TABLE OF CONTENTS. President s Message About Western Reserve Financial Highlights Selected Financial Data... 5

Transcription

1 ANNUAL REPORT REPORT ANNUAL

2 2014 ANNUAL REPORT TABLE OF CONTENTS President s Message... 2 About Western Reserve... 3 Financial Highlights... 4 Selected Financial Data... 5 Combined Statutory Statements of Income... 6 Combined Statutory Statements of... 7 Admitted Assets, Liabilities and Surplus Directors and Officers

3 TO OUR POLICYHOLDERS, INDEPENDENT AGENTS, AND ASSOCIATES For more than 108 years, the Western Reserve Group (Group) has been committed to providing excellent customer service and delivering on our promise of protection. A strong commitment to the fundamentals of our business and partnership with dedicated independent agents continues to provide the foundation that drives our success. We realized the benefits of our collective efforts with the achievement of several key financial milestones during the year. In 2014, we posted another year of outstanding results. The Group achieved a significant milestone with direct written premium exceeding $200.0 million for the first time, finishing the year at $203.7 million. This marked the sixth straight year of premium growth for the Group, culminating in a cumulative growth over that period of approximately $55.0 million or 37.8%. This milestone could not have been achieved without the strong relationships we enjoy with an outstanding group of dedicated independent agents. We improved operating performance in 2014 as the combined ratio ended the year at 94.8%, resulting in an underwriting gain of $8.9 million. This marked our best operating performance since 2006, as all of our profit centers and operating states generated underwriting gains during The profitable underwriting results combined with positive returns from the stock market contributed to the Group finishing the year with record assets of $460.8 million. Policyholders surplus increased to a record high $267.1 million. This improvement in financial strength along with improved operating trends helped us maintain our A.M. Best A Excellent rating. The Group s capital adequacy continued to outperform the industry as we finished the year in the strongest financial position in our history, translating to peace of mind for our insureds and agents. We remain dedicated to significantly investing in our business and implementing change that will position the Group for the future as demonstrated by our continued commitment to WRG Connect. This multi-year investment in a new technology platform for rating, underwriting, policy administration, claims management and billing will allow us to keep pace with the ever-increasing demands of our industry and customers expectations, in addition to providing a platform to help the Group prepare for future growth. The financial strength and profitable growth we accomplished in 2014 provides significant momentum as we head into The accomplishments we ve enjoyed this past year would not be possible without the commitment of our agents and associates. Thank you for your valued partnership, service, and dedication to the Group. Sincerely, 2 Kevin W. Day President & CEO

4 ANNUAL ANNUAL REPORT REPORT ABOUT WESTERN RESERVE GROUP Western Reserve Group (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 270 associates and over 2,800 licensed agents from over 625 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 Benden Dr. - Wooster Lebanon - Indiana Cleveland Rd. - Wooster 3

5 FINANCIAL HIGHLIGHTS Thanks to strong financial performance, loyal independent agents, and dedicated associates, Western Reserve Group is poised to deliver on its promise of protection while also investing in the future $ $ $ $ $ $ $ $ $ $229.6 TOTAL ASSETS (in millions) SURPLUS (in millions) COMBINED RATIO DIRECT WRITTEN PREMIUM (in millions) % % % % % $ $ $ $ $

6 ANNUAL ANNUAL REPORT REPORT SELECTED FINANCIAL DATA (IN THOUSANDS) Years ended December Operating Data Gross premiums written 203, , , , ,215 Net premiums written 192, , , , ,829 Premiums earned 189, , , , ,466 Net underwriting gain (loss) 8,863 2,875 (21,704) (15,352) (10,984) Investment income, net 9,143 8,462 9,074 9,297 9,123 Realized investment gains (losses), net 5,096 1, ,652 1,725 Net income, pre-tax 25,898 15,694 (9,061) (818) 2,055 Net income 23,954 16,045 (8,553) 638 2, Balance Sheet Data Cash and invested assets 412, , , , ,149 Total assets 460, , , , ,889 Surplus as regards policyholders 267, , , , , Ratios Loss ratio Loss adjustment expense Underwriting expense Combined ratio 94.8% 97.5% 111.7% 108.5% 106.0% 5

