwriting, loss reductionstrategies, and prudent expense management. Arbella was one of those companies.

SinceSeptember2022,A.M.Best’s outlook fortheU.S.personalinsurance segment has beennegative.This is primarilyduetoinflationarypressures and significantfinancial deterioration in theindustry’shomeandautolines.Despitesuchadverseconditions,in January2024,A.M.BestreaffirmedArbella’s Financial StrengthRatingofA(Excellent)with astableoutlook.Theycited our strongrisk-adjustedcapitalization,proactiveexposure management,refinementstoreinsuranceprograms,andsolidsurplusgrowth.

FINANCIAL RESULTS

Arbellaiswell-positionedtoaddress therisksandchallengesfacingourindustry. Two catastrophicweatherevents,plusacontinuedspikeinauto claimsseverity,putpressure onourfinancialresults. Wesustainedstrong customerretention, grewourdirectwritten premiumby11.9%,andachievedadirectexpenseratioof30.7%.Withacombinedratio of102.5%, we closedtheyearwith$5 million inafter-taxincomeandincreasedoursurplus to$946million.

NOTABLEACHIEVEMENTS

Arbella’slongandstabletrackrecordofexcellentperformanceisthedirectresultofour employeesandtheirabilitytoembracechange.Ourpersonalandcommerciallines departmentseffectivelymanagedunderwriting risks,whiledevelopingnew coveragesfor ourchanging world.

Thetrusting relationshipsweenjoywithouragents wasakeyfactorinourabilitytonavigate themarket. Throughouttheyear, theyreportedthatArbellaemployeeswere consistently responsive, transparent,andcommunicativeaboutmarketchanges.

OuremployeesachievedallofthisandvotedArbellatheBostonBusinessJournal’s#1Best Place to WorkinMassachusetts.

HERE. FOR GOOD.

Despite everything we were up against, our employees and agentsdid not abandon Arbella’svalues of putting people first. We saw in-person volunteering surge in 2023, and the Arbella Insurance Foundation was there to help employees address local hunger, homelessness, healthcare, education, and social justice issues.

Looking ahead, I am optimistic about 2024. Aswe have done since 1988, Arbella will leverage our strength and resilience to meet the evolving needsof our markets, agents, andcustomers

Thank you for your continuedsupport.

John F. Donohue Chairman,President & ChiefExecutive Officer Arbella Insurance Group

SERVICE

Great service means putting people first.

In 2023, significant rate increases and catastrophic weather events drove an understandablespikeincontactcenter inquiries. Arbella employees prioritized one customer at a time and delivered prompt, compassionateservice.

Insurance is complex, and many customers needed support navigating premium increases and personal economic challenges. Our employees responded to more than 780,000 phone andchat inquiries. We provided them with dedicated training to ensure they could support customers by helping them understand what was happening in the market. Although contact center wait times averaged longer than normal, our representatives spent asmuch time as needed with eachcustomer to deliver Arbella’s high-quality service experience. Both our customers and agents reported that Arbella service representatives were consistently professional, knowledgeable, and empathetic.

“We lost everything in a home fire on Thanksgiving. Many people told us that the insurancecompany would be a challenge to deal with. But they didn’t have Arbella. Arbella was the best part of the entire experience. They helped us navigate every roadblock and provided us with both guidance and comfort. At times it felt like they werethe only ones there for us. We highly recommend Arbella.”

– Paula S. South Easton, MA

We understand that our employees have a profound impact on our customers and agents. To further enhance our service levels, we launched a robust “voice of the employee” program, which provides opportunities to discuss service delivery pain points and ideas for improvement. Their feedback resulted in many exciting process enhancements that retained the personalized approach we are known for.

Finding the balance between people and systems is a critical element of our business strategy. Arbella’s service and operations teams collaborated to deliver major upgrades to our policy, billing, and payment systems. We look forward to launching these system enhancements in 2024.

Arbella’s special brand of service can be experienced through the Arbella Service Center (ASC). The ASC is a contact center that delivers tailored customer service on behalf of a select group of our independent agents. Participating agents reported that the ASC is among the very best in the business in creatively solving customers’ problems and assisting them with their coverages.

In 2024, we will continue to invest in our people and technology and introduce new solutions that benefit our customers and independent agents.

“WeleveragetheArbella ServiceCenterforourclients becauseArbellaemployees delivercustomerserviceat thesamehigh levelsof quality wedo.Theycomplementour serviceteamseamlesslyand strive to go above and beyond ourcustomers’expectations everyday.”

