Producer Update: Issue 1 – 2023

Year-end is always an exciting, challenging, yet somewhat stressful time around PLM, even when our results are good! Similar to your business, it’s a time when we look back on what worked for us during the year and what didn’t. We look at the operational and financial side of the ledger, review the goals and objectives that we completed, and identify the remaining items that may need additional work into the next year. We also build expense, premium, and loss budgets, in addition to various operational plans designed to allow us to prepare for the challenges and opportunities that we expect to face in the new year.

Looking back at our underwriting results, 2022 turned out to be a better year than we expected, however, the same cannot be said for our investment results. Our premium growth was exceptional with premium surging past $300 million and ending around $375 million for the year. While some of this significant growth was driven by the dramatic increase in sales experienced by many of our insureds, in the end it only accounted for about half of the positive premium variance we experienced. New business was strong, but slightly behind target. On the other hand, our renewal retention soared with more than 90% of our customers renewing coverage with us! I have always taken this as an indication of the value our policyholders place in their PLM relationship. In the insurance industry, it is common to retain around 83% to 85% of your customer base year-to-year. PLM has been well above those numbers for many years, but surpassing the 90% level is indeed remarkable.

We have seen continued improvement in our net promoter scores which measure to some degree our customer satisfaction. Similarly, it is an area where we also see numbers that outperform the insurance industry benchmarks.

Our agency, ABM, continued to grow in 2022 as we helped place not only workers’ comp, but also coverage options to new businesses that did not meet PLM’s underwriting requirements with quotations from excess and surplus lines markets. There are classes of wood business that do not fit in PLM’s underwriting appetite, so this approach of using the E & S markets to help our brokers place the tough accounts has significant potential for all.

Despite a strong start in the year, the spring and early summer was not kind to our profitability, followed by a long and difficult summer. Our ability to achieve profitability was up in the air as we entered November. We ended with a profitable November and December allowing us to finish the year in fairly good shape. Our reinsurance program worked exactly as it was designed, and we were able to hand off to our reinsurance partners a substantial amount of loss. Keep in mind though that reinsurers have long memories. They expect, and we understand, that we will pay them back in the form of increased premiums in the coming years.

If you looked at your retirement account at the end of 2022, you know that it was a difficult year for investments with equities dropping dramatically and interest rates on fixed income increasing, but only marginally so. This led to a significant drop in our investment portfolio. So much that despite an operating profit (underwriting profit/loss plus investment income), it caused a drop in our policyholder surplus.

We worked hard all year to identify and add quality professionals to the PLM team. Like so many of our insureds and brokers, finding and retaining good people during the best of times is challenging. Further, we stepped up in various training, such as professional and leadership development for our current staff.

We sell an intangible product. Our policyholders give us premium, and we give them a promise. So many look only at the premium when they make the buying decision. Yet when I look at buying insurance (or reinsurance where we spend in excess of $100 million a year), I look at the “promise side”. To fulfill that promise and to do it in a timely and efficient manner, we need high quality people with cutting edge skills. Whether it is working with you and your clients through the underwriting and buying process, the risk management and loss control process, or the claims process, our brokers and insureds want to work with the best, and at PLM, we have the best people in the industry. To have the best, you cannot be relying on out-of-date skills and training, hence the breadth and scope of our continuing education program.

We expect 2023 to be challenging, but eagerly look forward to meeting the challenges head-on. We will be pursuing premium growth which will take us past $400 million of premium while once again striving for underwriting profitability. We will return to our full show schedule, and in fact will be expanding the number of shows that we participate in. We hope to be able to reinforce our current relationships while developing new ones. Insurance is, after all, a relationship business.

We will continue to work on improving the rollout of Anytime Risk Management (ARM), our self-service loss control product for smaller insureds, while working on a similar product for larger exposures. We will continue our insured webinar series throughout the year. We plan to launch a new product specifically focused on hardware stores late in the first quarter or early in the second quarter. You can also expect to see us provide more support and expertise from a cyber security standpoint as we help our insureds overcome and contain this growing exposure.

I hope that you and your colleagues, as well as your families had a wonderful holiday season. I wish you all the best for very strong new year! I look forward to seeing many of you at various shows this year. As always, if you have thoughts, ideas, concerns, or suggestions and you’d like to speak to me personally, please do not hesitate to reach out to me at either jsmith@plmins.com or at 609-513-0928.