more than just customers
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Welcome to Penn National Insurance’s 2013 Annual Report Our Mission, Vision and Core Values
Combined Statutory Financial Highlights
President’s Message
Putting Policyholders First
Building & Strengthening Relationships Combined Statutory Financial Statements are Facts in Brief Policyholders Officers & Directors more than just customers
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As a mutual insurance company, we are owned by our policyholders. We focus all of our attention and resources on delivering on our promise of protection to our policyholders. Our policyholders are much more than just our customers. Collectively, they are our company. Penn National Insurance | 2013 Annual Report
2013
Our Mission Why we exist We deliver superior property and casualty insurance products and services through independent agents. In doing so, we provide financial security to businesses and individuals that assists them in managing their risk.
Our Mission, Vision and Core Values Our Vision What we are seeking to build, grow and maintain Combined Statutory Financial Highlights Penn National Insurance will distinguish itself from its peers and will be the regional President’s Message carrier of choice of top-performing independent agents. We will partner with our agents to grow profitably by providing them with comprehensive solutions that meet their needs. Putting Policyholders First As an employer, Penn National Insurance will:
Building & Strengthening Relationships n Be accountable for its actions. n Provide professional growth and development opportunities. Combined Statutory Financial Statements n Create a culture that encourages prudent risk-taking. Facts in Brief n Empower employees to take initiative and make decisions. Officers & Directors n Promote a healthy personal and work/life balance.
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Core Values How we will do business Integrity We will be open and honest in all of our actions. Financial Strength We will be profitable and maintain the ability to meet our financial commitments.
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 | 2013 Annual Report
Combined Statutory Financial Highlights 2013
(Dollars in thousands) 2013 2012 2011* 2010* 2009* 2008* 2007*
Direct premiums written $ 681,691 $ 633,571 $ 551,033 $ 518,978 $ 512,056 $ 537,878 $ 568,442 Our Mission, Vision and Core Values Net premiums written 644,536 595,863 517,723 489,123 481,156 506,734 536,857
Combined Statutory Financial Highlights Net premiums earned 619,758 570,761 507,689 488,099 487,031 518,373 538,849 Investment income, including President’s Message realized gains and losses 51,419 49,272 46,369 50,672 51,528 37,095 46,201 Net income (loss) 32,795 13,715 (25,164) (11,029) 29,040 35,135 39,150 Putting Policyholders First Total cash and investments $1,328,973 $1,223,269 $1,137,748 $1,210,396 $1,204,785 $1,161,226 $1,169,440
Building & Strengthening Relationships Total admitted assets 1,559,170 1,454,559 1,348,683 1,406,703 1,382,014 1,353,668 1,376,329 Total policyholders’ surplus 550,211 481,590 451,151 487,148 484,850 427,155 439,921 Combined Statutory Financial Statements Combined ratio after dividends 100.9 111.6 113.8 115.7 103.0 99.9 99.1
Facts in Brief
Officers & Directors
4 / 23 Direct Premiums Written Total Admitted Assets Total Policyholders’ Surplus Statutory Combined Ratio After Dividends (in millions) (in millions) (in millions) (lower is better)
$700 $1600 $600 115
600 1500 500 110
500 1400 400 105 400 1300 300 300 100 1200 200 200
95 1100 100 100
0 1000 0 90 07 08 09 10 11 12 13 * 07 08 09 10 11 12 13 * 07 08 09 10 11 12 13 * 07 08 09 10 11 12 13 *
*2011 and prior years do not include the results of Partners Mutual Insurance. Penn National Insurance | 2013 Annual Report President’s Message
A message from Kenneth R. Shutts, president & chief executive officer
“I am pleased to report that your company experienced a very strong year of solid financial performance in 2013.”
