FINANCIAL HIGHLIGHTS

The combined financial performance of Penn National Insurance for the year ended December 31, 2018, produced net income of $36.4 million. Net of the redemption of an additional $4.5 million par value of the surplus note during the year, our company added $4.4 million to its policyholders’ surplus since December 31, 2017, finishing the year at $591.3 million.

Direct premiums written were up by $31.2 million or 4.2 percent from last year, reaching $775.4 million for the year ended December 31, 2018. On a net basis, combined premiums written and earned were higher than the prior year by 4.4 percent and 3.8 percent, respectively. Premium levels during 2018 were boosted by renewal rate increases in our personal lines of business and new business growth in commercial lines.

Incurred losses and loss adjustment expenses that totaled $504.4 million during 2018 were higher than expected for both catastrophe and non-catastrophe events. In addition to significant storms in the winter and spring months of the year, we experienced net catastrophe losses from Hurricanes Florence and Michael of $10.0 million and $4.6 million, respectively.

Total net catastrophe losses and LAE incurred were $40.9 million or 5.7 points for the year ended December 31, 2018, compared to $18.3 million or 2.6 points for the prior year. Non-catastrophe occurrences produced higher net accident year commercial and personal automobile losses, as well as sizeable property claims, which also affected our overall loss experience. For 2018, our net loss and loss adjustment expense ratio was 70.4.

Our reported net combined ratio for the year came in at 102.5, which was 14.4 points better than the 2017 combined ratio. This improvement was primarily attributable to a 12.2 point decrease in the loss and loss adjustment ratio, which was last year unfavorably impacted by a change in estimate for reinsurance recoverables attributable to legacy claims. This was augmented by decreases to our underwriting expense ratio and dividend ratio of 2.0 points and 0.2 point, respectively. Total admitted assets rose slightly from December 31, 2017, to $1.8 billion as of December 31, 2018.