Surplus Grows in 2009
The year 2008 was a tumultuous year for many financial companies. While in general insurance companies suffered less than banks, they too lost millions of dollars in surplus as a result of the decline in the investment markets. I am pleased to report that, based on our preliminary year-end financials, we bounced back nicely in 2009 and ended the year much stronger than we began it.
All told, our policyholder surplus rose about 8.5% and will end the year above $70 million. Surplus is the financial "keel" that allows us to write insurance safely for over 100,000 policyholders in the six New England states. (Operations in New York, through our affiliate Eastern Mutual, are stated separately.) It is the basis that AM Best & Co, the primary rating agency for insurance companies, relies on in part to support our A minus (Excellent) rating. Policyholders and agents should know in addition to our solid foundation our investments are very conservatively invested, with less than 12% of assets in high grade equities or equity equivalents and the rest in AAA-rated bonds and other fixed income securities.
Unlike some of our peers, our direct written premium showed positive growth in 2009, rising 3.8% in Southern New England and 2.1% in Northern New England. We believe this underscores our strong underwriting, solid agency relationships and exemplary customer service.
On the loss side, incurred losses (the total amount of claim payments and loss reserves recorded during 2009) fell 20% from the year earlier, which was very rugged for us. Big fire losses also thankfully declined. While the year began much as 2008 had been, claims tended to subside as the year progressed, partly due to mild fall weather in Maine, New Hampshire and Vermont. Like other companies in 2009 we attacked our internal expenses looking for efficiencies and savings, and by year-end had posted a 3.6% reduction in total expenses inclusive of claims adjustment costs, underwriting expenses, agent commissions and investment fees. We managed to do this, I might add, without any general layoffs. (In fact our employee count was six positions higher at year-end than at the start of the year as we look to further improve our already exceptional service levels.)
Given the nature of our business, we are highly impacted by weather related events, so to some extent good fortune comes with sunny skies and mild winds. But obviously to sustain a healthy company, and a strong financial rating, we have to plan carefully for snow squalls, ice storms and heavy winds. And we do.
As I have said in the past, thank you for doing business with us.
John “Josh” Fitzhugh
President and CEO