7 COMBINED STATUTORY STATEMENTS OF INCOME (IN THOUSANDS) Years ended December Underwriting gain (loss): Net premiums written $192,701 $185,740 (Increase) decrease in unearned premiums (2,919) (4,740) Premiums earned 189, ,000 Losses and expenses incurred: Losses 99,594 97,914 Loss adjustment expenses 19,635 18,370 Underwriting expenses 61,690 61,841 Losses and expenses incurred 180, ,125 Net underwriting gain (loss) 8,863 2,875 Investment income: Interest 7,770 7,660 Dividends 4,018 3,570 Real estate income (primarily rent for own occupancy) Realized gains on investments, net 5,096 1,585 Total investment income 17,810 13,741 Less: Investment expenses 3,570 3,693 Net investment income 14,240 10,048 Other income, net: 2,795 2,771 Income before federal income taxes 25,898 15,694 Federal income tax expense (benefit): 1,944 (351) Net income $23,954 $16,045 6

8 ANNUAL ANNUAL REPORT REPORT COMBINED STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS (IN THOUSANDS) As of December Admitted Assets Bonds, at amortized cost $232,025 $221,040 Stocks: Preferred, at market (cost $2,086 and $3,154, respectively) 976 2,018 Common, at market (cost $68,955 and $72,431, respectively) 131, ,368 Real estate, at cost less accumulated depreciation of $5,490 and $4,962, respectively 12,624 13,083 Cash and short-term investments 25,414 19,690 Other invested assets 9,765 8,701 Total cash and invested assets 412, ,900 Premiums in course of collection, net 44,791 43,121 Accrued investment income 2,370 2,224 Reinsurance recoverable on paid losses Federal income tax recoverable - 2,584 Deferred tax assets - - Other assets Total admitted assets $460,841 $441,861 Liabilities and Surplus Loss and loss adjustment expense $71,130 $70,236 Unearned premiums 90,395 87,476 Ceded reinsurance balances payable Amounts withheld for others 6,033 8,164 Commissions payable 6,061 7,913 Accrued expenses and taxes, other than income tax 11,902 10,232 Federal income tax payable Deferred tax liability 5,267 3,561 Other liabilities 1,833 1,552 Total liabilities 193, ,096 Surplus 267, ,765 Total liabilities and surplus $460,841 $441,861 7

9 DIRECTORS AND OFFICERS (L to R) (seated): Ronald E. Holtman, Kevin W. Day (L to R) (standing): John P. Murphy, C. Michael Reardon, Jeffrey P. Hastings, Kenneth L. Vagnini, Eddie L. Steiner, Floyd A. Trouten DIRECTORS: Ronald E. Holtman Partner in law firm of Logee, Hostetler, Stutzman & Lehman, Chairman of the Board of Western Reserve Group Kevin W. Day President / CEO of Western Reserve Group John P. Murphy Retired (formerly President/ CEO and Secretary of Western Reserve Group) C. Michael Reardon Chairman and President, United Titanium EXECUTIVE LEADERSHIP: Gary W. Gwinn Vice President-Claims / Chief Claims Officer (CCO) Greg A. Brunn Vice President-Marketing- Underwriting-DSD / Chief Marketing & Underwriting Officer (CMUO) Kevin W. Day President / Chief Executive Officer (CEO) Jeffrey P. Hastings Of Counsel with the Law Firm Collins & Scanlon, LLP Kenneth L. Vagnini Retired (formerly National Accounts Manager - PSC Metals Inc.) Eddie L. Steiner President and CEO, CSB Bancorp Inc. Floyd A. Trouten Partner BDO USA, LLP Michael A. Shutt Vice President-Finance, Treasurer & Chief Financial Officer (CFO) Gregory J. Owen Vice President-IT / Chief Information Officer (CIO) (L to R): Gary W. Gwinn, Greg A. Brunn, Kevin W. Day, Michael A. Shutt, Gregory J. Owen (L to R Seated): Michele Young, Dennis Manzella, Kay Risner, Terry Rhodes, Woody Vogel, Brooke McVay (L to R Standing): Dave Chandler, Randy Donnamiller, Fritz Raab, Jim Geopfert, Dave Jarrett, Adrian Besancon 8 ASSISTANT VICE PRESIDENTS: Michele Young Assistant Vice President, Business Operations Dennis Manzella Assistant Vice President, Marketing Kay Risner Assistant Vice President, Strategic/Product Development Terry Rhodes Assistant Vice President, Personal Lines Underwriting Woody Vogel Assistant Vice President, Claims Property/ Recovery Brooke McVay Assistant Vice President, Controller Dave Chandler Assistant Vice President, Claims Casualty Randy Donnamiller Assistant Vice President, Commercial/Farm Underwriting Fritz Raab Assistant Vice President, Human Resources Jim Geopfert Assistant Vice President, IT Application Services Dave Jarrett Assistant Vice President, Legal Counsel Adrian Besancon Assistant Vice President, Investments

10 Western Reserve Group Western Reserve Mutual Casualty Company Lightning Rod Mutual Insurance Company Sonnenberg Mutual Insurance Company 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.