2009 Annual Report 2009 Annual Report : Page 5
2009 FinAnciAl OVErViEw The Main Street America Group achieved several significant financial outcomes in 2009 following a very challenging economic environment that had greatly impacted our 2008 results. We exceeded our goals and outperformed the property-casualty industry in a number of areas. our 2009 results inCluded: • Return on equity of 18.2 percent versus our 2008 return on equity of -6.2 percent. • Combined ratio of 97.4, which will stand up well against the industry and our peer company results. It was the fourth consecutive year we had achieved an underwriting profit and the sixth year out of the last seven where we recorded a combined ratio under 100. We fell short of our 97.0 goal mainly due to the impact of lower-than-planned premiums on our expense ratio. • Surplus increase of $84.5 million to raise our total surplus to $692 million. This followed a surplus decline of $12.5 million in 2008. Our premium- to-surplus ratio also improved to 1.18:1. • Net income gain of $74.4 million to $89.5 million, an 83 percent increase. • “A” rating affirmed by A.M. Best, the P&C industry’s premier rating agency, with a stable outlook. We had the best investment year in our history, gaining $105.5 million. Our 2009 investment statutory return exceeded our plan by $28.5 million. We exceeded our goals and outperformed the property- casualty industry in a number of areas. Overall, our investment portfolio returned just under 14 percent versus its blended benchmark of 8.7 percent. Fixed income securities (92 percent of our portfolio) returned 13.1 percent, and equities and high yield investments (8 percent of our portfolio) returned 30.1 percent. Our asset allocation decisions contributed greatly to the strong investment results as we recognized $21 million in municipal bond gains. After significantly reducing our equity portfolio in 2008, we gradually began to rebuild it during 2009. The equity investments we made in 2009 returned just under 43 percent and new private equity returned slightly over 40 percent. Our net written premium increased 1.3 percent to $815 million, which was below our plan but slightly better than the industry that is projected to report its third straight year of decline. Our premium shortfall reflects significant price softening in the commercial lines market, but we remained steadfast in our resolve to write business only at prices that will produce profits. We finished 2009 with a loss ratio slightly better than we expected, but 1.2 points above 2008. Our loss reserve position remains very strong. for more details regarding our 2009 financial results, please see pages 22-24 of this annual report, as well as our web site, www.msagroup.com. surPlus growth (dollars in millions) key result MeasureMents (dollars in millions) 2009 2008 CoMbined ratio net written PreMiuM return on surPlus and equity surPlus and equity PreMiuM-to-surPlus ratio 97.4 $815 18.2% $692.0 1.18:1 94.9 $805 –6.2% $607.5 1.33:1 2007 95.8 $851 17.8% $620.0 1.35:1 the Main street america group 2009 annual repor t 5 2009 2008 2007 2006 2005 $607 $692.00 .50 $620.00 $560.00 $524.00
2009 Financial Overview
The Main Street America Group achieved several significant financial outcomes in 2009 following a very challenging economic environment that had greatly impacted our 2008 results. We exceeded our goals and outperformed the property-casualty industry in a number of areas.
Our 2009 results inCluded:
• Return on equity of 18.2 percent versus our 2008 return on equity of -6.2 percent.
• Combined ratio of 97.4, which will stand up well against the industry and our peer company results. It was the fourth consecutive year we had achieved an underwriting profit and the sixth year out of the last seven where we recorded a combined ratio under 100.
We fell short of our 97.0 goal mainly due to the impact of lower-than-planned premiums on our expense ratio.
• Surplus increase of $84.5 million to raise our total surplus to $692 million.
This followed a surplus decline of $12.5 million in 2008. Our premiumto- surplus ratio also improved to 1.18:1.
• Net income gain of $74.4 million to $89.5 million, an 83 percent increase.
• “A” rating affirmed by A.M. Best, the P&C industry’s premier rating agency, with a stable outlook.
We had the best investment year in our history, gaining $105.5 million. Our 2009 investment statutory return exceeded our plan by $28.5 million.
Overall, our investment portfolio returned just under 14 percent versus its blended benchmark of 8.7 percent. Fixed income securities (92 percent of our portfolio) returned 13.1 percent, and equities and high yield investments (8 percent of our portfolio) returned 30.1 percent.
Our asset allocation decisions contributed greatly to the strong investment results as we recognized $21 million in municipal bond gains. After significantly reducing our equity portfolio in 2008, we gradually began to rebuild it during 2009. The equity investments we made in 2009 returned just under 43 percent and new private equity returned slightly over 40 percent.
Our net written premium increased 1.3 percent to $815 million, which was below our plan but slightly better than the industry that is projected to report its third straight year of decline. Our premium shortfall reflects significant price softening in the commercial lines market, but we remained steadfast in our resolve to write business only at prices that will produce profits.
We finished 2009 with a loss ratio slightly better than we expected, but 1.2 points above 2008. Our loss reserve position remains very strong.
For more details regarding our 2009 financial results, please see pages 22-24 of this annual report, as well as our web site, www.msagroup.com.
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