Central reports challenging year in 2018

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Central Mutual Insurance Company held its annual Policyholders’ Meeting on May 8 at the Home Office in Van Wert.

President and Chairman of the Board F.W. Purmort noted 2018 was marked by challenging results, both internally and externally, and acknowledged that the company needed to evolve and change.  

“We have initiated changes to our internal organizational structure with a goal of leveraging the technical expertise and communication across our operational departments insuring improved efficiency and strategic decisions,” Purmort said.

Central’s new corporate structure is focused on marketing and outward facing relationships; finance, risk and investment of its assets; and operations and execution of its promises,” the president and board chairman explained. The new corporate structure will support relationship-driven marketing, while sizable future investments in improving the company’s technology systems will capture efficiencies in productivity and promote better decisions in supporting both agents and policyholders. 

“This is a big deal — it’s a lot of work,” Purmort shared. “But we’ve got a fantastic team working on it and we’ll get it done.” 

Purmort noted that, although the Policyholders’ Security Fund decreased slightly to $808.6 million in 2018, the company anticipates this number will increase in 2019 and continue to trend upward. 

“We do quite a bit of financial forecasting and if we keep doing what we do best, we should see an ever-increasing Policyholders’ Security Fund in the future,” he added. “That’s the path we have set for the company and that’s the path we intend to follow.”

In conclusion, Purmort thanked policyholders for their investment in the company and noted that while Central’s structure is changing, the company’s culture of Integrity, Relationships, and Excellence that is driving these changes will not. 

“We’ll acknowledge the changes around us, think wisely about how we need to adapt, and create a company that you will want to be associated with for as long as you need us,” he said.

Vice President and Treasurer Thad Eikenbary began the Treasurer’s Report by stating: “It was certainly a unique year in terms of how the financial results came together from the insurance operation as well as from the investments.” 

Direct written premiums for the company increased from $720 million in 2017 to $770 million in 2018. Commercial premium writings increased by 12.8 percent to $329 million and policy counts increased by 7.4 percent. Personal lines premiums increased by 3 percent to $441 million, but policy counts decreased by 2.6 percent. 

After paying out $496 million in losses and loss adjusting expenses, and $221 million in underwriting expenses, the company recorded a $33 million underwriting loss resulting in a combined ratio of 103.9 percent for 2018, which compares unfavorably to 98.4 percent recorded in 2017. 

“2018 was a year of transition for the company’s investment portfolio as we shifted management to external portfolio managers from Goldman Sachs and BlackRock,” Eikenbary noted. “Leveraging this newly added expertise and market exposure helped provide the lift needed to overcome this year’s underwriting challenges.”

Net investment income decreased by $4.4 million from $41.3 million in 2017 to $36.9 million in 2018. Eikenbary noted this was a result of systematically re-positioning the portfolio into a new strategic model co-created with the new managers to enhance income going forward. 

“We should see net investment income improve year-over-year now that the portfolio has been transitioned,” the company treasurer said.

Repositioning the portfolio included taking action on some long-held investments that enjoyed significant embedded realized capital gains, resulting in $83.4 million in net realized capital gains in 2018.

After combining both the insurance operations and investment results, Central registered a net income after taxes and dividends of $91.3 million in 2018. 

Central’s assets increased from $1.75 billion at the end of 2017 to $1.80 billion as of December 31, 2018. Central’s bond portfolio totaling $988 million made up 55 percent of those total assets. The quality of the portfolio remained very solid and Central continued to manage the maturity of the portfolio to ensure that it maintained the liquidity necessary to meet the company’s financial needs. Central’s stock portfolio investments represented nearly 16 percent of the company’s total assets.

By the end of 2018, the company’s Policyholders’ Security Fund had decreased by $13.4 million to $808.6 million but reflected an 11.2 percent return on average PSF and a Premium-to-Policyholders’ Security Fund leverage ratio of 0.87 to 1.

The company also maintained its “A” excellent rating with A.M. Best while continuing to provide high quality customer service, enhanced Internet technology, and support to its agency partners.

In other business, Keith Moore, senior vice president and secretary, read the minutes from the 143rd Policyholders’ Meeting. F.W. Purmort, E.J. Noonan, and D.D. Stripe were re-elected to the Board of Directors for a three-year term. Other directors include E.R. Buhl, J.L Covington, T.B. Kearney, S.K. Moore, E.P. Purmort, and D.C. Ward. 

Central Mutual Insurance Company is a personal and commercial property and casualty insurance company operating exclusively through independent insurance agents in 24 states. The home office is located in Van Wert, with regional offices located in Dallas, Atlanta, Boston, and Van Wert.