Nova AGSM Report - 2022 : simplebooklet.com

3ROI 4.3%EXPENSE RATIO 40.7%ROE 0.7%CLAIMS RATIO 64.5%INVESTEMENTS $41.0MCOMBINED RATIO 105.2%MCT 365%Company Proﬁle as of December 31, 2021AGENTS 3EMPLOYEES 48BROKERS 20Broker–86%Agent–14%Digital–0%DISTRIBUTION SPLITAutomobile–31%Commercial–24%Farm–17%Residential–28%LINE OF BUSINESS SPLITANNUAL GWP 10 YEAR GROWTH10 YR CAGR 10.0%$10$14.6$14.4$14.3$15.0$16.3$18.5$21.4$25.2$30.3$34.5$35.62012 2013 2014 2015 2016 2017 2018 2019 20202021 2021PLAN$15$20$25$30$35

Page 4

INTEGRITYRESPECTCOURAGEHUMANITYSIMPLICITYPRACTICALTRUSTOur PurposeOur Values“TO PROTECT THE UNIQUE LIFESTYLES OF EACH OF OUR MEMBERS BY EMPOWERING OUR PEOPLE TO PROVIDE SOLUTIONS THAT ARE CREATIVE, TRANSPARENT AND MEMBER CENTRIC.”Our CultureGUIDING PRINCIPLES1) Humanity above Bureaucracy2) Simplicity above Complexity3) Practical above Hypothetical4) Trust above All#WheneverWhereverWhateverINTEGRITYWe are open, honest and ethical. We hold authenticity and transparency in the highest regard.RESPECTWe treat others the way they want to be treated. We show empathy for others by listening and keeping an open mind.COURAGE We believe it takes courage to lead. We respond, adapt and embrace the changing world in which we operate.

Page 5

Page 6

Message from the ChairOn behalf of the Board of Directors, I am pleased to present the Nova Mutual Insurance Company Annual Report for the year 2021.As we continue to navigate through the ups and downs of the Covid-19 pandemic, please be assured Nova Mutual is committed to maintaining a high standard of governance.It has been my pleasure to serve as Chair of the Board of Directors for 2021.Through collaboration and productive Committee work, the Board currently consisting of 8 Directors, has made great strides in its commitment to good governance, and the determination of the strategic direction of the Company to be led by the Senior Leadership Team. Although times are constantly changing, Nova Mutual’s courageous attitude toward supporting our members and member communities is greater than ever. History shows the pride we have taken in engaging, supporting and recognizing our communities and we look forward to future opportunities to continue this commitment.As a member-driven organization, our purpose, values, strategy and tactics align to support the success of our members. The Board operates within the statutory requirements deﬁned in the Insurance Act and the Corporations Act, as well as in a manner consistent with best corporate governance practice.The success of Nova Mutual would not be possible without the hard work and dedication of our sta, led by our President and CEO Gary Anderson. The Board wishes to express its appreciation to them for their continuing commitment and achievements. Over 2021, the Board has undertaken an in-depth review and update of its governance practices, and the Governance Committee, led by its Chair, Barbara Bethune, has spearheaded this initiative. The Audit Committee, chaired by Mark Matson, has worked with CFO Glenn Pick, his team and the appointed auditors to oversee and prepare the audited ﬁnancial statements. The Investment Committee, chaired by Eric Harrop maintains oversight over the performance of the investment portfolio and

Page 7

7has undertaken the lead in developing Nova Mutual’s Risk Management framework. Our Board is committed to providing its Board members with educational opportunities, including individual director designations and, Directors participate in the work of the broader Mutual community: Barbara Bethune, OMIA Legislative Aairs Committee; Catherine Akins, Legislative Aairs Committee; Eric Harrop, Group B Committee.The Board nominations process is an important part of looking ahead, recognizing our changing environment, and maximizing our strength in our governance role. As we continue to reﬁne our process, we strive to draw expertise from the wide spectrum of our membership to continue to build a diverse and competent Board of Directors, ensuring the Board has the appropriate skills, knowledge, and experience to perform its role. In this regard, the Nominating Committee, chaired by Barbara Bethune, followed a process to assess the skills and expertise needed to continuously strengthen and refresh board composition. Interested individuals were subsequently invited to seek nomination for a position on the Board, and following an interview process, the Committee recommended the best-qualiﬁed individuals as nominees for election at Nova Mutual’s 3rd Annual General Meeting. Members will have the opportunity to select 3 Candidates for a 3-year term and 1 Candidate for a 2-year term. In continuing to follow the advice of public health authorities and Orders under the Ontario Emergency Management and Civil Protection Act resulting from the Covid-19 pandemic, the Board of Directors opted to once again hold the Annual General Meeting and conduct the meeting electronically. The Board of Directors welcomes your attendance and participation at the Annual General Meeting to be held on Tuesday, March 1st, 2022Regards, Michelle Spoelstra Board Chair, Nova Mutual Board of DirectorsAt Nova Mutual Insurance Company, we conduct business in the towns known as Simcoe and Jarvis. The Nova Mutual Board of Directors wishes to honour and respect the Traditional Land of the Haudenosaunee and Anishinaabeg people.

