Chairman and President s Message 2 About Western Reserve Group 3 Accomplishments 4 Claims 5 & 6 What our Customers Say 7 & 8 Commitment to the

Transcription

1 2011 A N N U A L R E P O R T

2 table of contents Chairman and President s Message 2 About Western Reserve Group 3 Accomplishments 4 Claims 5 & 6 What our Customers Say 7 & 8 Commitment to the Community 9 Financial Highlights 10 Selected Financial Data 11 Combined Statutory Statements of Income 12 Combined Statutory Statements of Admitted Assets, Liabilities, and Surplus 13 Directors and Officers 14 1

3 chairman and president s message 2011 was a year marked by unprecedented catastrophic losses worldwide, ranking as the highest loss year on record globally and the fifth highest loss year on record for the United States. Taken as a single event, the spring 2011 tornado and thunderstorm season would be the fourth costliest event in United States history. Ohio and Indiana were not immune to the weather as the Western Reserve Group (Group) experienced the worst weather loss year in its history, closing approximately 8,000 weather claims in 2011, twice the amount handled in In settling these claims, the Group remained focused on providing our affected policyholders and agents with service and value that would support our relationships and long-term perspective on business. This approach over time has helped build the financial strength and resources necessary to absorb a record $50 million of weather losses in 2011 and still end the year with exceptionally strong policyholder surplus. The Group s combined ratio ended the year at 108.5%, a 2.5 point increase from the 106.0% in The Group posted record net weather losses of $27.5 million or 17.4 net loss ratio points in 2011, a significant increase from the five-year average of $19.3 million or 13.4 net loss ratio points. Along with the increase in weather losses, a $3.5 million targeted investment in our information technology infrastructure added 2.1 points to the combined ratio. We remain dedicated to the long-term investment in technology as we build upon an infrastructure with improved efficiencies. A significant accomplishment in 2011 was reaching the highest premium level ever achieved by the Group at $174.8 million. While most of the industry was expected to post flat to nominal growth in 2011, the Group achieved a 7.1% rate of growth in direct written premiums. We have now experienced 34 straight months of policy count increases and this success could not have been achieved without the strong relationships with our independent agents. We remain committed to making it easy for our agents to do business with us by offering competitively priced products, implementing new technology to streamline processes and enhancing efficiencies while providing exceptional service. Policyholders surplus ended the year at $229.2 million, a decrease of only $0.3 million or 0.1%, despite record weather losses and nominal investment appreciation from the stock market. The Group also posted net income for the year of $0.6 million. The financial condition and capital adequacy of the Group continued to outperform the industry as evidenced by the superior premium to surplus ratio of 0.7 to 1. During 2011, A.M. Best affirmed our rating of A (Excellent) representing more than 50 consecutive years at a rating of A or better. Our sincere thanks to our agents and associates who have all contributed to our success. We appreciate your business and the confidence you place in the Western Reserve Group. 2

4 about the Western Reserve Group For 106 years, the Group, working with professional independent agents, has provided the highest quality property/casualty insurance products, competitive pricing, and exemplary service to hundreds of thousands of policyholders. Headquartered in Wooster, Ohio, with a regional claims office in Lebanon, Indiana, the Group is supported by 256 employees and over 2,400 licensed agents from over 500 locations. The Group consists of Western Reserve Mutual Casualty Company, Lightning Rod Mutual Insurance Company, and Sonnenberg Mutual Insurance Company, three Ohio-domiciled property/casualty insurance companies. As a regional carrier doing business exclusively in Ohio and Indiana, the Group has developed extensive expertise and understands the unique needs that exist for our customers. Whether it be for auto, home, business, or farm, we have programs to protect them all. Even in today s volatile financial environment, the Group maintains an unsurpassed record of financial stability and fiscal responsibility. During 2011, A.M. Best affirmed our rating of A (Excellent) representing more than 50 consecutive years of A or better. A.M. Best bases its ratings on financial strength, operating performance, and the ability to meet obligations to policyholders. Visit our website at 3

5 ACCOMPLISHMENTS IN 2011 Homeowners Revision Personal Auto Product Update Introduced New Driver Class Plan Decreased Motorcycle Rates Introduction of ISO Personal Umbrella Program Introduction of ISO Home Business Program Dwelling Policy Revisions EFT Notification Changes Commercial General Liability Update Commercial Umbrella Liability Update Commercial Employment Practices Liability including: ~ Video ~ Website Recipient of the 2011 Applied Systems Interface Partner Award Farm Policy Program Update Introduction of Equipment Breakdown for Farm Owners Revised Request for Reinstatement Process 4

