Welcome to Penn National Insurance’s 2010 Annual Report Same faces. New places.
Consolidated Statutory Financial Statements Same traditions.
Facts in Brief
Officers & Directors
Annual Report Penn National Insurance | 2010 Annual Report
Best Places Award
Consolidated Statutory Financial Highlights
President’s Message Wow!
Our Management Team
Ease of Doing Business
Consolidated Statutory Financial Statements
Facts in Brief
Officers & Directors
Winner of: Best Places to Work in Insurance We have earned two of the three awards several times before Best Places to Work (Best Places to Work in PA, 2009, 2008, and 2001, and the Best Places to Work in IT 2009, 2008, 2007, 2005, 2004). in IT This was the first year our company entered the Best Places to Work in Insurance program.
Best Places to Work We know of no other property/casualty insurance company that has won all three awards, in PA or that has earned more than one of the awards multiple times, as our company has. Penn National Insurance | 2010 Annual Report
Penn National Insurance 2010 Annual Report
(Dollars in thousands) 2010 2009 2008 2007 2006 2005 2004 Best Places Award Direct premiums written $ 518,978 $ 512,056 $ 537,878 $ 568,442 $ 578,738 $ 593,876 $ 575,610 Net premiums written 489,123 481,156 506,734 536,857 553,082 572,855 554,625 Consolidated Statutory Financial Highlights Net premiums earned 488,099 487,031 518,373 538,849 555,447 570,838 539,535
President’s Message Investment income, including realized gains and losses 50,672 51,528 37,095 46,201 41,821 38,902 40,479 Net income (loss) (11,029) 29,040 35,135 39,150 38,849 36,410 28,180 Our Management Team Total cash and investments $1,210,396 $1,204,785 $1,161,226 $1,169,440 $1,092,727 $ 994,280 $ 908,309
Ease of Doing Business Total admitted assets 1,406,703 1,382,014 1,353,668 1,376,329 1,300,397 1,203,748 1,117,371 Total policyholders’ surplus 487,148 484,850 427,155 439,921 398,940 336,750 304,593 Consolidated Statutory Financial Statements Combined ratio after dividends 115.7 103.0 99.9 99.1 98.3 98.7 99.2
Facts in Brief
Officers & Directors Consolidated Statutory Financial Highlights
Statutory Combined Ratio Direct Premiums Written Total Admitted Assets Total Policyholders’ Surplus After Dividends
(in millions) (in millions) (in millions) n Industry Average n Penn National Insurance
$600 $1500 $500 115
500 1400 400 110
400 1300
300 105
300 1200
100 200 200 1100
95 100 1000 100
0 900 0 90 04 05 06 07 08 09 10 04 05 06 07 08 09 10 04 05 06 07 08 09 10 04 05 06 07 08 09 10
(lower is better) Penn National Insurance | 2010 Annual Report
P r e s i d e n t ’ s M e s s ag e
A Message From Kenneth R. Shutts, president & chief executive officer
In a year marked by severe weather catastrophies,
Best Places Award 2010 nonetheless saw the Company make
Consolidated Statutory Financial Highlights significant progress in a number of areas.
President’s Message For Penn National Insurance, 2010 was a threshold year, both operationally and Our Management Team strategically. In the context of abnormally high catastrophe losses, in which severe weather Ease of Doing Business caused damage to the homes and businesses of approximately 4,000 of our insureds, coupled Consolidated Statutory Financial Statements with resolving the challenges resulting from a 20-year-old legacy risk exposure with lead Facts in Brief paint litigation, we nonetheless made significant progress in strengthening our organization and Officers & Directors in moving the Company forward to meet the challenges facing our industry on several fronts.
Although our domestic economy is starting to show early signs of an improved economic “We have come a long way outlook, we believe it will take some time for since our beginnings in 1919, conditions to more fully rebound. Given that outlook, we still expect a somewhat slow and and as we examine past choppy economic recovery period over the successes, we recognize that next 18 to 24 months. While our nation’s gross domestic product has started to grow over the same ingredients result the last four quarters, business activity in the in success today and in commercial construction sector remains very the future.” weak, and this important market segment is projected to have an even slower economic recovery. This is a relevant factor for Penn National Insurance, as 38 percent of our commercial business is in the construction sector.