Page 8

CEO ThoughtsOn behalf of Leadership, I am pleased to present to U Nova Mutual’s 2021 Annual Report. The pages contained within are highlights of eorts brought forth by every member of our Team. One of several things that sets Nova apart is the passion and commitment our employees have for the work we do, and the alignment of our values to how it’s done. With the groundwork laid in 2019-2020 involving our company’s Purpose, Values and Culture, coupled with our 3 Year Strategic Direction, it is now time to fully embrace our “Servant Leadership” model. Servant Leadership takes the traditional power-leadership model and turns it completely upside down. This new hierarchy puts the people – or employees, in a business context – at the very top and the leader at the bottom, charged with serving the employees above them.Ultimately, Servant Leadership means placing the needs of others at the forefront. A servant leader focuses primarily on the growth and well-being of people and the communities to which they belong. They focus on serving instead of commanding, showing humility instead of brandishing authority, and are always looking to enhance the development of their teammates in ways that unlock potential, creativity and a sense of purpose. The Servant Leader moves beyond the transactional aspects of management, and instead, looks to develop and align the employees’ experience to the company’s purpose.In keeping with our strategy of “playing the odds.” I believe trusted and empowered employees will develop as future leaders, thus helping to ensure the long-term viability of Nova Mutual as we play the Inﬁnite Game. Our employees conceptually understand that we are doing things dierently; however, the true challenge is understanding what makes it dierent.Terms like Responsibility and Accountability are often used by more traditional companies interchangeably. Responsibility is typically dealt with by deﬁning roles, job descriptions, establishing processes, and putting controls in place. Accountability is often understood that employees are only accountable to their superiors, if they think they are accountable at all. Traditional terms and ideals such

Page 9

9as these are acceptable until adversity, or unfavourable events upset the status quo. Defensive mentalities develop when issues arise that are unidentiﬁed in company policies for those who rely on them for guidance and instruction. Companies often try to solve these problems by redeﬁning responsibilities—reorganizing what people do and restructuring the way work is done— only to ﬁnd that changing where people sit in the organization will not necessarily change how they think and perform.Our Servant Leadership approach instills INDIVIDUAL OWNERSHIP and TEAM ACCOUNTABILITY as driving factors to function as a high-performance organization. Ultimately, Mutual members, Brokers, and Vendors will beneﬁt as they all want to work with problem solvers, not blame-shifters. Evidence of this is reﬂected in our current inﬂux of new business as well as our 97% retention rates on existing members. Individual Ownership is our preferred description of Responsibility; these are the duties an employee is personally committing to as it pertains to their role. The individual is the sole owner of their role while being supported by team members. This means fully owning your responsibilities and looking internally ﬁrst when something goes wrong. We have found that this isn’t something you can force on people, for its value to resonate—they must want it and accept it themselves. Team Accountability at its core is simple – RESULTS MATTER.As Team Members, we are collectively accountable for our strategic objectives, outside of our individual ownership. It is not just doing our jobs but ﬁnding a way to do what needs to be done that contributes to our organization’s strategic direction. This is more of a mindset than a management process. Nova’s is a culture of teamwork and excellence. Thank you,

Page 10

Strategic Direction 2020-2022We will provide our members substantially more value than the competition while operating proﬁtably enabling us to give back to our communities.The foundation of our strategic focus is building upon the research of McKinsey’s “Strategy Beyond the Hockey Stick”. We are adopting the theme of “strategy” is about playing the odds.Not every decision is going to result in a win, however, companies that increase their shots taken, so to speak, are more likely to succeed. Strategy is probabilistic, not deterministic.Their study revealed that “insurers can take concrete, evidence-backed actions to move them in the right direction and, cumulatively, improve their odds of long-term success.”These purposeful, concrete and evidence-backed actions are referred to as Bold Moves. McKinsey’s study found that insurers who did the following dramatically improved their odds of reaching the top quintile of economic proﬁt over a ten-year period: • Dynamically shift resources between businesses. • Reinvest a substantial share of capital in organic growth opportunities. • Pursue thematic and programmatic M&A. • Enhance underwriting margins. • Make game-changing function improvements in productivity.We will undertake these Bold Moves in parallel to give us an opportunity to move into the top quintile of the Power Curve and substantially increase the amount of value creation.WE WILL PROVIDE OUR MEMBERS SUBSTANTIALLY MORE VALUE THAN THE COMPETITION WHILE OPERATING PROFITABLY ENABLING US TO GIVE BACK TO OUR COMMUNITIES.

Page 11

Page 12

Page 13

13Attract and Retain Top Talent2021 was a tremendous year for talent as we celebrate the onboarding of New Team Members.PHIL MOURAChief Information OcerMICHAEL RZEPCZYKProperty Casualty AdjusterADAM HARRISONNetwork EngineerSUE RIVARDEmployee Experience DirectorKRISTINE MITCHELLPayroll SpecialistGRANT HISCOCKSAgribusiness UnderwriterHEATHER DAY Auto AdjusterGRAEME REED Brand Production SpecialistANN BANDA Comm Auto Underwriter

Page 14

Attract and Retain Top TalentAMANDA PONACommercial UnderwriterKELLY JANTZIComm Lines UnderwriterSHEENA SHANKARBusiness AnalystDEPARTING WITH DIGNITYWe acknowledge that moving on from a company and/or a role, for whatever reason is a normal part of life, from accepting new positions to retirement, this year we celebrate a few of our team members doing exactly this:GLENNA KUNKLE BLAKE KNEBEL JENN MORRISON RHONDA REISTBECKY KNIFTONPersonal Lines UnderwriterSTEPHANIE GRUHLEMember Experience DirectorMONIQUE FOXBusiness AnalystMICHAELA VAN BELOIS Business AnalystDAN SCARROW Business Analyst

