President’s Letter

John K. Smith, President & CEO

John K. Smith, President & CEO

I want to take a moment before sharing an update on PLM’s results to thank everyone who supported the recent Insurance Society of Philadelphia (ISOP) event and donated to the scholarship program or the smoke detector campaign. I was honored to be recognized with their Distinguished Leadership Award, but more importantly, touched by the many donations that we received for this great organization and the Philadelphia Fire Department Foundation. This is the first time since the ISOP started this award that they decided to recognize a smaller mutual insurance company. The outpouring of support was indeed humbling and very much appreciated.

Further, I was surprised and pleased during the ProDealer Industry Summit in October when the National Lumber and Building Material Dealers Association (NLBMDA) recognized me with its “Chairman’s Award.” This was a thrilling event and an award that I will cherish.

With that said, whether it is the NLBMDA Chairman’s Award or the ISOP’s Distinguished Leadership Award, I fully understand that these honors reflect upon the great team that we have built at Pennsylvania Lumbermens and the fine work they do on a daily basis for our customers and brokers. I am privileged to have the opportunity to lead such a great group of people. At the end of the day, they do the heavy lifting that leads to the type of recognition that we have enjoyed this fall.

Moving on to results, I regret to advise you that this has been a difficult and challenging year from a profitability standpoint. Like much of the insurance industry, we are facing extremely difficult commercial auto results that have led us to take significant actions from a loss control and underwriting perspective in an effort to return this area to profitability. On top of that, we have a number of general liability cases that have gone bad. Subsequently, we had to increase reserves dramatically on a half a dozen cases, putting negative pressure on our results.

On our property line of business, a surge in large losses associated with our retail building material dealers, and light and heavy manufacturers plagued us throughout the year, only to be topped by two hurricanes that made landfall, both of which will cost us dearly.

The fact of the matter is: we are in the insurance business to pay losses. We can’t have a good year every year! We are coming off three very strong years, and as such, we will absorb these losses and move on. Surprisingly, our surplus was actually up at the end of September over of the same time last year. With the change in the equity markets in October and the impact of the two aforementioned hurricanes, I have to think we will see a drop in surplus by year-end.

On the other hand, premium production has soared this past year. It appears we will not only exceed our production target of four percent, but will grow past $250 million of gross written premium. Policy counts are increasing, as is the number of insureds that have placed their faith and confidence in Pennsylvania Lumbermens.

While we have seen an increase in frequency of loss that has put some strain on our claims department, we still have very positive feedback about the timeliness and the quality of our claim settlement process. We receive regular kudos from our customers regarding our loss control and risk management efforts. Also, our flat organizational structure has encouraged more open and direct communication between senior management at PLM and our insureds and the brokers who represent them, than I have ever seen before. We must be doing something right!

This last point is particularly important to note as carrier after carrier—many of which were once hot competitors—have begun to dramatically increase pricing, non-renew accounts or exit the wood niche entirely.

So, as the year comes to a close, I unfortunately do not sense that we will be profitable. Rest assured, however, we will do our best to take the appropriate corrective action to recover in 2019.

Regarding 2019, we are well into renewing our reinsurance program. While it will be more expensive, due to the amount of loss that we have ceded to our reinsurance partners, I do not anticipate significant difficulty in renewing the coverage.

I stand ready to receive and answer any questions you may have at 267-825-9246 or at jsmith@plmins.com.

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