Our Mission, Vision and Core Values Penn National Insurance’s results of operations In addition to premium growth, the company’s reflected a combined ratio that improved by 10.7 favorable annual results and improved combined Combined Statutory Financial Highlights points compared to the previous year, which enabled ratio were largely the result of fewer losses incurred the company to enhance its results from underwriting during the year than in 2012. Overall losses and loss President’s Message operations. For 2013, the company earned statutory adjustment expenses were down $35.8 million or net income after taxes of $32.8 million. This strong 8.1 percent, with 2013 net catastrophe losses and loss Putting Policyholders First net income performance, coupled with investment adjustment expenses weighing in at just $8.1 million portfolio market gains, resulted in the company’s compared with $27.4 million experienced the year Building & Strengthening Relationships policyholders’ surplus increasing to $550.2 million, the prior. This yielded a favorable shift in the statutory highest surplus level in the history of the company. loss and LAE ratio of 11.9 points. Combined Statutory Financial Statements Indeed, during the past 10 years, policyholders’ surplus for Penn National Insurance has nearly doubled. As the economy in our country continues to exhibit a Facts in Brief slow recovery, I believe that many in our industry feel Our positive results in 2013 were driven by the as if we have been told, “Welcome to the new, slow- concerted efforts of our dedicated employees and growth economy.” We are witnessing an increase in Officers & Directors agency-partners, a continuation of our focus on exposure growth (an indicator of increased business underwriting discipline, expanded margins resulting activity) of between 1.5% and 2.0%. We might not from ongoing momentum from our rate initiatives, like the pace of growth, but momentum is gradually 5 / 23 and lower than expected catastrophe losses. We are improving. pleased that our premium rate increases over the last several years have continued to outpace loss In this slow, yet incrementally improving business costs trends. environment, we do see some areas of slightly faster business pick-up, especially in the small commercial Specifically, direct premiums written experienced business sector, and in the construction segment, growth of 7.6 percent from the previous year, totaling both key parts of our commercial lines core business nearly $681.7 million for the twelve months ended writings. These early indicators bode well for a December 31, 2013. Commercial lines direct premiums continuation of economic activity and expansion exceeded 2012 levels by 7.3 percent, largely due of the economy. to overall rate increases of 6.9 percent for renewal pricing and 2.0 percent for new business. In the personal lines of business, 2013 direct premiums written exceeded the prior year by 8.0 percent. Penn National Insurance | 2013 Annual Report
Our Mission, Vision and Core Values
Combined Statutory Financial Highlights
President’s Message
Putting Policyholders First
Building & Strengthening Relationships
Combined Statutory Financial Statements
Facts in Brief
Officers & Directors
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Kenneth R. Shutts Christine Sears, CPCU president and executive vice president and chief executive officer chief operating officer Penn National Insurance | 2013 Annual Report
President’s Message continued
The word “mutual” means something shared by, or common to, both parties.
Our Mission, Vision and Core Values Penn National Insurance is well positioned to Although our company has long operated under the achieve additional margin improvement in 2014, as abbreviated trade name “Penn National Insurance” our Combined Statutory Financial Highlights our underwriting emphasis is on small and middle- full legal name is Pennsylvania National Mutual Casualty market businesses and individual consumers, Insurance Company. Almost 270 years ago, Benjamin President’s Message markets in which we have competitive advantages Franklin, who developed the concept of mutual and positive momentum. The following things insurance, said that “a mutual insurance company is Putting Policyholders First differentiate Penn National Insurance in our value one whose fund for the payment of losses consists not proposition from other carriers: of capital furnished by outside parties, but of premiums Building & Strengthening Relationships mutually contributed by the persons insured, all being n Our agency-centered business strategy. members (or policyholders) of the company.” Combined Statutory Financial Statements n The strength and tenure of our agency relationships. The word “mutual” means something shared by, or common to, both parties. A mutual insurance company Facts in Brief n Our decentralized local presence and is one in which the members (the policyholders) are knowledge. Officers & Directors both the insureds and the insurer, because mutual n The convenience and ease of doing business companies are owned by their policyholders. So the that we offer our agents and policyholders. essence of the mutual insurance industry is the fact that people are at the heart of the business. The forces 7 / 23 n Our commitment to