Only In California For Penn America's Non-Standard Auto Insurance

The Penn-America Insurance Co. is to concentrate its non-standard personal automobile insurance portfolio in California, where approximately 60% of the company's current business of this type is underwritten. Consequently, the company will run-off its books of non-standard personal automobile business in other states, principally Nevada and Washington.

"Our job is to make money through sound underwriting and pricing," said Jon S. Saltzman, president and CEO of Penn-America. "When we can't do that, we go elsewhere. In the past year the nature of the non-standard personal automobile business changed and we can't play profitably under the new rules of the game in most of the country." During 1998, large national direct insurers invested heavily in technology, cut prices significantly and greatly expanded market share. The economies of scale in underwriting, marketing and claims management that allowed these price reductions appear to be increasingly important to profitability in this market segment.

"As with many other things, the rules are different in California and our non-standard personal automobile business there continues to be profitable," Saltzman continued. "As we run-off the business there will be some associated costs but by eliminating a marginally unprofitable business we expect currently that the overall impact on 1999 earnings will be neutral."

During 1998, Penn-America underwrote approximately $24 million in premiums for non-standard personal automobile insurance. The discontinued books of non-standard personal automobile business represent about $10 million in 1998 premiums, approximately 10.5% of 1998 total commercial and personal lines gross written premiums of approximately $95 million.

The Californian non-standard coverage will be underwritten by Penn-America Insurance Co. and its subsidiary Penn-Star Insurance Co. and will be marketed through its agent in that state, Carnegie General Agency (Camarillo, CA).