The commercial lines segment of the property/ casualty insurance industry remains under rigorous price competition, since excess capital in our industry has caused underwriting capacity to remain high, while at the same time, demand for commercial insurance has continued to contract, due to the economic recession and a lack of new business activity. Penn National Insurance | 2010 Annual Report
P r e s i d e n t ’ s M e s s ag e
A Message From Kenneth R. Shutts, president & chief executive officer
Industry-wide, commercial pricing levels have against the insured landlords under these types of stabilized somewhat over the last several quarters, policies. These claims are part of what is commonly but they are still well below 2003-2004 levels. While known as “lead paint litigation.” After carefully and Best Places Award premium decreases continue to moderate in the thoroughly evaluating our options, we have decided commercial lines segment, most good commercial to pursue a reinsurance solution that would transfer Consolidated Statutory Financial Highlights accounts, with favorable experience, are still experi- the risks under these policies to a reinsurer that encing price level decreases upon the renewal of their specializes in handling these types of claims, thereby President’s Message insurance. Hence, it has remained a buyers’ market. cutting off our exposure moving forward. Before completeing this transaction, which we contemplate Our Management Team 2010 was a very active year for catastrophic weather- closing in March 2011, we strengthened our reserves related events in the Mid-Atlantic region of the at year-end 2010 by $55 million. Accordingly, our Ease of Doing Business United States. Indeed, last year witnessed 14 separate earnings for 2010 were reduced by this amount on industry-designated catastrophe events that impacted a pre-tax basis. Fortunately, the $55 million charge Consolidated Statutory Financial Statements insurers writing business in our operating territory. to earnings was a one-time event, and once the On average, in most years, Penn National Insurance reinsurance solution is in place, we will no longer Facts in Brief experiences around 1,000 catastrophe claims from face future exposures from these policies. our policyholders, with aggregate storm-related Officers & Directors losses totaling approximately $8.0 million. In 2010, Within this overall picture, our core book of business severe weather caused losses for approximately remained profitable in 2010, and excluding the impact 4,000 of our policyholders, with aggregate losses of the lead paint reserve strengthening, we would and loss adjustment expenses for the year totaling have hit or exceeded our net income objective of $21.9 million. There is no question that during times $25.6 million for the calendar year (as compared to like these, the trust that underlies the insurance net income of $29.0 million in 2009). I believe this policy’s “promise to pay” becomes a very real and performance demonstrates the strength of the book tangible asset of the policyholder to allow them of business we have at Penn National Insurance. to get back on their feet. Nothing we do as an insurance company is more important than executing During 2010, we continued to deliver on our value exceptionally well on our “promise to pay” in support proposition to our agents and policyholders by of our policyholders, and to protect their financial providing tailored solutions to their insurance needs security by putting them back in the position they and requirements in many ways. were before the loss. In our personal insurance division, we are introducing Another area of progress for the Company in 2010 new automation that is making it easier for our agents was the work we did on positioning the Company to quote homeowners insurance. Agents can also to resolve a 20-year-old legacy exposure issue automatically upload changes to their clients’ auto with lead paint litigation. In the early-to-mid-1990s, policies, for overnight processing. The division also the Company issued a limited number of policies expanded its payment options, with EFT payments covering certain liability risks in connection with for new customers, and a new credit-card payment rental properties located in the Baltimore, Maryland option. These advances built on those delivered in area. The Company non-renewed these policies in prior years, and agents’ high satisfaction resulted in 1996, and we no longer issue these types of policies. a continuation of premium growth in the division. Unfortunately, many insurers, including Penn National Insurance, have been exposed to toxic tort claims Penn National Insurance | 2010 Annual Report
P r e s i d e n t ’ s M e s s ag e
A Message From Kenneth R. Shutts, president & chief executive officer
In our commercial insurance division, a team of Of course, the best plans mean very little without employees and agents created plans for a new quoting the right people to execute the plans. Our talented system that will allow agents to do business with and committed employees are the bedrock of our Best Places Award us more efficiently. The system will give immediate strategy. Our objective at Penn National Insurance is feedback on the desirability of a potential account, to be responsive to our agents and policyholders in Consolidated Statutory Financial Highlights automatic incorporation of third-party underwriting helping them tailor coverage solutions to meet their data, and a new system that eliminates discrepancies insurance needs. It is the innovation of our employees President’s Message between our former two-system process. that allows us to identify, create, refine, and deliver improvements in our value