competing on analytics. that drive mutual insurers are not shareholders or stock n Our reputation for technical proficiency in prices (they do not exist for a mutual), but rather the underwriting and claims. driving force is providing for the financial security of its policyholder-members. Historically low interest rates have helped to drive sustained pricing increases on the part of most responsible insurance carriers. We believe that Simply put, because we do not low investment yields will continue over the short term, and therefore our pricing philosophy remains have shareholders, we put the unchanged. We will continue to implement prudent needs of policyholders first. rate increases at actuarially appropriate levels. But the strategy for Penn National Insurance is not just about achieving rate increases and improving Even though mutuals are the oldest form of insurance in our margins. It is about using our underwriting the United States, mutual companies like Penn National discipline and advanced analytics to achieve Insurance are on the leading edge of embracing how growth in those classes and niches in which risk- independent agents and policyholders want to transact adjusted underwriting profit margins are favorable, insurance and communicate with their carrier in the and likewise to shrink our exposure on classes of 21st century. At Penn National Insurance, we have long business in which risk-adjusted underwriting profit provided excellent levels of one-on-one policyholder margins are not favorable. service through our Customer Contact Center, 24/7 claims reporting hotline and loss control services. Penn National Insurance | 2013 Annual Report
This little toy steam tractor represents what in its day was a fearsomely dangerous advancement in farming. When operated incorrectly, these tractors frequently exploded, maiming or killing the farm laborers who ran them. Our company’s founders, a group of safety-conscious and value-conscious farmers, joined together in 1919 to form a mutual insurance company that would offer lower rates for workers’ compensation insurance to farmers who operated their steam-driven farm equipment safely and avoided accidents and injury. That spirit lives on today. Our policyholders mutually own our company, for the benefit of each other, promoting safety and keeping insurance costs low.
Our Mission, Vision and Core Values Today, policyholders and agents want information This annual report emphasizes the centrality of immediately, at their fingertips. And they want that the independent agency system as our sole means Combined Statutory Financial Highlights information in their preferred means of interfacing of distribution, and the competitive advantage we with their insurance carrier, whether that be online gain through our company’s mutual structure of President’s Message through a website, email, text messaging or social incorporation. These characteristics have been at the media. The fact is inescapable that policyholders have heart and soul of our company since its founding in Putting Policyholders First greater expectations, and indeed demands, for contact 1919. They continue to empower us to achieve strong and communication with their agents and carriers, in results, as we did in 2013, and they will carry us to a Building & Strengthening Relationships the form that is their personal preference. successful future.
Combined Statutory Financial Statements In 2013, we introduced new technology that builds To our policyholders, we thank you for trusting us on our personal service by offering new tools to with your insurance protection, and we are honored Facts in Brief our agents and policyholders. Pages 13 through 16 to be here to make you feel secure. To our agents, of this annual report provide the details of those we thank you for your partnership with us and enhancements, which include the following: for selecting us as the insurance provider for the Officers & Directors customers you place with us. And to our employees, n A new mobile-ready version of our website, which we thank you so much for your fine performance makes our site easy to use on mobile devices. and commitment to service. 8 / 23 n A new mobile app that empowers policyholders to perform various policy management functions and to submit claims from their mobile device, in a way that is much easier than using the Very truly yours, device’s Web browser to visit our website. n The start of a complete redesign of our website, which will present tools, services and information in a simplified format. n Weather alerts by email or text to warn our Kenneth R. Shutts, policyholders about impending storms. president & chief executive officer n A new billing system that simplifies our bills, March 3, 2014 offers convenient payment options and emphasizes the agency’s brand on the bills. Penn National Insurance | 2013 Annual Report You’re a smart shopper.
You buy wisely and don’t like to leave money on the table. You belong to a credit union, to escape the fees imposed by banks. You’re a wholesale shopping club member, where you get the best values. You look for the most customer-focused providers. With the help of your independent agent, you selected Penn National Insurance as You made a smart buying choice, your insurance provider. and here’s why.
