Message From the President
“Patience is not passive; on the contrary, it is concentrated strength.”
Bruce Lee
After our successful merger in August 2023, we optimistically welcomed 2024 fully prepared to roll up our sleeves and get to work integrating our new underwriting company, Clearpath Specialty, into Harford Mutual Insurance Group (HMIG). With the new office and team members in Louisville, Kentucky, ready to support our Midwest expansion, we were poised to implement our growth strategies and offer our products to the region. Patience and persistence, however, would be required as the challenges and risks that emerged post-COVID became the norm, and we began to experience an increase in losses and activity in specific lines of business and states that would compel us to refocus our efforts and refine our strategies to ensure financial stability and a return to underwriting profitability.
While the workers’ compensation book of business from Clearpath Specialty was added to the group, it required significant adjustments to stabilize volatility and ensure long-term profitability. These actions were necessary and demonstrate our dedication to preserving the successful legacy of Clearpath and the nearly 6,000 policyholders who rely on us to protect their businesses and safeguard their employees. The merger also solidified our commitment to Midwest expansion with the Louisville office now serving as our Midwest hub.
Georgia and South Carolina played a significant role in our success from 2018 to 2021. However, various challenging conditions in these two states led to deteriorating underwriting performance over recent years, requiring us to adjust our strategies. This negative loss trend began to take shape after COVID-19 as we experienced growing severity and frequency of automobile losses, an increase in severe weather events impacting our property business, and the legal system’s exploitation in unfavorable litigation environments driving up casualty losses. Since 2022, we have focused on addressing this primarily through improved rate-to-exposure; however, the high-value liability environment in both states demanded more substantial changes, and in 2024 we implemented several profit improvement initiatives designed to improve our results.
Adding to an already challenging year, Hurricane Helene, which damaged businesses in Georgia, North Carolina, South Carolina, Tennessee, and Virginia, combined with significant development on a prior year Tennessee hailstorm loss, brought weather-related losses to approximately $21 million. Although these events impacted our financials negatively, they demonstrated the importance of our mission in protecting the financial well-being of our policyholders and being there for them in their time of need.
Adverse loss development from previous accident years continues to impact the industry significantly. HMIG is no exception, especially with our casualty and workers’ compensation portfolios and operating in various challenging litigation environments. Although our overall reserve position adequately addressed the development we experienced during 2024, the ongoing negative trends prompted us to take substantial and proactive steps to strengthen reserves to maintain this position. We will keep assessing our position, adopt suitable practices, and uphold our conservative fiscal approach while continuing planned de-risking initiatives within the portfolio to align to the current risk environment.
The underwriting loss we experienced, worsened by our proactive reserving efforts during the final quarter, were not offset by our investment income and unrealized gains. This resulted in a $28.6 million, 6.9% decrease in Policyholders’ Surplus for the year, bringing the total to $389 million. Our capital position remains exceptionally strong, with our net written premium to surplus ratio at 1:1 – highlighting the critical importance of significant growth in our capital over the past decade.
It is essential to highlight that 75% of our portfolio is performing exceptionally well, thanks to our underwriting efforts over the past few years. As a result, our overall revenue remains extremely robust, with an impressive premium retention rate of 94% for the year. We wrote $56 million in new business and concluded 2024 with $467 million in direct written premium, reflecting a 7.1% increase from 2023. The value of our franchise and agency partnerships is critical to our success, as evidenced by our growth to 91 agencies with over $1 million in premium volume.
“Dripping water hollows out stone, not through force but through persistence.”
Ovid
While not all our financial expectations for 2024 were met, our achievements in operational efficiency and bolstering our foundation for future success remained impressive. We fully integrated all Clearpath Specialty policies into HMIG systems and replaced our last legacy system for accounts receivables and billing. We formed an Artificial Intelligence (AI) governance committee to evaluate AI tools and their impact across all departments. We introduced ACORD uploads for faster quoting and new software platforms to analyze call volume and service levels, budgeting, and auto claims handling. Many of these initiatives were the final components of a strategic plan launched in 2019 to advance the organization and sustain our profitable growth. Thanks to the incredible efforts of our team, we were able to conclude this plan three years ahead of schedule, allowing us to present a new strategic plan to our team at the end of March!
In an industry where strategic underwriting adjustments take two years to fully affect results, patience and persistence are once again necessary as we move into 2025. By understanding and embracing the principle of persistence, we can better navigate our journey toward success, knowing that every effort, no matter how small, brings us closer to our goals. It reminds us that true success is rarely the result of a single, monumental effort. Instead, it is the culmination of consistent, determined actions over time, often blending setbacks with achievements.
As a mutual carrier, it is also important to remember that our primary objective isn’t solely to generate profit. Instead, we strive for the long-term success and capital appreciation essential for fulfilling our mission of protecting our insureds from unforeseen loss events that could threaten their businesses. While we did not meet our financial targets, we successfully maintained our core responsibilities: safeguarding our insureds, providing a quality work environment for our employees, and supporting the communities in which we operate – just as we have for more than 182 years.
So, let’s embrace and learn from the setbacks, and always find the strength to get back up and keep moving forward.
Always to our mutual success.
Steven D. Linkous
President and Chief Executive Officer