President’s Commentary

I usually begin my commentaries by discussing our financial performance over the past couple months. However, I would like to take a moment to speak on our recent charitable fundraising event. At our company-wide National Meeting in April, 17 PLM employees “braved the shave” in support of the St. Baldrick’s Foundation, the second largest funder of childhood cancer research behind only the United States government.

300,000 children will be diagnosed with some form of cancer this year, one every two minutes. One in five will not survive. We are very proud of not only the 17 employees who volunteered to shave their heads, but also of the entire PLM team that supported them in various fundraising efforts. With a final goal of $125,000, to date we are approaching $168,000 with donations still being made and funds still flowing in. There’s plenty of time to give to our effort and join the many brokers, insureds, and other stakeholders that have generously done so. Simply click this link, www.stbaldricks.org/events/PLM2023, or copy and paste it to your web browser to donate. Nearly every single person will be impacted by cancer in their lifetime. Whether this may be a diagnosis to themselves or a loved one, cancer creates a scourge that no one deserves to experience.

Financial Overview
PLM’s first-quarter production was robust, however for ABM, our in-house brokerage, it was not the case. While PLM finished above our target premium, ABM failed to achieve its new business or renewal objectives from a workers’ comp standpoint. We were, however, successful in writing several non-comp accounts through ABM that did not meet PLM’s underwriting guidelines. At the moment we are rolling out a logging program for small loggers in a number of Southeastern states through ABM. Other product and program rollouts will occur as ABM moves forward. Let me be clear though, our expectation is that we write the workers’ comp associated with the accounts that are being placed with PLM. This is particularly true on the more difficult classes of wood business such as sawmills, pallets, frame “unprotected buildings”, new ventures, and risks located in CAT-related areas. We know we have work to do to tighten up and smooth out the process with the flow between PLM and ABM. Rest assured; we are working diligently in those areas. Ultimately, through ABM, we hope to bring more insurance solutions to the industry. ABM will expand our risk appetite in the wood niche to a point where we can provide you with coverage either in PLM or in another market for your wood business.

Unfortunately, profitability was behind target from an underwriting standpoint which dragged down our operating results, although we did produce an operating income before taxes. We are being pounded by weather-related losses and continually seeing the negative impact of nuclear verdicts, social inflation, litigation funding, and things of this nature on the liability side. The investment market return produced mixed results while our bottom-line surplus growth was not nearly what we expected.

There is no doubt that the insurance marketplace, particularly the property line of business, has hardened dramatically. Large limits are more difficult to fill out, and much more expensive than I have seen in the past. Businesses located in CAT-prone areas are seeing dramatic increases as insurance carriers price the risk to cover their normal reinsurance program, and then subsequently must increase it further because of the CAT exposure all driven by reinsurance costs. All of this and we have not even begun the wildfire season, let alone the hurricane season!

At the same time, the entire industry is stepping up to address insurance to value challenges that have plagued the industry for decades. This action adds a third layer of premium increase on top of the two already mentioned. We see carriers reducing the utilization of agreed amount and blanket coverage, or demanding updated signed statement of values that are changing rapidly due to the cost inflation in the marketplace.

Brokers, for the first time in my memory, are being cautioned by their associations and professional groups to get property values right or be faced with professional liability challenges by clients.

Most of this is driven by the reinsurance market and by the lack of profitability due to weather losses in the property business. While many carriers saw dramatic reinsurance increases on their January 1st renewals there were thoughts in the marketplace that April reinsurance renewals would be cheaply priced. That did not occur, and that was before the weather turned ugly throughout the country. Now, cheap reinsurance and capacity in the property line of business is a thing of the past.

Loss control efforts have been redoubled in our attempt to control and reduce potential losses. However, we are finally recognizing that the most broad-based and well executed loss control programs are severely hampered if the owner and front-line managers are not committed to taking the hard actions necessary to execute these loss control plans. Owners need to stop putting unsafe drivers behind the wheel of a truck and sending them out on deliveries. We still hear excuses about the cost of the technological solutions and who will pay for them. We still hear about issues like trucks that are not loaded properly, and maintenance being deferred on vehicles and machinery. Today’s juries are more willing to send a clear message to defendants who operate their business in an unsafe manner. One way they are doing this is by awarding judgments far in excess of insurance limits that are endangering the personal assets of business owners. When that happens, everyone pays attention!

Finally, we rolled out our first new product in many decades with the launch of HardwareXpress, an insurance solution designed for smaller hardware stores. The program provides a robust array of coverage, can be quickly turned around for a quote, and has been streamlined from a handling viewpoint allowing us to price the product more competitively. For more information, please reach out to Matt Kienholz, Director of Regulatory Compliance or Lindsey DiGangi, AVP of Marketing.

A final fact for you to consider. Since you started reading this commentary, at least three more children have been diagnosed with some form of childhood cancer.