President’s Commentary

By Steve Firko, President

Before delving into an overview of our operating results, I wanted to comment on how exciting it is to be a Philadelphia-based mutual insurance company while the country is celebrating its 250th anniversary. As the cradle of liberty and birthplace of our nation, Philadelphia will host an exciting series of celebrations leading up to July 4th. The city will come alive with concerts and fireworks, a Salute to Independence Parade through Center City, and several FIFA World Cup matches at Lincoln Financial Field, home of the Eagles (Go Birds!). The festivities will culminate with Philadelphia taking center stage as host of the MLB All-Star Week. It can’t get more apple pie than that!

If you’re a history buff like I am, July is an ideal time to visit Philadelphia. You can stroll on the same cobblestone streets in Old City where our country’s founders walked, explore historic landmarks like Independence Hall, where the Declaration of Independence was signed, the Liberty Bell, and Betsy Ross’ House, and then spend time at the Museum of the American Revolution. There, you’ll discover remarkable artifacts and powerful stories that bring this pivotal chapter of our nation’s history to life. When I see people standing in line, who come from all over the world to visit these historic sites, it is a reminder to me of just how special our country is and the significant role it has played, and continues to play, in shaping the world in just 250 years! Happy Birthday, America!

Now, on to some PLM news. Every year PLM goes through the annual review process of AM Best to receive a financial credit rating. AM Best is the largest credit agency in the world that specializes in the insurance industry. This highly regarded rating shows the industry and our stakeholders our long-term viability to hold our promise and obligations as an insurance company. We were pleased to announce in April that AM Best reaffirmed our rating as A- Excellent with a Stable outlook for 2026. There were many contributing factors that went into our rating affirmation including ending the year with $225.8 million in surplus and $855.8 million in assets, both an all-time high, combined with a high-quality investment portfolio designed to support long-term stability and reduced earnings volatility. They also noted positive net income reported in each of the past five years, demonstrating the strength and resilience of PLM’s balance sheet. As we look ahead, we remain focused on consistent underwriting and operational performance to support long-term financial strength.

From a financial results perspective through the first 4 months of the year, we are pleased that 91% of our customers chose to renew their insurance coverage with us, which continues to be well above the industry average. We are very appreciative of the faith and trust our customers have placed in us to protect their businesses and believe this reflects the value our insureds place on partnering with a carrier that understands their business and is committed to long-term stability. However, when looking at our premium retention, we are a few points below target at 93%, driven by some leveling of rate increases in certain lines, slower sales growth among our customers, and the movement of a few larger accounts. We also made the decision to walk away from a few accounts that were unwilling to partner with us on loss control and risk mitigation recommendations. While new business submissions remain strong, new business production is below target at 144 accounts and $7.4 million. As a result, our premium growth through the first four months of the year is down 4.1% to $153.6 million.

In the last issue, I commented that we ended 2025 on a positive note on the property side of the business from a profitability standpoint, but the same could not be said for the casualty side of our business. Unfortunately, as we enter the first 4 months of 2026, both property lines and casualty lines are presenting some challenges. On the property side, weather losses have had an impact on our results. It started early this year when a late January winter storm resulted in several large building collapses from the weight of ice and snow. Combined, the collapse losses for that one storm totaled almost $15 million on a gross basis. This, along with an uptick in larger fire losses, resulted in property profitability deteriorating to a negative $3.8 million versus a positive $6.4 million last year. In looking at these property losses, we believe several of them could have been avoided, especially the fire losses as they were due to common exposures and hazards in woodworking operations or building material operations.

From a casualty standpoint, we are continuing our efforts begun last year and are reviewing all open claim files to increase reserves where appropriate. As noted in our last Lumber Memo, there are significant challenges facing both PLM and the broader insurance industry related to problems stemming from the U.S. legal system and society’s evolving attitudes toward litigation. Issues such as nuclear verdicts, social inflation, and litigation funding are generating an upward pressure in loss reserve development in all casualty lines including auto, general liability, and umbrella. Reasonable loss reserve expectations are increasingly proving to be inadequate, driven by the magnitude of settlements being handed down by the courts, in addition to a host of other issues that confront the U.S. economy and insurance industry. Last year, we added nearly $60 million in bulk reserves (IBNR) and are continuing this effort in 2026 by adding over $18 million in the first 4 months of the year which is $12.6 million more than the amount of IBNR that was added last year at this time. As a result, our underwriting loss through the first 4 months is $19.6 million compared to an underwriting loss of $13.9 million last year. Our loss ratio rose to 93.4% versus 86.3% last year but the expense ratio dropped to 28.4% from 28.7% last year for a combined ratio of 121.8%. Despite strong investment income of $8.3 million compared to $7.1 million last year, we ended up with an operating loss of $11.4 million versus a $6.9 million loss last year. While it is a bit painful in the short term to load these bulk reserves, we believe this reserve strengthening is appropriate and prudent to secure PLM well into the future.

In addition to reserve strengthening to address the challenges in the casualty lines, PLM is also responding in other ways. First, we are tightening our underwriting standards to ensure that we are appropriately managing risk in this evolving environment. Second, we have developed targeted initiatives and controls to address each of the identified drivers of loss. You will continue to see more information from PLM to raise awareness with our insureds and will share it with the broader lumber, woodworking, and building material industry to highlight loss drivers and how we can work together to reduce their impact with a prevention mindset and partnership. We have been publishing articles in various trade journals, sending direct communication materials with specific loss prevention materials targeted by lumber industry segment, and posting commentary on social media. In fact, there are several articles in this edition of the Lumber Memo regarding how to protect yourself from construction defect claims, reduce the risk of loss during hurricane season, and ways to protect yourself against cyber risk.

