John K. Smith, President & CEO
We are pleased to inform you that A.M. Best, the insurance industry’s foremost evaluator of financial performance, has recently reaffirmed PLM’s A- Excellent rating. We are equally pleased that they saw it appropriate to upgrade our financial outlook to “Stable.” In considering this rating, it’s important to note that A.M. Best is not simply evaluating a company’s balance sheet strength. If they were, PLM would have been upgraded long ago. Rather, they are looking at PLM’s business plan, leadership, past operating results, enterprise risk management program, the insurance marketplace as a whole and in particular the commercial insurance marketplace that we operate in. They then evaluate all this information into a model that projects future performance. The results are reviewed in an annual joint meeting between A.M. Best analysts and PLM’s leadership team.
We are off and running in 2018. After a great 2017, we had a dismal January with several large fires, a winter storm loss that will tap our reinsurance protection and several general liability/auto claims that went sideways on us (a rarity). Thus, we recorded a substantial underwriting loss for the month. Coupled with a volatile equity market in January, the best thing we can say about the month is that it is behind us. A bright spot in January was extraordinary premium growth. With a growth objective in the area of 6 percent for the year, we easily surged past that goal driven by excellent new business numbers and exceptional renewal retention levels.
We bounced back in February by producing a slight underwriting profit for the month. However, the volatile equity markets continued. As I write, it is too close to call March, but it appears that we will achieve another small underwriting profit for the month, and again achieve our objective.
One of the large loss fires we covered in January was a hot works grinding loss in a sawmill. The severity of the second large loss, at a light wood manufacturing account, was so great that we still have not determined its cause – and we probably never will.
From a casualty standpoint, poor driving habits continue to be the prime cause of auto losses. While distracted driving was clearly part of the problem, it has become quite clear that temporary drivers that are hired from agencies are not the solution to the driver shortage problem. Significant bodily injury claims are rising that are tied back to temp drivers that either didn’t have proper qualifications or the experience that they claimed. This was then compounded by their unfamiliarity of the route, equipment, and proper loading and unloading procedures!
We are routinely seeing significant auto losses in which vehicles are being taken out of service for extended periods. Over the past six to nine months, we have spent a considerable amount of time tightening down the loss control efforts by both our business development and loss control reps to address the commercial auto situation. We have noted that insureds are beginning to respond accordingly. The fact is we need an all-out commitment from both parties if we are to gain control of this problem.
Our trade show season is in full swing. We are participating in a record number of shows this year. We are proud that our people— including me—appear to be in some demand as speakers at many of these shows. Whether it is hard insurance topics such as coverage, underwriting pricing methodologies, loss control risk management, or a host of other topics, we are seeing a steady stream of requests. Feedback regarding our people’s efforts has been excellent. We are also suppling a steady flow of risk management articles for publication in various trade magazines.
We began the rollout of our new Cyber/Data Breach Coverage. While we originally planned to add that coverage onto our policies at expiration, we now have the capability of adding it mid-term to existing policies. You need to request for us to do this mid-term, something we strongly recommend. We will not add this coverage mid-term unless we are asked to do so. We are still wrestling with one or two state insurance departments to gain approval for this coverage in those states but expect to get those wrapped up soon.
With regards to the wood niche and the insurance marketplace, the upheaval continues with more insurance carriers exiting the niche or revamping their underwriting appetite by rewriting their book of business and aggressively raising their prices. In my last communication I talked about PLM working with one of the recent entrants who had decided to exit the niche. Since then, we have begun renewing another carrier’s book of wood business as they too wanted to leave the niche. Pallet operations are being dumped into the market, particularly in the Midwest. Recently, we heard that another competitor will retrench by non-renewing unprotected business and re-underwriting and up-pricing much of their book of wood business. With that said, if you are not one of our current insureds, we continue to be interested in talking to you about whether you should be!
In closing, I would like to thank those of you that have placed your faith and confidence in Pennsylvania Lumbermens Mutual Insurance Company. Our team of talented and dedicated insurance pros wake up every morning eager to demonstrate to you why you chose to place your insurance for your valuable business with PLM. Keep in mind—if we don’t do wood, we don’t do business. In other words, our commitment to the niche requires us to identify problems and find solutions… not run for the hills!
As always, I look forward to hearing from you with any thoughts, questions or comments. Either call me at 267-825-9246 or send me an email at jsmith@plmins.com.
