Welcome to Penn National Insurance’s 2009 Annual Report CUL8RSee you later BBL Be back later Peacepz TMI Too much information
Hug Hug back Kiss H HB K BTW By the way Officers & Directors BFFBest friend forever LOL Laughing out loud
Just joking JJ YCMU You crack me up G2GGot to go !
Think happy thoughts ZUPWhat’s up? T:)T Thanks WR@ Where you at?*w*Wink THNX
People are talking. Penn National Insurance | 2009 Annual Report
No matter how you say it … the news is good. Consolidated Statutory Financial Highlights
Good news. Great performance!
President’s Message
Chairman & CEO’s Retirement Consolidated Statutory Financial Statements : ) Facts in Brief Better automation. Better service. Officers & Directors Solid growth in personal insurance. New targets for business insurance growth.
Our financial strength rating from the We’ll let our employees tell you about it. A.M. Best Company is A- (Excellent), in the Secure Rating category.
We were named one of the 100 Best Places to Work in Information Technology by Computerworld Magazine.
We were named one of 50 best large companies to work for in Pennsylvania, by the Great Place to Work® Institute.
Customers continue to report high satisfaction with our claims service, ranking our claims professionals’ courteousness and quick response time at the top of the list of service categories that we measure. Penn National Insurance | 2009 Annual Report
Consolidated Statutory Financial Highlights
Consolidated Statutory Financial Highlights (Dollars in thousands) 2009 2008 2007 2006 2005 2004 2003
Good news. Great performance! Direct premiums written $ 512,056 $ 537,878 $ 568,442 $ 578,738 $ 593,876 $ 575,610 $ 546,447 Net premiums written 481,156 506,734 536,857 553,082 572,855 554,625 523,462 President’s Message Net premiums earned 487,031 518,373 538,849 555,447 570,838 539,535 510,583 Investment income, including realized gains and losses 51,528 37,095 46,201 41,821 38,902 40,479 49,179 Chairman & CEO’s Retirement Net income 29,040 35,135 39,150 38,849 36,410 28,180 25,919 Total cash and investments $1,204,785 $1,161,226 $1,169,440 $1,092,727 $ 994,280 $ 908,309 $ 858,205 Consolidated Statutory Financial Statements Total admitted assets 1,382,014 1,353,668 1,376,329 1,300,397 1,203,748 1,117,371 1,066,158 Total policyholders’ surplus 484,850 427,155 439,921 398,940 336,750 304,593 286,125 Facts in Brief Combined ratio after dividends 103.0 99.9 99.1 98.3 98.7 99.2 101.4
Officers & Directors 20Penn National Insurance09 Annual Report Statutory Combined Ratio Direct Premiums Written Total Admitted Assets Total Policyholders’ Surplus After Dividends
(in millions) (in millions) (in millions) o Industry Average n Penn National Insurance
$600 $1500 $500 110
500 1400 400 105
400 1300
300
300 1200 100
200 200 1100
95
100 1000 100
0 900 0 90 03 04 05 06 07 08 09 03 04 05 06 07 08 09 03 04 05 06 07 08 09 03 04 05 06 07 08 09
(lower is better) Penn National Insurance | 2009 Annual Report
Commercial Lines
Consolidated Statutory Financial Highlights Sharon Lane
vice president – Commercial Lines Good news. Great performance! As an avid gardener, Sharon knows you President’s Message have to plan early for next season’s harvest. Her division is currently cultivating the soil by Chairman & CEO’s Retirement planting new automation and planning growth in targeted classes of commercial insurance. Consolidated Statutory Financial Statements
Facts in Brief
Officers & Directors Penn National Insurance | 2009 Annual Report
Commercial Lines
Consolidated Statutory Financial Highlights We know that our agents tend to place
Good news. Great performance! more business with companies that are
President’s Message easy to do business with, and that offer automated systems that are efficient Chairman & CEO’s Retirement and easy to use. This holds true in both Consolidated Statutory Financial Statements personal insurance and business insurance. Facts in Brief
Officers & Directors Our recent introduction of automation improvements in commercial lines has driven a 23 percent increase in our quoting activity. Our new, automated bridging tool allows agents to transfer information housed in their agency management systems into our Web rating tool, effortlessly. We have also seen a 12 percent increase in the number of agents using our quoting tool now that the bridging application is in place.
