In Memoriam - Germania Insurance by linxiaoqin


									The Road Ahead
Annual Report for Fiscal Year 2011
                                                                                The Road Ahead

                                         Our 2011 strategic plan theme, “Germania–Committed to
                                         Excellence,” reflects our continuing drive to be the very best in all that
                                         we do. To provide emphasis to our new vision statement, this year we
                                         selected “e Road Ahead” as our 2012 strategic plan and annual
                                         report theme. Our new vision continues our commitment to excellence
                                         in aspiring to be #1 in customer experience.

                                         2011 was a year of catastrophic events which spanned the globe. For
                                         Germania, we experienced a record winter freeze, frequent and severe
                                         hailstorms during the spring, and wildfires fueled by drought
                                         conditions during the summer and fall of the year. While these events
                                         provided us a few obstacles and challenges throughout the year, we
                                         have weathered the storms and have remained on course.

                                           In July of 2011, David Sommer retired as president and chairman of
the board. His 32 years of service and dedication to Germania – and our close personal and professional
relationship – make David a tough act to follow. Yet as I take the helm, as only the 7th president in the
Association’s 115 year history, I know I am simply building upon the solid foundation which has been laid by
those who came before me. Our company’s strength and commitment to Texas families steers us steadily
toward our mission of providing “fair and honest insurance protection through competitive products and
responsive service.” It is an honor to do so with such strong leaders by my side: Gary Weiss, 1st vice president;
Blake Lovelace, 2nd vice president; and Derrell Krebs, secretary-treasurer.

Our new management team remapped the road ahead with a new vision statement for Germania: Our vision
for the next five years is to be #1 in customer experience through the products and service we provide. During
this period, Auto will dominate the growth in our business and we will grow policyholder surplus equal to or
greater than net written premium. Our vision provides a clear picture to our agents and our employees of the
direction Germania is headed over the next few years.

In the final weeks of the year, we received an A- (Excellent) rating with a stable outlook from A.M. Best
Company. While lowered from A (Excellent), the negative outlook which had been in place since 2009 was
removed, evidencing the confidence and respect the rating agency has for Germania’s board, management and
agency force. Considering the extreme events logged in the state and the nation, we are encouraged by and
optimistic about the A- (Excellent) rating.

As you will see in the following pages, Germania continues to embody the spirit and vitality of the mutual
insurance concept. We are membership owned and membership driven, existing to serve our policyholders.
Our business partners share in our commitment to Texas and Texans and we thank them for their support.

I look forward to traveling the road ahead with our Association and am proud that Germania is “e Insurance
Texans Trust.”

                                                                               Paul Ehlert
    Headed in the Right Direction
    Market Overview

          We believe Germania’s 115 year focus on serving the Texas market provided us with another year of exceptional
          growth. Our competitive products, dedicated agency force and employees continued to drive our success.

          e 82nd Legislative Session was very active regarding insurance. In addition, Texas trial lawyers attempted to
          roll back some of the lawsuit reforms that had been passed in previous sessions. By the end of the session, the
          Texas Department of Insurance withstood the Sunset review, the Texas Windstorm Insurance Association
          benefited from positive reform legislation and no negative legislation was passed that affected Germania and
          other Texas farm mutuals.

          As in years past, members of Germania’s Legislative Committee and representatives of other Texas farm
          mutual’s met with key state legislators. e committee mounted a grass-roots political effort to contact
          individual representatives about key issues. Employees actively supported the Germania Farm Mutual Political
          Action Committee, with 109 employees signing up for GFM PAC payroll deduction.

          We look forward to working with the newly appointed Texas Department of Insurance Commissioner, Eleanor
          Kitzman, whose experience and passion are sure to have an impact on the insurance marketplace in Texas. e
          appointment brings the Houston native back to Texas from South Carolina and early meetings with her have
          shown favorable support of farm mutuals serving Texas property owners.