Our Mission, Vision and Core Values
Combined Statutory Financial Highlights
President’s Message
Putting Policyholders First
Building & Strengthening Relationships
Combined Statutory Financial Statements
Facts in Brief
Officers & Directors
9 / 23 Penn National Insurance | 2013 Annual Report
There are two main organizational structures for insurance companies:
Our Mission, Vision and Core Values 1. Combined Statutory Financial Highlights Insurance companies owned by stockholder-investors. President’s Message
Putting Policyholders First
Building & Strengthening Relationships
Combined Statutory Financial Statements Stock companies exist solely for the benefit Facts in Brief of their investors. Officers & Directors 2. Mutual insurance companies, which are owned by their policyholders. 10 / 23
Mutual insurance companies exist solely for the benefit of their policyholder-owners.
That’s a big difference. Penn National Insurance | 2013 Annual Report
As a mutual insurance company, we like to remind the world that we work for Main Street, and not for Wall Street.
Our Mission, Vision and Core Values Like members of a credit union, policyholders of a mutual insurance company are the company owners Since our founding, in 1919, Combined Statutory Financial Highlights and the sole focus of the insurance company’s we have operated as a mutual attention. Our owners include Main Street American President’s Message entrepreneurs in the business community, and owners insurance company. No Wall Street of cars and houses that require insurance. These Putting Policyholders First people are our policyholders, and more importantly, investor-owners. You own us. And our owners. we are here to take care of you. Building & Strengthening Relationships We don’t extract profit from our operations and pay that profit out to Wall Street investors. We have no investors. Combined Statutory Financial Statements If that’s old fashioned, we’re very proud to say Instead, we operate as efficiently as possible, to keep that we are just as old fashioned as can be. our premiums as low as possible, for the benefit of our Facts in Brief policyholder-owners. We reinvest in our business to stay efficient and to keep our service standards high. But we’re pretty modern, too. Officers & Directors This probably sounds like an old-fashioned way to do The farmers who founded our company in 1919 would have business. And it is. In fact, it’s the original business no idea what to make of our automated systems that allow model that all insurance companies followed. It dates our agents and policyholders to do business so easily with us 11 / 23 back to the late 1600s in England, and to 1752 in North today. Our founders used steam-driven farm equipment, which America, when Ben Franklin founded the Philadelphia at the time was so modern that most insurance companies Contributionship for the Insurance of Houses From did not understand how to affordably insure farm workers from Loss by Fire, a company that exists to this day, still injuries caused by steam-tractor explosions. So they formed for the sole benefit of its policyholder-owners. their own mutual insurance company to get affordable rates for workers’ compensation insurance. Those farmers from Somewhere along the line, as some mutual companies 1919 would marvel at the hybrid cars that we insure today, grew rapidly and needed large injections of cash and the houses with geothermal heating systems and solar to finance growth, acquisitions and investments in panels and automated security systems that we insure. their infrastructure, some of those mutual companies converted into stock companies. Many other stock We share their old-fashioned belief in putting the customer – companies were formed from scratch, by investors the policyholder – first. That’s at the core of our beliefs. seeking high returns. And these days, to do that, we employ some pretty modern marvels.
“Within a week of filing my claim, it was approved and the check was in the mail. Three weeks later, I had my new roof. Awesome experience on my first-time homeowners insurance claim.”
Donna W., Thurmont, Md. Penn National Insurance | 2013 Annual Report Put policyholders first. That’s the core.