Page 15

15Attract and Retain Top TalentFIELD GUIDE After much collaboration, dedication and internal expertise, the Nova Field Guide was launched by the Employee Experience Team at the beginning of the year. A collection of helpful guidelines and policies, this is an invaluable resource to assist our Team in how to work within the values of Integrity, Respect and Courage. As a ‘living document’ this resource can be revised and updated to reﬂect changes to internal or legislative requirements and ensures all team members are informed and up to date.ENVIRONMENTAL MINDFULNESS Nova Mutual is proud to provide space for employees’ passions and to explore opportunities that align with our Company’s Purpose and Strategic Direction.As concern for the environment grows, several like-minded employees formed an Environmental Action Committee (EAC) to explore ideas and actions that could be adopted by Nova Mutal to make changes in both the workplace and at home. We expect this eort to grow as more employees collaborate to discover new, sustainable alternatives to elevate Nova Mutual as an environmentally mindful community partner.

Page 16

Page 17

17Increase ProﬁtabilityNEW BROKER APPOINTMENTS Aligning with our Risk Management mitigation eorts, we made some key plans to onboard new Broker Partners and expand our geographical footprint. We are fortunate to have partnered with four new Brokers whose values align with ours and are looking forward to long-term success with our newest Broker Partners.Nova Mutual is excited to welcome;Josslin Insurance–with a large focus on Farm and Commercial business and six locations in the Waterloo Region. Kenny Insurance, a family-owned and operated brokerage, has locations in both London and St. Thomas. Miller Insurance, which serves 8 locations in mid-western Ontario, has a shared passion for our Agricultural Members. Newman Insurance provides general insurance coverage to the Hastings County and Quinte areas of Ontario with 9 oce locations.

Page 18

Increase ProﬁtabilityCOMMERCIAL AUTONewly acquired expertise in this space has allowed us to begin the development of a self-sucient Commercial Automobile department to service the needs of our Broker partners. We have identiﬁed our service appetite and have created guidelines to support this. The Commercial Automobile and Information Technology departments collaboratively worked on developing software to reduce a time-consuming data entry process from a 6-hour task to a two-second click of a button. Commercial Auto also pioneered a pilot project with Farm Mutual Re to decentralize the Commercial Auto Fleet and Garage quoting process. Nova can now underwrite, and price risks based on our corporate objectives utilizing our experience and technical ability, allowing us to manage expectations with our members without needing Farm Mutual Re’s involvement. In addition to the reduction in labour time for our Underwriters, this signiﬁcant time savings allows Nova Mutual to provide our broker partners and policyholders a better experience and helps further set us apart from our competitors.

Page 19

19EFT UPDATEThis year we launched EFT (electronic funds transfer) payment options for our Claims vendor partners. Prior to utilizing this system, the claims department requested the printing of between 50-75 cheques weekly. Thanks to the joint eorts of our Claims and Finance Teams, we are delighted to share that 35 claims vendors are taking advantage of this program. Taking advantage of our members’ and suppliers’ appetite for Direct Deposits and therefore faster and paperless payments, the average number of weekly cheques requested has been reduced to less than 20. These remaining cheques are primarily settlements and the occasional non-regular vendor. EFTs represent huge savings in time and the elimination of lost or stale-dated cheques. Likewise, by emphasizing the value of Pre-authorized payments, Agency has signiﬁcantly reduced monthly overdue premiums by members. The cost savings to Nova Mutual are clear, as are the beneﬁts to our members and suppliers in receiving prompt payments.INFLATION INCREASE TO 7% An excellent example of the collaborative work taking place in Operations, team members from all departments worked together to determine and set a new inﬂation factor on residential, commercial, and agribusiness policies that takes eect on renewals and new business on September 1st, 2021. This is our response to the rising costs of rebuilding/lumber/labour and is in alignment with other markets. Traditionally we have typically set inﬂation at around 3-5%. With 3-L Dwelling Coverages (seasonal/rentals/mobile & vacant dwellings) we introduced a 4% inﬂation increase as previously we did not inﬂate these types of risks. THIS INCREASE REPRESENTS OVER $1.1M OF PREMIUM FOR RENEWAL BUSINESS BETWEEN SEPT 1, 2021AUG 31, 2022$239K Agribusiness$849K Residential$27K Commercial REINSURANCE SAVINGSThe Farm Team implemented a Facilitative Reinsurance Calculator improving eciencies in purchasing reinsurance on certain risks. This tool also contains another proﬁtability-focused function by determining if the amount of reinsurance required exceeds our rates- ie- we’d be losing money on the risk. This allows us to adjust our rates to accommodate those added reinsurance costs. For example, one farm account alone represented a cost savings of $2000 as a result of using this tool.Increase Proﬁtability

Page 20

Increase ProﬁtabilityRATE INCREASE HIGHVALUE HOMESWe undertook a review of our rates for High-Value Homes (homes valued between $850,000 and $2.5M*) for an update to ensure competitiveness, and this year implemented a 7.5% rate increase for these properties. This represents a potential increase in the annual premium of over $40,000.00.*We do not write high-value dwellings over $2.5M unless the policyholder is a full-time Farmer. (This is a Farm Re requirement.).LEARNING FROM LOSSESOne of the challenges that we face as a Mutual is quick access to real-time data on losses. We are committed to looking at risks and claims holistically, and instead of a total moratorium on a class of risks (say, hog farms), we consider the outcomes and impact internally and externally.Our response has been to work with a reality-based mindset and thus when we experience a ‘special and extraordinary’ loss, we bring cross-functional team members together for a discussion. While we may not always be able to ﬁnd a perfect compromise, this has allowed us to establish important boundaries to ensure our Brokers and Agents understand our appetite based on real data and the expertise of our Team Members.