proposition to our true Our Management Team We were pleased to again earn the Best Places to customers – the independent agents who represent Work in Pennsylvania award, and the Best Places to Penn National Insurance – thereby helping our agents Ease of Doing Business Work in IT award. We also entered a new program this deliver value to their clients – our policyholders. year, the Best Places to Work in Insurance, and were Consolidated Statutory Financial Statements honored to also win that recognition. These programs analyze results of extensive employee surveys, to Hard work by dedicated Facts in Brief measure employees’ satisfaction with their employer. The data from these surveys confirm that our Officers & Directors people remains the employees gain high satisfaction from their ability to see the direct connection between the work they are formula for success. performing on behalf of our agents and policyholders, and the strong financial performance of our company. Since our Company’s inception 92 years ago, Penn Their empowerment leads to their strong performance, National Insurance has always been dedicated to and this creates high job satisfaction. the independent agency system as the sole means of distributing our insurance products and solutions. In 2010, Penn National Insurance’s progress also While many other insurance companies move toward extended to the new Strategic Plan that we built “distribution channel indifference” – they will write and embarked on as a corporate management business both directly with the policyholder or through team. Our new Strategic Plan covers all of the major an independent agent – Penn National Insurance elements we deem as prerequisites to business success: is committed to only writing business through our financial strength, clarity of strategic direction, partners – independent agents. That partnership has operating effectiveness and efficiency, coupled with served us well in the past, and will continue to be the developing our most important asset – our talented foundation upon which we build our future together. and dedicated employees. Yesterday, today, and tomorrow, Penn National We are excited about our new Strategic Plan because Insurance is here to meet the insurance needs of it lays out the structure for creating a system of organic our agents and policyholders. growth management for Penn National Insurance. We are establishing a rigorous discipline around a Very truly yours, development process for profitable growth initiatives at the Company. Our efforts will be focused on working with our agency-partners to generate new growth concepts, to pre-screen and test individual growth initiatives with our agents in favorable classes Kenneth R. Shutts of business, and then work with our agents to co- President & CEO market and go after the best accounts in those classes February 23, 2011 of business. Penn National Insurance | 2010 Annual Report
Best Places Award
Consolidated Statutory Financial Highlights
President’s Message
Our Management Team
Ease of Doing Business
Consolidated Statutory Financial Statements
Facts in Brief
Officers & Directors
O u r M a nag e m e n t T e a m
Gregory Stine, Karen Yarrish, Robert Brandon, Christine Sears and Kenneth Shutts
When Denny Rowe retired Our senior executive team will carry on the hallmarks that typified our company during Denny’s leadership. And as grateful as we are to Denny for his superb leadership and stewardship of our in October as our CEO, he company, he himself would tell you that the hallmarks you knew our company for during passed the baton to a seasoned his leadership were not new qualities that he instilled. Instead, he carried the torch that prior management team, with 111 years leaders and mentors of his had passed to him when he took the top management chair. of combined experience at our Our new team will carry on the traditions you have company, that will continue his appreciated about our company over many, many years. legacy of respect for, and support We will continue to execute the fundamentals of our business model, which entails providing of, our independent agents. superior, value-added underwriting, loss control and risk management services to our agents and policyholders, and also furnishing fast, friendly, and fair claims service when a loss occurs. The key to this strategy rests in our continually becoming easier to do business with, designing our systems and processes to make it easier for agents to place business with us quickly and seamlessly, and in being able to respond quickly when a loss occurs. Penn National Insurance | 2010 Annual Report Our Management Team
Best Places Award Kenneth R. Shutts president & CEO Consolidated Statutory Financial Highlights
en Shutts, who had been serving as president and COO before President’s Message Denny’s retirement, is now our president and CEO. Ken joined Our Management Team Kour company in 1980 as associate counsel, was elected to the board of directors in 1987, was elected senior vice president, secretary, and Ease of Doing Business general counsel in 1995, executive vice president, secretary, and general counsel in 1998, and president and COO in 2007. The company’s elected Consolidated Statutory Financial Statements officers all report to him, with the exception of the senior vice president of underwriting operations, who reports to the chief operating officer. Facts in Brief Also, the chief information officer will continue to report to Ken.
Officers & Directors
“The best plans mean very little without the right people to Plans execute the plans. Our talented and committed employees are the bedrock of our strategy. “
What excites you about our new strategic plan and the Company’s future?