Policyholders are more than just “customers” when they buy from a mutual insurance company n Business decisions are made with a “policyholder-first” focus n Policyholders have a voice in the direction of the company n Customer service is more personal and responsive n Policyholders can earn dividends on some types of policies
Our Mission, Vision and Core Values And for a regional mutual, like us, Now, what else does a mutual much more localized service Combined Statutory Financial Highlights insurance company offer? Good service keeps customers. Bad service loses customers. Great service provided by local people, and President’s Message We’ve shared the core benefit of buying insurance from a responsiveness to local conditions and local customer mutual. No investors siphoning off profits. Total focus on the needs, results in the high levels of customer satisfaction policyholder. From your perspective, we hope you perceive Putting Policyholders First that we measure among our customers. The largest the enormous difference. And there’s more. insurance companies, and particularly those that sell Building & Strengthening Relationships online and not through local, independent agents, Voting rights operate under a one-size-fits-all approach. Not us. Combined Statutory Financial Statements As policyholder-owners, all policyholders may vote at our We take a flexible, local approach. We like to say that annual meeting, or give their proxy vote. Each year, we send we satisfy and retain our customers by “out-localing” invitations to our annual meeting and information about voting Facts in Brief the biggest insurance companies. in person or giving a proxy vote, in a mailing to all policyholders whose policies renew during the time period mandated by Officers & Directors And for “super regionals” like us, we have statutory regulation for mutual insurance companies. the resources to offer the same quality of automated services that the giant, impersonal Stable, reliable market appetite direct-selling stock insurance companies offer 12 / 23 Mutual insurance companies make long-term decisions that Our size allows us to offer you both the hometown are not as subject to quarter-by-quarter reversals as those feeling of warm, personal service, and also the of stock insurance companies. If we develop an insurance resources to match the sophisticated automation product for a particular niche of customers, we do not take offered by the biggest companies. We fall into a size those customers out for a test ride. Our intention is to make category that insurance industry analysts call “super a commitment and stick to it for the long term. Policyholders regional” – the largest of the regional insurance carriers. appreciate the time-savings of sticking with the same We like the sound of that category. We will give you insurance carrier year after year. They count on their insurer the individual attention and flexibility that very small to provide a competitive price and excellent service, and insurance carriers can provide, backed up with the then to stick with them over the long haul. Mutual insurance resources and automation that only larger insurance companies are more likely to take a long-term approach carriers can provide. to customer relationships, and are less likely to pull out of markets and business categories compared to stock insurance companies, which tend to do so in response to quarterly profitability pressures from investors. Penn National Insurance | 2013 Annual Report
Building and strengthening relationships in a high-tech world.
Our Mission, Vision and Core Values Let’s start with how we are making enhancements At Penn National Insurance, to our billing system to build and strengthen Combined Statutory Financial Highlights we don’t think that high-tech relationships.
President’s Message replaces or conflicts For years, our bills have looked like the bills produced by all insurance companies. Functional, but printed in black Putting Policyholders First with personal service and and white and in small type, and hard to read. Our new decision making. billing system turns black and white to color and cleans up Building & Strengthening Relationships the billing presentation, making bills easy to read. The new system offers more convenient payment options and allows We have a variety of projects underway that are Combined Statutory Financial Statements for customization that emphasizes the agency’s brand on making it easier for our agents and policyholders to the company’s bill. The high-tech of our new billing system transact business with us. By simplifying everyday Facts in Brief is strengthening the customer’s bond with the agent. business transactions, we are clearing the decks of administrative complications and making more room The old bills showed the agency name and agency code Officers & Directors and more time for responsive, personal service. in small, black text. The new bills include a highlighted box entitled “Your Hometown Agent,” and the box prominently We can group our high-tech displays the agency name, address and phone number. investments in customer relationships 13 / 23 We’ve introduced payment flexibility, new payment options, into four general categories: paperless options and the addition of marketing messages to promote the brand of the independent agency. Everything 1. Billing system enhancements we have done is designed to make it easier for policyholders 2. Website enhancements to transact business with us. Agents will receive fewer requests for assistance with billing issues, and will be able to 3. Mobile and social media enhancements devote more of their time to relationship management with their customers. 4. Analytics enhancements
Go Paperless! Our new billing system will let customers turn off paper and Receive an e-mail notice when your invoice is ready and payment is due. turn on electronic billing with a Securely pay your bill online at: variety of convenient features. www.pennnationalinsurance.com/OIC Penn National Insurance | 2013 Annual Report High-tech empowers people to serve.