          It remains clear that our niche as the Texas insurer, our understanding of the Texas market, along with
          generations of faithful policyholders, a loyal agency force and a staff of well-informed employees, keep
          Germania as the largest farm mutual in Texas – and “e Insurance Texans Trust.”

                                                                         Curves in the Road
                                                                                          Catastrophe Management

As an insurer, Germania is at its best at the worst of times. Our Claims Department had ample opportunity to
shine in 2011 as the year challenged them with everything from unusual winter freezes, near record tornado &
hail activity and unprecedented wildfires.

Winter storms produced freeze-related claims of over $5.5 million, much higher than we would experience in a
typical year. It was an extremely active hail season with approximately 20,000 storm claims and losses totaling
more than $100 million for the year. Fortunately, no major hurricanes hit Texas in 2011 and Tropical Storm
Lee managed to produce fewer than 100 claims for us in September.

To top off a difficult year, drought conditions and high winds resulted in the worst year for wildfires in Texas
history. Nearly 3.7 million acres of the state burned in 2011. e costliest wildfire in the state’s history blazed
through 34,000 acres in Bastrop. is catastrophe resulted in 380 Property and Auto claims at a cost of $37

e strength of Germania’s Catastrophe Management Plan was on display in this trying year. Our Catastrophe
Response Team was among the first responders to many of the hardest-hit areas, providing additional living
expenses on covered losses. In Bastrop, the Catastrophe Response Unit remained open 12 hours a day as
adjusters handled site visits. As we look back on this enormous disaster, we are grateful for their dedication and
proud of the way they helped our members to put their life back in order as quickly as possible aer this event.
It is at these times we are humbled by the assistance we provide to our members and the teamwork we
demonstrate while serving.

    The Road We’ve Traveled
    2011 Accomplishments

          In 2011 we continued to focus on the ease of doing business processes through improved technology and
          ongoing feedback.
              • Project Genesis continued to develop Information Technology enhancements in 2011:
                   - Phase I added a new web-based claims capability which allows policyholders to submit claims via
                     GermaniaConnect 24/7.
                   - Phase II further improved the claims process by automating claims assignments to adjusters.
              • We launched a new online claims satisfaction survey for policyholders in April providing us with valuable
                feedback on our claims process. Policyholders may complete the survey for claims that have occurred
                within the past two years. e survey takes 1-2 minutes to complete and can be accessed through the
                policyholder’s online claims history.
              • In an ongoing effort to improve our agent relationships, we contracted with Deep Customer
                Connections, a third party company, to measure the expectations of our agents and benchmark our
                performance against key competitors. Our survey was fielded to our agents of record, producers and
                customer service representatives.
                   - Germania Insurance was recognized as one of the Top Ten P&C carriers in the overall survey results.
                   - In 2007, the same survey showed Germania’s “Competitor Comparison Overall Ease of Doing
                     Business Index” at 92.7 percent. e 2011 result showed an improvement to 95.2 percent.
              • Our Employee Satisfaction Survey also showed improvement over an earlier survey. On a scale of 1-5
                with 5 being the best, our employees rated their satisfaction at 3.93 in 2011, compared to 3.84 in 2007.
              • We upgraded our Voice Response Unit to include a new welcome message and improved menu options
                that provide agents and policyholders access to policy data.
              • We established a High Availability Policy Administration System in the Home Office data center, plus
                conducted a system failover test to ensure data recovery following a hardware failure. e system
                minimizes the risk of data loss in the event of a disaster.

          In 2011, we implemented Insurance Based Scoring for new and renewing Germania Farm Mutual business
          effective January 1, 2012. is gives Germania a more competitively priced product in the marketplace.