Page 21

21Increase ProﬁtabilityHere are some of the outcomes we have implemented because of Learning from our Losses:From our large commercial realty loss in April, we added several London area codes to our “no-ﬂy zones”. Our Lifeworks Partnership was an initiative born from these cross-functional collaborations.After experiencing a poultry loss where another branded device failed to deliver, we have partnered with PrevTech as our preferred loss prevention solution.After our large hog farm loss in June, we developed SwinePro with a mandatory PrevTech component.Inspections for dwellings valued at $1M+ have now been implemented by our Farm Underwriters for Agribusiness Members.GUARANTEED REPLACEMENT COST ENDORSEMENT Without a depreciation deduction, Guaranteed Replacement Cost Endorsements (GRC) pay for full replacement value after a loss. Given this coverage covers the gap to re-build, the ongoing pandemic has caused a breakdown in our supply chain of building materials, which added additional strain to our claims process with payouts and timely repairs. As a result, the Personal Lines Underwriting and Claims teams collaborated with their Broker Partners to broaden our eligibility and develop guidelines for this highly sought-after coverage. Extensive cross-team participation resulted in a decision to apply a $100 increase for every policy with GRC, as well as the inclusion of mandatory evaluations every 3 years. This, in turn, ensures Nova receives the appropriate premiums, and homeowners have peace of mind knowing they are properly insured and that their home will be rebuilt should a disaster happen.WATER DAMAGE DEDUCTIBLE ENDORSEMENTThe Commercial Lines Team introduced a new Water Damage Deductible Endorsement on all in commercial buildings policies on new business and renewal. Moving forward, water losses will have a higher deductible applied in an eort to reduce or eliminate small water loss claims. This endorsement is becoming an industry standard; applicable policies will now have a Water Damage Deductible of $5,000 or more for higher-value buildings or those who have experienced a water loss recently. (Separate Flood and Sewer Back-up Deductibles will still apply.)

Page 22

Page 23

23BROKER EXPERIENCEWEBINARS2021 presented an opportunity for us to take strides in enhancing our Broker experience. Nova was delighted to oer webinars, many of which oered RIBO credits for our Broker Partners.Uplift Your Self Care we shared valuable tips and strategies for staying emotionally, mentally, and physically healthy with techniques that can be easily implemented into one’s daily routine.Errors & Omissions in Claims was hosted by Hugh Fardy, Senior Vice President at Arthur Gallagher Canada Limited who also joined us on an episode of our podcast, Uplift. Hugh provided valuable mentorship on risk management with an emphasis the how a sturdy foundation of a good broker/client relationship is a key component in mitigating risk.Ethics for Insurance Professionals with special guest host Pam DeBoer, Continuing Education Director for Paul Davis Restoration had everyone thinking about ethical dilemmas and the eectiveness of the Code of Ethics in the oce and was sold out with 500 registrants.Level Up your Virtual Experience with our very own Brand Production Specialist, Graeme Reed shared the ins and outs of how to bring your virtual presence to the next level.Embracing Change hosted by Rhonda Reist focused on the fundamentals of change provided valuable tips and strategies on how to manage responses to change so you can live your best life.Ending the webinar season with Burnout Prevention hosted by Bonita Eby, owner of Breakthrough Personal & Professional Development Inc, oered insight into identifying burnout, common myths around burnout, how to recognize the signs of burnout, and three practical wellness strategies to prevent burnout so you can thrive.Enhance Member & Broker Experience

Page 24

Enhance Member & Broker ExperienceWORKING TOGETHER MATTERS  BROKER EDITION Nova was thrilled to work with our Broker Partners at Haldimand Insurance Brokers to Uplift the community of Jarvis. The mural project embraces the community and history of the neighbourhood while providing a piece of public art for everyone to enjoy. Nova’s very own Digital Media Specialist, Shane Drever, is the artist of this beautiful piece.MEMBER EXPERIENCEDIRECTOR SNAPSHOTS Though much of the work was completed in the latter part of 2020, we ocially launched our Director Snapshot Series on social media in 2021. We were so pleased to be able to share feature blogs on our Board Members and to highlight their community work through givebacks to cherished organizations. For those who haven’t seen these, all the blog posts can be found on our website.

Page 25

25Enhance Member & Broker ExperiencePEER SUPPORT NETWORK NORFOLK PARAMEDICS Norfolk Paramedics Peer Support Team provides a safe and trusting environment where colleagues can access psychological support in response to the traumatic nature of the job. The Peer Support Network, powered by an app, oers crisis intervention, peer mentoring and education. In addition to a ﬁnancial contribution, Nova was able to provide support by bringing awareness of this program through our Uplift Podcast, Social Media awareness and creating some branded educational materials to provide to other prospective funders to encourage more donations.RONALD MCDONALD HOUSE CHARITIES  FOOTSTEPS FOR FAMILIESNova Mutual was the proud sponsor of Footsteps for Families through RMHC. As the sponsor of Car Wash week, Nova encouraged car wash activities with participant families of Ronald McDonald house. This 7 week-long event ended up raising $80,000.00! All the funds raised support the house in dierent ways including, bedtime stories, family dinners, movie nights and special playtimes. WORKING TOGETHER MATTERS WITH SPECTRUM We love recognizing and uplifting our community and policyholders in out-of-the-box ways. Mid-year we uplifted 2 of our policyholders who felt the signiﬁcant impact from restrictions of the pandemic - but continued to show courage and integrity in their business. Nova Mutual is the proud sponsor of a stunning mural designed by the wonderful team at Art With Heart Studios, placed on the outside of Spectrum Gymnastics in Simcoe, an all-abilities gymnasium.

