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We are now halfway through the year. As expected, our combined ratio deteriorated slightly, but we still benchmark very well against our peers. The wind blew, the hail fell, tornadoes occurred, and did it ever rain. Records will be set for rain in many areas of the Midwest this year. In my travels around the Midwest, I don’t think I have ever witnessed the soil erosion I have noticed this year. Having my roots in a small Iowa town with significant ties to farming, this erosion always saddens me. The rain has also stressed home plumbing, sewers, and sump pumps. Add to this all the flooding of historical (some along the Missouri River have described it as “Biblical”) proportions and you have the makings of a tough claims environment for P and C Insurance Companies. That said, we continue to manage claims with the same quick turnaround standards that you have come to expect. This is what we do and we feel like we do it well. We’ve received numerous compliments from both Agents and Customers regarding our claims service this year. Thanks for the positive feedback. We are fortunate that we have not experienced storms with the devastation realized in Tuscaloosa, Alabama or Joplin, Missouri. Industry records have been set based upon these storms and so we are reminded that though storms have been fierce in our seven state region, things could be worse.

As we enter the 3rd quarter, storms that occur (if they must) will have a lesser impact on our financial results as we have satisfied much of our catastrophe Reinsurance retentions (deductibles) in this second quarter. We are mindful however that recoveries from our Reinsurors will have an influence in our future costs from a Reinsurance community already experiencing heavy losses on world wide catastrophes from earthquakes, flooding, and tornadoes. Let’s pray for a quiet hurricane season. I saw financial results from one Reinsuror who had a Combined Ratio in the first quarter in the 90’s that ballooned to over 150 after second quarter results were factored in. Based on our current financial position with our Reinsurance which blocks our net cost on storms for the balance of this year I am confident we will achieve acceptable underwriting results by year end.

Our Written Premiums have grown by 10% YTD!!!! We are thus ahead of our 8% target for growth in our 2011 business plan. We thank you VERY much for all the new business in the first half of the year. Our commercial quote success ratio is just under 30% and this ratio is on quote activity that is roughly 20% ahead of last year’s pace. All lines of business are showing varying degrees of growth. Commercial Lines continue to grow at a faster pace than Personal Lines though Personal Lines is showing good growth also. An interesting observation has occurred in the last few months. Year to date last year in 2010, we experienced a combined negative written premium growth in the processing of endorsements and premium audits. Through June of 2011, this trend has reversed itself with significant increases. I believe this is a sign of improvement (or at least stabilization) in our economy in the Midwest. It appears insured’s are buying and endorsing more new cars, boats, jewelry, and other acquisitions this year than last year. Premium audits are now positive year to date compared to 2010 which implies more hiring. When WC audits show positive earned additional premiums this also means a positive change in the new policy term as deposit premiums are endorsed upward to reflect these increased audited payrolls. If you know someone looking for employment, North Dakota might be a good destination. I read recently that jobs opportunities are more plentiful than people to fill available jobs in North Dakota right now. That state currently enjoys the lowest unemployment rate in the nation. Midwest values breeds great results and we’re happy for those living in North Dakota.

With our premium growth rates, control of our staffing, increased productivity, and our effective use of technology our expense ratios continue to improve. Our Underwriting expense ratio in 2011 has lowered to 23.9% in 2011 compared to 26.4% in 2010. Our claims expense ratio is 10% in 2011 compared to 12.1% in 2010. Without these expense ratio improvements, our Combined Ratio in the first 6 months could have been worse by about 4.6 Combined Ratio points. It’s our efficiency that allows us to pass off competitive premiums to our customers.

Have you ever counted the number Companies who use of TV/Radio advertisements to sell personal auto insurance? By the way, most all the messages are encouraging the customer to come DIRECT to the Company. Now, reflect on the number of ads you see to sell Homeowners. There is a reason for this and has everything to do with profits. Recently one of these very active “advertisers” for Auto withdrew entirely from the Homeowners line. Can you guess who? Question to all Independent Agents: Is your Homeowners book growing? I’ll bet it is. Is your personal auto book growing at the same rate as Homeowners? I’ll bet it isn’t. How many of you represent these same direct writer “advertisers” who are working hard at writing your auto business on a direct basis? Final question: How many of you are writing Personal Auto with these same “advertisers” who would prefer to write your auto business direct. The “advertiser” field is growing and becoming crowded. It seems I see a new one every month or so. My prediction: The next thing you might see in the future is a major car manufacturer (General Motors –they still owe us tax payers from being bailed out from avoiding filing bankruptcy) teaming with a well known Insurance Company (you may represent this Company) giving away “free” auto insurance with the sale of new car. What? You’re kidding me! This is already happening too? Nothing ceases to amaze me!

May you live in interesting times! We have much work to do to realize acceptable underwriting results by year end. We are focused on doing so and I am confident this will happen. Have a great summer and always know we appreciate your business.

Best regards,

Ron Boyd, CPCU
President and CEO


Posted on Monday, August 08 @ 09:36:54 -06:00
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