          Improving mileage through marketing
             • e 6th annual agents conference took place in January 2011 at the Renaissance Marriott Hotel in
               Austin. We hosted 407 agents and guests, plus 57 Home Office employees. e successful event
               continues to invigorate Germania’s team of partners and set the groundwork for a successful year of
             • We appointed four new agencies and five additional satellite offices for a total of 366 active Germania
               agencies across Texas.
             • Germania received widespread recognition in 2011 with our sponsorship of “Texas Ranch Properties.”
               e television program hosted by outdoorsman Keith Warren, showcased rural/ranch properties around
               the state and included a “Germania Minute” in each segment, featuring educational information about
               rural insurance protection. e 26-week program aired three times a week from July–December on
               RFDTV via DISH Network and DIRECTV.
             • Two new slim-line tabletop display units were introduced in 2011 and Germania agents have been
               enthusiastically using the promotional displays for product messaging at trade shows, community events
               and other meetings.
             • We added new illuminated channel-letter Germania logo signs as a purchase option through the
               Germania signage program on AdSource. e energy efficient LED sign is available in two sizes and
               competitively priced.
    • We launched the flexible Custom Direct service for agents who want to build customizable Germania
      marketing materials on demand. e printed items can be personalized with the agent’s photo plus
      contact information. In addition, the service offers exclusive Germania materials like door hangers and
    • A new “About Your Claim” brochure was created for our agents to distribute to policyholders at no cost.
      It is an easy-to-understand overview of the claims process including terminology, FAQs and information
      on Germania claims programs like Safelite and Direct Repair.
    • Print versions of our new ad campaign – “We Understand” – were made available to agents through
      AdSource. e print ads can be customized with the agent’s contact information for placement in their
      local publications. Pre-recorded radio ads are also available for agents to place on local stations.

Germania continues to move forward using superior performance and reliable strategies to improve our
products and services. We appreciate all who make these achievements possible.

    The Road Ahead
    Into the Future

           As the road ahead reveals itself, Germania remains steady as we enter our 116th year. e values and guiding
           beliefs that have led us here continue to light the pathway ahead and our new vision statement provides us with
           a clear map for the years of success in front of us.

                 Our vision for the next five years is to be #1 in customer experience
                 through the products and service we provide. During this period, Auto
                 will dominate the growth in our business and we will grow policyholder
                 surplus equal to or greater than net written premium.

           ree vision committees, comprised of members of the senior leadership team, have been tasked to develop
           strategies to achieve the goals of the new vision statement.

               • e Customer Experience Committee will strategize to achieve the goal of “being #1 in customer
                 experience through products and service.” Because providing competitive products and responsive service
                 is fundamental to Germania’s success, the team is implementing actions that both meet and exceed the
                 expectations of our policyholders, our agents and our employees.
               • e vision statement acknowledges that “Auto will dominate the growth in our business,” and the Growth
                 Committee is seeking ways to control property policy count growth to 1% and achieve a 5% policy count
                 growth rate for Auto. Until 1980, Germania was strictly a Property company. Auto now comprises 36
                 percent of our book of business, compared to an average of 53 percent within the top 25 U.S. companies.
                 Over the past several years of inclement weather, Auto has remained profitable and has served as a buffer
                 to the weather-driven volatility in our property book. Germania has experienced good Auto growth over
                 the past few years and we will continue to move toward balancing our premium writings in Auto and
               • e Premium/Surplus Committee will work toward a target of obtaining a 1.5:1 leverage ratio in the next
                 five years, growing policyholder surplus equal to or greater than net written premium. We have been
                 successful over the past several years in growing our written premiums in Auto and Property.
                 Unfortunately, with the weather-related surplus losses we experienced in 2008, 2009 and 2011, our
                 premium to surplus ratio has declined to 2:1, compared to an industry ratio closer to 1:1. e committee
                 is developing ways to improve our leverage ratio by growing our surplus at least as fast as net written
                 premium. is improvement to our leverage ratio is an important benchmark used by rating agencies,
                 regulators and the industry to measure financial strength.

           All of Germania is focused on our vision statement in 2012, dedicated to forging our path through teamwork,
           continuous process improvement, exceptional service, integrity and honesty. With the needs of our
           policyholders in sight, we look to the year ahead as one of purpose, shared success and distinction.