“We are excited about our new Strategic Plan because it lays out the structure for creating a system of organic growth management for Penn National Insurance. We are establishing a rigorous discipline around a development process for profitable growth initiatives at the Company. Our efforts will be focused on working with our agency- partners to generate new growth concepts, to pre-screen and test individual growth initiatives with our agents in favorable classes of business, and then work with our agents to co-market and go after the best accounts in those classes of business.” Penn National Insurance | 2010 Annual Report Our Management Team (continued)
Christine Sears, CPCU executive VP and COO
hris Sears is now serving as executive vice president Best Places Award and COO. She had been serving as executive vice president and CFO. She joined our company in 1980 Consolidated Statutory Financial Highlights C as a financial analyst. She held various positions of increasing President’s Message leadership in our company, and was elected to boards of directors of our affiliated companies during the 1990s and to Our Management Team our Mutual Company’s board in 2002. She is responsible for underwriting, claims, and our company’s third-party claims Ease of Doing Business administration subsidiary, Inservco Insurance Services, Inc.
Consolidated Statutory Financial Statements What do you foresee as the toughest challenge Facts in Brief facing you in your specific span of control within “The way we transact business in our industry is changing rapidly. Officers & Directors the organization during 2011? My toughest challenge will be to coordinate the many efforts we are undertaking to respond to these issues so that we are unified and move forward with one voice.”
What do you foresee as the greatest accomplishment our company is likely to achieve during 2011?
“Our greatest accomplishment in 2011 will be providing products and services that our customers need to be successful and profitable.” Relationships “We believe in the value of relationships, as a vital part of our corporate culture. Our corporate relationships include those with our employees, agents, business partners and the communities in which we live. Nurturing strong relationships with all our constituents gives me great satisfaction.” Penn National Insurance | 2010 Annual Report Our Management Team (continued)
Gregory R. Stine, CTP, FLMI senior vice president, treasurer, and CFO
reg Stine is now our senior vice president, treasurer, Best Places Award and CFO. He had been serving as vice president and controller. He joined our company Consolidated Statutory Financial Highlights G in 1993 as manager – Cash Operations, and has held President’s Message various management positions within our Financial Division. He was named vice president and controller in 2003. He is Our Management Team responsible for the financial areas of the company, including investments, and the Actuarial and Controller departments. Ease of Doing Business
Consolidated Statutory Financial Statements Describe an attribute of “During my career I have worked for very small local companies and very large multinational corporations in Facts in Brief our company and of your which it was very hard to get a feeling that what you did job that brings you the every day made a difference. I enjoy coming to work every Officers & Directors most satisfaction and joy. day because I believe we have a corporate culture in which you can make a difference, and what you do every day does contribute to the success of the Company. I also enjoy coming to work because of the people that I work with. They are great people — not just great employees — and I feel very fortunate to work with them.”
What do you foresee as the greatest accomplishment our company is likely to achieve during 2011?
“We have been working on a stochastic economic capital model since June of 2010 and expect to have the final pieces of the model completed and working fully in 2011. The model will provide us ranges of outcomes that will lead to a more sophisticated discussion of our risk appetite and risk tolerance-level. This model should also provide us with a link to our strategic plan’s profitable growth initiatives and the levels of capital that will be required to achieve the growth.”
Accomplishments Penn National Insurance | 2010 Annual Report Our Management Team (continued)
Karen C. Yarrish senior vice president, secretary, and general counsel
aren Yarrish is now our senior vice president, secretary, and general Best Places Award counsel. She had been serving as vice president, secretary and general counsel. She joined our company in 1990 as a legal intern, Consolidated Statutory Financial Highlights K later became associate counsel, and in 1998 was appointed to the position President’s Message of vice president–Legal, and assistant secretary. In addition to the Legal Department, she is responsible for our Administrative Services and Human Our Management Team Resources departments.
Ease of Doing Business What excites you about “I have always been interested in innovation in our work environment. We have so many talented, knowledgeable and dedicated employees in Consolidated Statutory Financial Statements our new strategic plan and our organization. By providing an environment where employees are Facts in Brief the Company’s future? challenged, can grow and are rewarded, we maximize these qualities for the benefit of the organization. At the same time, and just as importantly, Officers & Directors we foster individual growth, creativity and satisfaction. I am excited that our strategic plan supports these premises and builds upon the strong foundation that already exists.”
