President’s Commentary

I would like to begin this commentary by providing an update on our financial performance and where we find ourselves through the end of May 2025. I’m writing this just after the end of June, and while full results are not yet final, I’ll share several initial thoughts as I cover each area.

Our Current Results

We are currently trailing our forecasted premium plan. Year over year, while premium was up $11.8 million, we are at $7.1 million, 3.5% lower than target. This number did not improve at the end of June, either.

New business continues to be strong, with 338 new accounts written, a 16.6% increase year over year, and above target as it relates to new accounts. Premium associated with these accounts looks robust at $17.9 million, which is, again, over target. Our ability to retain your confidence and renew your business is measured by a metric we refer to as renewal retention. From a policy count viewpoint, so far this year 92.5% of our insureds renewed their coverage with PLM, which is well above the industry average! We believe this is a testament to the value our clients and their brokers see in our relationship.

So, where does the premium shortfall come from? To be candid, your businesses did not grow last year at the rate that we expected, meaning the premium audit program generated more return premiums (to you) than additional premiums to PLM. Therefore, we are off target by $1.5 million in premium.

Premium generated by endorsements is also off target by $1.5 million. Some mergers and acquisitions resulted in the consolidators moving PLM business to their own carrier. This is unusual for us, as in most cases we insure them and we receive endorsement requests to add acquisitions. I do believe this is just a timing error.

Finally, if we look at the premium associated with the renewals that we are retaining as noted above, we find it’s about two points below target. That translates into about a $10 million shortfall on premium and renewals alone.

Green Tree Risk Partners has seen its business pick up substantially this year, both by providing workers’ compensation coverage to our insureds, and beginning to fulfill our promise to “never say no” by providing quotes on wood accounts that PLM is not a market for. We expect this organization will approach $20 million in premiums this year!

We are asking to quote workers’ compensation on all new accounts and are starting the process of doing the same on our renewal business. We need to get better at referring accounts that do not meet our underwriting guidelines to Green Tree before we decline it to either you or your broker.

A Look at Emerging Losses

Regarding profit, we are off to a rocky start with general liability, particularly with construction defect claims leading the way. While these claims used to be nuisance oriented, we are seeing this dynamic change significantly. This includes not only the claims submitted to PLM, but across the entire insurance industry.

The size of construction defect losses is ramping up resulting in larger claims settlements. We have communicated on appropriate risk management solutions to protect your business regarding this issue, such as tighter contracts, better record retention, working with only reputable installers, contracts with adequate insurance coverage and getting certificates of insurance and maintaining them. Visit our website or call your Business Development / Loss Control Representatives or Underwriters for more information.

Despite the construction defect losses, new general liability losses, as well as property losses, are down. Further, auto activity is flat from a new claims perspective.

Finally, while we’re profitable now from a property standpoint, we are enduring a difficult number of large property claims that quite frankly were preventable and should not have occurred.

After over 10 years since I can remember our last oily rag claim, we are now being hit with a slew of them, including some in excess of $5 million. We are also seeing a number of faulty appliances claims this year, even one approaching $10 million! The story is always the same: an insured buys a new microwave for their home and takes the old one to the breakroom to “upgrade” that microwave. Then, after years of use, it finally breaks down and burns the whole building down. Another recent issue is where one too many devices were all plugged into one outlet in a breakroom, resulting in an over $5 million loss.

This is a tough enough industry with its high severity risks, and we are used to dealing with large, fortuitous claims associated with the operation of these businesses. But, overloading a kitchen outlet, a microwave going bad, or an oily rag disposal claim? These are preventable and easily fixed, and you don’t need much help to spot the problem and take action. You just need to be committed to doing it.

Many of us are aware of the wildfire in Hawaii that essentially burned down the town. I did not realize that the fire only burned through a couple hundred yards of grassland before hitting the town. What caused the fire to burn out of control was the vegetation that grew over the years around the various homes and buildings. This is a frequent problem we see with our insureds failing to maintain the brush around their buildings or stacking combustible products up against the exterior of their buildings. Again, you don’t need our assistance to point out these problems; you just need to walk around your property!

Evaluating Adequate Coverage

I recently saw an article in LBM Journal that reflected your comments in response to a survey they conducted regarding tariffs. Many of those that responded indicated they were “building inventory” as a way of delaying the potential impact of tariffs on their business. They expected inventory costs to go up dramatically and were ordering before the tariffs kicked in.

I can’t comment on the wisdom of that strategy. However, I will tell you this: if you’ve done that, you’ll likely have an insurance valuation problem, meaning you need to reevaluate the coverage limit you have on that inventory. If you rely on machinery, equipment, forklifts, etc. to operate your business, much of it comes from overseas. As a result, it’s going to be more expensive and time-consuming to rebuild or to replace lost equipment. Please make sure that you have the coverage you need in place before the loss occurs.

Your business is difficult enough to operate successfully, and no one has time to deal with a loss that could have been avoided. I can assure you that whatever business plan you have in place the day before a major loss will be abandoned once said loss occurs. Replacing a microwave, making sure that there’s adequate power and outlets for devices, ensuring your people are storing oily rags correctly, keeping up with regular vehicle and equipment maintenance, and a host of other routine matters will help you avoid the loss that causes you to refocus your priorities.

If you’re insured by PLM, we will be there. Rest assured that we’ll work to get you back in business as quickly as possible. So long as you have adequate coverage, you’ll be made whole again per your policy coverage. Those that have experienced significant losses with PLM know how successful we are in this area. It’s one of the reasons why our Net Promoter Score (NPS) and retention numbers are so far above the industry average.

Educational Sponsorships

I also want to take a moment to chat about sponsorships that many of the organizations, and in some cases, our insured and brokers seek from PLM. For years we have had a formal policy in this area, and I’d like to take a moment to discuss it with you.

Since 1895, Pennsylvania Lumbermens has been dedicated to fostering growth within the lumber, building material, and woodworking communities. We believe the growth and future success of these industries is underpinned by a common principle: investment in learning.

As a result, our sponsorship resources over the years have been limited to educational interests, such as speaker sessions or instructional presentations. Our guidelines are strategically focused on the pursuit of education, regardless of topic or subject matter.

It does not have to be risk management education (although we are a bit more liberal in sponsorships that are focused on that area). We have never really been all that comfortable in sponsoring cocktail parties, golf outings, and such.

Rather, PLM is focused on supporting community-driven charities, both corporately and through employee giving. Appropriate sponsorship requests can be sent to Matthew Kienholz, Vice President of Marketing, at mkienholz@plmins.com. If by chance you do need an educational session regarding your insurance or risk management needs, we are more than willing to provide speakers on any topic related to our expertise.

In closing, I want to share with you the key contact information for our leadership team, who are eager and willing to assist you in any way possible.

I wish you the best for the remainder of 2025! As always, if you have questions or comments (which I welcome and enjoy), or would just like to talk, please do not hesitate to reach out to me at jsmith@plmins.com or on my cell phone at 609-513-0928.