| |
|
|
I am happy to
report that the company finished 2011
stronger than where it began. We were able
to achieve one of our most significant
objectives- maintaining a sound financial
base that provides adequate capital to meet
the ongoing company obligations.
2011 was a very challenging year for the
property & casualty industry as a whole. The
major headlines were the numerous
catastrophic losses (earthquakes, tsunamis,
hurricanes, tornados and floods) around the
world and here in the United States, many of
which were record breaking. Fortunately for
us, Michigan fared better than most other
areas of the country regarding these events.
Underwriting Results 2011: Even
though Michigan was somewhat spared
regarding severe weather, we still
experienced an overall company underwriting
loss of $2.6 million. The major contributors
to this loss were our two largest lines of
business; personal automobile and
homeowners.
When evaluating the personal automobile line
of business, we have found that the personal
injury protection (PIP) coverage is
generating the greatest amount of loss at
$2.8 million. Physical damage (comp &
collision) is also in a significant negative
position, producing a loss of $1.7 million.
We continue to be hopeful that the current
legislative action regarding Michigan
no-fault automobile insurance will produce
prudent and reasonable reform to help
control costs going forward. The proposed
reforms will increase the affordability of
personal automobile insurance for our
policyholders and all other Michigan
residents. We believe that reasonable and
prudent reform can take place, while at the
same time, protect what is well known- that
Michigan’s personal automobile coverage is
the best in the country!
The homeowners line of business continues to
experience large fire and water losses on a
regular basis. Many of these can be
attributed to adverse weather conditions and
accidental events. However, we are seeing an
increase in the number of claims being
attributed to the difficult Michigan economy
such as fraud, lack of proper maintenance
and theft. Ultimately, we experienced an
underwriting loss of $3 million on this line
of business for the year.
As always, it is extremely important for the
company to achieve rate adequacy on these
two major lines of business.
Investment Results 2011: In the past,
insurance companies could count on their
investment portfolio to add to the bottom
line in a much more robust manner, but this
is currently not the case. With the
unprecedented and historic low interest rate
environment of fixed income securities,
along with the volatility of the equity
markets, insurance company investment
portfolios are performing well below their
historical averages and ours is no
different.
| |
Net
Investment Income: |
$
13,869,420 |
| |
Federal
Income Tax Incurred: |
$
(2,738,922) |
| |
Unrealized Gain/ (Loss): |
$
(957,240) |
| |
Total
Investment Results: |
$
10,173,258 |
Bottom
Line Results: When you combine both
areas of our operation, underwriting and
investments, we have had a gain of
approximately $7.6 million in policyholder
protection, resulting in a return on equity
of a modest 3.6%. Maintaining adequate
capital to preserve long term financial
viability is paramount to the company’s
objectives.
| |
Underwriting: |
$
(2,620,880) |
| |
Investments: |
$
10,173,258 |
| |
|
|
| |
Gain in
Policyholder Protection: |
$
7,552,378 |
Total
Policyholder Protection as of 12/31/2011:
$215,403,150
In Summary: We feel very fortunate to
have been able to navigate a very difficult
year with satisfactory results. Our
management team and all our associates
remain focused and poised to take on the
challenges and opportunities the future
presents.
We are blessed to be affiliated with a loyal
group of policyholders, strong network of
independent agents and a dedicated team of
employees.
We are proud of the protection, services and
financial stability we have provided for
over 100 years to Michigan individuals,
families and businesses.
We appreciate your confidence in placing
your insurance with us and do not take it
for granted.
Thank you for your business!
Sincerely,
Kurt P. Foley
President, CEO |
|