Robert B. Brandon, CPCU senior vice president of underwriting operations
ob Brandon leads our underwriting operations as senior vice president of that division. He had been serving as vice president Bof underwriting operations. He joined our company in 1995, held a variety of line and staff commercial underwriting management positions, and was appointed vice president–Underwriting Operations in 2005.
What do you foresee as “The most visible signs of successful accomplishments will be in the automation arena: Homeowners PennPlus and the beginning of the the greatest accomplishment Commercial Lines Web Portal replacement. our company is likely to “Not as visible, but equally important, is the institutionalization of a achieve during 2011? disciplined approach to managing growth initiatives. Throughout 2011, multi-discipline teams will be focused on evaluating initiatives and making recommendations to management for implementation. The best ideas will be funded and brought to market.” Penn National Insurance | 2010 Annual Report
24/7 online services
Best Places Award Convenience.We offer convenient, secure, 24/7 online services to our policyholders, including Consolidated Statutory Financial Highlights paying online, submitting a claim, setting up automatic payments and President’s Message viewing policies. We also offer a variety Our Management Team of monthly billing options and payment plans. Online, policyholders and agents Ease of Doing Business can do the following: n Electronic funds transfer, where Consolidated Statutory Financial Statements payments will be withdrawn automatically from a checking account Facts in Brief n Request changes to payment plans Officers & Directors n View billing information
n View dec pages for personal insurance policies
n Request changes to the lien/titleholder, make address changes and order ID cards (for personal auto policies)
n Report and view claims
n Choose from a variety of payment options Taking care of our customers since 1919.
Experienced. Strong. We back our promise of protection with our strong financial position. We’re more than $1 billion strong in assets, and we rank 105th among the approximately 1,000 U.S. property/casualty insurance groups (based on net premiums written). Penn National Insurance | 2010 Annual Report
We can’t always say to claimants, “Relax, you’re covered.” Sometimes we have to tell people that their loss isn’t covered. Our consistently high customer satisfaction results, based on objective data from years of quantitative research, show that Best Places Award whether we’re delivering good or bad news, we’re doing it
Consolidated Statutory Financial Highlights promptly and politely and with genuine concern and empathy.
President’s Message
Our Management Team
Ease of Doing Business Consolidated Statutory Financial Statements great claims service Facts in Brief Service Officers & Directors
Here are just a few of the comments that our customers write about our claims service:
“Service was excellent and personnel were very cooperative. Thanks for your help!”
“During my 40 years of driving, I’ve had four claims including this one. I must say I never experienced a more courteous, professional and friendly customer service department.”
“Excellent service. One phone call and ten minutes later my windshield replacement was completely scheduled. All I had to do was show up for the appointment.” Penn National Insurance | 2010 Annual Report
better automation Best Places Award Easier. Consolidated Statutory Financial Highlights Personal Lines In 2010, we responded to agents’ requests for automation President’s Message enhancements. We worked with a team of our agents to identify Our Management Team opportunities to improve our automated systems, and to design a new personal lines homeowners quoting system. Ease of Doing Business We delivered enhancements that allow agents to upload auto policy changes for overnight processing and changes to Consolidated Statutory Financial Statements existing policies are automatically made to renewals.
Facts in Brief We also added EFT payment options for new business, a credit card payment option, and a new home valuation tool. Officers & Directors In 2011, we are adding a new homeowners business quoting system, which will offer easier site navigation, more efficient quoting, competitive rating, and swift policy issuance. We will also introduce a new homeowners policy option that will bundle additional coverages into one affordable endorsement (all states except North Carolina).
…Happier agents. Happier customers. Automation makes it easy for our agents and policyholders to work with us.
We enhanced personal lines products by offering our new Auto PennPac endorsement (in all our states except North Carolina), which for just $20 adds the following protection: Pet Coverage, Automobile Death Benefit, Seat Belt and Restraint Benefit, and for policyholders (all states but Virginia) who include Collision and Comprehensive coverage on their policy, Towing and Labor, Travel Interruption, Locksmith Services, Airbag Replacement, Personal Effects, Non-owned Trailer, Sound Equipment, and deductible waivers. Penn National Insurance | 2010 Annual Report
Commercial Lines
Our commercial lines division is also revolutionizing the automated services it offers our agents. Working with agents to plan and implement the new system, the division will be introducing
Best Places Award incremental improvements throughout 2011 and into 2012.
