Corporate Office - Rockingham Group

As is true for most businesses
these days the outlook for the
property and casualty insurance
industry continues to evolve.
Weather volatility is a growing
concern for insurers even though
it was less of an issue during 2013.
While dramatic changes related
to technology and the shift to a
world economy are impacting the
business, the ultimate effect is yet to be seen. Responding to
shifts in consumer preferences and seeking cost efficiencies,
some companies will continue to take meaningful steps to
reposition themselves by moving more of their business
to an electronic online environment. It is not yet clear to
what extent customers are willing to accept more of a selfservice environment for their insurance needs in order to
reduce their short-term cost. The regulatory environment
will continue to produce new challenges reflecting not only
a battle for control at the state, federal and international
levels, but also more restrictions on underwriting practices
that may raise premiums for those who manage risk well
and reduce them for those who do not.
There is no doubt that terrorism and computer attacks
present growing threats that the P&C industry must
address.
All of this means there is no safe haven for responsible
companies like Rockingham. That is why we took one
of the biggest steps in our 145 year history during 2013
and converted the corporate structure to a Mutual
Holding Company that became effective November 1,
2013. While this change will have little noticeable impact
on policyholders in the short term, it provides desirable
flexibility necessary for the company to adapt and
grow in the years ahead while still remaining a mutual
company. We are very focused on achieving the growth
and diversification that will be necessary for us to address
the significant costs of doing business and unpredictability
that is inherent in our business. We will continue to
develop new lines of business, enter new geography and
provide easy to use online options while maintaining our
traditional focus on individual customer service.
W. Neal Menefee
President & Chief Executive Officer
Rated A (Excellent)
by A. M. Best Company
2013
Agents conveniently located
throughout Virginia and Pennsylvania
Nancy H. Agee .........................Roanoke, VA
Gene P. Berry...........................Indianapolis, IN
Warren K. Coleman ..............Richmond, VA
Stephen C. Fogleman............Alexandria, VA
H. Roger Higgins, III ..............Charlottesville, VA
Anne B. Keeler ..........................Staunton, VA
W. Neal Menefee ....................Harrisonburg, VA
Carolyn F. Sedwick ................Orange, VA
Pamela L. Turner ..................Charlottesville, VA
Christopher S. Runion..........Bridgewater, VA
The Rockingham Group is a proud
member of the following:
Corporate Office
633 East Market Street, Harrisonburg, VA 22801
540-434-5344 or 800-434-7736
www.rockinghamgroup.com
W
eather conditions were much better in 2013
compared to recent years giving the property and
casualty industry some welcome relief from catastrophe
related losses and producing the best underwriting
results since 2007.
Premium growth strengthened as the industry continues
to recover from the revenue decline that occurred
during the recent recession. Overall growth was about
4% in terms of premiums written. Higher revenue and
lower losses together produced a combined ratio of
approximately 96% meaning the industry generated
about 4¢ of profit for every $1.00 collected in revenue.
In spite of interest rates that remained at historically low
levels, the industry saw good improvement in investment
income mostly due to strength in the equity markets.
The overall result was a much needed improvement in
net profitability and a respectable increase in surplus for
the industry.
The legislative and regulatory arena remained very
dynamic and troubling. We continue to see political
efforts at the federal and state level that would block
or disrupt logical business responses to factors that
impact the industry. In
response to political
“In some instances overpressure to keep rates
regulation is making it
low, Congress took action
more difficult for
to rollback reforms that
insurance companies to set would have put the
rates in accordance with National Flood Insurance
the factors that ultimately Program on more sound
financial footing.
The
produce claims.”
focus in Washington,
D.C. on income disparity
and insurance cost equalization could disrupt the
homeowners market and raise premiums for many
policyholders. And in Virginia we saw a major effort by
plaintiff attorneys to change the underinsured motorist
law in order to make it very challenging to pursue
underinsured motorists for the losses they cause.
In some instances over-regulation is making it more
difficult for insurance companies to set rates in
accordance with the factors that ultimately produce
claims.
Consolidated Balance Sheet
December 31, 2013
Statutory Basis
ASSETS: Bonds $ 57,080,654
Common stocks 25,151,020
Short-term investments 7,195,628
Real estate 974,739
Assessments & premiums due
6,649,061
All Other 7,789,286
Total Assets $ 104,840,388
Asset Trends
Millions
$110
$100
$90
$80
$70
$60
$50
2009
2010
2011
2012
2013
LIABILITIES & SURPLUS: Net unpaid losses & unpaid loss
adjustment expense
$ 13,531,453
Premium unearned 21,474,118
All Other 11,241,905
Total liabilities 46,247,479
Surplus (Policyholder safety fund)
58,592,909
Total Liabilities & Surplus
$ 104,840,388
Millions
Surplus Trends
$60
$55
$50
$45
$40
$35
2009
2010
2011
2012
2013
Buffamante Whipple Buttafaro, P.C. conducts an annual independent audit of the
companies’ results.
*Rockingham Mutual Group, Inc. is the parent company of the Rockingham
Group which includes Rockingham Group, Inc., Rockingham Insurance Company,
Rockingham Casualty Company, and Rockingham Mutual Service Agency, Inc.
W
hile we did see some benefit from moderate
weather conditions in 2013 the amount of losses
booked was well above expectations. We were challenged
by several large fire losses during the year, which pushed
our combined ratio to 105
meaning we paid $1.05
for losses and expenses
for every $1.00 of revenue
collected. High property
loss activity not only
depletes our financial
resources, but also raises
our cost of doing business
going
forward
and
translates into property
premium increases that
many of our policyholders
are seeing. Our auto insurance
program continues to perform
well leading to only moderate
adjustments in premiums
related to driving performance
for most policyholders.
We were pleased to see our
revenue
growth
remain
strong at over 10% during the year as we added new
policyholders while retaining a high percentage of
existing policyholders. Our intent is not to be a low
price player, but rather a steady provider of reliable,
responsive and economical insurance coverage for our
customers. Recent results indicate that our total value
package compares favorably to what is being offered by
other service oriented insurance companies.
Investment markets were reasonably favorable across
the year and our strategy produced respectable returns
without assuming excessive risk. We continue to manage
our investment portfolio in a conservative fashion with
broad diversification in the equity and fixed income
markets. Investment income coupled with appreciation
in the value of our holdings during the year more than
offset our underwriting loss producing an increase in
surplus of about 7%. The strength of our balance sheet
allowed us to maintain our A (excellent) rating with the
A.M. Best rating organization.