We see high-tech tools and services as opportunities to make our relationships stronger and better.
Our Mission, Vision and Core Values Next, let’s look at enhancements we are making to our website. Combined Statutory Financial Highlights Our website consists of three components: the general President’s Message public site that is available to anybody; the PennConnect portal, which is available only to our agents; and the Online Putting Policyholders First Insurance Center, which is available only to policyholders. Earlier this year, we made improvements to our Online Building & Strengthening Relationships Insurance Center, to organize the information and services more efficiently and to make it easier for policyholders to Combined Statutory Financial Statements use. We kicked off the total re-engineering of our website with the Online Insurance Center since that component Facts in Brief of the site offered the highest return on investment from a customer satisfaction standpoint. Officers & Directors We will also be improving the PennConnect agency portal of our website. PennConnect is filled with tools and services, We are currently working with a consulting firm that some of which are probably confusing to newer users. performs usability studies to measure how easy or 14 / 23 Working with our usability consultant and members of our how hard it is for visitors to a website to find what agency technology council, we will reorganize PennConnect they need to find and to do what they need to do. to make it easier to use.
We are putting function first, and creating visual redesigns that enhance functionality rather than just providing window dressing.
“I was treated with respect. I should have switched to you years ago.”
Thelma S., North Irwin, Pa. Penn National Insurance | 2013 Annual Report New tools for policyholders.
Our Mission, Vision and Core Values
Combined Statutory Financial Highlights
President’s Message
Putting Policyholders First
Building & Strengthening Relationships
Combined Statutory Financial Statements
Facts in Brief
Officers & Directors
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Our new mobile app loads More than 5,500 visits to our website each month come from mobile devices, comprising quickly and shows up clearly nearly 10% of site visits. So by making our website mobile-ready, we have improved the on small, mobile-device screens user experience for those customers. Penn National Insurance | 2013 Annual Report Data-driven solutions for agents. Making it easier for policyholders and agents to transact business with us.
Our Mission, Vision and Core Values Going mobile. And finally, analytics.
Combined Statutory Financial Highlights We’ve made it simple for policyholders to interact with us We talk a lot about being a data-driven organization, on their mobile devices in two ways. First, we optimized and we are focusing lots of our attention and resources President’s Message our website to recognize when a site visit is coming from a on developing our analytics to improve every aspect of mobile device and to present a special, simplified mobile- our business operations. Putting Policyholders First ready screen view to make the information easier to read and We understand, however, that from the perspective of work with on a mobile device’s smaller screen. When our site our agents, when we say we are data-driven, agents Building & Strengthening Relationships recognizes that the visitor is using a mobile device, it displays might interpret that to mean that we have turned over a special message asking if the visitor would like to switch decision-making authority to the computers. Combined Statutory Financial Statements to the simplified, mobile-ready screens, or stick with the standard screens, which are optimized for full-size desktop But that’s not what we mean at all. or laptop computer monitors. Despite the sophistication of Facts in Brief Just like our agents, we know that no matter how data- mobile computing devices, you just cannot see some types intensive our business becomes, there is no substitute of information very well on a smaller screen unless the screen Officers & Directors for the wisdom, judgment and decisions that our staff presents redesigned, simplified information. people make as they collaborate with our agents. Think We also developed a mobile app, for iPhone of us as empowering our people with rich data so they 16 / 23 and Android phone users. Our app allows can collaborate with agents to make business decisions. users to do the following things: Our improved analytics capabilities are allowing us n View policy information to accurately price types of risks that we might have n View invoices otherwise declined in the past, before we had the data n Make payments necessary to price accounts that fall outside the norm. n Submit claims n View agent information and contact the agency We are still – n Find repair shops and towing facilities n Complete a property damage checklist and will always be – Even more so than the mobile-ready pages displayed a people business. on our website, the mobile app simplifies and streamlines information and tasks.