    Checking the Mileage

           2011 proved to be a multi-faceted year. As part of our commitment to excellence, Germania implemented
           projects to increase the ease in which agents and policyholders do business with us and to make our current
           products more competitive. e year also proved to be challenging as the company experienced catastrophe
           losses which impacted the financial results.

           Direct Written Premium for 2011 grew 4 percent to a total of $381 million. e policy count growth rate for
           Property, Auto and Liability remained consistent throughout the year at 3 percent, 6 percent and 3 percent
           respectively. Both cross-selling efforts and better-than-anticipated policyholder retention for all lines
           contributed to this growth.

           Significant wind and hail storms, wildfire and freeze losses had an effect on the year’s profitability, producing a
           combined ratio of 108.9 for the Property and Casualty group. Germania’s weather-related and fire losses were
           $88 million higher than expectations, translating into 27 combined ratio points. While results in the Property
           line were heavily affected by weather, combined ratios in Auto and Liability lines were better than target.
           Reinsurance recoveries of $56 million helped to limit the amount of our underwriting loss to $33.6 million.

           is unusual year required us to utilize about $16 million of surplus, ending the year with a policyholders’
           surplus of $163 million. Our surplus position remains strong and supports our A.M. Best “A-”(Excellent)

As of December 31, 2011 and 2010
Admitted Assets                                              2011                      2010
Cash and Investments                        $ 4 06 , 5 83 , 7 3 6      $ 389 , 74 3 , 7 79
Real Estate and Equipment                         4 , 7 58 , 74 5            4 , 8 89 , 96 2
Premiums Receivable                             86 , 4 28 , 3 4 6          8 2 , 0 71 , 20 5
Accrued Investment Income                         3 , 0 16 , 1 3 7           3 , 1 54 , 4 0 4
Reinsurance Recoverable                           4 , 5 5 1 , 06 8               15 4 , 75 9
Net Deferred Tax Asset                          1 5 , 4 82 , 3 8 4         14 , 82 3 , 81 4
Federal Income Tax Recoverable                    5 , 52 9 , 8 9 9           2 , 01 9 , 6 9 9
Other Assets                                      1 , 466 , 7 4 6            2 , 36 3 , 41 7
     Total Assets                           $ 52 7 , 8 17 , 0 6 1|     $ 4 9 9 , 2 21 , 0 3 9

Liabilities and Surplus
Unearned Premiums                           $ 1 86 , 06 8 , 06 3       $ 17 9 , 1 96 , 16 3
Loss and Loss Adjustment Expenses               6 5 , 9 55 , 86 1|         6 7 , 55 3 , 2 8 8
Life Future Policy Benefits                      4 4 , 9 89 , 53 5          4 0 , 416 , 51 8
Notes Payable                                   1 5 , 1 15 , 0 0 0                          -
Payable For Securities                          1 2 , 84 0 , 4 7 4                          -
Other Liabilities                               3 9 , 4 3 7 , 1 01|        32 , 24 7 , 4 0 9
Total Liabilities                             36 4 , 4 06 , 0 3 4        31 9 , 41 3 , 3 7 8
Policyholders' Surplus                        16 3 , 4 11 , 0 2 7        1 79 , 80 7 , 6 6 1|
Total Liabilities and Surplus               $ 52 7 , 81 7 , 06 1|      $ 49 9 , 221 , 0 3 9

For the years ended December 31, 2011 and 2010
Underwriting Income
Net Premiums Written                        $ 34 2 , 7 37 , 1 2 0      $ 32 9 , 5 9 4 , 9 3 8
Increase in Unearned Premiums                    6 , 8 71 , 90 0          11 , 9 31 , 6 7 4
Net Premiums Earned                           3 35 , 86 5 , 2 2 0        31 7 , 66 3 , 26 4