The major goal of the project is to implement Consolidated Statutory Financial Highlights a new agency-focused quoting application that improves ease-of-use for the agency. President’s Message This includes:
Our Management Team n Immediate feedback to the agents regarding the underwriting desirability of the risk with real-time underwriting edits upon completion Ease of Doing Business of each screen.
Consolidated Statutory Financial Statements n Automatic ordering and integration of third-party information, such as credit data and property public protection class. Facts in Brief n One system to quote and issue. Officers & Directors That means no premium difference between a quote and the issued policy.
n Improved internal efficiencies by:
• Eliminating re-keying of policy information as the new quoting application will upload data directly into our rating system.
• Generating the summary record for accounts submitted automatically.
• Eliminating maintenance of two systems by using the same rating engine for quoting 2011: The year for simply delightful, and policy issuance. • Streamlining workflows by incorporating faster quoting in Commercial Lines third-party data and underwriting edits.
These include a new insurance quoting system that will be dramatically easier for agents to use, with automatic integration of third-party underwriting data and immediate notification to the agent of our ability to quote the account. The system will eliminate re-keying of customers’ policy information, by taking it directly from the agents’ internal automation systems. We have also instituted a new process to identify and develop growth opportunities.
These improvements build upon enhancements in 2010, which included attractive additions to our BOP, new group programs, and various marketing opportunity enhancements. We also expanded payment plan options for all premium levels. Penn National Insurance | 2010 Annual Report
2010 Consolidated Statutory Financial Statements (Unaudited)
Consolidated Statutory Balance Sheets (Unaudited)
Best Places Award December 31, (dollars in thousands) 2010 2009
Consolidated Statutory Financial Highlights Admitted Assets Investments: President’s Message Bonds ...... $1,022,070 $1,029,928 Stocks ...... 141,454 116,313 Our Management Team Mortgage loans ...... 21,689 22,266 Real estate & other ...... 2,384 2,227 Ease of Doing Business Cash and cash equivalents 22,799 34,051 Total cash and investments ...... 1,210,396 1,204,785 Consolidated Statutory Financial Statements Agents’ balances and uncollected premiums ...... 121,281 123,867 Facts in Brief Investment income due and accrued ...... 12,025 11,908 Amounts due from reinsurers ...... 8,854 6,983 Officers & Directors Deferred tax asset, net ...... 28,628 23,955 Other assets 25,519 10,516 Total admitted assets $1,406,703 $1,382,014
Liabilities and Policyholders’ Surplus Liabilities: Reserves for losses and loss adjustment expenses ...... $642,960 $ 617,310 Unearned premiums ...... 215,734 214,710 Premium taxes and other expenses ...... 20,494 27,570 Drafts outstanding ...... 10,958 10,662 Other liabilities 29,409 26,912 Total liabilities 919,555 897,164
Policyholders’ surplus: Surplus notes ...... 50,000 50,000 Unassigned surplus 437,148 434,850 Total policyholders’ surplus 487,148 484,850 Total liabilities and policyholders’ surplus $1,406,703 $1,382,014 Penn National Insurance | 2010 Annual Report
2010 Consolidated Statutory Financial Statements (Unaudited)
Consolidated Statutory Statements of Income (Unaudited)
Best Places Award Years Ended December 31, (dollars in thousands) 2010 2009
Consolidated Statutory Financial Highlights Underwriting loss: Net premiums written ...... $489,123 $481,156 President’s Message Decrease (increase) in unearned premiums ...... (1,024) 5,875 Premiums earned ...... 488,099 487,031 Our Management Team Losses and loss adjustment expenses ...... 394,825 322,143 Underwriting expenses ...... 166,604 174,531 Ease of Doing Business Total losses and expenses ...... 561,429 496,674 Consolidated Statutory Financial Statements Total underwriting loss ...... (73,330) (9,643)
Investment income: Facts in Brief Net investment income ...... 49,808 49,157 Net realized gains on investments ...... 864 2,371 Officers & Directors Total investment income ...... 50,672 51,528
Other income (expenses), net ...... 2,037 (4,348) Income (loss) before dividends and federal income tax expense (benefit) (20,621) 37,537 Dividends to policyholders ...... 3,944 2,734 Income (loss) before federal income tax expense (benefit) . . (24,565) 34,803 Federal income tax expense (benefit) ...... (13,536) 5,763 Net income (loss) ...... $ (11,029) $ 29,040