In 2010, we are undertaking a major project to overhaul our Web rating tool to integrate the application with our policy issuance system. The project will allow us to do the following:
n capture agency-entered data and transfer the data to our policy issuance system, speeding service and improving accuracy in the process
n offer an easy, intuitive entry system that is agent-friendly
n increase straight-through processing (without requiring manual intervention)
23% increase in quoting activity making it easier 12% more agents using our quoting tool Penn National Insurance | 2009 Annual Report
Personal Lines
Consolidated Statutory Financial Highlights A 52 percent new-business
Good news. Great performance! increase tells us that agents
President’s Message love the enhancements we’ve made in the last few years. Chairman & CEO’s Retirement More enhancements currently Consolidated Statutory Financial Statements in the pipeline should drive this Facts in Brief phenomenal increase even higher. Officers & Directors Our Personal Lines Technology Council, consisting exclusively of our agents’ staff members, helps us plan and prioritize our improvements.
Automation makes it easy for ...it’s personal our agents and policyholders Sharia Benn
to work with us. underwriting manager – Personal Lines Sharia Benn loves people. She’s a youth pastor. Mentor to teens. Inspirational speaker. Actress. Historical re-enactor. Community leader. Like all successful leaders at property/casualty insurance companies, she has a head for numbers. But her heart for people is what makes her so successful. And so valued by our customers. Penn National Insurance | 2009 Annual Report
Personal Lines
Consolidated Statutory Financial Highlights
Good news. Great performance! Competitive rates. President’s Message Easy technology. Chairman & CEO’s Retirement Fast customer service. Consolidated Statutory Financial Statements 24
Facts in Brief These traits add up to big growth. Officers & Directors
Upload policy changes project
BEFORE AFTER
When agents changed policy Now, our automated systems information – to add or delete a vehicle accept data from our agencies’ to a customer’s policy, for instance – we systems and incorporate it so that had to re-key the information sent by we can produce a quote without the agency, and we took about a week manual intervention. The week-long to produce a quote for the change. endorsement turnaround time shrunk Sometimes longer. Agents told us to just 24 hours. Less administrative they needed faster response to make burden and faster response times their jobs easier and to satisfy their mean more capacity for growth and policyholders’ demands. happier customers.
| | | | | | | | May 2007 July 2007 March 2008 May 2008 May 2008 January 2009 2010 2010 bridging technology quote policy changes comparative rating bridging for new PennPlus agency renewal underwriting/ rollout begins for new PennPlus for released (new business) within portal support expanded endorsement quoting portal launched processing launched for auto endorsement upload homeowners, to make quoting, (easier quoting/submission/ submitting and changing easier changes) for auto Penn National Insurance | 2009 Annual Report
Claims Division
Consolidated Statutory Financial Highlights When a property claim gets big enough or ugly enough,
Good news. Great performance! people call Mark. Storms. Explosions. Catastrophic fires.