Page 26

Enhance Member & Broker ExperienceSHANNON’S PLASMA CELL MATESWhen we learned a Nurse in our community was battling Cancer, we asked “How can we Help?” Nova used episode 19 of Uplift as a platform to speak about the awareness of Stem cell research and help support Shannon’s ﬁght. This was released shortly before our community came together for a great cause and Team Members of Nova Mutual were some of many who lined the streets to welcome the Ride for the Registry.WEBSITE UPDATEThis year we launched an almost-the-same-but-better AODA (Accessibility for Ontarians with Disabilities Act) compliant website. In the spirit of inclusivity, we took our existing site and amended it to allow everyone the ability to ﬁnd what we need from Nova Mutual as easily as possible. U can now ﬁnd a website where the text is clearer, colour themes have more contrast, and the layout is much more intuitive.NOVA GALAXYNova Galaxy is our multimedia showcase designed custom for our Broker Partners, Policy Holders and Community Members. Located directly on our website the Galaxy contains educational webinars, digital ﬁeld trips, member spotlights, community givebacks and team members videos.

Page 27

27Enhance Member & Broker ExperienceREMEMBRANCE DAY Once again, Brand team members were live on-location for the Hagersville Remembrance Day Service. Having the technology to live stream this service is a gift that we are proud to oer to not only our members but to the community at large. Through the ongoing challenges the pandemic has created, this may be one of our most cherished opportunities.CLAIMS NET PROMOTER SCOREThe Claims Team has been providing our members with a Net Promoter Score survey after each settlement of their insurance claim. The year-to-date ﬁgures indicate we have an exceptional score of 79, compared to a 2020 Canadian P&C Insurance Industry survey of -8. We are proud that our claims team is providing enhanced value to our members when they need it most.UPLIFTWe kicked o Q4 of 2021 by celebrating our ﬁrst anniversary of Uplift; our podcast project. With our in-house created podcast, we have spotlighted 45 Uplifting stories from our members, brokers, community, and team, giving an authentic look at what Nova Mutual is all about. Not only did the podcast turn one, but we broke another milestone of 2000 downloads.In our anniversary celebration of Uplift, we reveal the intentions and power behind Nova’s ongoing initiative, #WorkingTogetherMatters. With solid roots of collaboration - our goals are to celebrate those who represent and embrace our values; courage, integrity, and respect.Deep dive into all things Nova, from our unconventional work culture to sharing authentic stories. Uplift with Nova Mutual is available on your favourite podcast app.

Page 28

Enhance Member & Broker ExperienceLIFEWORKS PARTNERSHIPThis collaboration between Employee Experience and Claims is a living example of how our Team Members take a people-focused approach to our Claims Experience. We are the ﬁrst insurance company to partner with LifeWorks, counselling support for our Members who experience particularly dicult or traumatic claims.SOCIAL MEDIAAcross our Social Media Platforms, we have seen signiﬁcant increases in followers and engagements. As a direct result of this increased engagement, we are experiencing higher volumes of direct messages sent to us through our Social Media channels. Our followers are interested in how they can be involved, how they can become members and even how can they join our team! In addition to this, we have also seen an increase in shares of our own content, and tags mentioning us within other’s. Both allowing for meaningful and expanded engagement beyond our current reach. Our brand’s impact can be dicult to measure, but it is through interactions such as these that we are reassured Nova Mutual is making an impact on people, allowing us the opportunity to provide insight into their inquiries through referrals and exploring their needs.

Page 29

Page 30

Page 31

Page 32

Page 33

33Optimize Capital to Support ScalabilityNOVA MUTUAL PROPERTY ASSESSMENTS Nova Mutual currently owns two buildings, one at 35 Talbot Street plus the vacant lot next door at 29 Talbot Street East in Jarvis Ontario and the other at 33 Park Road in Simcoe Ontario. With our culture of working whenever, whenever, the need for multiple physical locations is redundant. By embracing remote work arrangements, neither of these buildings are used to capacity and operating costs are higher than necessary. There is a need to keep one location as an ocial head oce, however, the divestiture of one location allows Nova Mutual to deploy its capital more appropriately. Further, by acknowledging that maintaining two underutilized buildings can have signiﬁcant environmental impacts, selling one would also allow Nova Mutual the opportunity to reduce its carbon footprint. Nova Mutual engaged Valco Real Estate Appraisals & Consultants to complete a formal appraisal of each location as of March 12, 2021, and as a result of the valuations, it was decided by our Board of Directors and Leadership to sell the Simcoe oceSERVER MOVEThe team successfully relocated Nova Mutuals’ core server infrastructure from the Simcoe oce to a Toronto co-location facility. This resulted in improved connectivity which grants Nova Mutual more ﬂexibility when installing upgrades, performing backups, and falling back into a disaster recovery state. Centralizing the core resources also allows our Team Members across Ontario better access to the network.Additionally, we have signiﬁcantly upgraded the internet connectivity to our Jarvis oce with a 1,000-megabit line (it was originally 50mbs). This will allow better streaming connectivity for Uplift productions and allow Team Members more stable access to the internet when in the physical oce.

