Dear Fellow PURE Members,
Despite significant losses from unprecedented winter weather and major fires, PURE emerged from 2015 with a stronger capital position and a “Positive” outlook from the leading financial strength ratings agency. We made changes in our long-term holding company partners, strengthening our capital flexibility and affirming our independence—something we believe will create tremendous advantage in the coming years. We continued to grow and diversify. We personally engaged with more members than ever before, and have maintained an industry-leading member retention rate and a world-class Net Promoter Score.
In short, 2015 was a good year for PURE and the future has never looked brighter.
MAJOR LOSSES AND ANOTHER SSA ALLOCATION
The extreme cold and record-setting snowfall that occurred in the first quarter produced losses arising out of burst pipes and ice dams at a cost nearly twice that of losses stemming from Superstorm Sandy. Make no mistake: It was exceptionally cold for a sustained period of time—and the New England snowfall was unprecedented. But my colleagues and I look back on this event with the feeling that there is more we could have done than just pay claims, and we paid a lot.
With so many members spending winters away, we need to be more proactive in our efforts to help prevent losses in your unoccupied homes. The technology that can alert you and others when the temperature in your home drops is relatively inexpensive—and it works. The same is true for the technology that shuts off your water supply at the first sign of a leak. Other smart home devices allow you to remotely change the temperature setting in your home when the forecast calls for frigid conditions (on the days when you were smart enough to be in a warmer locale). Together, we can do more to stop the severe losses caused by burst pipes in unoccupied homes.
2015 also saw a record for the frequency and cost of large fires, including major losses caused by faulty electronics, for which we are working hard to receive significant subrogation. These tragic events led us to invest more of our time learning ways we can help our membership recover from traumatic loss and return to normalcy more quickly. We are grateful for Dr. Steven M. Southwick, Professor of Psychiatry, Post-Traumatic Stress Disorder, and Resilience at Yale Medical School, for his work with our team to educate us on post-traumatic stress and the keys to strengthening human resiliency.
In the end, we still saw enough gains from operations to make an allocation of $4 million to Subscriber Savings Accounts (SSAs).
CONTINUED GROWTH AND DIVERSIFICATION
We grew premiums by 40% in 2015, as we have in every year since our inception. We know that streak will come to an end someday, but we are not ready to predict when that will be. Even using a very narrow definition of “successful families,” we estimate the high net worth insurance market in the U.S. to be approximately $15 billion in annual premiums. Some of our competitors suggest it is even larger. Regardless, the headroom for PURE is significant, and we are confident that we offer the best combination of coverage, service, and overall value. We intend to carefully scale PURE year after year with the goal of being the undisputed leader in our category. At the recent Family Wealth Report Awards, an independent judging panel from the wealth management industry already affirmed our position as the best high net worth insurer for 2016.
We continue to maintain important relations with a select group of the best independent insurance brokers in the country. We believe this channel represents an extraordinary value for all stakeholders. We get access to a hand-picked sales and service channel that has deep experience in our category and strong roots in their communities. Our membership can work closely with trusted partners who have access to other companies should any members’ needs change or should they feel that PURE is not living up to their expectations. Naturally, independent brokers can offer PURE to their other clients if other companies don’t keep up with client demands. We ask all of our employees to practice “Membercentricity,” but we never lose sight of the great work that the best brokers do, and we have a deep respect for them.
CONSOLIDATION, RECAPITALIZATION AND ALIGNMENT OF INTERESTS
Last year, I wrote about the decision that Fireman’s Fund made to sell the renewal rights to their policies for high net worth families. In 2015, another competitor, the Chubb Corporation, agreed to sell their entire company. As your friends bemoan the pains they may be experiencing as the acquirer tries to digest all these transactions, we hope you’ll recommend PURE—at least to your most responsible friends.
We also reached a fork in the road in 2015, and the path we took is great for all parties.
As we outline every year of this report, our structure includes the policyholder-owned exchange (PURE) and the for-profit management company (Attorney-in-Fact), as well as a pooled stock company that provides additional capital and capital flexibility. Our model is so appealing because policyholders get extraordinary service at lower prices with the promise of SSA allocations, while investors in our holding company get the predictable fee income of the management company. The pooled stock company adds to the mix by providing more financial strength and reinforcing the alignment of interest (if we allow bad business into the pool, we have to “eat our own cooking”).
Large insurers are looking for ways to grow, especially in specialist areas, such as high net worth. The holding company for PURE is considered particularly attractive as an acquisition target given our model, our track record, and the consolidation in our niche. We have elected to remain independent, reinforce our culture, and focus on our plans to create market leadership. To do so, we renewed our partnership with one investor and welcomed two new ones. Stone Point Capital (manager of the Trident Funds) remains our majority investor, and we were thrilled to welcome Kohlberg Kravis Roberts (KKR) to the family as an important investor. Finally, at the end of 2015, XL Catlin bought a single-digit percentage of our holding company in return for their commitment to provide capital (surplus notes) at highly attractive terms for PURE. This is a terrific transaction for PURE that creates valuable capital flexibility, as we can draw upon this capital at just about any time in the future, including, if ever needed, after a major catastrophe.
A.M. Best, the leading rating agency affirmed the PURE Group’s Financial Strength Rating of A- (Excellent), improved the outlook on our rating to “Positive,” and moved us up a notch on their rankings for the size of insurance groups.
In the end, we move forward with world-class partners, more capital, more capital flexibility, and the ability to maintain our independence as the rest of the world consolidates.
CULTURE, SERVICE AND ENGAGEMENT
In 2015, we estimate that we personally met with more than 8,000 members in their homes for PURE360™ Risk Management Consultations, connected with around 15,000 members during a claim, reached out to more than 39,000 members through the PURE Situation Room™, received more than 20,000 calls into Member Advocates® and engaged with more than 3,000 members at various social, educational, or philanthropic events in your communities. We very much appreciate the chance to get to know you and understand your needs even better.
Our purpose is to make you smarter, safer, and more resilient, so you can pursue your passions with greater confidence. We can measure our progress based, in part, on whether you and others choose to renew each year, as well as whether you are compelled to act as an ambassador for PURE. I’m pleased that our annual member retention rate continues to be exceptional at 96% and that our Net Promoter Score® improved again to 66, a world-class result. I am appreciative of all of the feedback (positive and critical) that you share during the annual survey. You make us a better company.
In 2015, we were recognized as having a Top Corporate Culture from Culture IQ and Entrepreneur Magazine, among many other awards. We were also proud that our teams were increasingly active in their communities, and individual team members received important recognition during the year. Some of those stories are shared in this report. I hope you’ll enjoy learning more about the people who work so hard in the service of our membership.
Our team of more than 400 professionals combine great talents with passion, empathy, and engagement. They take great pride in doing great work. I’m sure you see that when you have a claim, but there are hundreds of others in the Risk Management, Member Services, Underwriting, Technology, Legal & Compliance, Sales & Marketing, Product Management, Finance, and Human Resources departments who care about you and this company in the same way.
On behalf of the entire PURE team, I thank you for your continued commitment to this extraordinary company.
Ross Buchmueller, President & CEO