President’s Message He knows how to help our customers bounce back. He knows the legal contracts, the cleanup and reconstruction Chairman & CEO’s Retirement vendors. And he knows what his customers want: Consolidated Statutory Financial Statements quick response, empathy, courtesy, and professionalism. Facts in Brief Mark Broadrick Officers & Directors property general adjuster – Claims When Mark’s not at work, you can find him with his wife and five-year-old daughter, and the family dog. He’s a runner who loves spending as much time as possible outdoors. Penn National Insurance | 2009 Annual Report
Claims Division
Consolidated Statutory Financial Highlights We sell a product that customers hope they never use. If they do have to use it, they interact with us during a time of Good news. Great performance! terrible crisis. A car crash. Inventory theft from a warehouse. A lawsuit alleging workplace misconduct. A fire. Our product President’s Message is a legal contract, promising to cover some types of losses, but not all losses. It can be tough explaining what’s covered Chairman & CEO’s Retirement and what’s not, when the customer is suffering through a crisis. Stress can lead to anger and unrealistic expectations. Consolidated Statutory Financial Statements It’s an uphill battle for our claims adjusters. They must stick to the terms of the legal contract of insurance. They must Facts in Brief keep the customers happy at the same time.
Officers & Directors
5 = Very Satisfied Customer satisfaction with promptness of contact by claims adjuster = 4.61
1 = Very dissatisfied
“I was thinking about switching my insurance before this for a cheaper premium. After the way High Customer Satisfaction Scores Penn National Insurance handled Fifteen years of customer satisfaction research confirms the claim, I will be a customer an amazingly high satisfaction rate. We can’t always say for life.” to claimants, “Relax, you’re covered.” Sometimes we have to tell people that their loss isn’t covered. Our consistently Note sent by a recent claimant high customer satisfaction results show that whether we’re delivering good or bad news, we’re doing it promptly and politely and with genuine concern and empathy. Penn National Insurance | 2009 Annual Report
A Message From Kenneth R. Shutts, president & chief operating officer
Consolidated Statutory Financial Highlights We are pleased to report that, in a year in Good news. Great performance! which the property/casualty insurance industry President’s Message was buffeted by the strong headwinds of Chairman & CEO’s Retirement the persisting economic recession, and
Consolidated Statutory Financial Statements the premium-dampening effects of the soft
Facts in Brief commercial lines pricing environment,
Officers & Directors our core book of business continued to post solid bottom-line profitability.
marked the fifth consecutive through many more rating tiers and factors. year of industry pricing As a result, we are getting more “at bats” with our 2009decreases in the commercial agents, which in turn is translating into more policies lines segment. In short, due to declining exposure written and true growth in our personal lines book. bases of businesses forced to retrench in the Indeed, our personal lines quoting activity increased economic recession and continuing price-cutting 61 percent during 2009 over 2008 levels, and our in commercial coverages in 2009, our industry total number of personal lines policyholders grew actually shrank in premium volume for the third from 205,531 in 2008 to 224,127 in 2009. consecutive year. Our losses incurred and our claims frequency trends While the decline in premiums in the industry’s remained very well behaved for the most part, with commercial lines segment continued unabated, the the notable exception of the legacy of lead-paint industry experienced slight premium growth in the claims in Baltimore. Although we have handled personal lines segment. The strategy we implemented lead-paint claims over the last 17 years (the last three years ago about who we are as a personal lines policy was effective in 1997), the number of newly carrier, and what products, pricing, and services we opened claims per year has always been small. have to offer agents and policyholders in personal However, over the last two years, we have received lines, continues to attract business to our company. an unexpected number of new lead-paint claims, Because of our greatly enhanced ease-of-doing- and therefore, it was necessary to strengthen loss business, agents can now rate, quote, and bind reserves for lead-paint cases to account for this policies in a few minutes. Our heightened pricing exposure moving forward. Even with this issue, granularity expands the number of price-points we had a very strong performance for the year. Penn National Insurance | 2009 Annual Report
A Message From Kenneth R. Shutts, president & chief operating officer
