Central has challenging year in 2012

Central Insurance news

A conservative position and focusing on what can be controlled was the focus of the 138th annual Central Mutual Insurance Company policyholders meeting held May 8 in Van Wert.

“Our company is in the most conservative position we’ve been in since I have been president,” said Chairman of the Board and President F.W. Purmort.

“The property/casualty industry had a challenging year in 2012,” said Purmort, “but our conservative actions are having an impact – we beat the industry in 2012.”

Purmort provided a recap of the steps Central took to cut expenses and increase revenue. Better underwriting decisions, investments in workflow technology, and improved customer service all contributed to the company’s $32 million improvement in underwriting results over 2011 results.

“I’m very pleased with the pace of our improvement,” said Purmort. “We’ve made good decisions in selection and pricing, and spent our money in a controlled way. The improvement of $32 million in just 12 months is very satisfying.”

Purmort noted the company also committed to significant technology improvements. “We’ve made huge investments in workflow technologies that will add lots of advantages for the policyholder.” A big investment of time and resources has been in the upgrade of the company’s 20-year-old claims management system with improvements that could cut Central’s claims processes by a full day, saving the company and its customers millions of dollars.

Purmort also recapped the storm activity of 2012 and the effect it had on the company’s bottom line.  While hail and tornado events were down from 2011, wind continued to be costly for the company.

“Wind is a huge issue for us,” said Purmort. Of the 14,351 recorded wind events in 2012, Central customers were affected by over 7,000 of them, an average of 19 a day. The wind event that had the greatest impact took place on June 29, 2012 – the derecho. The highest measured wind speeds of this storm were 91 mph at the Fort Wayne, Ind., airport.

“Right in our own backyard,” said Purmort. “We’ve paid out $12.8 million in claims for this storm that lasted only a few hours. This is why it’s so important to maintain a conservative, financially sound position.”

Purmort concluded his presentation by sharing his perspective on the company going forward.

“I have great confidence today in the Central Insurance Companies,” said Purmort. “We work with fewer agency partners than most companies our size because we are very selective in choosing those agencies. Our policyholders should be very confident in the Central team working on their behalf. We have built all of our products and services with the highest level of integrity and financial security, and we will continue to do so at an exceptional level going forward.”

Thad Eikenbary, vice president and treasurer, began the treasurer’s report by stating: “Calendar year 2012 was a year where we began to see real signs of fruit from our labors over the last few years. I am proud to report that we recorded relatively significant additions to our historically strong financial position.”

Eikenbary reported that Central’s direct written premiums increased from $499.5 million in 2011 to $500.7 million in 2012, despite a 1.9 percent decrease in commercial lines writings.  On the other hand, personal lines business increased by 1.5 percent.  The company’s combined ratio for 2012 improved significantly to 103.5 percent as compared to 111.7 percent in 2011.  Of course, a combined ratio of less than 100 percent is preferred in the industry.

Net investment income for the company decreased by $2.9 million, from $41.7 million in 2011 to $38.8 million in 2012.

“Income from the company’s investment portfolio continues to be a positive and very consistent contributor to the entire operation,” said Eikenbary.

Central’s bond portfolio decreased by 2.8 percent during 2012. The quality of the portfolio remained very solid and Central continued to manage the maturity of the portfolio to ensure that it maintained the liquidity necessary to meet the company’s financial needs. Central’s stock portfolio represented 15.4 percent of the company’s total invested assets.

Central registered a net income after taxes and dividends of $28.4 million in 2012, which was a significant increase over 2011.  While the company experienced a net underwriting loss of $15.9 million, this was completely offset by positive investment returns.

Central’s assets increased by 1.2 percent to $1.31 billion, and by the end of 2012, the company’s Policyholders’ Security Fund had also increased by 11.5 percent to $510.5 million, one of the best increases in years.

In other business, Edd Buhl, senior vice president and secretary, read the minutes from the 137th policyholders meeting.  F.W. Purmort announced that Janet L. White, recently promoted to senior vice president of human resources, had been elected to the company’s Board of Directors and appointed to the company’s Executive Committee. D.P. Maconachy, E.J. Noonan, and F.W. Purmort were re-elected to the Board of Directors for a three-year term. Other directors include T.B. Kearney, R.S. Lawson, E.R. Buhl, R.J. Kutella, C.A. Runser, and J.L. White.

Central Mutual Insurance Company is a personal and commercial property and casualty insurance company operating exclusively through independent insurance agents in eighteen states.  The home office is located in Van Wert, with regional offices located in Dallas, Atlanta, Boston, and Van Wert.