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March 8, 2005
To the Policyholders of Greater New York Mutual
Insurance Company
I am
pleased to deliver the Annual Report of operations and inform our
policyholders that 2004 was, by every measure in our industry, the
most successful year in the history of Greater New York Mutual Insurance
Company and its two wholly owned stock subsidiaries, Insurance Company
of Greater New York, and Strathmore Insurance Company. It was a
year of record growth of premiums, net income, surplus, and assets.
Although the industry had favorable
results last year, which enabled some insurance companies to reduce
their loss reserve deficiencies, A.M. Best in its January 2005 edition
of Review and Preview reported that year-end industry loss and environmental
reserves were still deficient by about $59 billion; that price softening
in many commercial markets had accelerated more quickly in the latter
half of 2004 than most pundits had predicted; that in an attempt
to gain market share, standard carriers had already begun to quote
on gray area excess and surplus business; and that the need to improve
underwriting standards has become more important in recent years
as investment income declined in an environment of nominal interest
rates.
For our Company, the 2004 year was
a continuation of the successful operations that began in 1999.
The solid foundation which we had built in prior years for future
growth and development was made even stronger last year by our continued
disciplined and focused approach to all aspects of our operations.
In the last six years, our direct written premium has grown by 272%
to $293 million, admitted assets have grown by 55% to $721.8 million,
and surplus on a statutory basis has grown by 38% to $249.4 million.
All aspects of our operations were
successful as indicated by the notable financial and operational
achievements in 2004 as follows:
- Net premium writings grew by 7.7% to a record level of $235.7
million compared with the industry's premium growth rate of about
4.8%.
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The ratio of net premiums written to surplus
for the twelve months ending December 31, 2004 was .95 to 1.
This reflects conservative leverage, which resulted from the
strong growth of our surplus.
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Pre-tax operating income, on a conservative
statutory accounting basis, increased 38.4% to $28.2 million.
Our after tax income increased 60.2% to $17.8 million.
- The combined ratio declined 1.1 points to 97.9% and the operating
ratio was a very profitable 86.4%, which we estimated is in excess
of 5 points more profitable than the industry's operating ratio.
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Consolidated statutory surplus increased 7.6%,
or $17.7 million, to a record level $249.4 million.
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Our balance sheet, which on a relative basis
is one of the strongest in the industry, reflects asset strength,
superior liquidity, conservative leverage, and full loss reserves.
| a. |
Admitted assets
grew 9.5% or $62.6 million to $721.8 million.
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| b. |
Our bond portfolio
of $557.2 million comprises 77.2% of our admitted assets.
Of these bonds 60.6% are securities backed by the full
faith and credit of the United States Government, and
32.3% are highly rated municipal bonds.
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| c. |
Invested assets including
accrued investment income at year-end 2004 of $610.7 million
exceeded our loss and loss adjustment expense reserves
of $304.1 million by a wide margin of $306.6 million,
which produces liquidity ratios far and above industry
standards.
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| d. |
2004 was the twenty-fourth
consecutive year in which independent casualty actuaries
who are Fellows of the Casualty Actuarial Society, certified
the adequacy of our loss and loss adjustment expense reserves
to the regulatory authorities, and further, our held reserves
were 104.3% of the reserves projected by the independent
casualty actuaries. |
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Management undertook
the reengineering of the General Liability Claims Department
in 2001, which has generated a significant reduction in loss
costs in each of the ensuing years. Since 2001, the number of
claims in suit has declined 18.9%; the number of open general
liability claims has declined 6.7%; the average paid claims
for the general liability section of the Commercial Multi Peril
policy has declined 12.9%; while our direct written general
liability premium increased 109.2%.
It is a pleasure
to advise that once again, A.M. Best Company affirmed our A+ rating
and classified our strong capitalization under its financial model
(BCAR) at 225.3%, which is well above the 175% threshold required
for a Superior (A++) rating, and considerably higher than the industry's
BCAR rating of 187.9%. Standard & Poor's also affirmed our A
rating in February 2005, and revised its outlook to positive from
stable, and classified our capital adequacy ratio at 312%, well
above the threshold of 175% required for a Superior (AAA) capital
rating. The Standard and Poor's rating analysis stated in part:
...The revised outlook is based upon our higher
level of confidence in the sustainability of GNY's positive
increases in operating income. It also reflects the view that
GNY's competitive position will be sustainable as the company
grows its niche business at a measured pace through disciplined
underwriting and careful risk selection. GNY has met or exceeded
all of Standard & Poor's expectations for 2004.
The ratings on GNY reflect its strong earnings in 2004, sustainable
strong competitive position in its niche commercial multi-peril
business (with early signs of measured growth in other states
besides the tri-state area), and extremely strong capital adequacy,
partially offset by its geographic concentration in New York...
For the last several
years the GNY Insurance Companies, on a consolidated basis, have
been the fourth largest writer of Commercial Multi Peril business
in New York State, and within the Commercial Multi Peril line, the
second largest writer of general liability insurance. Also, for
the fifth consecutive year in 2004, GNY was named one of the fifty
best property/casualty insurance companies in the United States
by Ward Financial Group, in terms of performance out of 2,700 property/casualty
insurance companies.
Last year, management decided that
prudent underwriting practices required the Company to diversify
into other areas and regions, and expanded its area of operations
into upstate New York, Massachusetts, Pennsylvania, Maryland, and
Virginia, and began doing business with many local producers in
the important communities of each of those states and regions. The
Company also opened a new modern branch office located at 1900 Crown
Colony Drive,
Quincy, Massachusetts. We believe that these new operations will
prove to be most profitable to our producers and to our Companies
in the years to come.
In 2004, Mr. Max Freund, who had been
a member of our Board for seven years, resigned from the Board for
reasons of poor health, and passed away shortly thereafter. Mr.
Freund was a devoted director of our Companies, and served with
distinction on our Boards. To replace Mr. Freund, the Board of Directors
elected Mr. Larry L. Forrester. Mr. Forrester retired from his position
as President & CEO of the National Association of Mutual Insurance
Companies (NAMIC) after 33 years of service, and became President
& CEO of the Insurance Education Foundation, a not for profit
organization committed to insurance education at the secondary school
level. The Officers and Directors of our Companies are in a position
to benefit from Mr. Forrester's vast knowledge and experience in
our industry, and we welcome him to our Boards.
In closing, I wish to express appreciation
to my fellow officers and our capable, dedicated, and hard working
staff who have contributed so significantly to our record results.
And, finally, I am most grateful for the outstanding contribution
to our companies' success by our Board of Directors and by our President,
Dominick Vicari for the superior performance and skill with which
they carried out their duties.
Respectfully
submitted,
Warren
W. Heck
Chairman of the Board &
Chief Executive Officer
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