Employers Insurance of Wausau was incorporated in 1911, the same year as the passage of the Wisconsin Workmen's Compensation Law. It was organized for the purpose of providing coverage required by law for injury to employees of the lumber business. Sentry Insurance, originally Hardware Mutuals, was organized to provide low cost fire insurance to hardware dealers. It was relocated to Stevens Point when P.J. Jacobs became secretary of the Wisconsin Retail Hardware Association.

The Sentry Life Insurance Company and Employers Life Insurance Company were organized to support and complement the fire and casualty activities of the major insurers in our area. The first life insurer, Sentry Life, was established in 1958.

Today's Insurance Business in Wisconsin

The total number of employees directly involved in the insurance business in Wisconsin is difficult to pinpoint exactly. However the industry clearly represents one of the major employment categories for the state. Federal government sources show Wisconsin insurance employment at 43,079 in 1985, up 11,870 from 1975. Each of the four Central Wisconsin counties included in this study contains a single major player in the applicable employment bracket, so because of disclosure laws, official government data do not provide separate figures for insurance employment. But other published sources list the total employment of Church Mutual, Sentry Insurance and Employers Insurance of Wausau at approximately 5000 people. In addition there are approximately 250 agencies in the four county area covered in this report. They range in size from one person to a dozen or more. The Office of the Commissioner of Insurance sent license renewal notices to 55,200 insurance agents statewide in late 1987. About 15 percent will not renew which indicates that the insurance business continues its function as an entry into and exit from production or sales employment. However on a statewide basis between 700 and 800 new insurance agents are licensed monthly. Due to high turnover and fluctuations in the work force, total employment figures may be somewhat understated. But overall, the employment trend in sales has been upward, the number of people holding licenses is two and a half times greater than in 1977.

TABLE 2
Largest Wisconsin Life Insurers
(According to National Premiums and Annuities)

Our four county area is the home for 20 of the 269 Wisconsin domestic insurance companies. These companies have to a large degree participated in the ups and downs of the national insurance business cycle. Figure 1 shows the percent change in the assets for all Wisconsin insurers for the years 1967-86 adjusted for inflation. These assets are the totals for all insurers combined (life, health, property and casualty). The combining of all types of insurance in the chart will reduce somewhat the fluctuations that would be seen in single lines of insurance, such as. general liability, worker's compensation or health insurance. Over this 20 year period assets increased from the previous year in all but 1969, 1974 and 1981. Central Wisconsin companies, representing 7.4 percent of Wisconsin domestic insurers, held 12.4 percent of the assets. In dollars the assets held by these 20 companies totaled $5.7 billion. The three major players, Church Mutual, Sentry Group and Wausau Companies, held in excess of 99 percent of these assets.

Figure 1
WISCONSIN INSURANCE COMPANIES
% CHANGE IN ADJUSTED ASSETS 1967-1986

Performance of the Central Wisconsin Insurance Industry 

All insurers conducting business in Wisconsin had written premiums (the life insurers) of r $2.84 billion, and earned premiums (the property and casualty insurers) of $3.83 billion for their Wisconsin operations for a total of $6.67 billion. The benefits paid and direct losses incurred by these 1392 companies came to $4.6 billion.

How did our Central Wisconsin insurance companies fare? Remember, this is a business where stock property and casualty companies (companies owned by stockholders as opposed to mutual companies which are owned by policyholders) had an underwriting gain in only 4 of the 14 years from 1972 to 1985. In fact stock property and casualty companies had underwriting gains in only 12 of the 30 years from 1957 through 1985. This report will deal with the 1986 figures, the most current available.

Looking at the 1986 property and casualty figures first, our 13 Central Wisconsin property and casualty companies were responsible for 16 percent of the property and casualty net income in Wisconsin. On their nationwide operations these companies had a loss ratio of 78.2 percent. That percentage is derived by dividing direct losses incurred by direct premiums earned. On their Wisconsin business, this ratio improved significantly to 63.7 percent. The lowest loss ratio of the IS property and casualty companies belongs to the Seneca Sigel Mutual Insurance Company, a Town Mutual from Vesper, Wisconsin, which had a 44 percent loss ratio. In every case but one, the Central Wisconsin companies enjoyed better loss ratios on their Wisconsin business than on their nationwide activity (Table 3). Apparently there is truth to the statement that Wisconsin is a good place to do business. Total net income from nationwide operations, including Wisconsin, totaled $79.9 million. Only two companies had negative figures in the net income column for 1986.

TABLE 3
Central Wisconsin
Domestic Property and Casualty Insurance Companies

TABLE 4
Central Wisconsin
Domestic Life Insurance Companies

The life insurance companies here in Central Wisconsin wrote premiums of just over $43 million in Wisconsin and paid benefits of $36.9 million. Central Wisconsin life insurance companies had 4.8 percent of the premium and annuity considerations written by Wisconsin companies on a nationwide basis. Their gain from operations was 2.5 percent of the almost $1.3 billion gain of Wisconsin life insurers. The net income and gain from operations of the life and property/casualty companies exceeded $102 million making 1986 a good year for the industry in Central Wisconsin.

Outlook for Wisconsin Insurer

CEOs from Northwestern National Insurance Company, Heritage Insurance, and Milwaukee Insurance, addressing the Independent Insurance Agents of Wisconsin at their annual meeting in April, indicated that the years ahead will not be easy. A recent headline in Business Insurance, March 21, 1988, .said "Competition to Pressure Insurer's 1988 Results." 81's survey of 26 major commercial property/casualty insurers indicates that the underwriting recovery (profit from underwriting activities) has slowed if not stalled and premium growth is sluggish. According to a vice-president of Sentry Insurance, "It's going to be a very challenging year."

The industry will have a variety of challenges to contend with in 1988. The group health insurance business will be difficult with continuing increases in health care costs. Organizations, in their attempts to keep employee benefit costs down, will ask covered members of the group to pay an increasing portion of health care bills. To control costs, deductibles in policies will increase, second opinions will be required and certain medical procedures will be done on an outpatient basis. It will be difficult to make money in the health care business. While the creation of health maintenance organizations has provided competition, some health insurers may face financial difficulties. Myron Picault, senior vice president and senior analyst for Oppenheimer and Company, describes the group accident and health area as "the pits."

Commercial property and casualty pricing will be under increasing pressure. Insurance companies attract business by lowering rates which results in lower premiums. C. Robert Snyder, chairman and chief executive officer of Milwaukee based Northwestern National Insurance Company, explained insurance company behavior to a group of insurance agents this way: it is "like a grocery store where check-out girls set the price for each product as it goes through the check-out." When asked if companies would be buying business by lowering premiums, he added, "It looks like it is coming."