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Terra Stock Value Jumps Almost 10% in 2004. Hits New All-Time High.
Corte Madera, CA - Terra Insurance Company stock has achieved a new record-high book value for the 17th consecutive year: $195.95 per share at the close of business on December 31, 2004. The new high - 9.8% above the then-record $178.53 achieved December 31, 2003 - represents the second largest book-value-per-share increase in Terra's history.
"Our earnings were particularly strong in 2004," said Terra CEO David L. J. Coduto. "At $15.86, they were more than 15% above the $13.78 we recorded for 2003, and 2003 was a good year."
Terra was founded in 1969 to serve as a reliable source of professional liability insurance (PLI) for geotechnical and environmental engineering firms. At the time, conventional PLI was virtually unavailable to them. After nearly two decades of successful operations, Terra reconstituted itself as a risk retention group (RRG) in 1988. The RRG's initial owner/insureds capitalized the company at $10 per share. Their investments have since appreciated by 1,860%.
Federal law requires risk retention groups to be owned by their insureds. As such, all Terra insureds also are owners of the company, realizing a financial benefit whenever the company's stock value improves. According to Mr. Coduto, "Terra's performance over the years has been so strong that some of our owner/insureds have paid nothing - literally nothing - for their PLI for 17 years." Despite Terra's accomplishments, "some prospective insureds still are averse to the buy-in concept," Mr. Coduto said, "and they continue to wander into the marketplace year after year, looking for the cheapest PLI products they can find." He noted that the "hard" market conditions now facing the PLI industry have significantly reduced the number of insurers willing to accept geotechnical and environmental risks. Terra owner/insureds also include firms that provide civil and structural engineering, as well as those that offer "earth engineering" services, such as construction materials engineering and testing, brownfields revitalization, biological/ecological consulting, geology, and infrastructure security.
One of Terra's principal strengths has been its underwriting policy, Mr. Coduto said. "We price our products realistically. We don't compromise our quality standards in order to grow our book of business, and we don't discount our rates in order to boost cash flow for investment purposes." Nonetheless, given the rates other PLI insurers are now charging geotechnical and environmental engineering firms, "Terra's rates are competitive even before you consider the value of stock price appreciation and premium rebates," Mr. Coduto said.
The premium rebates Terra has given its owner/insureds over the years amount to millions of dollars that have been invested in programs and services to improve insured firms' practice quality. Terra has also given millions of dollars to ASFE/The Best People on Earth, a trade association, to support development of programs, services, and materials that help both Terra insureds and other ASFE member firms enhance their business practices. "We require all our insureds to be members of ASFE," Mr. Coduto said, "and to use its programs and materials for purposes of risk management and to enhance client relations. ASFE's programs and materials work extremely well. We are convinced that our policyholders' adherence to ASFE guidance has had a favorable effect on Terra's loss experience."
A. M. Best Company, the insurance company evaluation organization, rates Terra A ("Excellent"). Terra comprises 90 owner/insureds whose gross annual fees range from $500,000 to more than $150 million. Surveys of insureds indicate that, of all aspects of Terra's performance, the quality of service is most highly rated.
More information about Terra and the products it offers, as well as free risk management materials and a copy of the Terra "QuickApp," can be found at www.terrarrg.com, or by contacting 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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