Second Quarter 2005   Volume 12 Number 1

Since taking on my new role at Penn-America, I've met with 59 of our 65 general agents. My goal has been to better understand each agent's strategies and initiatives and to hear first-hand what Penn-America must do to maintain — or move into — our intended position as the first market of choice for our agents' small commercial business.

In every part of the country, I've heard that our core business strategy is working; Penn-America's greatest strength is that we appoint a limited number of agencies (two to six in a given state) and create franchise value for every agent. We do that primarily by providing high levels of responsive service and excellent information technology support. And we do it better than any of our competitors. It's a straightforward equation that works for us and our agents.

Clearly, we have a vested interest in every one of our agents' success. When you build a nationwide business around a limited number of agencies, as we have done, every agent must be a profitable, growing enterprise. In essence, the current and future success of Penn-America is dependent upon each and every agency relationship. So, from Penn-America's perspective, what makes a successful agency relationship? Here's what I've observed:

• We are the first choice for the agent's small commercial business;
• The agent invests in technology;
• The agent knows his or her territory and the retail brokers with whom they do business;
• The agent has experienced underwriters and a disciplined underwriting process that ensures our underwriting expectations are met.

Ultimately, a successful Penn-America agency relationship is built on a $5-6 million profitable book of business, which produces significant returns both for us and our agents.

Having a small number of agents gives us another benefit: we solicit and receive continuous feedback, it's frank and we can respond rapidly and uniquely. So I've also been asking our agents, "How can Penn-America help to make you more successful?" Their answers tell me that we have room for improvement, that we can make doing business with us even easier.

Our agents have given us great suggestions for extending more underwriting authority so that they have to make — and we have to process — fewer submissions. They've told us that our electronic underwriting manual can be even easier to use. They want to see our underwriters in their own offices more frequently. All of these improvements will work together; by extending more authority to our agents and delivering a better manual that communicates our underwriting expectations more clearly, we'll have fewer submissions to be approved by our underwriters, allowing them more time to visit our agents.

We're working on plans and new uses of technology to make all of these changes and others. We're sharpening our tools in Underwriting, Claims, Financial and Information Technology, to improve our responsiveness and to increase the "value" in franchise value.

Sincerely,

Joseph F. Morris
President and Chief Executive Officer

 

Summary Financial Data
(In millions, except ratios)

	Six Months Ended June 30,
	2005	2004
Gross Written Premiums	$133,183	$129,019
Statutory Combined Ratio:
Loss Ratio	58.7	60.7
Expense Ratio	24.3	30.1
	83.0	90.8
	At June 30, 2005	At December 31, 2004
Total Assets	$446,146	$441,646
Statutory Surplus	$158,427	$140,336

A.M. Best Rating: A- (Excellent)