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2015A N N U A L R E P O R T
12 0 15 A N N U A L R E P O R T
Message from John F. Donohue
The extreme weather of 2015 had a significant impact on
New England’s infrastructure, economy, and insurance market.
As a direct result of five catastrophic snowstorms, Arbella’s
Homeowners claim volume tripled over 2014, and along with
most of our local competitors, we experienced substantial losses.
Despite these challenges to our business and our financial results,
I couldn’t be more proud of Arbella’s performance.
John F. Donohue | Chairman, President, and Chief Executive Officer | Arbella Insurance Group
2 A R B E L L A I N S U R A N C E G R O U P
Over the past 50 years, our region has experienced a drastic increase in extreme weather events, and last year the trend continued as historic snowfall records were shattered. However, many of the strategic decisions we made leading up to 2015 actually softened the blow to our results. Several years ago, we began factoring the changing climate into our risk management strategy, and in 2012 we significantly enhanced our reinsurance program. This decision substantially minimized our 2015 losses and the impact on our surplus, while contributing to the confirmation of our A- (Excellent) rating by A.M. Best.
We closed the year with strong revenue growth of 7.2 percent, which was driven by competitive pricing, effective partnerships with our independent agents, and our powerful, local brand. Our Personal and Commercial lines delivered overall increases in both policy count and premium. And, Arbella’s market share in Massachusetts Private Passenger Auto—our largest line of business—grew to 10 percent.
The Arbella Service Center also continued its growth. By the end of the year our employees were providing expert service to the customers of 26 of our independent agents and managing more than $50 million in premium.
The year’s record claim volume presented us with an important opportunity to solidify our reputation as one of the best insurance service providers in New England. As the claims poured in, our employees demonstrated remark-able resilience and adaptability. In fact, our agents reported that while many carriers struggled, Arbella’s service levels increased. With a combined ratio of 113.5 percent, our capacity was certainly strained in 2015. Still, for the seventh consecutive year, our employees voted Arbella one of the Boston Business Journal’s Best Places to Work.
Aligned with our strategy, our advertising and marketing programs emphasized the Arbella brand while providing our agents with the resources and support they needed to sell our products. The achievement of key technology milestones enhanced our online presence and made it easier for agents, customers, and employees to conduct Arbella business.
The work of the Arbella Insurance Foundation continued to make a positive impact throughout New England. Recognized as a top corporate giver, the
Several years ago, we
began factoring the
changing climate into
our risk management
strategy, and in 2012 we
significantly enhanced our
reinsurance program.
32 0 15 A N N U A L R E P O R T
Foundation has donated almost $20 million to those in need since its 2004 inception. In 2015, the Foundation further expanded its reach into our communities through new donations, matching gifts, and volunteer programs.
Last year was certainly one of the toughest in our company’s history, but together we demonstrated that Here. For Good.® is much more to us than a tag line. Looking ahead, I am optimistic about Arbella’s ability to continue to grow our company, to work toward adaptive solutions to climate change, and to enhance the lives of the people in our communities.
Thank you for your continued support.
John F. Donohue Chairman, President, and Chief Executive Officer Arbella Insurance Group
The year’s record claim
volume presented us with
an important opportunity
to solidify our reputation as
one of the best insurance
service providers in
New England.
4 A R B E L L A I N S U R A N C E G R O U P
serv
ice
52 0 15 A N N U A L R E P O R T
The story of 2015 cannot be told without illustrating
the exemplary service that Arbella employees delivered
in the face of record claim volume and historic winter
weather. Consistent with our core values, we have always
been dedicated to delivering the highest levels of customer
service, and last year we worked hard to maintain our
strong reputation in the market place.
WINTER OF 2015
The winter storms challenged every department in
our organization, but we remained steadfast in our
commitment to our customers. Even with Homeowners
claims up 180 percent over 2014, Arbella employees
worked tirelessly to deliver on our promises, and their
performance was nothing short of a triumph.