–Brenda Weser Senior Vice President, Personal Lines & Operations, Assured Partners Insurance

PERSONALLINES

Early in 2023, most companies—including Arbella—saw inflation-driven home, auto,and medical loss costs that far outweighed premiums. Combined with the growing impact of extreme weather events and sharply increasing reinsurance costs, the industry’s first quarter projections were bleak.

Arbella, however, has always prepared for theunexpected. Our ongoingapproach of careful underwriting, combined with a focus on profitable growth, provided us with a strong foundation for what was to come in 2023. In the first quarter, we reevaluated our risk exposures andappetite strategies and worked with regulators to adjust our personallines pricing.

Despite market pressures, we were able to grow by 13.6% to $766 million, while retaining our healthy book of business. We increased our revenue in Connecticut by 44% to just shy of$60 million, achieving a major strategic milestone. Arbella Personal Lines is wellpositioned for thefuture.

Our agents are always vital to our success. We pride ourselvesin being accessible, especially during the toughest of times. We communicated early and often to ensure they understood the changes we were making. We assisted them with training and communication tools to help our customers understand, too.

Our employees spent many hours working on a new policy administration system that will support our homeowners line of business in Massachusetts. With an expected launch date in 2024, this system will bring new coverages, easier processing, and faster response times.

We anticipate that loss costs will continue to be a concern in 2024. However, we will embrace these challenges as opportunitiestoprovideafairandresponsivemarketforour personal insurance agents and customers.

“In this time of unprecedented disruption in Personal Lines insurance, it’s great to see Arbella expanding into Connecticut. Our company cultures are well-aligned and allow us to work synergistically – we have already written millions in new business together.

I trust Arbella to ‘do the right thing’ for our business and our clients.”

– StephenG. Todd CPCU, CIC, President & CEO, Brooks, Todd & McNeil

COMMERCIALLINES

Historic freezing temperatures, destructive rains, winds, and flooding have dealt unprecedented damage to New England properties. These losses have brought distress to policyholders and record-setting claims costs to commercialinsurers.

Likeourcompetitors,Arbellaneededtoraiserateslastyeartooffsettheimpactofthese losses and risingglobalreinsurancecosts.Yearsofdisciplinedriskmanagement and strategic growthmadeitpossibleforustominimizerateincreases and keepourpricingatmid-market levels.Effectivemanagementofwind and coastalexposureswascriticaltooursuccess. Ouremployees and agentsworkedtogethertofindcreativesolutionstorisksthatwere anythingbutstandard.Arbellaagentstoldusthatouremployeesdifferentiatedusfromour competitors.Theyprioritizedresponsiveness,listenedtotheirneeds, and avoideda one-size-fits-allapproachtopricing.

As a resultoftheseefforts,weachievedoutstandingfinancialresults,includingexcellent customerretention,an8.3%increaseinvoluntaryrevenuegrowth,adirectvoluntaryloss/ALE ratioof47.4%,andacombinedratioof93.5%.Commercialautoremainedourmostprofitable lineofbusiness.WealsomadegoodprogressinexpandingourbusinessinNewHampshire— by17%—andwelookforwardtocontinuedgrowththerein2024.

Inadditiontotheseachievements,wereached a significant companymilestoneaswebegan2023:weexceeded$300 millionincommercialinsurancebusiness.Commercial insurancenowrepresentsmorethan30%ofArbella’stotal revenue.Thisdiversificationhashad,andwillcontinueto have,astrongpositiveimpactonthefinancialstrengthof ourcompany.

Extremeweatherisnotgoingaway, and wearefacingit headon.Wearecommittedtohelpingourcustomersbuild moreresilientbusinessesthroughnew and innovative programs and products.In2023,welaunched a moisture andtemperature sensor programtohelpcustomersreduce water-relateddamagetobuildings—oneofthemostfrequent andexpensiveclaimspolicyholdersface.Wedeveloped newapproachestopricing and riskmanagement,and weexpandedourlosscontrolconsultingteamtobetter equipcustomerswiththeknowledgetheyneedtoprotect theirassets.

Ourindustryisfacingformidablechallenges.However, Arbellawillremain a financiallystrongcommercialinsurance marketleaderthatdeliversthecoverage,pricing, and support ouragents and customersneed.

“As an independent agency, we value Arbella’s out-ofthe box thinking, which is critical in today’s market. Their Commercial Lines managementteam and underwriters are responsive, professional, and creative. They work to accommodate our clients and write new business that works for all parties involved.”