Our losses incurred and our claims frequency trends Our loss reserves are not only reviewed and set by our Consolidated Statutory Financial Highlights remained very well behaved for the most part, with the own actuaries, but the long-tail lines of business are reviewed by actuaries of our external auditor every year. Good news. Great performance! notable exception of the legacy of lead-paint claims in Baltimore. Although we have handled lead-paint claims We are pleased that our reserves continue to be in very good shape. President’s Message over the last 17 years, (the last policy was effective in 1997), the number of newly opened claims per year Penn National Insurance has a very strong capital Chairman & CEO’s Retirement has always been small. However, over the last two foundation and a very conservative investment portfolio, years, we have received an unexpected number of new which helped us weather the financial market crisis of Consolidated Statutory Financial Statements lead-paint claims, and therefore, it was necessary to late 2008 and early 2009 much better than most carriers. strengthen loss reserves for lead-paint cases to account Due to the unprecedented decline of the financial markets during that time, A.M. Best reports that on Facts in Brief for this exposure moving forward. Even with this issue, average, carriers lost 15 percent of their investment we had a very strong performance for the year. portfolios’ value. At December 31, 2008, due to our Officers & Directors conservative capital management philosophy, our The financial results of operations during 2009 are as portfolio only lost 2.9 percent of its value. During both follows: good times and bad, we have always had a long-term, The company achieved statutory net income of very conservative and patient view for managing our $29.0 million for the year ended December 31, 2009, capital. We are thoughtful, prudent, and methodical when a decrease of 17.3 percent when compared to the looking at capital preservation and growth, and we take $35.1 million reported in 2008. This decrease was seriously our responsibility to be good stewards of our primarily driven by the continued competitive pricing policyholders’ money. environment in our commercial lines of business and While the top line has been affected by the recession and the exposure erosion caused by the current economic the continuing competitive pricing cycle in our industry, conditions, as evidenced by declines of 5.0 percent our core earnings remained strong, due to the strengths and 6.0 percent in our net premiums written and net of our technical underwriting and claims competencies. premiums earned, respectively. Our operating results for Our strengths of disciplined underwriting, quality risk 2009 were favorably impacted by a 7.1 percent reduction selection, and aligning the appropriate rate level to the in net losses incurred, compared to the prior year, which risk we are putting on the books, has continued to serve contributed to a 0.6 point improvement in our statutory us well in this market, and you can see those strengths in loss ratio. The premium declines, as well as higher our bottom-line results. loss adjustment expenses associated with lead-paint claims and higher employee benefit and compensation While we are confident about our strengths, we are Net Income Combined Ratio costs, were responsible for the 3.1 point increase in our also realistic about the challenges facing our economy statutory combined ratio in 2009. Investment gains of and the property/casualty industry. We believe that the (in millions) (lower is better) $2.4 million were realized in the current year, while reduction of exposure bases caused by the recession will $40 103 realized investment losses of $12.2 million were reported continue in the short-term, putting additional pressure on in 2008 due to impairment write-downs on certain economically sensitive premiums. We also believe that 35 102 investment securities. the lack of credit and loans to businesses will continue 30 101 to impede the expansion and growth of existing firms, as Our balance sheet, including our loss reserve position, well as hinder the formation of new business ventures. 25 Net Income 100 is very strong. Our total policyholders’ surplus increased Lastly, we believe that the combination of the decrease in 13.5 percent during the year, increasing from $427.2 Combined 20 Ratio 99 exposure base in commercial lines insurance and excess million as of December 31, 2008, to $484.9 million as of 15 98 capacity of insurance carriers will hold pricing in check December 31, 2009. through 2010. 10 97
5 96
0 95 05 06 07 08 09 05 06 07 08 09 ...we had a very strong performance for the year. Penn National Insurance | 2009 Annual Report
A Message From Kenneth R. Shutts, president & chief operating officer
