Harleysville Group profile

The Harleysville Insurance organization—of which Harleysville Group is a member—is ranked as one of the top 70 largest property/casualty insurers in the United States. The information that follows has been prepared to give you a better understanding of our strategic initiatives, organizational structure, business objectives and corporate culture.

Company history

Harleysville Insurance was founded in 1917 by automobile owners who sought protection from what was already a growing problem: car theft. First known as the Mutual Auto Theft Insurance Company, the original Harleysville was much like the horse theft societies farmers had used for years to spread the risk among many. Under the original proposal, each member of this association contributed a small fee to a fund that would pay the costs to recover or replace any of their stolen vehicles.

A second company—Harleysville Mutual Casualty Company—was created in 1922 to insure homes and businesses. In 1933, that company was merged with the Auto Theft Company, and then, in 1956, the company's name was changed to Harleysville Mutual Insurance Company. In 1960, Harleysville Life Insurance Company was established to offer life insurance and related financial services.

Growing our organization Harleysville Group Inc. was formed in 1979 to manage our expanding group of regional insurers. Through these regional operations, we leverage our superior knowledge of local markets to create more productive and longer-lasting customer relationships than those of national companies. Conversely, the broader scope of our organization as a whole offers the economies of scale available from centralized support—without compromising local marketing autonomy and managerial entrepreneurship in each regional operation. Our broad geographic base also enables us to spread our exposure to weather patterns, political environments and regulatory risks over a wider area.

Because we are a growing group of companies, our collective size has proven to be large enough to attract the capital markets to fund our growth initiatives. On May 23, 1986, we raised $32 million in our initial public offering. Since then, there was a $31 million secondary offering of Harleysville Group stock in 1992 and a $74 million debt offering in 1993.

Methods of growth We have expanded our organization by focusing on three primary methods of growth: acquisition, start-up operations and internal growth. Through the successful execution of these growth modes, we have grown—both in size and geography.

In 1982, the entire Harleysville operating territory consisted of eight Mid-Atlantic states. One year later, we completed our first significant step in creating our national network with the purchase of Worcester Insurance Company, a regional insurer operating in New England and New York. At the time of the acquisition, Worcester was a personal lines company that wrote $25 million in premiums. Today, Worcester is a multi-line company with direct written premiums of more than $250 million.

In 1987, we entered the Southeast by acquiring Atlantic Insurance Company of Savannah (now known as Harleysville-Atlantic Insurance Company). Two years later, we entered into an agreement with Berkshire Mutual Insurance Company to manage that company’s operations for a fee. In 1991, we expanded our presence in New York with the purchase of New York Casualty Insurance Company.

With the 1993 acquisition of Lake States Insurance Company, a highly profitable company based in Traverse City, Michigan, we took our first step into the Midwest. Since then, Lake States has expanded its own territory by establishing offices in Indiana (1994) and Illinois (1995).

In 1994, we formed a new subsidiary—Great Oaks Insurance Company—as an Ohio-domiciled property/casualty insurer. That same year, we opened a new regional office in Nashville to serve Tennessee, Arkansas and Alabama.

Our most recent activity in the Midwest occurred in 1997 with the acquisition of Minnesota Fire and Casualty Company, headquartered in Edina, Minnesota, and operating in 12 Midwestern states.

In 2001, Harleysville announced the decision to consolidate all the individual companies under the Harleysville name in order to: better convey the overall organization’s size, stability and financial strength; unify Harleysville’s brand; and position the company more prominently in the small commercial marketplace. As such, Great Oaks was renamed Harleysville Insurance Company of Ohio, Lake States Insurance Company is now Harleysville Lake States Insurance Company, Minnesota Fire and Casualty Company became Harleysville Insurance Company, New York Casualty Insurance Company is now Harleysville Insurance Company of New York, and Worcester Insurance Company was renamed Harleysville Worcester Insurance Company.

Today, Harleysville Group and its subsidiaries write insurance in 32 states primarily in the eastern and midwestern United States.

Marketing strategy Because Harleysville was founded as an auto insurance company, our mix of business was heavily weighted by personal lines business in our earlier days. That changed in the mid-1970s (shortly before Harleysville Group was formed) when we began a diversification effort to increase the amount of commercial lines business on our books.

Initially, we focused on writing small and medium-sized commercial accounts. Our goal was to be a generalist underwriter, providing a broad range of coverages for a wide variety of businesses. We have found that by writing entire accounts we greatly increase account profitability and long-term retention of the business.

While our "generalist" philosophy provides our agents with a wide range of basic coverages, we have also placed an increasing emphasis on certain business segments in which we have the most experience and expertise.

In personal lines, we offer a full range of products, including auto, homeowners, dwelling fire, personal excess and pleasure craft. To improve our personal lines business, we stress effective underwriting, proper risk classification and insurance-to-value programs.

Agency relationships We credit much of our success to the independent insurance agents who represent us. To ensure lasting partnerships with our agents, we limit appointments to those agencies we’ve identified as having long-term growth and profit potential. In fact, many of the independent agencies associated with Harleysville’s field operations have been with us for 10 years or more. Today, some 1,300 agencies represent the Harleysville organization as a whole.

We enjoy an open and mutually productive relationship with our producers. Agents and management meet regularly at local and national agency councils to discuss common concerns and new ideas. As a direct result of these forums, we have successfully developed a variety of products, programs and services to improve the competitive position of our company and our agents.

Establishing a personal stake in the results In establishing our strategic direction, we continue to create new ways to ensure that employees and agents have a direct stake in Harleysville Group’s results. We match employee contributions (up to 125 percent) to our employee 401(k) plan, based on our profitability. The higher our profits, the higher the match. The popularity of the program is evident: more than 80 percent of our employees participate and thus have a direct stake in our financial performance.

Members of our management team are required to hold a certain amount of stock to be eligible for stock option grants. In addition, more than one-third of all employees own Harleysville Group common stock, and many employees hold stock options as a result of a special program instituted to commemorate our 75th anniversary.

An agency stock purchase plan was introduced to 300 of our best agencies in 1995 and has since expanded to provide more of our agents with an attractive means of acquiring an ownership interest in Harleysville Group.

© Copyright 2003-2008 Harleysville Group Inc., Harleysville, Pa., U.S.A.
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