LumberMEMO
“Together we’re better.”
Pennsylvania Lumbermens Mutual Insurance Company
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SPECIAL/2013
Pennsylvania Lumbermens Mutual and Indiana Lumbermens
Mutual insurance companies are proud to announce their recent
affiliation. The two companies have been in talks for the past
five months and have decided to join forces to create a premier
niche provider of property/casualty insurance in the wood industry.
“Together we’re beer.”
Indiana Lumbermens, currently led by CEO John Wolf, was created in 1897, just two years after the
inception of PLM. Both companies started as an alternative method to providing fire insurance for
wood-related businesses. Now, more than 115 years after the inception of either company, PLM and
ILM are planning on combining their individual strengths to provide the best of each company’s
products and services to all our clients. Both companies have professional staff with a deep understanding of your wood business. We will come together under a common leadership to work closely
with you and your broker or agent to insure you reap the best value for your insurance dollars.
PLM brings over $150 million in total written premium to the affiliation, with ILM bringing an additional $40 plus million. Our customer base will reach from the Atlantic to the Pacific and from
Canada to Mexico. We will also have licenses to operate in Hawaii and Alaska. We believe that our
separate strengths in different markets and geographic locations will help us be more effective in
handling most of your property and casualty insurance needs. We believe that together we are better.
While both the ILM and PLM legal entities will remain separate, they will eventually share products,
services and people. How exactly does this work? The affiliation will be controlled by three agreements: a Master Affiliation Agreement, a Management Services Agreement, and a Reinsurance
Agreement (detailed on page 3). As of now, the companies plan on maintaining an affiliation status
for the foreseeable future, however, a possible merger at some point should not be ruled out.
The affiliation process has already begun and will continue over the next few years. Transition teams,
comprised of both PLM and ILM management and frontline employees will help lead the process by
determining the strengths and weaknesses of both companies' processes and determining the best
course of action to create and implement the most effective and efficient products and services.
On the next page, you will find an organizational chart that illustrates how the two companies will
operate with a single management team that will oversee both companies.
You may be wondering how all of this will affect you. Our goal by creating this affiliation is to be a
reliable premier niche provider. This LumberMemo will detail just how we plan to accomplish these
goals efficiently and effectively. Although a specific group of individuals will start the push, it will
take the effort of everyone at both companies to really make this affiliation a success. Both PLM and
ILM value our relationship with you. Above all, we are trying to better suit your needs and we
believe that "together we're better”.
Merger vs. Affiliation
Hearing that two companies will soon work together to create a common master affiliation, management services, and reinsurance agreements may leave you assuming that they are becoming one
company. It is important to understand the differences between a merger and an affiliation in order
to fully understand how PLM and ILM will interact together going forward.
The fundamental difference is the number of legal entities that will exist. A merger turns two companies into one single surviving entity. PLM and ILM will continue to exist as two separate legal
Continued on page 2...
LumberMEMO
Merger vs. Affiliation
...continued from page 1
entities during the entirety of their affiliation. Two Boards of Directors will continue to exist, however it has been determined that both Boards will be made up of the same members in order to create more consistency between the two companies.
No one should assume that the affiliation will automatically eliminate the ILM brand. Both companies are well known in
the wood niche. By working together, both companies can utilize their most effective tools to become a premier carrier in a
niche that they have been present in for over a century.
Dividend Programs
Organizational Structure
Currently, both PLM and ILM have
relationships with certain trade
organizations. A part of these relationships include dividend programs
for those who place their insurance
with one of our companies.
CEO
Asst.
*
Claims
Field
Ops
Reg.
HR
ILM
PLM
ILM
N/E
S/E
ILM
Cust.
Service
IT
ILM
PLM
West
Marketing
PLM
Cust.
Service
Investments
Heavy
Mfg.
ILM
Acct’ing
Underwriting
/Loss
Control
PLM
Loss
Control
PLM
ILM
* The highlighted portion represents some of the various transition teams that will
review current operations to determine how to proceed through the affiliation.
As of now, your dividend program
and trade association relationship
with PLM or ILM will continue as
before the affiliation was announced.
We will review these relationships,
without bias, in the coming months
to determine how each will continue.
Both PLM and ILM value our relationships in these industry specific
associations and want the affiliated
company to continue to be present in
them. We believe that together we
can offer you better, more comprehensive relationships.
A.M. Best
PLM and ILM anticipate a single rating of A- (Excellent)
with a stable outlook to be assigned to the
affiliated companies. The companies expect
that the rating will be
placed "under review"
during the regulatory
approval process, after
which A.M. Best will
assign a final rating.
Currently, ILM and its subsidiaries, Lone Star National
Insurance Company and National Building Material
Assurance Company, have been assigned a financial
strength rating of B+ (Good) with a negative outlook.
PLM holds a financial strength rating of A- (Excellent)
with a stable outlook.
Concerns have been raised about the possibility of a negative impact on the rating strength of PLM due to the
affiliation. From the first discussions with ILM, it has
been a chief concern of Pennsylvania Lumbermens to
retain its current A.M. Best rating. ILM, PLM and A.M.
