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Terra Achieves Highest Share Value in Its History, with Largest Per-Share Increase Ever. 2002 Is Company's Best Year.
Corte Madera, CA - Shares of Terra Insurance Company have achieved the highest book value in their history - $158.54 - thanks to a $16.83 per-share increase in 2002, the largest single-year increase in the company's history. Because Terra is a risk retention group, all outstanding shares are owned by the company's insureds.
Established as a risk retention group in 1988, Terra has recorded 15 consecutive years of per-share value gains, averaging more than 10% per year. During the ten-year period 1993-2002, the value of Terra stock increased by an average 12.5% per year. Those Terra owner/insureds that have been with the company since 1988 have seen their original $10-per-share investment increase by almost 1500%. Stock value appreciation and premium rebates have for a number of Terra insureds effectively reduced the net cost of professional liability insurance to zero.
Terra's new records were achieved while most professional liability insurers were experiencing one of the worst years in the industry's history. Terra CEO David L. J. Coduto attributed that outcome to poor underwriting and claim management and unusually high claim severity and frequency.
"This is a truly classic case of the tortoise versus the hare," quipped Mr. Coduto. "Unlike some of our 'go-go' competitors, some of whom are now 'gone-gone' or on their way, we have consistently tried to attain overall company profitability by achieving solid underwriting profits and modest returns on our investment portfolio. Our policyholders' capital has averaged a 12.5% annual net growth rate over the last decade, which is somewhat remarkable. Most of them regarded their initial capitalization in Terra more or less as 'throwaway money,' as though it was part of 'the deal' in order to have consistent, high-quality professional liability insurance coverage. Few policyholders envisioned such significant financial benefits from the process of investing in themselves. Management was far more optimistic."
Mr. Coduto attributed the company's success to its owner/insureds' commitment to excellence, combined with a keen focus on high-quality performance. He commented that, as a group, Terra owner/insureds "believe in the efficacy of staff training and professional development," which are activities that Terra encourages strongly and supports financially. "We derive an outstanding return on our support of training programs," he said, "witness the fact that Terra is experiencing the fewest claims per firm in the company's history. Those results and the fact that they are opposite those of most other professional liability insurers' would be a somewhat amazing story in and of itself," Mr. Coduto said, "but there's more to it than that: The firms we cover are considered to be particularly liability-prone, because of the high claim frequency and severity usually ascribed to the services they provide: geotechnical, environmental, and civil engineering. Our policyholders' commitment to continuing education and building financially successful engineering firms, their quick response to problems that occur, the professional culture and values they maintain, plus their nonautocratic management philosophies, have been critical to their and Terra's success."
The original Terra was founded in 1969 because the ten founding firms were uninsurable. Geotechnical engineers were the most liability-prone professionals of all. Now Terra comprises some 90 owner/insureds that generate about $750 million in gross annual fees. Their sizes, measured in gross fees per year, range from less than $1 million to more than $150 million. Terra is rated "A" (excellent) by A. M. Best Co., the internationally recognized insurance company rating authority. No other comparable risk retention group is rated as high as Terra.
For more information, contact Terra Insurance Company, 2 Fifer Avenue/Suite 100, Corte Madera, CA 94925; tel. 1/800-872-0077 (in CA, 415/927-2901); e-mail terra@terrarrg.com.
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