Message to Policyholders


For any organization — and certainly, for one as enduring as ours — life will bring periods of challenge, opportunities to invest, and rewards for those who respond to them properly. I am pleased to report that, for Harford Mutual, this year was a year of rewards. We entered 2012 under a cloud of uncertainty, driven by a volatile economy, wavering consumer and business confidence, and a continuing soft insurance climate. The two prior years had brought record-breaking weather catastrophes, both frequent and severe. Throughout the year, the business and operational plans initiated in preceding years gained traction, as management continued to pinpoint and target areas of concern and opportunity; and, by year’s end, the company had posted record highs in revenue, assets, and surplus. The company’s performance underscores the hard work and dedication of the entire Harford Mutual team; and, moreover, highlights how fortunate the company remains.


Our success came amidst a challenging backdrop for American business. Despite a slight uptick in housing starts, modest job creation, and a tenuous rise in consumer spending, economic uncertainty prevailed at home and abroad. Europe’s economy faltered, tensions in the Middle East remained unsettled, and U.S. foreign and economic policies hung in the balance throughout most of the year. I am proud to report that at all levels of the organization our dedicated and talented staff prevailed in the face of adversity. The achievements should be credited to teamwork, strong agency partnerships, solid underwriting, careful management of losses, and quick responses when losses did occur. And, while we are pleased with the results of our combined efforts, we are humbled by the knowledge that our prosperity is governed, in part, by the forces of Mother Nature, and a bit of good fortune.


The severe weather experienced in recent years continued into 2012; though, fortunately for Harford Mutual, less frequent and less severe. As a result, catastrophic claims amounted to $10.4 million for the year. In late June, the Mid-Atlantic states fell prey to a Derecho (a wall of thunderstorms packing damaging, hurricane-intensity, straight-line winds), that formed west of Chicago, and cut a destructive path over 600 miles long, before blowing off the Delmarva Peninsula. Then, during late-October, post-tropical cyclone (“Super Storm”) Sandy hit the Eastern seaboard near Atlantic City, New Jersey, ripping a path through New England. In addition, there were two major spring hailstorms and a June tornado that impacted a segment of our insureds. We are pleased to report that our Claims Department was able to respond quickly to each major event, turning around claims, addressing the needs of our insureds, and getting them back in business in a fair and expedient manner. Finally, the frequency of severe losses from non-catastrophe events we saw in the prior two years abated, reverting in 2012 to a more historic norm.


In response to the growing challenges and changes in the marketplace, we took steps to maintain our strength, focused on underwriting discipline and financial security, while being mindful of the needs of our agents and insureds. Our solid underwriting and business development efforts paid strong dividends in 2012. Direct written premium growth of 9.5%, $10.8 million, raised our overall writings to $123.7 million — the highest revenue in the company’s history. This year-over-year change, the largest since 2002, outpaced the industry’s commercial sector, and speaks to the company’s very strong agency relationships in writing quality risks. Working in concert with our agencies, Business Development and Underwriting worked to maintain renewals at fair and adequate pricing levels, while taking advantage of opportunities to harvest new accounts. We set the bar high for new business, achieving $21.3 million for the year in the most conservative way by seeking out opportunities with our agents to introduce ourselves to many new insureds; who, like our current policyholders, were looking for a stable market, strong carrier, and superior service.


Good fortune and strong underwriting performance ultimately led to an outstanding 92.7 combined ratio for the company, playing a pivotal role in adding $16.8 million to the Policyholders’ Surplus, bringing our total to $162.6 million. Such historical highs, measured against 170 years of operation, reinforce our position as a sound and fiscally responsible provider — a fact reaffirmed by A.M. Best with a rating of “A (Excellent)” with a “Stable” outlook.


While underwriting performance and financial security are paramount strategies, we understand the need to constantly improve and provide quality services to our customers and agency partners. In early-2012, the company embarked on a multi-year technology initiative intended to develop and implement system changes that will enhance delivery and dramatically improve communications and business transactions with our agents. Marked by frank conversations between IT and all areas of the company, along with invaluable input from our agents, we have begun to identify systems that will improve ease of doing business and accelerate speed to market, making it possible for us to be more responsive to the ever-changing needs of our insureds and partners. As we look to the future, we recognize the need to expand the company and grow in an accelerated fashion, while developing the products, services, and systems that will enhance our efficiency and support our growth.


After looking past the disappointing losses driven by record-setting weather events of 2010 and 2011 in an attempt to convey all the positive development and work taking place here, it is certainly gratifying to now be able to expound on the outcomes seen in 2012 for those efforts. No doubt, we are subject to Mother Nature and good or ill fortune, but we must be prepared to maintain the security of the company in those difficult years and remain positioned to take advantage of success when it presents itself to us. We most assuredly captured that advantage in 2012!


The hallmark of our service — our Commitment to Mutual Success — requires a concerted effort, and so it is appropriate to say a word of thanks to the many people who help ensure that trust. We thank our Board of Directors for their guidance, wisdom, and leadership. We recognize the many contributions of our employees, whose work serves to steward the resources entrusted to us. We are grateful for the loyalty of our agency partners and remain deeply committed to their success and to serving their needs and those of our policyholders. Finally, while we strive to always work as a team, individual efforts do stand out. So, in that context, on behalf of the entire organization, I want to thank Joyce Thomas (retired Vice President and Secretary) and Carroll Fitzgerald (retiring Chairman of the Board) for their long tenure, knowledge, skilled expertise, and their unfailing leadership. We wish them both all the best in their lives ahead, and thank them for leaving Harford Mutual so much stronger than when they first entered our doors.


As we look to 2013 and the years ahead, we do so from a position of strength and fortitude. Thanks to our conservative principles; steadfast underwriting discipline; outstanding team of directors, officers, and employees; and our excellent and longstanding agent relationships, we have continued to increase our strength, even in the face of major adversities, protecting those who entrust us with so much. With a resolute responsibility to our values and principals of mutuality, we remain committed to our mutual success. Thank you for your continued support of Harford Mutual.




Steven D. Linkous

President and Chief Executive Officer

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