Lastly, you may have noticed our Loss Control and Business Development Representatives visiting your business more frequently and making many of these risk management recommendations directly. We feel it is important to address these with our customers in real-time with real world observations and recommendations to operate your business more safely. To date, we have visited over 5,600 locations and made almost 6,000 recommendations related to property and general liability exposures. This is a significant and meaningful increase over the same period last year. I am pleased to hear from our Loss Control and Business Development Representatives that the feedback from our customers during these visits has been overwhelmingly positive. Our Net Promoter Scores (NPS) reinforce this trend, consistently landing in the mid‑80s up to 100 on post-visit surveys. For context, our internal benchmark sits in the high 50s, while the broader insurance industry typically averages in the 40s. Our customers appear to appreciate the consultative risk management recommendations and want to implement them in their businesses to reduce the potential for a catastrophic loss that could harm their employees or customers. In some cases where conditions have changed at an operation and recommendations are not heeded or completed, we have taken the difficult decision not to renew coverage. We believe loss prevention is a partnership between PLM and our customers. We are there and will be there to pay claims when they happen. However, we expect our customers to have a safety mindset and partnership to help reduce the potential for a catastrophic claim when a loss control recommendation is made… if not for PLM, then for their business, their employees, and their customers.

From an investment standpoint, our asset allocation strategy to de-risk our portfolio continues with 93.9% of our assets in lower risk fixed income and 6.1% in equities at the end of the first quarter 2026, compared with 84.5% and 15.5% at the end of the first quarter 2025. Over the past twelve months, fixed income holdings have increased, reflecting a deliberate repositioning toward capital preservation, reduced equity volatility, and enhanced income generation.

Succession Planning

Senior leadership has been a stable foundation for PLM’s significant growth over the last 25 years. With pending retirements of several of our senior leaders on the horizon, the company has been developing its next level of leadership to smoothly transition into senior positions. This process for developing the next set of leaders has been methodical and ongoing for several years. In early 2025, PLM took its first step in the succession planning process with the move of several key employees into new leadership roles. We were pleased that these promotions and rotations into new roles were all internal candidates, reflecting a deep bench with solid experience at the management level.

In April of 2026, further progress was made in our succession planning efforts with the following changes:

• Last year, I was promoted to the role of Executive Vice President (EVP) and chief operating officer (COO) reporting to John Smith, President and CEO. This year, the Board of Directors appointed me to the role of President reporting to John Smith who remains as CEO of PLM.
• Lindsey DiGangi, CPCU was promoted to SVP & Chief Operating Officer replacing me. Lindsey has served in leadership roles across several departments and will now oversee Underwriting, Field Operations, Loss Control, Marketing, Customer Service, Operations, and our agency, Green Tree Risk Partners.
• Laura Page was named Director of Green Tree Risk Partners, replacing Angelo Ganguzza who is taking on a new role within the agency as he prepares for his eventual retirement. Prior to joining Green Tree, Page served as the Vice President at Extraco Insurance Agency, where she successfully enhanced training programs, modernized onboarding processes and demonstrated a strong commitment to sustained profitable growth.

We have also made some additional executive level changes and promotions in April to strengthen the leadership team at PLM:

• BJ Gardner was promoted to Assistant Vice President of Information Technology. He most recently served as Director of IT and brings nearly 20 years of experience at PLM across systems architecture, infrastructure, and technology operations.
• Ray Rogers was promoted to Assistant Vice President of Property Claims. He previously served as Director of Property Claims and has more than two decades of experience at PLM, progressing through multiple claims roles since joining the company in 2001.

While we are making rotational assignments and promotions at the senior level to prepare our next set of leaders at PLM, we are also actively working to build a pipeline of next generation insurance professionals. We have nine interns who will be joining PLM over the summer, learning the insurance business and supporting different areas within PLM such as Business Development, Claims, Customer Service, Loss Control, Operations, Underwriting, and in our in-house agency, Green Tree Risk Partners. This has been a great program for PLM and for the students who intern with us as they apply their college education to real life experiences within the insurance business. It has also provided us with an opportunity to identify and hire promising next generation insurance professionals before they graduate. This year, we hired two individuals who have gone through our intern program into full-time positions at PLM. A fun fact, Lindsey DiGangi, our new SVP and COO, was a PLM intern who joined us full-time after graduation 13 years ago! For some thoughts on succession planning, I encourage you to read Lindsey’s article in this edition of the Lumber Memo, “A Guide to Succession Planning: Protect the Future of Your Lumber Business.”

In addition to visiting our customers directly to provide risk management and loss prevention advice, we have been busy meeting them at various lumber industry events. To date, we have attended 37 lumber-related trade shows this year. This is a great opportunity to learn more about issues and emerging trends in the industries we serve so we can provide more tailored risk management advice and coverages to address them. At several of these trade shows, we have also held customer appreciation dinners. I really enjoy these dinners as I get to build meaningful relationships with our customers, their families, and team members. It’s also an opportunity to say thank you for the faith and trust that they have placed in PLM to protect their businesses.

In the last Lumber Memo, I commented on our slippage in meeting our service standards in several areas of the organization and the changes we have been making to resolve it moving forward. While we have made progress as we re-staff and re-focus training of our teams on operational efficiency, improved communication, and customer service, I apologize that we are still not yet back at the level of service we expect from ourselves, and the level of service that you have been accustomed to and deserve when dealing with PLM.

I want to assure you that we are working hard to resolve these issues and hope the trust and goodwill that we have built over the years affords us your patience as we take the necessary corrective actions. We value the faith and trust you have placed in us over the years to protect and service your business and hope we can continue to earn it moving forward.

As always, please do not hesitate to reach out to me directly with your thoughts and comments.

In closing, I want to wish you all a safe and fun summer season enjoying some time off with your family and friends.