John K. Smith, President & CEO
At our January board meeting, we announced to our Board of Directors that in 2016 PLM achieved an underwriting profit for the first time in a number of years. When combined with strong investment income, this fueled a surge in our policyholder surplus, which increased by over 9% to approximately $135 million. Our total admitted assets finished the year comfortably north of $500 million. Perhaps just as importantly, our independent actuaries verified that we continue to maintain a comfortable claims reserve position. We ended 2016 with a loss ratio of approximately 64% and an expense ratio of around 32%, giving us a combined ratio just over 96%.
Our investment income was solid in spite of PLM reducing investment risk early in 2016. We made the decision to change the balance of our investment portfolio to a more conservative approach by increasing the mix of fixed income instruments and reducing our marked-to-market holding while rebalancing our Master Limited Partnership portfolio to a more long-term view. This was the right decision because we were unsure of where the US economy, the presidential election and our underwriting result might end up. Unfortunately, we missed the strong rebound that occurred in the energy sector that fueled MLP growth during the latter part of the year, but we felt this was an appropriate strategy to implement due to uncertainty in the marketplace. We also took steps to slow our ever-shortening bond portfolio by buying longer term bonds. These actions reduced the overall risk of our investment portfolio and we saw a drop in investment income as a result.
Premium production was below expectations, with the company finishing the year down about 4% to just over $219 million. Policyholder “retention” in the retail/wholesale and light manufacturing classes approached 90% while heavy manufacturing was below 80%. Yet even with the slide in production for this class, we continue to be one of the largest underwriters of sawmill, pallet and other heavy wood manufacturing accounts in the United States today! New business surged in the final quarter of the year as we wrote 577 new accounts that generated around $19 million in new business.
With that said about last year, let’s now look toward the future. We renewed our reinsurance program without any trouble this past January 1, and are pleased that we continue to have a a strong set of reinsurers standing behind our promise to you. January was a strong production month for PLM and we fully expect to be over target for February as well.
We are off and running at trade shows and busy visiting current and potential clients in an effort to support our desire to grow the organization this coming year. We have seen an increase in submission activity in the heavy manufacturing segment (sawmills, pallets, et al.) as some of the companies that jumped into the marketplace are repricing business or getting out. The new claims system we implemented on November 1 is running well. Over time this system will assist us in providing more detailed loss information for both our underwriting and loss control teams as well as to your brokers and you.
In addition, we are putting the final touches on a data breach coverage that we hope to roll out by the second quarter and we are pleased to announce that our loss control department is once again fully staffed. At the same time, we are finalizing a number of changes to improve our ability to track loss control recommendations. We signed a deal to put the last piece of our systems overhaul in place and believe that by the end of the year we will have shut down the last of our COBOL-based systems and will have moved most of our servers to the cloud.
All of this means we have another busy year ahead in our ongoing effort to make PLM the company of choice for insureds that operate in the wood and building material niche.
I continue to seek your feedback, so if you have comments please either give me a call at 267-825-9246 or email me at jsmith@plmilm.com.