Best have already met to discuss the rating and how the
affiliation might impact it.
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SPECIAL/2013
MASTER AFFILIATION AGREEMENT
The companies will both continue to have separate Boards of Directors, however it has been determined that
the management team will be comprised of the same set of people, with PLM President and CEO John Smith
overseeing both companies. Current ILM President and CEO, John Wolf, is set to retire soon after regulatory
approval has been granted. He will become a member of the Board.
MANAGEMENT SERVICES AGREEMENT
This agreement allows for the combination of certain operations and creates a single management team. We
expect a unified management to create better cohesion between the two companies. Over time, PLM and ILM
will be able to use each other's products and services to better suit customer needs. This agreement controls
that aspect of the deal. The affiliation will eventually create a single distribution system, including both PLM's
"Open Brokerage” and ILM's “Direct and Agency” model. Vendors will also be combined as a result of the
affiliation.
REINSURANCE AGREEMENT
Currently, PLM and ILM have two separate reinsurance programs in place. Both programs will be terminated
and the affiliated companies will execute a single "pooled" reinsurance program. Both companies will continue to rely only on “A” rated reinsurers.
Affiliation Agreements
This agreement sets the legal terms of the Affiliation in macro terms.
Reliability
Our insureds purchase insurance to guard against unpredictable losses. We want to do more than just keep you and
your business safe today. Through the affiliation of PLM and
ILM, we believe we can insure that you will be safe tomorrow and well into the future. It is our belief that by working
together, PLM and ILM will be able to better provide for your
individual needs.
Sometimes, losses are inevitable. Changes in our environment have affected weather patterns nationwide, exposing
new areas to an increased number of weather events.
Through this affiliation, it is our goal to create a joint disaster relief program to efficiently and effectively get your
business running again. During these stressful times, we do
not want you to worry any more than you have to.
Currently, both of our companies offer unique products tailored to your specific insurance needs. We will evaluate the
current coverage offered with the intention of creating the
most effective coverage for you. These changes will happen
over time so your current policy will continue to stay in effect
as it normally would.
Aside from written policies, we are also very concerned with
our loss control techniques. It is often hard to remember that
insurance should be used as a last resort. Our goal is to prevent a loss before it happens. We do not want to see our
insureds hindered or inhibited from their very livelihood in
the case of a loss. One way to decrease the frequency and
severity of claims is to take precautions against losses before
they happen. We often utilize inspections with the intention of
having a trained eye identify any potential problems that
could cause a loss. Even throughout the transition of our companies, expect your current inspections and meetings to continue as scheduled. We will continue to improve our loss control techniques because it is our goal to keep you and your
business running safely.
Regulatory Approval Process
Many of the changes that will come from the affiliation are
contingent on Pennsylvania, Indiana, and Texas granting regulatory approval. It is important that we clarify that we have
no reason to believe that our proposed affiliation would be
rejected by any of these states.
The signed agreements and operational and financial analysis
of both parties have been provided to the regulators for the
purpose of obtaining approval. We expect regulatory approval
within 90 days. Until then we must continue to operate as
two distinct and competing companies.
Once regulatory approval has been granted you may expect a
series of communications regarding specific changes that
may impact how you do business with us.
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Pennsylvania Lumbermens
Mutual Insurance Company
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7008
Communication
This affiliation affords our companies the ability to highlight our customer service so that
we are better able to accommodate you when you are in need. Our goal is to create one
service center to simplify the processes of both companies. Eventually the PLM and ILM
systems and websites will be combined.
PLM and ILM will continue to place a significant emphasis on personal relationships with
insureds. We want to know you and understand your business so that we are better prepared
to help you. Overlaps in Field/Business Development, Loss Control, Underwriters and
Claims will be identified and streamlined. We understand your desire to continue those relationships that you currently enjoy and we will do our best to insure that those relationships
are maintained. At this time, please continue to communicate with the same people you currently do. Report claims as you normally do, and of course continue to pay your premiums
in your normal method. Our insureds value our presence in the industry. You will
continue to see both PLM and ILM at industry trade shows. Instead of two separate exhibits, you will see our brands together, presenting the affiliated company and all our combined products. It is important to us
to give you the most accurate and current reflection of our companies and the insurance products you can look forward to at the time
of your renewal.
An announcement will be made once regulatory approval
has been granted. In the interim, we have created a webpage where you can direct any questions you may have on the
PLM/ILM affiliation. Questions may be entered at
http://clientquestions.plmins.com.
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Lumbe r MEMO
President &
CEO
John K. Smith
[email protected]
VP of Field
Operations &
Marketing
Steve Firko
[email protected]
Sr. Marketing
Specialist
Susan Cho
[email protected]
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7008
MAIN 800.752.1895
FAX 215.625.9097
www.plmins.com
[email protected]
Lumbe r MEMO is published
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Marketing Department of Pennsylvania
Lumbermens Mutual Insurance
Company.
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