Our management team has performed through a number The individual contributions that Denny made during his Consolidated Statutory Financial Highlights of past soft market cycles in our industry, and we have tenure as chief executive officer to the continued growth, seen what happens to carriers that continue to stretch and profitability, and financial strength of Penn National Good news. Great performance! push for growth and market share in an environment in Insurance are truly outstanding. For those of us who have which price is not adequately aligned to exposure. We had the good fortune to work closely with him, Denny President’s Message won’t sacrifice continued long-term profitability for short- was not just a great leader and consummate insurance term growth, in a market that does not adequately reward professional, but just as importantly, he was a wise Chairman & CEO’s Retirement growth. mentor, trusted colleague, and great friend to so many of us over the years. For all that his career has stood for, and Consolidated Statutory Financial Statements Although there are some early indicators of a start to an he recounts some of the milestones and memories of his economic recovery, we believe that the fundamentals of life’s work in these pages, Denny always well and truly our nation’s economy will remain weak, and we believe Facts in Brief served, and indeed championed, the interests of Penn that is not likely to change in the near term. Hence, our National Insurance every day of his career in a tireless projections for 2010 are for a slow and patchy recovery and selfless manner. He always encouraged employees Officers & Directors in the economy, and for our industry’s soft-market pricing to enrich their development and training through cycle to continue throughout most of the year. professional education, to aspire to take on greater responsibilities and challenges within the organization, As an insurance company insuring over 315,000 and to fulfill all their career plans at the company. And he policyholders, our top priority always is to afford our certainly embodied the realization of all of those tenets policyholders the strongest financial security in our during his career. company, as we safeguard and protect their financial security and assets. In that vein, we are committed to Moving forward, we are confident that we have a highly building on our strong relationships with our agency- effective capital management philosophy, encompassing partners, who entrust us with their clients’ business. a very high quality, conservative investment portfolio We remain committed to being a disciplined underwriter and conservative reserving policy, and a comprehensive with a strong orientation to providing superior service to reinsurance program that partners with the highest our agents and policyholders, and to continuing to build- quality reinsurers, all of which are integrated within a out and enhance our product offerings and coverages very disciplined and robust enterprise risk management across all of our lines of business. process. Lastly, and most importantly, we are confident that we have the most talented and dedicated employees, Moreover, we are committed to continuing to invest in all of whom are committed to ensuring Penn National our people, to preserve and enhance our performance Insurance’s continued growth, profitability, and financial through continuing education, training and development strength. of our most important asset – our employees – and through our performance management philosophy On behalf of our employees, I want to sincerely thank and results-based compensation, all for the purpose our agents for their valued partnership with the company, of empowering our employees to provide excellent and for their continued commitment to placing their customer service and execution that produces superior best customers with Penn National Insurance. Together, value to our agents and policyholders. we will continue to provide value-added solutions to meet all of the insurance coverage needs of our mutual September of 2010 marks the retirement of our chairman policyholders. and CEO, Denny Rowe. Denny’s career with our company has spanned 43 years, and the changes he has seen in the property/casualty insurance industry over nearly half a century have been remarkable.
Kenneth R. Shutts president & chief operating officer Penn National Insurance | 2009 Annual Report
Consolidated Statutory Financial Highlights
Good news. Great performance!
President’s Message
Chairman & CEO’s Retirement
Consolidated Statutory Financial Statements
Facts in Brief
Officers & Directors
Christine Sears, CPCU Dennis C. Rowe, CPCU Kenneth R. Shutts executive vice president, chairman and chief executive officer president and chief operating officer chief financial officer, and treasurer Penn National Insurance | 2009 Annual Report
43 Years of Service: A Career Retrospective
Consolidated Statutory Financial Highlights On August 28, 1967, I reported for my first Good news. Great performance! day of work at Pennsylvania National Mutual
President’s Message Casualty Insurance Company (the name in itself was daunting), 19th and Derry Streets, Harrisburg. Chairman & CEO’s Retirement
Consolidated Statutory Financial Statements I was one of 10 new trainees venturing into
Facts in Brief a world of insurance that none of us knew or understood. Officers & Directors
It was a hot August day and our four-story office building on Derry Street was not air conditioned — “pot floor fans” as we called them were the sole source of whatever cool air there was to extract from an otherwise hot day. Little did I know that 43 years later I would be sitting in a 15-story office building (equipped with air conditioning, of course) writing a farewell message to be included as an insert to the last annual report in which I would be listed as chairman and chief executive officer of Penn National Insurance (shorter name, easier to remember).
