Germantown Mutual quietly earns high fiscal rating

Oldwick, N.J.-based A.M. Best Co. recently rated Germantown Mutual Insurance, which specializes in property/casualty underwriting, at an A rating. The rating system, ranging from A++ to C, measures institution’s financial strength and security.

Germantown Mutual Insurance Company (GMI) is the only Wisconsin-based company to appear on the list and has had a rating of A or higher since 1922.

The company was founded in 1854 and, according to Richard Smith, president since 1978, remained small up until 10 or 15 years ago.

Around that time, GMI built a 26,000-square-foot headquarters that can be seen from Highway 41 and acquired four smaller companies from around the area to help the company grow, said Smith.

“As a small to medium-sized business, placing our building in this location makes it a pretty effective advertising vehicle,” Smith said.  “I can’t reach that many people in one day any other way efficiently, about a hundred thousand people drive by us every day.”

GMI, conducts business through independent insurance agents in four states (Wisconsin, Utah, Minnesota and Michigan) and recently opened a small office in Sandy, Utah in addition to the Germantown headquarters.

The company has 350 agencies between the four states and has around 80 percent of that business in Wisconsin, Smith said.

“We write different plans in different states but write all of them in Wisconsin,” he said.

With around 50 employees in the Germantown headquarters, GMI has plenty of room to grow in the facility. Smith said the company plans to expand, but that most likely will not happen for a few years until the market turns.

“We are a company that’s in very good financial condition, and that’s why we tend to grow in spurts, when the market changes and some companies’ capital is stretched, we are in a position to take as much new business as we want,” Smith said. “Of course, we are always looking for growth through acquisitions, but the industry has been pretty good, so that usually isn’t when companies are looking to merge.”

The market over the last four years has seen insurance rates going down, Smith said. 

“I expect to see, certainly for homeowners insurance that drop to bottom,” he said. “For auto we may see a leveling off for a short period, and on the commercial side it’s probably going to go down slightly but not a lot. If you look at the storms we’ve had and the amount of water damage claims, there has just been too many losses. Therefore, I expect the homeowners insurance rates to at least stabilize and probably even go up a little bit.”

The Wisconsin department of Insurance, unlike many states, allows companies to compete with each other for the best rate, which ultimately drives costs down. Insurance rates in the state of Wisconsin are some of the lowest rates across the country, Smith said.

The biggest challenge the company faces, like so many other industries, is gaining interest from qualified people to replace the aging baby boomers looking towards retirement.

“Many young people think insurance is just selling; they don’t realize we need accountants and data processing people, and claims adjusters and other aspects of the company as well,” Smith said.

As for Smith, he says he is having too much fun and is still too young to look at retirement, but succession planning is definitely something the company is thinking about.

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