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MFM Announces 2011 Results and Plans for 2012 icon

We are nearing the end of our Statutory Accounting for MFM’s 2011 results. Though our results were better than most of our competitors results were not up to our expectations. Our Combined Ratio for 2011 was 103.7. Comparatively, the entire Industry is expected to report in excess of 110 and some Companies will report MUCH worse results. Unexpected storm severity and frequency were the culprits in 2011 for all property and casualty companies throughout America and MFM was no different incurring 10M in storm losses throughout our Midwest region. Not one of our 7 States avoided a share of the storm losses. Our claim’s people did a masterful job of promptly settling these claims. Many compliments from our Agents and their Customers were received in 2011.

Investment income was stable in 2011 as invested assets for the company exceeded 100M for the first time ever. No reasonable investment yield can be found without risk today so investment income will continue to suffer in 2012. Even full faith and credit of our Federal government is only worth “maybe” 2% on a 10 Year Treasury. This trend continuing in 2012 should continue to influence the industry to get back to some Underwriting discipline. Investment income positioned us to be able to financially meet all of our Policyholder obligations in 2012 and realize a modest surplus gain. Some rebound in the economy should help future prospects but let’s face it - the Midwest has not experienced the downturn that the Coasts have experienced. By the way, if you want to see an economic activity frenzy take a drive to western North Dakota sometime. However, if you do, plan to sleep in your car as motels and hotels are full. With the exception of Illinois, the unemployment rate in the Midwest is lower than the unemployment rate for the entire nation and has been lower for some time.

Written premiums grew almost 10% in 2011 to 90M. We continued to find efficiencies to reduce our expense ratio in 2011 to 26%. This trend continues to give Midwest Family a competitive edge to many of our competitors. Rate increases particularly on Property Lines of business will help MFM return to Underwriting profitability in 2012. Due mainly to storms, our Homeowners book produced the poorest results. This is no surprise for the 3rd year in a row. Homeowners Insurance has been an under priced bargain for years and it time for a change. The only realistic change to improve experience in Homeowners is more premium per policy. When was the last time you saw major TV advertising to sell Homeowners? Auto yes! Home no! By the way, our Personal Auto loss experience is excellent also.

Our A M Best rating of A- minus was recently affirmed. We will grow written premium by 6% in 2012 to $95M of written premium. Pricing changes and Reinsurance adjustments will allow for much better prospects for producing an Underwriting profit in 2012. Our business plan calls for a repeat of 2011’s 10M of storms but in 2012 we will produce an underwriting profit. If storms are less than 10M we obtain a bonus in our results. More of our 2012 growth will again come from Commercial Lines than from Personal Lines. We are expecting little growth in Homeowners Policy Count in 2012 though we expect premiums for Homeowners to grow by 10+%. Writing Homeowners in conjunction with a Portfolio account will be our mainstay for Personal Lines marketing in 2012. Growing more in casualty lines in lieu of property allows for less volatility in our results and also controls our catastrophe reinsurance cost.

Our re-domicile to Iowa became effective on 1/1/2012. Construction on our office space in Chariton, Iowa will be completed and ready for occupancy by April 1, 2012. This move will continue to influence improvement in our cost structure. However, Agents in all of our states will see no change in our commitment to you from a Sales and Service perspective. Product filings in 5 new states have been approved. We are nearing technology execution to write insurance in Montana, Kansas, Missouri, Indiana and Ohio. We should be active by 4-1-12. Our Re-domicile to Iowa has put us in a more centralized regional position to service Agents in these new States also. Finally, MFM was licensed this past year in the states of Arizona, Nevada, Utah, Colorado, Idaho, Washington, and Oregon. Applications are pending in New Mexico and Wyoming. All of these states will give you a view into our future business plans. MFM is now 120 years old formed in Montevideo, Minnesota in 1891. Interestingly enough on its 100th anniversary in 1991 the Company wrote business in Minnesota and Wisconsin with roughly 90% of this business in Minnesota and 100% of MFM’s business being all Personal lines.

The sales and service efforts of our Agents will be our mainstay for success in 2012. Nothing changes. Our continued efforts to focus on our Agents and their clients as our primary customers will pay dividends for MFM in 2012. That is why we are so optimistic about prospects for 2012 and the future. Always know we appreciate your business.

Best regards,

Ron Boyd, CPCU
President and CEO

Posted on Saturday, February 11 @ 13:02:27 -06:00
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