– Russ Martorana Chief Executive Officer, FBinsure

CULTURE & BRAND

Arbella’s local, reliable, relationship-driven brand has helped usremain highly competitive in today’s complicated insurance market. Our brand is a true reflection of who weare—a people-firstcompany. This includes listening and responding effectively to employees’ needs.

In2023,ouremployeestolduswedojust that byvotingArbellatheBostonBusinessJournal’s #1Best PlacetoWork. Thisawardacknowledgescompaniesthatcreatehighlevelsofemployee satisfactionandpositiveworkplacecultures.Itisnowonderthat wehavebeenrecognizedasa Best PlacetoWorkfor15consecutiveyears!

Diversityisasimportanttoastrong workforceasitistoastrongbookofbusiness.Arbella’s focusoncreatingamorediverseandinclusiveworkforceisembeddedinourculture,andwe continuetomakegreatprogress.Infact,in2023,nearly40%ofallnewhireswerediverse. OurhighlyengagedDiversity&InclusionCouncilexpandeditspresenceandhelpedleadthe companythroughmeaningfulchange. Theysharedautobiographicalstories, facilitatedgroup discussions,hostedculturalcelebrations,andorganizedsocialjusticevolunteeropportunities.

Voted #1 Best Place to Work!

Ourcommunicationsteamworkedhardtoensurethatour employeeshadthetoolsnecessarytohelpourcustomers understandwhytheyhaveseenpriceincreasesintheirpolicies. Wehostedwebinarsandprovidedtalking pointsforour agents astheyplayedanessentialroleinhelping communicatemarket changes. Additionally, welaunchedtheArbellaAgentLearning Centertoprovideagentswithamultimediasuiteofdigital learningtools.

Ouradvertisingandmarketingpartnershipshavehelpedbring Arbella’sbrandtoNewEngland,includingarobustmedia campaigninConnecticut.Ourloveoftheregionanditspeople inspiredourcampaign,whichemphasizedtheimportanceof “doing goodthings.” ThroughTV,social,print,andbillboards, ouradsleftapositiveandlastingimpression, reflectingabrand that customersknow, trust,andbelievein. Weteamedupwith theBostonCelticsthroughagreat runintotheplayoffs. We hostedtheSpecialOlympicsofMassachusettsTorchRunand ourrecord-breakingbreast cancerfundraiser,“PinkDay,” atour headquarters. WeagainproudlysupportedtheWEEI/NESN JimmyFundRadio-Telethon,whichhelpedraisemillionsand celebratetheJimmyFund’s75thanniversary.

ArbellawasandwillcontinuetobeHere. ForGood.

LocalHull,Mass.fisherman, CaptainChad,wasfeaturedin ournewTVcommercial.

“Thecelebrationofvarious festivalsandculturesat Arbellanurturesa feeling ofcommunity,unity, andcamaraderie.Diwali celebrationsareespecially fulfillingformeasthey allowmetopartakein the preparationsandevents awayfromhome.”

– Karthika Chidambaranathan ITPortfolioManager, Arbella Insurance Group

FOUNDATION

The past year was one of transitions for the Arbella Insurance Foundation. Beverly Tangvik, former Foundation president, retired, leaving an incredible 18-year legacy of leadership and giving. Robin Jones, became our new executive director, bringing an impressive track record of nonprofit leadership and consulting experience to the role. Together, they worked to ensure the continuity of the Foundation’s mission and sustain its positive impact.

Approximately50%ofArbellaemployeesparticipatedincommunityvolunteeropportunitieslast year—morethantwicethenationalaverageforcorporatevolunteerism.Inpartnershipwiththe Foundation,Arbellaemployeeshelpedprovidevitalsupport for24nonprofitorganizationsthatare improvingthequalityoflifeforpeopleinourcommunities.

ArbellaemployeesandagentsaretheeyesandearsoftheFoundation. Theyknowwhereour communities’needsaregreatest. ThroughtheFoundation’smatchinggiftprograms,employees andagentsdonatedmorethan$158,000tothecausesthatmeanthemost tothem. Throughour “Let’sDriveOutHunger”program, theygavemorethan$77,800tofoodpantriesandprograms throughoutNewEngland.Intotal,theFoundation,Arbellaemployees,andindependentagents gave$3millionto521charitableorganizationsin2023.

Approximately50%ofArbella employeesparticipatedin communityvolunteer opportunitieslastyear.