While there is no way to predict the impact of extreme
weather events, our ongoing efforts to refine our catas-
trophe plan positioned us well for 2015. Although we
continued to receive ice dam claims 10 months after the
storms that caused them, 98 percent of all claims were
resolved by the end of the year and customer satisfaction
remained consistent at a very high 94 percent.
“Arbella has been absolutely wonderful during this whole experience. You and your team turned a
terrible situation into an easy, no-stress matter.”
– Cat C., policyholder, Haverhill, MA
6 A R B E L L A I N S U R A N C E G R O U P
CUSTOMER
SATISFACTION
94%
LIKELY TO
RECOMMEND ARBELLA
93%
To attain these service levels, we leveraged the strength
of the entire organization. One hundred and forty-seven
employees outside of our Property Claim department
assisted with the record claim volume. Kim Kwiatkowski,
assistant vice president of Commercial Lines, volunteered
herself and her team to process mail so that Claim
employees could attend to policyholders on the phones.
Deb Gellerman, an administrative assistant in Information
Technology, enjoyed the experience so much that she
switched to a regular position in the Claim department.
During late nights and weekend shifts, Arbella employees
took personal responsibility for the claim experience
of our policyholders who in return gave us very high
satisfaction ratings for our service.
“Arbella is among the best in the business. They always do a stellar job of closing claims and taking
care of customers.”
– Lori Burkavage, claim specialist, Insurance Center of New England
72 0 15 A N N U A L R E P O R T
A NEW STANDARD OF SERVICE
The Arbella Service Center (ASC) has become an essential
resource for our independent agents who trust us to
deliver superior service to their customers. Last year,
the distinguished way in which we handled each
customer interaction led to a 73 percent increase in
agency enrollment in the center.
As our agents focused on new business and customer
retention, Arbella employees responded to nearly 35,000
phone calls and completed thousands of service transactions
on their behalf. And, the announcement of our expanded
weekend hours was met with positive feedback by agents
and policyholders alike.
The quality service delivered by ASC employees had a
direct impact on the growth and success of participating
agents. By all accounts, ASC agents outperformed others
in overall premium growth, retention, and loss ratios.
Arbella’s Customer Service Operations department
delivered exceptional service across all lines of business.
In response to a record number of phone calls driven by
the growth of our Massachusetts Private Passenger Auto
line and severe weather events, we activated our Customer
Service Response Team to maintain our outstanding
levels of service.
We achieved several key technology milestones, including
self-service enhancements to both our credit card and
telephone payment systems.
In the future, Arbella will continue our commitment to
delivering the best service in New England by listening
to our agents and policyholders, taking action on their
feedback, and enhancing their experience with us.
“The service that Arbella provides is flawless.
As a result, our agency staff has been able to
focus on customer retention and new business.”
– Ken Fries, president, Castle Edge Insurance
8 A R B E L L A I N S U R A N C E G R O U P
pers
onal
line
s
92 0 15 A N N U A L R E P O R T
As 2015 began, we knew that increased pressure from
national carriers would require an aggressive Personal
Lines strategy—and we were prepared. For several years
we had been transforming our operation, and by mid-year
our ability to make dynamic and precise adjustments to
our pricing and coverages had paid off.
With a laser focus on our fluid marketplace, we implemented
rate changes as needed while introducing a number of
products and enhancements, such as Disappearing
Deductible Rewards Plus and Accident Forgiveness. By
year’s end, Arbella Personal Lines had grown premium by
7.3 percent, policy count by 6.2 percent, and beat overall
plan by $40 million. Even as direct writers continued to
burn into the state, Arbella increased its market share in
Massachusetts Private Passenger Auto to 10 percent.
We could not have achieved this success without the
partnership of our independent agents. Our new Portfolio
Underwriting program helped 40 agents develop their
optimal book of business by identifying specific opportunities
to improve their loss ratios. Feedback on the program was
very positive, and the majority of participants showed
significant improvement.
Our talented employees are the foundation of our success,
and we recognized their strong contributions to Arbella and
their capacity to contribute even more. Multiple training
and development initiatives prepared employees for new
opportunities, and we were pleased to promote 10 of our
talented professionals to positions of greater responsibility.
