Professional Documents
Culture Documents
would cause little trouble upon the at- centration of writings in unusually
tainment of premium volume in excess profitable lines. Actually the reverse is
of $26,000,000. true. Although represented in all major
Adjusting for only 25% of the in- lines, Western is still primarily an au-
crease in the unearned premium re- tomobile insurer with 60% of its vo-
serve, earnings of $1,367,063 in 1952, lume derived from auto lines. Since
a very depressed year for auto insur- automobile underwriting has proven
ers, were sufficient to cover total se- generally unsatisfactory in the postwar
nior charges of $129,500 more than 10 period, and particularly so in the last
times over, leaving earnings of $24.74 three years, Western’s experience was
on each share of common stock. even more favorable relative to the in-
It is quite evident that the common dustry than the tabular comparison
stock has finally arrived, although in- would indicate.
vestors do not appear to realize it Western has always maintained am-
since the stock is quoted at less than ple loss reserves on unsettled claims.
twice earnings and at a discount of Underwriting results in the postwar
approximately 55% from the Decem- period have shown Western to be over-
ber 31, 1952 book value of $86.26 per reserved at the end of each year. Tri-
share. Table II indicates the postwar ennial examinations conducted by the
record of earnings and dramatically il- insurance commissioners have con-
lustrates the benefits being realized by firmed these findings.
the common stock because of the ex- Turning to their investment picture,
panded earnings base. The book value we of course find a growth in invested
is calculated with allowance for a 25% assets and investment income paral-
equity in the unearned premium re- leling the growth in premium volume.
serve and is after allowance for call Consolidated net assets have risen
price plus arrears on the preferreds. from $5,154,367 in 1940 to their
Since Western has achieved such an present level of $29,590,142. Western
excellent record in increasing its in- follows an extremely conservative in-
dustry share of premium volume, the vestment policy, relying upon growth
reader may well wonder whether in premium volume for expansion in
standards have been compromised. investment income. Of the year-end
This is definitely not the case. During portfolio of $21,889,243, governments
the past ten years Western’s operating plus a list of well diversified high qual-
ratios have proved quite superior to ity municipals total $20,141,246 or
the average multiple line company. 92% and stocks only $1,747,997 or 8%.
The combined loss and expense ratios Net investment income of $474,472 in
for the two Western companies as re- 1952 was equal to $6.14 per share of
ported by the Alfred M. Best Co. on a Western Insurance common after mi-
case basis are compared in Table III nority interest and assuming senior
with similar ratios for all stock fire and charges were covered entirely from
casualty companies. investment income.
The careful reader will not overlook The casualty insurance industry
the possibility that Western’s superior during the past several years has suf-
performance has been due to a con- fered staggering losses on automobile
1955
1956