Net Losses Incurred                              230 , 8 15 , 21 8      1 83 , 45 5 , 8 4 0
Loss Expenses Incurred                            3 2 , 1 38 , 9 3 9      2 9 , 24 3 , 9 8 9
Underwriting Expenses Incurred                   101 , 91 3 , 6 8 4       96 , 57 7 , 0 1 8
Increase in Life Future Policy Benefits              4 , 56 4 , 88 9         4 , 38 0 , 76 2
     Net Losses and Expenses Incurred            36 9 , 4 32 , 7 3 0    31 3 , 6 5 7 , 6 0 9

Underwriting Gain (Loss)                    ( 33 , 56 7 , 5 1 0 )           4 , 0 05 , 6 5 5

     Net Investment Income                        1 5 , 6 76 , 4 1 2      1 4 , 22 5 , 7 5 6

Other Income                                      1 , 319 , 4 1 7           1 , 6 4 0 , 2 01|
    Net Income (Loss) before Taxes          ( 16 , 571 , 681 )            1 9 , 87 1 , 6 1 2
Federal Income Taxes                          ( 7 , 11 9 , 88 5 )           6 , 0 96 , 4 2 9
    Net Income (Loss)                       $ ( 9 , 4 51 , 7 96 )       $ 13 , 7 7 5 , 1 8 3

     On Solid Ground

           Germania’s journey is paved with hard work on behalf of our policyholders and their trust in us. Our farm
           mutual model has maintained that bond for 115 years as we strengthen the financial security of our
           policyholders and agents alike in Texas’ rural areas, small towns, cities and suburbs. As “e Insurance Texans
           Trust” we proudly preserve the values of the past as we focus on successfully serving future generations.

           Germania is committed to provide fair and honest insurance protection through competitive products and
           responsive service.

           Our vision for the next five years is to be #1 in customer experience through the products and service we
           provide. During this period, Auto will dominate the growth in our business and we will grow policyholder
           surplus equal to or greater than net written premium.

Officers and Directors
Back Row (L-R): Ralph A. Beadle, Henry D. Lehmann (deceased), Philip R. Roeber, C.H. Herring, Jr., Dwayne W. Herring

Middle Row (L-R): Donald W. Spiess, Don McAfee, Russell C. Janecka, J. Bryant Holub, Gary Miller, Bruce Germer

Front Row (L-R): Blake Lovelace, Gary Weiss, Robert A. Reeves, Fredda Gibbs Lemons, Derrell Krebs, Daniel Wilkinson,
Paul Ehlert

                                       In Memoriam
“Whereas, on the 10th day of May, 2012, it was the will of our Heavenly Father to take Henry Dean
Lehmann of Brandon, Texas, unto his heavenly home, away from the cares and troubles of this earthly

 Henry Dean Lehmann shall always be remembered as a faithful and dedicated agent and director for
the Germania Companies. He served as Director on the board of Germania Farm Mutual Insurance
Association from 1999 until his passing in 2012.

It is our privilege to have known and worked with Henry. He exemplified the qualities of a Christian
gentleman, a loving husband and father to his family, a wise counselor, and a devoted friend to all with
whom he came in contact in the various fields of endeavor in which he participated. We shall always
cherish the memory of our departed friend.

We extend to Jolene and all of Henry’s family our deepest sympathy; therefore,

BE IT RESOLVED by the Board of Directors of Germania Farm Mutual Insurance Association, in ses-
sion on this 15th day of May, 2012, in behalf of the Board of Directors, the officers, and employees that
we do here and now express unto Henry’s beloved family our deepest sympathy and ask God’s blessing
on each of them as they proceed along life’s journey on this earth, perpetuating those Christian princi-
ples to which Henry Dean Lehmann dedicated his life.

BE IT FURTHER RESOLVED that a copy of this resolution be printed in the minutes of the Board
of Directors meeting and a copy hereof forwarded to the family.”

Germania Companies
P.O. Box 645
Brenham, TX 77834-0645

Germania Farm Mutual Insurance Association
Germania Insurance Company
Germania General Agency, Inc.
Germania Life Insurance Company
Germania Fire & Casualty Company
Germania Credit Union
Germania Purchasing Group
Germania Select Insurance Company
Texas Heritage Insurance Company

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