6 c l a i m s To say that 2011 was a whirlwind is more than a metaphor. The U.S. experienced some of the worst storms on historical record with severe tornados, hail, flooding, and straight-line winds. Ohio and Indiana were no exception. In a recent news report from the Ohio Insurance Institute, Mary Bonelli stated that 2011 has been an unusually costly year for weather-related disasters across the Buckeye state as well, with six major storms, causing insured losses of up to an estimated $640 million (for the industry). 1 Indiana also experienced significant weather events including substantial wind and hail. Western Reserve Group certainly didn t escape the wrath of Mother Nature, as we also received storm losses of historic proportion. The Group received over 8,000 storm claims in 2011, resulting in losses of $50 million. The most costly of which was the May hail storm that struck parts of Indiana and southwestern Ohio. The May storm alone accounted for 2,300 claims with incurred losses that exceeded $22 million. Not only were there a vast number of claims but the severity of the storms produced many claims in excess of $50,000. Our people truly make the difference. 1 Quote by Mary Bonelli appeared in the December 9, 2011 edition of the Dayton Daily News. 5

7 Here are just a few examples of the major losses that we received last year: A commercial property loss where hail caused damage to roofs on 24 separate buildings in a condominium complex in which the Group insured the Condominium Association resulted in a loss totaling $827,000. A farm owner s claim in Indiana involved a tree that blew over onto a house, causing extensive damage when rain was allowed to enter the interior of the home. The wind also caused damage to four silos and an implement shed. This resulted in a loss of $120,000. The Group sustained another farm loss in Ohio in which hail caused extensive damage to the dwelling roof, siding, gutters, down spouts, windows, and doors. Three other structures on the property also sustained hail damage to roofs, siding, and windows. This resulted in a $98,000 loss. In the Cincinnati, Ohio area, a tree blew over onto a home, crashing through the roof and wall on the back of the home and coming to rest in the family room. The insureds were at home at the time in the kitchen area and sustained no injuries. Had they been in the living room, it could have been a much different story. This incident resulted in $78,000 in damages to the home and contents. A wind storm totally destroyed two commercial buildings located on the same premises. The insureds operations were a farm and heavy equipment sales and service dealer. It was their off season at the time of the loss, so equipment inventory was at a minimum. Loss was in excess of $960,000. Despite a record number of weather-related claims, the Claims Department was able to deliver on their promise to provide prompt and fair claims service. Many of our Claims Representatives willingly volunteered to work long hours and weekends to fulfill that promise. Based on a survey of our customers, the Group received a 99% overall satisfied customer service rating with 93% of those surveyed rating our service as superior, something that makes us very proud. In retrospect, we learned many things from the catastrophic events of Most importantly, our staff had a genuine compassion and willingness to do whatever was necessary to assist our policyholders in their time of need. 6

8 What our customers say: Thank you so much for all of your help. We couldn t have been more satisfied. Excellent service and very understanding. They made me feel valued and comfortable about the bad experience. I would recommend your company to my friends. We have always had superior service with all our claims and are very happy with all our insurance. Thank you for great service! Very quick and easy to work with, thank you very much! 7

9 The best service ever from an insurance company!!! Thank you. Very nice people who act like they cared about you. Excellent! Could not ask for better, that s why I have been a customer for over thirty years. It is service like this that makes a person want to stay with your insurance company. Thank you all! One of the best experiences ever had from (the agent) all the way to the claims people! Thank you! 8

10 commitment to the community Just as a commitment to excellence is fundamental to our Company s growth, commitment to the community is fundamental to our quality of life. It s why we work, live, and raise our families where we do. We consider it a responsibility to dedicate resources toward improving the well-being of our home communities. We are profoundly aware that people are our core asset, and that, as a service business, it is people whom we serve. This includes the professional independent agents representing our Company, as well as the individual policyholders who have placed their trust in us. We believe that when people work together, friendships develop, neighborhoods are strengthened, and great things happen. Through our Western Reserve Group Partnering Program, we join forces with our agents to help meet community needs, not only through financial means, but also through volunteerism. We work with agents to sponsor youth and high school sports as well as other events which contribute to each locality. This may run the gamut from popping popcorn at a community theater day to recognizing and honoring high school graduates. Our agents and employees have donated generously in both time and money to many organizations such as the United Way, Village Network (Boy s Village), YMCA, Chamber of Commerce, Relay for Life, Rails to Trails, Boy Scouts of America, as well as to their own favorite personal causes. These key fundamentals translate into a continuing commitment by our Company to the communities we serve and the personal reward each of us enjoys from our fulfillment of that commitment. 9

11 financial highlights Thanks to strong financial performance, loyal independent agents, and dedicated employees, Western Reserve Group is poised to deliver on its promise of protection while also investing in the future. 10

12 WRG selected financial data (IN THOUSANDS) Years ended December Operating Data Gross premiums written 174, , , , ,025 Net premiums written 163, , , , ,766 Premiums earned 157, , , , ,544 Net underwriting gain (loss) (15,352) (10,984) (10,786) (9,489) (5,731) Investment income, net 9,297 9,123 8,854 10,101 9,418 Realized impairment losses* (12,467) 0 Realized investment gains (losses), net 2,652 1,725 1,255 1,003 3,461 Net income, pre-tax (818) 2,055 1,509 (8,709) 9,233 Net income 638 2,695 4,435 (9,152) 8,203 * The Group recorded $12.5 million of impairment losses in December required by statutory accounting as a result of the significant decline in the equity markets. Absent the impairment losses, the Group had capital gains of $1.0 million and net income of $3.1 million. As of December Balance Sheet Data Cash and invested assets 344, , , , ,824 Total assets 389, , , , ,404 Surplus as regards policyholders 229, , , , ,625 Years ended December Ratios Loss ratio Loss adjustment expense Underwriting expense Combined ratio % % % % 104.0% 11 12