We also developed a free weather alert service. Policyholders can sign up to receive alerts for a wide variety of types of dangerous weather conditions. They can choose to opt in or opt out of each type of alert, depending upon which ones interest them or apply in their area. We hope this app helps our policyholders protect themselves and their property before storms hit. Penn National Insurance | 2013 Annual Report
2013 Combined Statutory Financial Statements (Unaudited)
Combined Statutory Balance Sheets (Unaudited)
December 31, (dollars in thousands) 2013 2012
Admitted Assets Investments: Bonds $1,139,084 $1,039,077 Stocks 144,836 129,621 Mortgage loans 19,512 20,364 Our Mission, Vision and Core Values Real estate & other 1,752 2,004 Cash and cash equivalents 23,789 32,203 Combined Statutory Financial Highlights Total cash and investments 1,328,973 1,223,269
President’s Message Agents’ balances and uncollected premiums 163,581 149,166 Investment income due and accrued 11,352 11,012 Putting Policyholders First Amounts due from reinsurers 10,295 14,918 Deferred tax asset, net 36,262 51,540 Building & Strengthening Relationships Other assets 8,707 4,654 Total admitted assets $1,559,170 $1,454,559 Combined Statutory Financial Statements
Facts in Brief Liabilities and Policyholders’ Surplus Liabilities: Officers & Directors Reserves for losses and loss adjustment expenses $ 622,909 $ 603,330 Unearned premiums 285,314 260,537 Premium taxes and other expenses 39,705 53,114 17 / 23 Drafts outstanding 10,712 13,710 Other liabilities 50,319 42,278 Total liabilities 1,008,959 972,969
Policyholders’ surplus: Surplus notes 50,000 50,000 Unassigned surplus 500,211 431,590 Total policyholders’ surplus 550,211 481,590 Total liabilities and policyholders’ surplus $1,559,170 $1,454,559 Penn National Insurance | 2013 Annual Report
2013 Combined Statutory Financial Statements (Unaudited)
Combined Statutory Statements of Income (Unaudited)
Years Ended December 31, (dollars in thousands) 2013 2012
Underwriting loss: Net premiums written $644,536 $595,863 Increase in unearned premiums (24,778) (25,102) Premiums earned 619,758 570,761
Our Mission, Vision and Core Values Losses and loss adjustment expenses 405,768 441,546 Underwriting expenses 224,676 201,941 Combined Statutory Financial Highlights Total losses and expenses 630,444 643,487 Total underwriting loss (10,686) (72,726) President’s Message Investment income: Putting Policyholders First Net investment income 40,905 42,419 Net realized gains on investments 10,514 6,853 Building & Strengthening Relationships Total investment income 51,419 49,272
Combined Statutory Financial Statements Other income, net 2,504 40,857 Income before dividends and federal income tax expense 43,237 17,403 Facts in Brief Dividends to policyholders 3,327 1,910 Income before federal income tax expense 39,910 15,493 Officers & Directors Federal income tax expense 7,115 1,778 Net income $ 32,795 $ 13,715
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Combined Statutory Operating Statistics (Unaudited)
Years Ended December 31, 2013 2012
Loss ratio 55.1 65.9 Loss adjustment expense ratio 10.4 11.5 Loss and loss adjustment expense ratio 65.5 77.4 Underwriting expense ratio 34.9 33.9 Dividend ratio 0.5 0.3 Combined ratio after dividends 100.9 111.6
Net premiums written to surplus ratio 1.2 1.2 Net liabilities to surplus ratio 1.8 2.0 Net leverage ratio 3.0 3.2 Penn National Insurance | 2013 Annual Report
Facts in Brief l We ranked 92nd in net premiums written out of approximately 1,000 U.S. property and casualty insurance groups. l We employ more than 820 people. l We sell through more than 900 independent agencies, in eleven states. l We were founded in 1919. l Our principal lines of business are personal automobile, other liability, commercial automobile, workers’ compensation and homeowners. l We have a financial strength rating of A- (Excellent) from the A.M. Best Company.