Page 34

Optimize Capital to Support ScalabilityINSURANCE SYSTEM REPLACEMENT In the early days of Nova Mutual, we reported that our assessment of our current Insurance Operating Platform would be inadequate in the long term. At that time, we explored available options such as Duck Creek and Guidewire, however, our ﬁndings revealed that they were all too cost-prohibitive for a company our size. We became aware of a company known as Nude Solutions had a broker Management solution that intended on enhancing their core system to oer a Carrier system for Insurance companies. Nova Mutual entered into a “Risk-Reward” venture with two other Mutual Insurance companies to fund a Minimal Viable Product (MVP). Participating companies have reviewed the MVP on December 1, 2021. As a result, Nova Mutual will take time in early 2022 to reassess and consider revisiting current options to decide as to how we will move forward in this area.

Page 35

Page 36

Risk Management PriorityPrior Quarter PriorityRisk # Risk Title Risk Category Risk Type1 1 42 High Broker Consolidation Strategic Distribution 2 6 10 Multiple Major Fires Insurance Catastrophe 3 7 6 Extreme Adverse Climate Insurance Catastrophe 4 8 12 Reserve & Pricing Inadequacy Insurance Underwriting-Reserving 5 0 52 ERM ORSA Framework Strategic Competition & Disruption6 5 44 Threat to Market Share Strategic Competition & Disruption 7 2 18 Cyber Security Breach Operational External Event 8 3 25 Technology Failure-Production Operational IT & Infrastructure 9 9 3 Turbulence in Financial Markets Financial Market 10 10 51 Mutual Automobile Rate Filing Operational External EventRisk review by Leadership is undertaken quarterly with all Teams in our OKR sessions. By taking this approach, all teams are called upon to identify and articulate risks as they present themselves. Risks will be added to the Risk Register whereby Leadership will be assigned the responsibility of an appropriate risk within their area of expertise. The following section presents our top 10 risks captured in our Risk Register, ranked in order of priority. In assessing the potential impact for each of the top risks, the presence and eectiveness of risk mitigation activities are taken into consideration.

Page 37

37Risk Management #42HIGH BROKER CONSOLIDATION Strategic Risk | Distribution | CEOBroker merger and acquisition activity remains aggressively active and presents an unfavourable concentration of insurable risk to Nova Mutual. POTENTIAL IMPACT HOW WE MANAGE THIS RISKIf concentration of business of a single Nova Broker places business with us that represents more than 20% of our entire book, we are at risk of losing a substan-tial amount our portfolio if the broker is sold or cancels their contract with us.We currently have two brokers who have purchased other Nova Mutual brokers and now represent 25% each of our total book of business. We are mitigating this on two fronts. We have and will continue to nurture our good business relation-ship AND we are looking to expand our broker channel in dierent geographical areas in Ontario to oset our risk of con-solidation. We have appointed 4 Brokers in 2021.

Page 38

Risk Management #10MULTIPLE MAJOR FIRE LOSSES Insurance Risk | Catastrophe | COOResidential homes, Commercial Properties and Agri Business Operations are highly susceptible to loss by ﬁre and current costs of repairs drastically increases the poten-tial of claims becoming total losses.POTENTIAL IMPACT HOW WE MANAGE THIS RISKClaims resulting from 4-5 major ﬁre events could cause substantial volatility in our ﬁnancial results and could materi-ally reduce our proﬁtability or harm our ﬁnancial condition.We have hired 2 full time loss inspectors to review Farm and Commercial policies over $500K Total Insurance Value on an annual basis. We also contract with Bull-seye Inspections for residential inspec-tions. We have recently developed a ProFarms product for Agribusiness that requires Swine Risks to subscribe to an electri-cal system monitoring service (currently PrevTech) that vastly reduces potential ﬁres resulting from electrical failures. We are working with our broker partners in 2022 to execute on getting this risk management approach out to as many high-risk farming operations as possible.

Page 39

39Risk Management #6EXTREME ADVERSE CLIMATE Insurance Risk | Catastrophe | COOThe entire P&C Insurance industry is susceptible to changing climate patterns and an increase in the number and cost of claims associated with severe storms and other natural disasters. Changing weather patterns has resulted in hotter, drier weather in some areas and more humid, wetter weather in other areas. The result has been more unpredictable weather and increasingly severe storms.POTENTIAL IMPACT HOW WE MANAGE THIS RISKClaims resulting from natural catastroph-ic events could cause substantial volatili-ty in our ﬁnancial results and could mate-rially reduce our proﬁtability or harm our ﬁnancial condition.At present, we do not have sophisticated modelling programs to forecast natural climate disasters therefore “acceptance” of this risk with mitigation techniques of Reinsurance retention limits of $500K across all lines, reviewing Flood Mapping data when considering acceptance of new business and for renewal business, increasing deductibles or capping limits on current water damage products. Com-mercial Lines has implemented a new Water Damage Deductible Endorsement on all policies insuring Commercial build-ings. Applicable policies will now have a Water Damage Deductible of $5,000 or $10,000 for higher value building or those who have experienced a water loss recently.