13 WRG combined statutory statements of income (IN THOUSANDS) Years ended December Underwriting gain (loss): Net premiums written $163,600 $155,829 (Increase) decrease in unearned premiums (5,901) (5,363) Premiums earned 157, ,466 Losses and expenses incurred: Losses 102,934 91,267 Loss adjustment expenses 14,738 14,786 Underwriting expenses 55,379 55,397 Losses and expenses incurred 173, ,450 Net underwriting gain (loss) (15,352) (10,984) Investment income: Interest 8,198 8,331 Dividends 3,365 3,266 Real estate income (primarily rent for own occupancy) Realized gains on investments, net 2,652 1,725 Total investment income 15,115 14,222 Less: Investment expenses 3,166 3,374 Net investment income 11,949 10,848 Other income, net: 2,585 2,191 Income before federal income taxes (818) 2,055 Federal income tax expense: (1,456) (640) Net income $638 $2,695 12

14 WRG combined statutory statements of admitted assets, liabilities and surplus (IN THOUSANDS) Years ended December Admitted Assets Bonds, at amortized cost $196,238 $195,544 Stocks: Preferred, at market (cost $3,154 and $3,154, respectively) 3,398 3,405 Common, at market (cost $66,416 and $65,571, respectively) 105, ,542 Real estate, at cost less accumulated (depreciation of $4,530 and $4,015, respectively) 14,002 14,464 Cash and short-term investments 16,547 11,628 Other invested assets 9,194 9,566 Total cash and invested assets 344, ,149 Premiums in course of collection, net 38,228 34,862 Accrued investment income 2,146 2,180 Reinsurance recoverable on paid losses 1, Federal income tax recoverable 34 2,102 Deferred tax assets 2,464 0 Other assets Total admitted assets $389,671 $383,889 Liabilities and Surplus Loss and loss adjustment expense $60,641 $54,489 Unearned premiums 76,035 70,135 Ceded reinsurance balances payable Amounts withheld for others 11,263 12,672 Commissions payable 4,147 5,196 Accrued expenses and taxes, other than income tax 6,429 9,054 Other liabilities 1,400 2,191 Total Liabilities 160, ,338 Surplus 229, ,551 Total Liabilities and Surplus $389,671 $383,889 13

15 directors and officers (L to R) Robert P. Bogner, Eddie L. Steiner, Kenneth L. Vagnini, Kevin W. Day, Ronald E. Holtman, C. Michael Reardon, John P. Murphy Back row: Gary W. Gwinn, Gregory J. Owen, Kevin W. Day, Michael A. Shutt, Greg A. Brunn Front row: C. Michael Reardon, John P. Murphy DIRECTORS: Robert P. Bogner Retired (formerly Secretary and Treasurer of Bogner Construction Company) Eddie L. Steiner President and Chief Executive Officer, CSB Bancorp Inc. Kenneth L. Vagnini National Accounts Manager, PSC Metals Inc. Kevin W. Day Executive Vice President of Western Reserve Group Ronald E. Holtman Partner in law firm of Logee, Hostetler, Stutzman & Lehman, Chairman of the Board of the Western Reserve Group C. Michael Reardon Chairman and President, United Titanium John P. Murphy President and Secretary of Western Reserve Group OFFICERS: Gary W. Gwinn Vice President Claims Gregory J. Owen Vice President Information Technology Kevin W. Day Executive Vice President Michael A. Shutt Vice President Finance, Chief Financial Officer, and Treasurer Greg A. Brunn Vice President Marketing and Underwriting C. Michael Reardon Chairman, Executive and Investment Committees John P. Murphy President and Secretary ASSISTANT VICE PRESIDENTS: Adrian Besancon Assistant Vice President Investments Dave Chandler Assistant Vice President Claims Casualty Randy Donnamiller Assistant Vice President Commercial/Farm Underwriting Jim Geopfert Assistant Vice President IT Application Services Dave Jarrett Assistant Vice President Legal Counsel Dennis Manzella Assistant Vice President Marketing Fritz Raab Assistant Vice President Human Resources Terry Rhodes Assistant Vice President Personal Lines Underwriting Woody Vogel Assistant Vice President Claims Property Joe Wilford Assistant Vice President Controller Michele Young Assistant Vice President Business Operations 14

16 Our Mission To provide the best insurance products, protection and service to our policyholders, delivered by a quality agency force, backed by enthusiastic and service-oriented employees, sound investments and financial strength. Western Reserve Mutual Casualty Company Lightning Rod Mutual Insurance Company Sonnenberg Mutual Insurance Company