Looking ahead, we will continue to adapt and respond to
the changing weather and marketplace, and make adjust-
ments as needed to our products, pricing, and coverages.
We will provide our employees with new opportunities to
grow and develop with us. And, we will partner effectively
with our valued independent agents to drive mutual
profitable growth.
“Arbella’s portfolio review process helps us
determine exactly how to improve our loss ratio.
Most carriers don’t offer this level of service, so
we really appreciate Arbella’s support.”
– Paul Burke, president, Hadley Insurit Group
10 A R B E L L A I N S U R A N C E G R O U P
com
mer
cial
line
s
112 0 15 A N N U A L R E P O R T
Despite a highly competitive marketplace, Arbella
Commercial Lines remained focused on growing
New England middle market accounts in 2015. Our
efforts to deliver innovative products and improve
efficiencies were rewarded with positive feedback
from our independent agents and steady growth
each quarter.
Even during the severe winter weather, we inspected
properties without delay to ensure that customers were
insured in a timely manner. While maintaining our
underwriting discipline, and through the collaborative
efforts of our Loss Control, Underwriting, and Claim
departments, we continued to write new business and
grew our overall premium by 6.7 percent and our policy
count by 7.5 percent.
Excitement built around our new Builder’s Bundle
campaign, which we introduced to our agents in the fall.
The program provides a discount to trade contractors
when they bundle our Commercial Auto and Artisan
Contractors policies. This strategy marks our first Com-
mercial Lines consumer-facing marketing initiative, and
we are excited about its potential.
Our commitment to developing our employees continued
through 2015, as we introduced new training initiatives
to enhance their skills and prepare them for the future.
We further strengthened our leadership team and welcomed
two very talented new managers to our Middle Market
and Auto departments. These exceptional leaders quickly
established best practices and inspired and developed our
employees to seek the best path to profitable growth.
As we look forward, we expect the competitive landscape
to continue. By remaining responsive to the needs of our
agents and customers, we will continue to differentiate
ourselves and achieve strong, profitable growth into
the future.
“Working for Arbella enables me to make effective
decisions in real time. If I have a new idea to
share, all I have to do is walk outside my office
and talk to my team.”
– Mike Federico, underwriting manager, Arbella
12 A R B E L L A I N S U R A N C E G R O U P
foun
datio
n
132 0 15 A N N U A L R E P O R T
The Arbella Insurance Foundation reached new levels
of giving and community involvement in 2015, donating
almost $2.9 million during the year, and $19.1 million
since its inception. Arbella Insurance Group’s employees
and independent agents played a critical role in helping the
Foundation make a meaningful difference in communities
throughout New England.
Over the past ten years, the Foundation has partnered
with Arbella independent agents to donate more than
$3 million to the charities they care most about. “The
Foundation’s work with local insurance agents helps raise
awareness of many smaller charities that may otherwise
go unnoticed, allowing funding to go directly to those
who need it most,” says Beverly Tangvik, president of
the Foundation.
The Arbella Insurance Group’s commitment to supporting
its employees’ charitable initiatives has been instrumental
in creating the company’s culture of giving and helping
others. Arbella employees value corporate citizenship and
feel empowered to identify and support those who need
assistance. Through participation in more than 60 volunteer
events, employees gave 1,600 hours of their time in 2015,
further strengthening the Foundation’s partnerships with
local organizations.
With the support of the Foundation and the Arbella
Insurance Group’s employee matching gift program,
Arbella employees donated more than $223,000 last year.
Additionally, the Foundation supported employees in
Arbella’s Claim branch offices and Bearingstar Insurance
locations by donating $100,000 to a wide range of causes
throughout Massachusetts and Connecticut.
The Foundation’s steadfast commitment to advancing
safe driving continued as we partnered with our agents
to deliver the Distractology 101 safety awareness program.
The Be a Hero sponsorship and LiveNation Road Crew
initiative complemented our efforts and helped to position
Arbella as a leader in promoting responsible driving decisions.