For starters, in 1967 our premiums earned were $45.8 million, admitted assets were $62.5 million, policyholders’ surplus was $15.7 million, we had a net underwriting loss of $.5 million and our investment income earned was $2.2 million. For calendar year 2009, our net premiums earned were $487.0 million, admitted assets were $1.4 billion, policyholders’ surplus was $484.9 million, net underwriting loss was $9.6 million, and net investment income was $49.2 million. Truly amazing.
But it’s what’s packed into the years between ’67 and ’09 that really makes the story. And the true story is how Penn National Insurance shaped and influenced me, and not how I shaped and influenced Penn National Insurance. Penn National Insurance | 2009 Annual Report
43 Years of Service: A Career Retrospective
I began as an underwriting trainee, supplied with a set Consolidated Statutory Financial Highlights of manuals consisting of rates and rules for each line of business (OL&T; M&C; SKL; etc., and if you know what Good news. Great performance! each of these symbols means, you’re as old as I am) and a President’s Message Monroe mechanical calculator. I was assigned to a trainer with whom I sat for half-days, observing and learning basic Chairman & CEO’s Retirement work processing procedures, and the remainder of the day, at least for my first six months, was spent in the classroom Consolidated Statutory Financial Statements with alternating instructors who were truly polished underwriters in their individual disciplines of casualty, Facts in Brief property, automobile and inland marine lines of business.
I liked the sitting-with-the-trainer part of the routine best. Officers & Directors My trainer’s name was Lynda Stiver, and I liked her so much that I married her in 1969, and believe it or not, I’m still sitting with her today — at home of course. And I am a work in progress who certainly subscribes to the theory that “learning never ends.” Moving fast forward, I transferred to our Pittsburgh Regional Office in January 1970, and moved from commercial underwriting to the newly created position of underwriting services manager, a position I enjoyed very much until mid- 1972 when I relocated to Altoona, PA, to become the special agent for a six-county mid-state territory. Backtracking one step, when Lynda and I moved to Altoona, we were now a family of four — our twin daughters, Leslie and Rauna were born October 1970.
Having an underwriting and underwriting services background positioned me to thoroughly enjoy my role as an intermediary between agent, insured and branch office underwriting. I can’t say there is any job I enjoyed more than special agent.
An opportunity in Home Office Marketing allowed me to return to Harrisburg in mid-1974 as the assistant marketing director. I remained in marketing until 1982 when John Longnaker, What amazes me most is that president & CEO, enlisted the services of an outside consulting firm to review our short- and long-term marketing August 1967 truly does seem like and underwriting operations. I became a full-time member of the consulting team through delivery and implementation of yesterday! I cannot believe how a new and revised strategic operating vision that enabled me quickly those 43 years have passed. to lead the newly created Personal Lines Division, a position I held until 1988 when I moved to commercial lines as the vice president of that division. Penn National Insurance | 2009 Annual Report
43 Years of Service: A Career Retrospective
Consolidated Statutory Financial Highlights Thus far, most of what I have documented has been “I”-centric. I can tell
Good news. Great performance! you without any equivocation if it had not been for the team of dedicated and professional employees and agents that I worked with during my first President’s Message 31 years of employment, before I became president and CEO, I never would Chairman & CEO’s Retirement have seen the 32nd year, and I mean that sincerely. I was blessed with a Consolidated Statutory Financial Statements wonderful group of coworkers and a support staff, along with a cadre of Facts in Brief independent agents who simply made me look good! Officers & Directors
A vacancy in 1996 on our senior management executive staff together through good and bad, it is simply amazing how allowed me to lead all underwriting operations as the senior much fun we have had. Harmonious business relationships vice president — Underwriting Operations until 1998, when I can be very difficult to maintain. In many ways, the hurdles was elected president & CEO. encountered can mimic that of a marriage. So the secret is to work at it every day knowing there will be wins and losses — The culture at this company has don’t dwell on either and just keep kicking the ball down the field. never been anything short of My decision to retire was not an easy one and as the fall of honesty, integrity and simply people 2010 approaches, I keep telling myself to look forward to the event. And to be honest, I am beginning to look forward to working hard for the common cause retirement and the freedom it brings. What makes the whole of serving all of our constituencies in process easier is knowing the folks who remain here at Penn National Insurance will do better than I could have done if I a professional manner. stayed longer.
