Faithful Customers; Church Mutual Insurance credits 95% retention
A small oversight led to a big disaster for Evangelical and Reformed United Church of Christ in Waukesha.
One day in December, Advent candles were left burning on the church’s altar after a funeral. The unattended candles started a fire that destroyed the church. When the blaze was under control and the damage was plain to see, Pastor James Gorman went home about midnight and sent an e-mail to the congregation’s insurance agent, informing him that the church had burned down.
By 8 a.m. the next day, the agent for Church Mutual Insurance Co. had called and began explaining the claims process and “holding our hands and getting us through,” Gorman said. The church received a $3.3 million insurance settlement from Church Mutual and, with the help of gifts from the community and the congregation, is planning to construct a $4 million church on the same site.
“They’ve just been great,” Gorman said of Church Mutual.
The fire in Waukesha was one of about 2,200 fire or lightning- strike claims last year for Merrill-based Church Mutual. It was, as Church Mutual Chief Executive Officer Gerald Whitburn put it, an opportunity for the company to deliver on the product it sells: a promise to help when a trouble occurs.
Selling such promises, Church Mutual already the largest insurer of religious organizations in the nation reached a major milestone in the first quarter of 2006. The company topped $1 billion in assets, an achievement it celebrated at the company’s 160-acre home office campus last week.
Whitburn, who also is chairman and president of the company, said much of the growth stems from customer loyalty over the years. Church Mutual has been providing insurance since 1897, when it was started by two pastors in Merrill with the financial backing of several businessmen. Today, it insures about 95,000 religious institutions in all 50 states.
“A consistent 95 percent retention rate has been a major driver of this growth,” Whitburn said.
But growth also has come as the religious landscape has changed in the United States over the last 30 years or so. There are more religious institutions and more large churches, which means more insurance opportunities.
There are about 300,000 churches of various sizes in the United States, according to Scott Rolfs, managing director of the church and school financing division of Ziegler Capital Markets Group in Milwaukee.
“It’s been an evolving phase of religion in America, with most of the traditional Protestant denominations doing well, new non- denominational entities evolving and also the movement toward mega- churches,” Whitburn said. “We are beginning to write more of the increasingly large facilities where several thousand people or more worship each week.”
The move toward bigger churches has played a role in Church Mutual’s growth because larger churches tend to have more programs and, as a result, more liability risks.
The company insures synagogues and mosques as well as churches and religious schools, camps, colleges and senior living centers.
Along with coverage for relatively minor incidents and injuries, Church Mutual provides insurance for tragedies ranging from drownings during church-sponsored activities to sexual misconduct to major natural catastrophes such as hurricanes.
In 2005, Church Mutual had losses of $150 million on more than 2,000 claims from damage related to Hurricane Katrina and other hurricanes. The year before, it paid claims of $115 million on four hurricanes that hit Florida.
Whitburn said harsh weather in recent years and demographic changes pose challenges not just for Church Mutual, but all insurers that do business in hurricane-prone areas.
“We’re in a recognized period of more volatile weather patterns that impact America’s coasts at a time when residential and commercial development in coastal areas has never been stronger,” Whitburn said.
Conservative investments
Despite the large hurricane claims in 2005, Church Mutual posted net income of $36.1 million, up from $21.5 million a year earlier. Overall, Church Mutual added 7,200 houses of worship as customers in 2005.
It also maintained its A+ rating by A.M. Best Co., a firm that gauges the financial strength of insurers. It has kept that rating for more than five decades.
Whitburn, a Merrill native who served as secretary of the Wisconsin Department of Health and Social Services under then-Gov. Tommy G. Thompson, said the company has taken a conservative approach with the investment portfolio that comprises most of Church Mutual’s $1 billion in assets.
“Ninety-two percent is conservatively invested in highly rated fixed-income bonds. Less than 9 percent is in common stocks,” Whitburn said.
Largest private employer
In north-central Wisconsin’s Lincoln County, Church Mutual is the biggest private employer. Almost 550 work at the home office, which last summer opened a 70,000-square-foot addition.
“And these are good jobs. They are white collar, good-paying jobs,” said John Mulder, administrative coordinator of Lincoln County.