In 2016 and beyond, the Arbella Insurance Foundation
will continue its commitment to supporting nonprofit
organizations that have a significant, positive impact on
the people and communities we serve.
“Utilizing the generosity of the Foundation makes
a powerful difference in our area.”
– Sharon MacEachern, assistant vice president, Greylock Insurance
cultu
re &
bra
nd
14 A R B E L L A I N S U R A N C E G R O U P
152 0 15 A N N U A L R E P O R T
In an oversaturated insurance advertising market, it can
be difficult for consumers to cut through the clutter and
understand what is truly meaningful about a brand.
Arbella’s brand was developed to reflect our strong culture
of service and community involvement. Our ability to
distinguish ourselves as a local company that cares about
people has been the foundation for our growth since 1988.
Relationships are at the core of everything we do. Our
strategic approach to hiring is aligned with our values,
and it is no accident that our friendly, knowledgeable
employees enjoy helping others. So, last winter when we
received countless letters and calls from customers about
the caring service they received from our employees, we
were proud to see our strategy working.
Happy employees deliver better customer service, and
last year our commitment to our employees’ well-being
continued with a variety of new programs to support them.
Our wellness team introduced new nutrition counseling,
personal fitness training, and meditation classes. The
Employee Advisory Council and Arbella’s Activities
Committee provided many opportunities for employees to
share ideas and have fun together. Keeping our employees
informed and involved is critical, so we expanded the reach
of ArbellaVision to all four of our branch claim offices,
and increased engagement on our employee blog, ShoutOut
—achieving our highest levels of participation to date.
Because our brand is an extension of our culture, we were
able to leverage our many partnerships to build deeper
relationships in our communities. Our designation as the
Official Auto Insurance Partner of the Jimmy Fund and
Dana-Farber Cancer Institute allowed us to participate in
many of their fundraising programs like the Jimmy Fund
Scooper Bowl and the annual Jimmy Fund Marathon Walk.
Through our ongoing relationship with the Boston Celtics,
we participated in many of their community and in-game
programs and events. Our long-standing partnership
with the Mix 104.1 Mix Lounge helped to engage a new
demographic, and the new NESN Backyard Rink program
reached families in a fun and meaningful way.
Going forward, the challenges we face will require us to
be innovative and resilient. Remaining true to our core
values—putting relationships first—will continue to be
at the cornerstone of everything we do.
“I feel fortunate to work for a company that actively
seeks out employee ideas and suggestions and
empowers us to turn them into change.”
– Kacey Holbrook, chair, Arbella Employee Advisory Council
16 A R B E L L A I N S U R A N C E G R O U P
Arbella sells property and casualty
insurance products through independent
and other local agents in Massachusetts,
Connecticut, New Hampshire, and
Rhode Island.*
prod
ucts
* Doing business as Arbella Mutual Insurance Company; Arbella Protection Insurance Company, Inc.; Arbella Indemnity Insurance Company, Inc.; and Covenant Insurance Company
2015 DIRECT WRITTEN PREMIUM
(reported in thousands)
Private Passenger Auto $456,731
Homeowners and Other Personal Lines 199,249
Commercial Auto 95,006
Other Commercial Lines 96,389
Workers’ Compensation 19,325
TOTA L G R O U P $866,700
172 0 15 A N N U A L R E P O R T
ARBELLA INSURANCE GROUP STATUTORY RESULTS
(reported in thousands)
2015 2014 2013 2012 2011
Direct Written Premium $866,700 $808,742 $775,357 $725,034 $680,498
Underwriting Profit/(Loss) (113,117) 16,627 2,159 10,957 (125,223)
Net Investment and Other Income 41,874 43,381 38,131 41,260 35,149
Net Income/(Loss) (58,701) 47,612 33,762 52,335 (81,715)
Net Combined Ratio 113.5% 96.7% 98.6% 97.2% 119.6%
Net Combined Ratio excluding catastrophe losses 98.8% 95.8% 97.3% 94.8% 106.3%
BALANCE SHEET
Cash and Invested Assets $1,119,352 $1,121,188 $1,047,791 $956,255 $887,632
Total Assets 1,486,733 1,425,847 1,341,592 1,253,123 1,156,046
Loss and Loss Expense Reserves 441,582 364,814 351,709 345,188 355,682
Unearned Premiums 430,921 402,637 380,276 357,142 336,065
Policyholders’ Surplus 510,496 561,308 523,929 480,884 407,990
Growth in Surplus -9.1% 7.1% 9.0% 17.9% -13.9%
18 A R B E L L A I N S U R A N C E G R O U P
“Since 2011, Arbella has paid more than $300 million to policyholders for losses incurred
from catastrophic weather events. Whatever the New England weather brings our way,
Arbella will meet all its promises to our policyholders and our financial strength will endure.”