Our Mission, Vision and Core Values
Combined Statutory Financial Highlights
President’s Message
Putting Policyholders First Winner of:
Building & Strengthening Relationships Best Places to Work in Insurance • Best Places to Work in IT • Best Places to Work in PA Best Places to Work in Pittsburgh, PA • Best Places to Work in Greensboro, NC Combined Statutory Financial Statements • A top-10 carrier in Deep Customer Connections Ease of Doing Business national survey Facts in Brief
Officers & Directors
2013 2013 Combined Direct Premiums Combined Direct Premiums 19 / 23 Written by Line of Business Written by State
n Personal Auto 26% n Pennsylvania 39% n Other Liability 16% n North Carolina 17% n Commercial Auto 13% n New Jersey 12% n Workers’ Compensation 13% n Alabama 7% n Homeowners 13% n Maryland 6% n Businessowners 8% n Tennessee 6% n Other* 11% n Virginia 5% n Wisconsin 3% *Includes General Liability, Products Liability and Umbrella Liability n Other 5% Penn National Insurance | 2013 Annual Report
Penn National Insurance’s environmental efforts in 2013 achieved the following: n Saved 911 trees • Saved 375,127 gallons of water n Recycled 107,179 pounds of office paper n Reduced 161 cubic yards of landfill requirements n Saved 24,651 gallons of oil n Recycled 54 tons of paper materials n Saved 219,717 KW-hours of electricity
Our Mission, Vision and Core Values History A group of value-conscious, safety-conscious farmers founded our Combined Statutory Financial Highlights company in 1919 to gain lower prices for workers’ compensation insurance for their farm-laborer employees. As our country transitioned President’s Message from an agricultural economy to an industrial economy, we expanded into protecting workers in coal mines and sawmills. As suburbs expanded Putting Policyholders First and middle-class people could afford to buy new houses and cars, we insured them. And in today’s service economy, we protect people who Building & Strengthening Relationships work in jobs that our founders could never have conceived of, and we protect personal property they never would have dreamed of. Combined Statutory Financial Statements
Facts in Brief So much has changed in our country, Officers & Directors but our values of mutual insurance protection remain unchanged. 20 / 23 Penn National Insurance | 2013 Annual Report
Officers & Directors
Elected Officers
Kenneth R. Shutts* president and chief executive officer
Christine Sears, CPCU* executive vice president and chief operating officer
Gregory R. Stine, CTP, FLMI senior vice president, treasurer, and chief financial officer
Our Mission, Vision and Core Values Karen C. Yarrish senior vice president, secretary, and general counsel Combined Statutory Financial Highlights Robert B. Brandon, CPCU senior vice president of underwriting operations President’s Message
Putting Policyholders First *Also serves on the Board of Directors
Building & Strengthening Relationships Board of Directors Combined Statutory Financial Statements
Dennis C. Rowe, CPCU Todd R. Fisher, M.D. Facts in Brief chairman physician – private practice retired CEO – Penn National Insurance Officers & Directors Mark B. Glessner John H. Rhodes retired managing partner – lead outside director Harrisburg Office of PricewaterhouseCoopers retired president – Rhodes Development Group, Inc. 21 / 23 (real estate development) James E. McGill retired senior vice president – William H. Alexander Robins & Weill, Inc. (insurance agency) faculty – Wharton School, University of Pennsylvania Sherill T. Moyer, Esq. partner – Rhoads & Sinon LLP (law firm) Frank D. Campbell Annual Meeting: retired executive vice president and director – Douglas C. Stago Monday, April 14, 2014, 11:00 a.m. Conning Asset Management president – K.R. MacDonald, Inc. (insurance agency) (investment management firm) at Penn National Insurance’s Home Office. Stephen L. Swanson Alexander M. Clark president – The Alternative Board All policyholders invited to attend. senior managing director – (business consulting firm) Griffin Financial Group, LLC (investment banking)
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]