Episode 15: 2017 ALPS Year in Review

ALPS recently released our 2017 Annual Report online. Mark Bassingthwaighte was able to sit down with ALPS CFO Sara Smith as she elaborated on a year that was marked by growth and excitement for the company. 

ALPS In Brief, The ALPS Risk Management Podcast, is hosted by ALPS Risk Manager, Mark Bassingthwaighte.

Transcript:

MARK:

Hello. Welcome to another episode of ALPS In Brief, The ALPS Risk Management Podcast. We're coming to you from the ALPS' home office in the historic Florence Building in beautiful downtown Missoula, Montana. I'm Mark Bassingthwaighte, the ALPS risk manager, and I have the pleasure today of sitting down with our corporate CFO Sara Smith.

MARK:

We're going to be talking today about the ALPS annual report which is just out. But before we get into that, Sara, can you just take a little time to share with our audience? Tell us a little bit about yourself.

SARA:

Sure. Thanks, Mark. My name is Sara Smith. I've been with ALPS for 15 years. Prior to that, I had a pretty diverse background working at retail and coal bed methane exploration.

MARK:

Wow.

SARA:

All sorts of different things. I didn't think insurance would be where I would end up, but I have found it challenging and fun and quite exhilarating at times. I've enjoyed my career here at ALPS.

MARK:

Very good. Very good. Well, we are here to talk about the annual report, the numbers from 2017 and all the good things that have been happening around here. Why don't we start with some of the most basics, the things that people are most curious about. Can you share a little bit about revenue? What's been happening?

SARA:

Sure. I think the exciting thing happening at ALPS is just our growth and we have a great trajectory going forward, but we also had a fantastic 2017. We saw growth in key states like Washington and Colorado, where we saw tripled digit growth-

MARK:

Wow, nice.

SARA:

... which is super exciting, and so our overall top-line grew about 6%, which in this competitive and market environment, it's a great achievement.

MARK:

Yeah. Very good. Not only is growth important in terms of just an insurance company, but claims frequency is also a significant thing. What happened on the frequency front?

SARA:

Well, we started to think that maybe attorneys weren't having claims anymore the way the frequency number dropped. We have seen this in the industry overall in 2017, but it was great to see in ALPS as well. Our frequency dropped right below 3% so it was great, great year.

MARK:

Wow. Those are great numbers. Growth is not always built on just revenue in terms of playing with premium numbers and having savings and frequency. Can you share a little bit about what's happening in terms of policies, number of policies, number of attorneys? How are those numbers playing out this year?

SARA:

Both policies and attorneys grew over 7% in 2017 over '16. That translates to almost 18,000 attorneys in ALPS portfolio at the end of '17.

MARK:

That's a significant change from when we started all those years ago.

SARA:

It is.

MARK:

It's a very different company which is a good thing.

SARA:

It is a good thing.

MARK:

Another key component for insurance carriers is just, in terms of their overall stability as measured by surplus. What's happening in the surplus?

SARA:

Well, surplus is so important and so critical for all insurance carriers and, as a policy holder, it's something you should be concerned with when you look at your own insurance carrier. Basically, that is the actual money available to policy holders beyond what's established for reserves. It's the foundation of security and stability within an insurance company. Our surplus grew 6% in 2017. We're just up over $40 million at the end of the year. So we're in sound financial shape.

MARK:

Yeah and I think that's a good point in terms of having lawyers understand how insurance companies ... How to judge and determine how secure and stable a company is in terms of longterm presence in a market.

SARA:

Absolutely.

MARK:

Or just the ability to pay claims going forward. And these surplus numbers are key. I'd like, shortly, to shift into a little softer side of this discussion, but before we jump there, I would like to make our listeners aware. We have put up the annual report. As I understand it, it's all on our website, interactive. Do you have any comments about that? It's just ... Just go to alpsnet.com.

SARA:

Correct.

MARK:

I just encourage you folks, if you have any interest to dig into the numbers a little bit more, all of this information is available. Let's talk about the soft stuff in 2017.

SARA:

Yeah.

MARK:

You've shared some things about growth. Lots of great things happening with the company. Just fill us in.

SARA:

I think that sometimes there's a tendency to look just at the numbers and they tell a great story in 2017 but there is also a lot of foundational work that went into 2017 that is really priming the pump for 2018 and beyond. A couple of those things are ... We did a full rate study of our entire 30 years of data, right? What do we know about our attorneys and what do we not know? What are the assumptions we've made over the years and what are the surprises? So, that was a huge undertaking. Took a lot of time and I think we got some valid information out of that.

SARA:

The other thing we did is we heard from our policy holders that maybe there was some things that we could do in our policy forms that would be better and more customizable to them. We took a hard look at our policy and developed three new policy forms to better serve our customers. That is a tremendous amount of work.

MARK:

Yeah.

SARA:

We spent most of '17 working on that. Of course, that's just the easy part. Now, we have to ... At the end of the year, we started filing our forms and rates and policies in all of our states. So, now we're hurry up and wait and see what happens.

MARK:

Yeah, yeah, yeah. We're also at a point where we're beginning to expand jurisdictionally. Any comments on what's happening there?

SARA:

Yeah, we have really put some effort forward to diversify our book both geographically as well as just from a demographic perspective.  We did see significant growth in Washington and Colorado and we're going to continue to see that expansion play out. We recently were approved in Texas and starting writing business in April. So that's really exciting. We're on the march to get the last couple of states and get our Certificate of Authority. I expect that our footprint will be much different by the end of '18 then it even was in 2017.

MARK:

And while we have been recognized as a national insurer, we really now are on the verge of truly being national in terms of just a presence throughout the entire United States, which is exciting.

SARA:

It is exciting.

MARK:

It really is. Lots of opportunities coming. There's been some investments in technology as well. Can you share a little bit about what we're doing?

SARA:

Sure. I think that the consumers ... Consumers overall are changing and they're changing their purchasing patterns and the way that they like to access their information.

MARK:

Yes, right.

SARA:

I think that it's hard for insurance companies especially. We all have legacy platforms and we have to sometimes just rip the band aid off. Start over. We are working on finally e-delivery and being able to get our customers what they want, when they want it. So I think it's a huge task and it's much more complicated than you think it would be, but we're getting there.

MARK:

Very good. Very good. That's pretty much what we wanted to share. Do you have any closing comments? Exciting things to look forward in 2018? What's on your radar?

SARA:

Wow. So, 2018 right now is ... I'm really watching our rate implementation and execution and making sure that we're doing that in the right way. I think that going into new states is super exciting. How do we build traction? What does that look like? What are we going to learn? Cause you know we're going to learn a lot. We just don't know what it is at the point right now.

MARK:

And I'm looking forward myself in terms of one of the guys getting on the airplane so we can go to a few new places. Get a few more miles but-

SARA:

Right, right, right.

MARK:

To meet some new folks out in these new states. Doing some lecturing and what not. They are exciting times. Well, Sara, thank you very much. It's been a pleasure. To all of you listening, I hope you found something of value today and I encourage you, if you have any interest in learning more about what is happening here at ALPS, to visit alpsnet.com. There is a link to the annual report interactive and there's some great information there. In addition, if any of you have any questions or topics that you would like to see addressed in the future ... Or even speakers you'd like to hear on the podcast, please don't hesitate to reach out to me at mbass@alpsnet.com. Thanks for listening. Bye-bye.