This is a winning culture and one that has sustained us So for now I say thank you to everyone I have had the for more than 90 years. In today’s business world, that’s pleasure of working with over these many years, and life a culture that should be bottled and sold! could not be better!
Since 1999, our elected officer management team has Yours very truly, consisted of Ken Shutts, Christine Sears and me, backed by a staff of equally qualified individuals. Along with a highly professional group of board members, we have created a financially secure, technically sound and forward-thinking organization that has not yet reached full potential; the best is Dennis C. Rowe, CPCU yet to come! And when you consider the time we have spent chairman & CEO Penn National Insurance | 2009 Annual Report
2009 Consolidated Statutory Financial Statements (Unaudited)
Consolidated Statutory Financial Highlights Consolidated Statutory Balance Sheets (Unaudited)
Good news. Great performance! December 31, (dollars in thousands) 2009 2008
President’s Message Admitted Assets Investments: Chairman & CEO’s Retirement Bonds ...... $1,029,928 $1,003,331 Stocks ...... 116,313 96,698 Consolidated Statutory Financial Statements Mortgage loans ...... 22,266 22,820 Real estate & other ...... 2,227 2,321 Facts in Brief Cash and cash equivalents 34,051 36,056 Total cash and investments ...... 1,204,785 1,161,226 Officers & Directors Agents’ balances and uncollected premiums ...... 123,867 132,903 Investment income due and accrued ...... 11,908 11,955 Amounts due from reinsurers ...... 6,983 8,740 Deferred tax asset, net ...... 23,955 24,552 Other assets 10,516 14,292 Total admitted assets $1,382,014 $1,353,668
Liabilities and Policyholders’ Surplus Liabilities: Reserves for losses and loss adjustment expenses ...... $ 617,310 $ 629,772 Unearned premiums ...... 214,710 220,584 Premium taxes and other expenses ...... 27,570 34,379 Drafts outstanding ...... 10,662 10,492 Other liabilities 26,912 31,286 Total liabilities 897,164 926,513
Policyholders’ surplus: Surplus notes ...... 50,000 50,000 Unassigned surplus 434,850 377,155 Total policyholders’ surplus 484,850 427,155 Total liabilities and policyholders’ surplus $1,382,014 $1,353,668 Penn National Insurance | 2009 Annual Report
2009 Consolidated Statutory Financial Statements (Unaudited)
Consolidated Statutory Financial Highlights Consolidated Statutory Statements of Income (Unaudited)
Good news. Great performance! Years Ended December 31, (dollars in thousands) 2009 2008
President’s Message Underwriting (loss) income: Net premiums written ...... $481,156 $506,734 Chairman & CEO’s Retirement Decrease in unearned premiums 5,875 11,639 Premiums earned 487,031 518,373 Consolidated Statutory Financial Statements Losses and loss adjustment expenses ...... 322,143 336,888 Underwriting expenses 174,531 172,795 Facts in Brief Total losses and expenses 496,674 509,683
Officers & Directors Total underwriting (loss) income (9,643) 8,690
Investment income: Net investment income ...... 49,157 49,332 Net realized gains (losses) on investments 2,371 (12,237) Total investment income 51,528 37,095
Other (expenses) income, net (4,348) 1,498 Income before dividends and federal income tax expense 37,537 47,283 Dividends to policyholders 2,734 3,687 Income before federal income tax expense . . . . . 34,803 43,596 Federal income tax expense 5,763 8,461 Net income $ 29,040 $ 35,135
Consolidated Statutory Operating Statistics (Unaudited)
Years Ended December 31, 2009 2008