Chris Hall, Chief Financial Officer, Treasurer, and Executive Vice President
SURPLUS CHART
(reported in millions)
$200
20012002
20032004
20052006
20072008
2009201
0201
1201
2201
3201
4201
5
$400
$600
80.0%
90.0%
100.0%
110.0%
120.0%
2010
CR Excluding Catastrophes
2011 2012 2013 2014 2015
CR Impact of Catastrophes
COMBINED RATIO TREND
192 0 15 A N N U A L R E P O R T
BOARD OF DIRECTORS
JOHN F. DONOHUE
Chairman
FRANCIS X. BELLOTTI
Vice Chairman
PATRICIA P. BAILEY
THOMAS S. CARPENTER
ANNE M. DEFRANCESCO
J. ROBERT DOWLING
WILLIAM H. DUMOUCHEL
ANDREA GARGIULO
DAVID W. HATTMAN
THOMAS R. KILEY
JOSEPH G. MURPHY
BRIAN J. O’DWYER
JEANNETTE M. ORSINO
OFFICERS OF THE ARBELLA INSURANCE GROUP
JOHN F. DONOHUE
Chairman, President, and Chief Executive Officer
FRANCIS X. BELLOTTI
Vice Chairman
JANET R. CORCORAN
Chief Operating Officer and Executive Vice President
CHRISTOPHER E. HALL
Chief Financial Officer, Treasurer, and Executive Vice President
GAYLE O’CONNELL
Chief Marketing Officer and Executive Vice President
EILEEN S. CURRIE
Senior Vice President, Commercial Lines
GAIL EAGAN
Senior Vice President and General Counsel
JAMES S. HYATT
Senior Vice President, Personal Lines
PAUL J. BRADY
Vice President and Chief Information Officer
STEVEN A. JACOBS
Vice President, Marketing
LYNELLEN M. RAMIREZ
Chief Actuary and Vice President, Research Analytics
JOSEPH L. SALERNO II
Vice President, Claim
BEVERLY J. TANGVIK
President, Arbella Insurance Foundation
20 A R B E L L A I N S U R A N C E G R O U P
OUR VIS ION
Arbella’s vision is “to be the best property and casualty company in the Northeast.”
OUR MISSION
Arbella’s mission is to be a recognized regional leader in the property and casualty
insurance industry. We will achieve this goal by maintaining financial strength, selling
our products in select markets, and staying true to our core values and competencies.
OUR CORE VALUES
EMPLOYEES
We encourage a culture that supports the balance between personal interests and professional goals and development.
CUSTOMERS
We maintain the highest levels of customer service and treat all customers with honesty and fairness.
TRUST
We maintain positive and enduring relationships with all those who rely on our service. We keep our word and
act with honesty and integrity.
PERFORMANCE
We always seek new ideas, opportunities, and methods of doing business because we strive for excellence. We aim
to outperform the industry in every way. We are resilient and passionate about what we do.
CITIZENSHIP
We engage in activities that have a positive impact on the people and organizations within our communities.
ARBELLA INSURANCE GROUP 1100 CROWN COLONY DR IVE, QU INCY, MA 02169 | ARBELLA.COM