Consolidated Statutory Operating Statistics (Unaudited)
Years Ended December 31, 2010 2009
Loss ratio ...... 67.3 53.3 Loss adjustment expense ratio ...... 13.6 12.9 Loss and loss adjustment expense ratio ...... 80.9 66.2 Underwriting expense ratio ...... 34.0 36.2 Dividend ratio ...... 0.8 0.6 Combined ratio after dividends ...... 115.7 103.0
Net premiums written to surplus ratio ...... 1.0 1.0 Net liabilities to surplus ratio ...... 1.9 1.9 Net leverage ratio ...... 2.9 2.9 Penn National Insurance | 2010 Annual Report
Facts in Brief
l We ranked 105th in net premiums 2010 Consolidated Direct Premiums Written by Line of Business written out of approximately Best Places Award 1,000 U.S. property and casualty l 26% Personal Automobile insurance groups. l 16% Other Liability* Consolidated Statutory Financial Highlights l Our insurance operations l 15% Commercial Automobile President’s Message employ over 700 people. l 14% Workers’ Compensation l 11% Homeowners Our Management Team l We sell through approximately 750 independent agencies, l 7% Businessowners Ease of Doing Business in nine states. l 11% Other
Consolidated Statutory Financial Statements l We were founded in 1919. *Includes General Liability, Products Liability and Umbrella Liability
Facts in Brief l Our principal lines of business are personal automobile, other Officers & Directors liability, commercial automobile, and workers’ compensation. 2010 Consolidated Direct Premiums Written by State
l 41% Pennsylvania l We have a financial strength rating of A- (Excellent) from l 18% North Carolina the A.M. Best Company. l 11% New Jersey l 8% Alabama l 7% Maryland Operating Territory l 15% Other: Virginia, Tennessee, Other Our Mission Why we exist Core Values How we will do business We deliver superior property and casualty insurance products and services through Integrity We will be open and honest in all of our actions. independent agents. In doing so, we provide Financial Strength We will be profitable and maintain the ability financial security to businesses and individuals to meet our financial commitments. that assists them in managing their risk. Excellence We will strive to be the best in class for our policyholders, agents and employees. Respect We will treat everyone fairly and value differences among ourselves. Communication We will provide open, honest and frequent communication. Citizenship We will give back to our communities through both volunteer time and financial support. Penn National Insurance | 2010 Annual Report
Officers & Directors
Elected Officers
Best Places Award Kenneth R. Shutts* president and chief executive officer Consolidated Statutory Financial Highlights Christine Sears, CPCU* executive vice president and chief operating officer President’s Message Gregory R. Stine, CTP, FLMI senior vice president, treasurer, and chief financial officer Our Management Team Karen C. Yarrish senior vice president, secretary, and general counsel Ease of Doing Business Robert B. Brandon, CPCU senior vice president of underwriting operations Consolidated Statutory Financial Statements
Facts in Brief *Also serves on the Board of Directors Officers & Directors
Board of Directors
Dennis C. Rowe, CPCU James H. Davies chairman chairman – Davies & Associates, Inc. (insurance agency) retired CEO – Penn National Insurance Todd R. Fisher, M.D. John H. Rhodes physician – private practice lead outside director president – Rhodes Development Group, Inc. James E. McGill (real estate development) retired senior vice president – Robins & Weill, Inc. (insurance agency) William H. Alexander managing director – Sherill T. Moyer, Esq. Sol C. Snider Entrepreneurial Center, partner – Rhoads & Sinon LLP (law firm) Wharton School, University of Pennsylvania Gary C. Schultz retired senior vice president, chief financial officer Frank D. Campbell and treasurer – Annual Meeting: retired executive vice president and director – The Pennsylvania State University Monday, April 11, 2011, 11:00 am Conning Asset Management (investment management firm) Douglas C. Stago at Penn National Insurance’s president – K.R. MacDonald, Inc. (insurance agency) Home Office. Alexander M. Clark senior managing director – Griffin Financial Group, LLC Stephen L. Swanson All policyholders invited to attend. (investment banking) president – The Alternative Board (business consulting firm)
For more information, please contact: Christopher Markley, 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]