Page 40

#12RESERVE & PRICING INADEQUACY Insurance Risk | Underwriting/Claims | COODelivering on our strategic direction depends upon our ability to accurately assess the risks covered by the insurance policies that we write. From the premiums that we collect from our members, we set aside reserves to cover our estimated payment of all losses and loss adjustment expenses that we incur. These reserves are based upon a range of factors standard to our industry such as the following:• actuarial projections of the cost of settlement and administration of claims known.• estimates of trends in claims severity and frequency.• judicial theories of liability.• variables in claims handling procedures.• economic factors such as inﬂation.• judicial and legislative trends, judicial interpretation of policy coverage/exclusions.• the level of insurance fraud. Risk Management

Page 41

41#12POTENTIAL IMPACT HOW WE MANAGE THIS RISKInadequate pricing and inaccurate re-serving could negatively impact our abil-ity to accurately assess the risks of the policies that we write. In addition, there may be signiﬁcant reporting lags between the occurrence of the insured event and the time it is eventually reported to the insurer. This is commonly known as “In-curred but not Reported” (IBNR)The following factors may have a sub-stantial impact on our future actual loss-es and related expenses experience:• amounts of claims payments.• expenses incurred in resolving claims.• legislative and judicial developments.• changes in economic variables such as interest rates and/or inﬂation.We consistently reﬁne our reserve prac-tices through the year to ensure that we maintain a sucient level of claims reserve.Our plan is to review the results of each business line and determine if appro-priate action is required in terms of product design or pricing to remediate poor underwriting performance or claims handling practices. This will be done in-volving all functional team disciplines and remedies, if any, can be executed during our quarterly OKR sessions.In Q3 2021 we have increased premium on high value homes by 7.5%. In Q4 2021, Commercial Lines have implemented a 7% Rate Increase to be eective on March 1, 2022, renewals coupled with an additional 7% Inﬂationary increase applied to all buildings. It will be capped at 10% overall in order that our broker partners can bring members in line with appropriate valuesRisk Management

Page 42

Risk Management The P&C insurance industry is highly competitive, and we believe that it will remain so for the foreseeable future. We compete with many domestic and foreign insurers as well as Canadian banks that are selling insurance products. These entities have various distribution models. We compete not only for business and individual customers, but also for brokers and other distributors of investment and insurance products. We have two distribution channels.• Independent Brokers – 86%• Exclusive Agents – 14%Being a Farm Mutual, our focus is on Agribusiness as we believe this to be our niche. Currently larger competitors do not have expertise in this ﬁeld however that is only a matter of time before they see this as an opportunity.A great part of our success depends on our ability to attract and retain top talent to be leaders in this industry as well as our ability to enhance our Broker/Member experi-ence in dealing with us.#44THREAT TO MARKET SHARE Strategic Risk | Competition & Disruption | CEO

Page 43

43Risk Management POTENTIAL IMPACT HOW WE MANAGE THIS RISKIntense competition for our insurance products could harm our ability to main-tain or increase our proﬁtability, premium levels and written insured risk volume.The entrance of a new player in the market or a shift in methods to purchase insurance could challenge our distri-bution models. The use of information technology in the distribution and pric-ing of insurance products has increased over the last several years and this trend is expected to continue.Artiﬁcial intelligence is another area that is gaining much attention and could have a material impact on the insurance industry.Our multi-channel distribution strategy will be enhanced once we have made the transition to our modern technolo-gy platform. Independent Brokers and our Exclusive Agents will have access to straight through web processing of vari-ous commodity type policies.It is important to note that we are not circumventing either channel by going direct to consumer but including them both in the enhanced experience on their processing and the customer experience.Our strategy of enhancing our Broker/Member experience by providing value through superior expertise in the Agri-business arena will also be applied to our other lines of business as well. Signiﬁcant eorts in our Brand Presence are how we create the environment where commu-nity members see value in placing their business with Nova Mutual.#44

Page 44

#18CYBER SECURITY BREACH Operational Risk | External Event | CIORisk Management Information technology and cyber security risks continue to be key risks for many companies. Criminal organizations, hackers, and other external actors have become more active and better equipped to attack even robust systems and networks. Our dependency on technology, network, telephony, and critical applications makes our ability to operate and our proﬁtability vulnerable to business interruptions, service disruptions, theft of intellectual property and conﬁdential information, litigation, and reputational damage. The volume and sophistication of cyber-attacks continue to increase. These attacks may include targeted attacks on systems and applications, introduction of malicious software, denial of service attacks, and phishing attacks which could result in the fraudulent use or theft of data, and may involve attempts to fraudulently induce em-ployees, customers, or third-party service providers to disclose sensitive information to gain access to the Company’s data. Distributed Denial of Service (DDoS) and Ran-somware attacks continue to increase in frequency and severity. These activities are designed to disrupt the operations of an organization and/or to beneﬁt the attacker ﬁnancially.We may be unable to prevent cyber-attacks that result in system disruption or a breach of conﬁdential information, whether personal or corporate in nature. Third party service providers and other suppliers may also be the subject of successful cyber-attacks leading to a material impact on our systems or the theft of conﬁdential information.

Page 45

45#18Risk Management POTENTIAL IMPACT HOW WE MANAGE THIS RISKDespite our commitment to information and cyber security, we may not be able to fully mitigate all risks associated with the increased sophistication and volume in the threat landscape. As such, we may be the subject to a cyber-attack resulting in system unavailability, data corruption or deletion, or the disclosure of conﬁ-dential or personal information. Massive denial of service attacks and system intrusion attempts could compromise our ability to operate, or we may be unable to safeguard personal and conﬁdential information from public disclosure. These events and attacks may lead to wide ranging consequences including ﬁ-nancial loss, which also includes lost pro-ductivity, remediation costs, and costs associated with potential legal action; regulatory action, which may include regulatory ﬁnes and/or increased scrutiny by government; and reputational damage such as lost consumer conﬁdence and lower customer retention.We continuously upgrade our applica-tions to better protect our systems and information. We regularly monitor exter-nal trends in cyber security to ensure we can rapidly mitigate known vulnerabili-ties.Nova Mutual will continue to provide ongoing cyber security training to Nova Mutual team members. Nova Mutual will also continue per-forming penetration tests to discover new assets that have been added to our infrastructure and build out next steps to protect Nova Mutual assets. Additionally, we will insure ourselves in the event of a data loss event.