Loss ratio ...... 53.3 53.9 Loss adjustment expense ratio 12.9 11.2 Loss and loss adjustment expense ratio ...... 66.2 65.1 Underwriting expense ratio ...... 36.2 34.1 Dividend ratio 0.6 0.7 Combined ratio after dividends 103.0 99.9
Net premiums written to surplus ratio ...... 1.0 1.2 Net liabilities to surplus ratio 1.9 2.2 Net leverage ratio 2.9 3.4 Penn National Insurance | 2009 Annual Report
Facts in Brief 2009 Consolidated Direct Premiums Written by Line of Business Consolidated Statutory Financial Highlights l 24% Personal Automobile l We ranked 102nd in net premiums Good news. Great performance! written out of approximately l 16% Other Liability* 1,000 U.S. property and casualty l 16% Commercial Automobile President’s Message insurance groups. l 14% Workers’ Compensation l Our insurance operations employ Chairman & CEO’s Retirement l 11% Homeowners over 700 people. l 7% Fire Consolidated Statutory Financial Statements l We sell through approximately l 12% Other 750 independent agencies, Facts in Brief in nine states. *Includes General Liability, Products Liability and Umbrella Liability
l We were founded in 1919. Officers & Directors l Our principal lines of business are personal automobile, other liability, commercial automobile, Our Guiding Beliefs and workers’ compensation. We seek to demonstrate our Guiding Beliefs in all of our actions: l We have a financial strength rating of A- (Excellent) from n Integrity and Openness n Customer Focus n Excellence in Performance the A.M. Best Company. n Learning and Professional Growth n Teamwork and Empowerment n Citizenship
Operating Territory 2009 Consolidated Direct Premiums Written by State
l 41% Pennsylvania l 18% North Carolina l 11% New Jersey l 8% Alabama l 7% Maryland l 15% Virginia, Tennessee, Other Penn National Insurance | 2009 Annual Report
Officers & Directors
Consolidated Statutory Financial Highlights Elected Officers
Good news. Great performance! Dennis C. Rowe, CPCU* chairman and chief executive officer
President’s Message Kenneth R. Shutts* president and chief operating officer
Chairman & CEO’s Retirement Christine Sears, CPCU* executive vice president, chief financial officer, and treasurer
Consolidated Statutory Financial Statements Karen C. Yarrish vice president, secretary, and general counsel Facts in Brief
Officers & Directors
*Also serves on the Board of Directors
Board of Directors
John H. Rhodes James H. Davies lead outside director chairman – Davies & Associates, Inc. (insurance agency) president – Rhodes Development Group, Inc. (real estate development) Todd R. Fisher, M.D. physician – private practice William H. Alexander managing director – James E. McGill Sol C. Snider Entrepreneurial Center, retired senior vice president – Wharton School, Robins & Weill, Inc. (insurance agency) University of Pennsylvania Sherill T. Moyer, Esq. Frank D. Campbell partner – Rhoads & Sinon LLP (law firm) Annual Meeting: retired executive vice president and director – Monday, April 12, 2010, 11:00 AM Conning Asset Management Gary C. Schultz at Penn National Insurance’s (investment management firm) retired senior vice president, chief financial officer and treasurer – Home Office. Alexander M. Clark The Pennsylvania State University managing director – Sanders Morris Harris, Inc. All policyholders invited to attend. (investment banking) Douglas C. Stago president – K.R. MacDonald, Inc. (insurance agency)
For more information, please contact: Stephen L. Swanson Christopher Markley, president – The Alternative Board (business consulting firm) vice president, Corporate Communications
Penn National Insurance Two North Second Street P.O. Box 2361 Harrisburg, PA 17105
1-800-388-4764 ext. 6895 [email protected]