Below I’ve highlighted several components of the workers’ compensation strategic and operational plan for 2011. Regional Office Growth Plan The investment in regional office expansion over the past (3) three years continues to pay dividends for the Company. Eastern Alliance Insurance Group delivered year-over-year premium growth of 23 percent and finished 2011 with direct written premium of $156 million while maintaining underwriting discipline. Regional office highlights follow: Mid-Atlantic Region (Lancaster and Wexford, Pennsylvania offices) The Mid-Atlantic regional office had a breakout year increasing premium writings 17.9 percent to $120 million in its (4) four core operating states; Pennsylvania, Maryland, Delaware and New Jersey. The Company continues to “play well at home.” Pennsylvania premium writings increased to $110 million in 2011 representing approximately 90 percent of the Mid-Atlantic region and 70 percent of the overall Company premium. Premium growth was driven by premium renewal retention of 89.7 percent, renewal rate increases of 2.1 percent and new business writings of $21 million. The establishment of a local office in Wexford has been instrumental in the profitable growth of the Western Pennsylvania book of business from $16.0 million in 2009 to $24 million at year end 2011. The Mid-Atlantic regional office produced very solid bottom line results including a 91.1 percent combined ratio and net income of $6.8 million. Southeast Region (Charlotte, North Carolina Regional Office, Richmond, Virginia Satellite Office and Franklin, Tennessee Satellite Office) In 2011, we continued the very exciting build-out of the Eastern Alliance Insurance Group franchise in the Southeast region. The Southeast regional office increased its premium writings 34.2 percent to $20 million in its (4) four core operating states; North Carolina, Virginia, South Carolina and Tennessee. North Carolina is the largest state representing $9 million of the premium written in the Southeast region. Premium growth of 34.2 percent was driven by premium renewal retention of 83.3 percent, renewal rate increases of 2.9 percent and new business writings of $8 million. We are particularly pleased with the bottom-line results in this region including an 86.5 combined ratio and net income of $1.8 million. The Southeast regional office has produced excellent growth and profit results for the Company since its inception in 2008. Midwest Region (Carmel, Indiana Regional Office) We continue to be pleased with the execution of the Midwest business plan. Premium writings increased 26.3 percent to $16 million in its (3) three core operating states; Indiana, Kentucky and Michigan. Indiana represents $14 million of the premium written in the Midwest region. The premium growth of 26.3 percent was driven by premium renewal retention of 85.9 percent, renewal rate increases of 1.4 percent and new business writings of $4 million. This office produced a healthy bottom line with an 85.5 percent combined ratio and net income of $1.6 million. We announced the Midwest management succession plan in the third quarter of 2011. Mort Large joined the Company in July of 2011 to serve as the Regional Business Executive in the Midwest. He brings a wealth of talent, managerial experience and agency relationships to the Midwest regional office. We wish Mike Michael well in his retirement years and thank him for his valued service since he joined us via the acquisition of Employers Security Insurance Company in 2008.
Geographic Expansion Initiatives The strategy to expand beyond the Mid-Atlantic marketplace continued with the establishment of the Richmond, Virginia satellite office in the second quarter of 2011 and selected agency appointments in New Jersey, Virginia, Kentucky and Michigan throughout 2011. These strategic initiatives added direct written premium of $9.3 million to the top line of the Company and provided further geographic diversification. EIHI’s disciplined state strategy assessment process enabled us to deploy our capital and resources in 12 core states in three operating territories. In addition, we continued our state licensing process finishing 2011 with 28 state licenses. The ability to provide paper for incidental exposures in 16 non-core states has been instrumental in writing middle/large and alternative market business across a broader geographic platform. Interestingly, the three largest new business accounts written in 2011, representing direct written premium of $1.8 million, each had operations in at least four states. Product Management Initiatives We entered the “Pay-As-You-Go” market in 2009 with the launch of the Company’s ParallelPay ® brand. This initiative continues to be very well received by our agency partners and policyholders. The Company finished 2011 with ParallelPay premium writings of $20.9 million which is an increase of 35 percent over the prior year. We are particularly pleased with the excellent premium retention and attractive loss ratio results since the inception of this program. ParallelPay continues to be a unique program for employers of all sizes looking for innovative cash flow solutions in a challenging economy. We are very proud that ParallelPay was recently selected for inclusion in Best’s Review’s Innovators Showcase (January 2012 edition) as innovation is one of EIHI’s core values. We believe that ParallelPay will continue to differentiate Eastern in 2012 across all market segments. Alternative Market Operation Alternative Market premium writings, which are included in the $156 million of Company direct written premium, increased 17 percent to $39 million in 2011, driven by 100 percent program renewal retention (15 programs), renewal rate increases of 1.1 percent and new business writings of $6 million. The Alternative Market operation benefited from the Company’s geographic expansion strategy, writing new and renewal premiums of $5.1 million outside of Pennsylvania. We are particularly pleased with aggregate net income produced for segregated portfolio cell owners of $4 million and the combined ratio of 87.4 percent. This operation generated $5.5 million of fee-based revenue, which is an attractive offset to underwriting expenses. This operation is well positioned to grow its existing program business and start new ones as the insurance market firms in 2012. Agency Management Eastern Alliance Insurance Group agency partners continue to perform at a very high level. In support of the Company’s regional office and geographic expansion initiatives, we appointed 35 new agents across all operating regions. The new agency contracts produced $2.3 million of new premium in 2011. The Eastern franchise remains valuable to agents with only 121 contracts executed in 342 locations across 12 core states. Average premium per contract of $1.3 million is efficient, and leads to meaningful relationships with agency partners. Agency Advisory Councils have been established in all operating regions resulting in valuable feedback to the Company with respect to all aspects of our business plan. The high quality of our agency partnerships continues to be a competitive advantage for the Company in the marketplace.