|
|
|
Terra Stock Surpasses $200 per Share
Corte Madera, CA - Terra Insurance Company stock has surpassed $200 per share for the first time in company history. Terra CEO David L. Coduto made the announcement. "I would be extremely pleased by this milestone even if it had been easier to reach," he said. "But the fact is that we got there at a time when the industry is still reeling from continuing claims, losses, and ever-escalating reinsurance costs. What Terra has accomplished lends unshakable credence to a time-honored axiom: Slow but steady wins the race.
"Insofar as Terra's investment portfolio is concerned, 'slow but steady' means conservatism. I remember being told by several of my insurance industry colleagues that we were foolish; that we could make a lot more money by being more aggressive. Today, some of those colleagues are out of jobs and the companies they worked for no longer exist, or they've withdrawn from the market, or they've been sold.
"Slow but steady also means that we have consistently priced our products realistically. A number of our former competitors did not. They priced their products below cost in order to generate cash flow they could put into speculative investments that ultimately did not pan out. We have provided a quality product at the market price. We've grown slowly, creating our growth by relying on owner/insureds who also believe that slow but steady wins the race. In other words, they do exactly as we do: Provide a high-quality service for a reasonable fee. They do not try to buy clientele so they can fuel rapid growth. They believe in the virtues of quality and understand that low fee and high quality simply are not compatible. Their quality-focused clients understand that, too. They want to avoid claims, disputes, and litigation just as much as our insureds do. That's why Terra looks to our underwriting and the performance of our owner/insureds as our principal source of profit."
Terra Insurance Company is a risk retention group. Federal law limits ownership of a risk retention group to the group's insureds, and requires that each insured own some stock. No Terra owner/insured objects to the requirement. Established in 1969 as an offshore firm, Terra reorganized on-shore in 1988, shortly after risk retention group legislation was signed into law. Terra's initial owner/insureds capitalized the company at $10 a share, meaning that those who bought stock in 1988 have seen their investments grow 20-fold, to $200.03 on June 30, 2005. For many of them, the net cost of the professional liability insurance (PLI) they have obtained from Terra - i.e., premiums paid less the value of rebates and stock appreciation - has been zero or less.
Although "slow" may not be a particularly apt description of Terra's stock value growth, "steady" is, given that Terra's per-share value has achieved a new record high every quarter since the company began. On June 30, 2004, Terra stock hit $182.78 per share, at the time a record. "We've grown our value by more than 9.4% in the past year, which is remarkable given the climate we've done it in," Mr. Coduto said. He also noted that Terra recorded earnings of $4.29 per share for the six months ended June 30, 2005, more than 19% ahead of the $3.60-per-share earned for the same period in 2004, when reinsurance cost increases were less than what is being faced today.
Terra's performance has been recognized by A. M. Best Company, the internationally respected insurance company rating agency. It has reaffirmed Terra's stated rating of "A (Excellent)", Class V, as well as Terra's implied rating of "A++ (Superior)", Class V. According to Mr. Coduto, "Terra's small size and limited product line make it doubtful that we'll ever achieve a stated rating of 'A++ (Superior)', but to achieve an implied
'A++' rating is extraordinary. Best rates thousands of insurance companies. Fewer than 2% have a rating of 'A++'."
Another remarkable aspect of Terra's success has been the nature of the risks it insures. Terra provides PLI products to firms that engage principally in geoprofessional and/or environmental engineering, disciplines that some of Terra's competitors find "too risky" to cover. "I believe we have demonstrated consistently over the years that it's not so much the risk that matters as the way in which a company manages it. If you know what you're doing and you approach your practice with prudence and integrity, you will experience very few losses. And that applies as much to our insureds as it does to us," Mr. Coduto said.
Terra comprises 90 owner/insureds whose gross annual fees range from $500,000 to more than $150 million. 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.
|
|
|
back to listing