Page 46

Risk Management #52ERM & ORSA DEVELOPMENT Operational Risk | Processes | CEOOur board recommends our Risk Management approach needs to be enhanced to bet-ter reﬂect how we holistically deal with Risk.POTENTIAL IMPACT HOW WE MANAGE THIS RISKEnhancing our current methods will as-sist in responding to risks.BDO has provided us with a review of our current practices and has made rec-ommendations. Leadership will continue with reviewing our risks on a quarterly basis and report our ﬁndings according-ly. The Board will be organizing a formal session with BDO to further assist in developing a risk management frame-work that can be practically applied in operations.

Page 47

47#25TECHNOLOGY FAILURE - PRODUCTION Operational Risk | IT & Infrastructure | CIONova Mutual’s current hardware stack is over 6 years old and is showing signs of failure.The technology that the team members use day to day (laptops, headsets) are also reaching end of life, and are starting to cause problems and are being replaced more rapidly.POTENTIAL IMPACT HOW WE MANAGE THIS RISKTechnology is the core that allows the team members to do their day-to-day jobs (check emails, log in, print, send/re-ceive information, communicate etc.).If there are signiﬁcant outages either at their local station or in the core in-frastructure, that could lead to hourly / daily losses and the inability for team members to accomplish their tasks.We are building out a rolling 3–5-year technology refresh program for both local workstations and the core hardware stack.This will allow the IT department to plan anticipated growth in both company headcount and premium growth to sup-port with minimal reactiveness.As with all technology, sometimes it may not make it to the anticipated end of life, however that will be accommodated with a portion of the budget for edge cases that can arise.Risk Management

Page 48

Risk Management #3TURBULENCE IN FINANCIAL MARKETS Financial Risk | Market | CFOChanges in equity markets, interest rate, inﬂation and to a lesser extent foreign ex-change causes changes in realized and unrealized gains and losses. During a period of prolonged lower interest rates dividend and interest income are reduced. As inter-est rates rise the value of our ﬁxed income portfolio will decrease, resulting in lower realized gains and potentially higher realized losses. The company is more susceptible to changes in interest rates due to the substantial portion of the investment portfolio allocated to ﬁxed income than to equity market movements.POTENTIAL IMPACT HOW WE MANAGE THIS RISKChanges in the market variables men-tioned above could adversely aect our investment income and/or market value of the company’s investments.The company’s investment philosophy takes a long-term approach coupled with capital preservation. A substantial por-tion of the company’s investments are actively managed by a very experienced third part manager. The portfolio is mon-itored in conjunction with the company’s investment policies.

Page 49

49Risk Management #51MUTUAL AUTOMOBILE RATE FILING Operational Risk | External Event | CEOOMIA and Farm Mutual Re has advised the Mutual participants of Company 789 (share auto rate ﬁling) that the committee no longer wishes to manage the ﬁlings on behalf of the Mutual Participants. The rationale is that they do not have the resources nor the expertise to handle this eort properly.POTENTIAL IMPACT HOW WE MANAGE THIS RISKWith ARFC pulling out of managing auto-mobile rate ﬁlings, it will now cost Nova Mutual $20K annually to pay for this service. This is a non-budgeted risk.We have been given little notice of this risk. At present, Nova will accept the risk and cost that comes with it. We will explore alternative solutions in our 2022 strategy and budgeting sessions in Q4 of 2021.

Page 50

In ConclusionOur focus at Nova Mutual is to provide value to all those we conduct business with while working towards our four strategic goals to achieve our ultimate strategic directions as outlined earlier in this report. The operationalization of our values and guiding principles are pivotal strategic moves that continue to set us apart from our competitors.Unlike other companies, growth is not a driving factor at Nova Mutual. When Nova Mutual was formed in 2019, we started with revenues of $21M and now, three years later, we currently sit at $34M. This growth is a result of providing enhanced value. From a regulatory perspective, that can be problematic if our surplus does not grow at the same rate as our revenue. We did, however, have modest returns on our investment holdings and ended the year with a net proﬁt of about $180,000. Our surplus at the beginning of 2019 was $23M and we currently sit at $27M. In insurance, there are years with little claims activity, which we saw in 2020, and others with increased and/or larger losses. We were well on our way in managing the spread between our Gross Written Premium (GWP) and Surplus, however numerous property losses in 2021 prohibited us from adding to our surplus as we did in years one and two. On the brighter side of a year of reduced proﬁts, taking advantage of several recovery opportunities, we are recovering nearly a million dollars of overpaid taxes. Together with our Broker partners, we continue to focus on Agribusiness and Commercial sectors which has led to us writing over $5 million in new business this year. We have some catching up to do, but I have the utmost faith in our Team. In conclusion, I remain optimistic about Nova’s future as 2022 brings us into the third year of our three-year strategic plan. I have conﬁdence in the talent we have attracted, the execution of our strategic moves, our enhanced member and broker experiences and capital management. Combining these strengths with our risk mitigation practices and our ability to embrace the change and challenges that are inevitably presented over the year, we remain dedicated to supporting our community and most importantly, protecting our members.Thank U!Gary Anderson,Chief Executive Ocer, Nova Mutual

Nova AGSM Report - 2022

Page 1

Page 2

Page 3