50% ThroughtheFoundation’s matchinggiftprograms, employeesandagentsdonated morethan$158,000tothecauses thatmeanthemosttothem.

$158,000$692,000

Lastyear,theFoundation distributedmorethan$692,000 to18solution-driven organizationsconfrontingsocial andracialinjustices.

Homelessnessandhungerreachedcrisislevelsin2023, and the Foundation provided manyorganizationsonthe frontlines with additionalgrant support. We partnered withRian ImmigrantCenterand the Massachusetts Immigrantand Refugee AdvocacyCoalitionto support newlyarrived immigrantsinneedofshelterand food. When devastating floods struck communities inCentral Massachusetts, we supported farmersandfoodprogramsincollaboration with the United WayofCentral Massachusetts. Whentragicwildfires leveledpartsof Maui,we provided aidthrough the Maui Strong Fundinsupportoffamilieswho suffered greatlosses.

Through the Foundation’s Social Justice Initiative, we distributedmorethan$692,000 to18solution-driven organizations confronting socialandracial injustices,such asincome,housing,andeducation inequities.

When it’s easyto give,peoplegetinvolved. Last year, we launchedanew, online giving platform to simplifythegiving process forouremployees and agents, whileenabling us to more efficientlytrackandallocatefunding.

The Foundation will continue toengagein activities and support nonprofits thatmake a significant positiveimpact onthe peopleand communities servedbyArbella Insurance Group.

“The Arbella Foundation has taken leaps with us to tackle the racial home ownership gap in new and creative ways. Their support of our innovative STASH: FirstGen Homeprogram has helped 100 first-generation homebuyers purchase homes over the past fouryears.”

– Symone Crawford Executive Director, Massachusetts AffordableHousing Alliance

FINANCIALS

“Volatile weatherandrising auto claimscosts increased underwriting losses across the industry in 2023. Despite these headwinds, Arbella achieved modest profitability and grew surplus by 4%, attributable to the talents of our people, our product diversification, and sound investment strategy.”

– Chris Hall Chief Financial Officer, Treasurer & Executive Vice President, Arbella Insurance Group

OURVISION

Arbella’svision is to be the best property and casualty company in the Northeast.

OURMISSION

Arbella’s mission is to be a recognized regional leader in the property and casualty insurance industry. We will achieve this by maintaining financial strength, providingexcellent service and products, andstaying true to our core values.

OURCORE VALUES

EMPLOYEES

We encourage a culture that supports the balance between personal interests and professional goals and development.

DIVERSITY AND INCLUSION

We are committed to building a more diverse, supportive, and inclusive workplace where all individuals are valued for their talents and are empowered to reach their full potential.

CUSTOMERS

We maintain the highest levels of customer service and treat all customers with honesty andfairness.

TRUST

We maintain positive and enduring relationships with all those who rely on our service. We keep our word and act with honesty and integrity.

PERFORMANCE

We always seek new ideas, opportunities, and methods of doing business because we strive for excellence. We aim to outperform the industry in every way. We are resilient and passionate about what we do.

CITIZENSHIP

We engage in activities that have a positive impact on the people and organizations within our communities.

BOARDOF DIRECTORS

JOHN F. DONOHUE Chairman

THOMAS S. CARPENTER

ANNE M. DEFRANCESCO

WILLIAM H. DUMOUCHEL

ANDREA W. GARGIULO

THOMAS R. KILEY

FRANCIS X. BELLOTTI Vice Chairman

ELIZABETH K. KIM

JOSEPH G. MURPHY

BRIAN J. O’DWYER

JEANNETTE M. ORSINO

OFFICERSOFTHE ARBELLAINSURANCEGROUP

JOHN F. DONOHUE

Chairman, President & Chief Executive Officer

JANET R. CORCORAN

Chief Operating Officer & Executive Vice President

CHRISTOPHER E. HALL

Chief Financial Officer, Treasurer & Executive Vice President

JAMES S. HYATT

Chief Underwriting Officer & Executive Vice President

GAYLE O’CONNELL

Chief Marketing Officer & Executive Vice President

ROBERT BIZAK

Senior Vice President, Sales & Marketing

PAUL J. BRADY

Senior Vice President, Head of Claims

GAIL EAGAN Executive Vice President, General Counsel & Corporate Secretary

LYNELLEN M. RAMIREZ

Chief Actuary & Senior Vice President, Research Analytics

WILLIAM S. HUGHES Vice President, Commercial Lines

MATTHEW Y. POSTULKA

Vice President, Chief Information Officer