The President’s Message: Spring 2021
Last year was a difficult year for everyone including The WRC Group. The Covid-19 pandemic changed the way we lived our lives and the way we conducted business. Working from home, wearing masks and social distancing became the new normal. Even with this, The WRC Group was able to maintain our service levels and response to the needs of our reinsured clients, agents and policyholders.
Last year was also a difficult year due to losses sustained by our reinsured clients, with the most significant event being the derecho in Iowa on August 10. That storm alone created over $17 million in loss to WRC. Additionally, a significant hail event in July in Iowa as well as several storms in other states impacted our results.
The fourth quarter saw an increase in the frequency and severity of fire losses. Overall, this was the worst loss year in WRC’s history as WRC sustained almost $40 million in losses. Two factors reduced the impact of these losses on our ultimate results. First, we recovered almost $18 million from our reinsurance program and second, we were able to carryback losses for tax purposes, which provided us with a large federal tax refund.
Financially, WRC sustained a 127 combined ratio for the year with a loss to surplus of $2.3 million, which brings our surplus to $53.1 million. We continue to show a very strong net premiums earned to surplus ratio of 0.56 to 1.
This is the second consecutive year where severe weather events caused a loss to surplus at WRC. In 2019, winter storm losses and a small but destructive derecho in Wisconsin gave us our second worst year ever.
The first quarter of 2021 saw the continuation from 2020 of an increase in the fire losses sustained by our reinsured clients and fortunately there were no severe weather events. These fire losses have involved dwellings, dairy barns, machine sheds and just about anything that could burn. We have been reviewing these losses to determine if there are any patterns that are discernable but have found nothing at this time. Even with these losses, we were able to add $500,000 to surplus.
We were able to renew our 2021 reinsurance program with modest increases to our rates and retentions. Our reinsurers pointed out that changes were needed in primary company operations particularly with rate increases and exclusions. The pandemic caused reinsurers to add communicable disease exclusions and cyber liability exclusions to WRC’s reinsurance contracts. Our reinsured clients will need to review their rates and incorporate these exclusions into their policies.
We postponed our Annual Shareholders’ Meeting last year and held it virtually in August due to the pandemic. This year we again postponed the meeting to August but we are hopeful that with the lifting of the mask requirements and social distancing, we will be able to hold the meeting in person at Lambeau Field in Green Bay, Wisconsin, on August 4, 2021. We will be celebrating the 90th anniversary of WRC and the 30th anniversary of 1st Auto & Casualty. I hope you will be able to join us.
In closing, I am proud of how well The WRC Group team performed last year. Despite the concerns over the pandemic, the rapid work-from-home orders and the frequent changes to the Centers for Disease Control and Prevention guidelines, our team did an outstanding job of meeting the expectations of our reinsured clients, agents and policyholders.
We are one day closer to this being over. Stay safe and stay well.