2022 has been a challenging year for many Americans and neither our members nor our company are immune to the issues that are continuing to impact all of us at this time. At Armed Forces Insurance we are not ones to dance around difficult topics, so my letter this year will focus on the primary drivers that are impacting our members, our company and the entire insurance industry - Inflation, Weather and the Economy.

Inflation has certainly dominated the news in 2022 and it has also significantly impacted Armed Forces Insurance. All Property & Casualty insurance companies are typically negatively impacted by inflation. Policies are priced to cover expected member losses based on historical costs to repair or replace damaged homes or goods. When rapid inflation occurs it leaves insurance companies in a bind as premiums were set with the expectation that repair costs to our members’ damaged homes would be much less than the actual “inflation impacted” repair costs. As you can imagine, every insurance company, including Armed Forces Insurance, is dealing with this situation and is in the process of making sure that both the rebuild value of member’s homes and the policy premiums are properly adjusted for the increased cost of goods, materials and labor to repair damaged property.

Catastrophic weather has not been kind to anyone in the United States in recent years. According to national insurance data, catastrophic property losses (Tornadoes, Hail, Wind, Hurricanes, Wildfires and Freeze events) have been running 2 – 3 times higher than the long-term historical average for the last 6 years in a row. This has been true for Armed Forces Insurance as well. Historically, it was not uncommon to see a year or two every decade run at these levels, but 6 years in a row has turned the industry on end with every company, including Armed Forces Insurance working to adjust premiums and coverages to adequately manage and price for the higher catastrophe losses being incurred in practically every area across the United States.

One of the ways Armed Forces Insurance works to keep premiums as low as possible is by using our investment income to help offset losses and expenses. As all of you know, 2022 was a brutal year for the economy and financial investments. One investment manager expressed his sentiments about 2022 as “There was just nowhere to get a positive return…” as both equities and bonds declined. It is a rare event for both equities and bonds to have negative returns for a calendar year, yet 2022 was one of those years. Fortunately, management was forecasting interest rate increases and re-positioned our investment portfolio in late 2021 and early 2022 to minimize risk and mitigate losses, so while our investment results were not stellar, they were certainly better than many of our peers.

With all that said, Armed Forces Insurance was able to claw out a small profit in 2022 for the first time in multiple years, however the unfavorable financial markets did drag our overall surplus (our savings account) down by about 9 ½ percent. We are still very sound and solid, however our management team’s biggest concern is that in this inflationary and weather heavy environment we cannot sustain acceptable results going forward without continuing to adjust prices to adequately cover member losses.

Our challenges are the insurance industry’s challenges. Our Agents are having numerous conversations with individuals who moved to an insurance company to get a slightly lower price, only to get a large rate increase at their renewal. In a volatile market like this, there will be temporary price fluctuations between different insurance carriers but know that at Armed Forces Insurance, our goal is to provide the best long-term value in the insurance industry to our members. When you are with Armed Forces Insurance, our experienced agents will give you insights and advice on how to best navigate this volatile insurance market.

No one likes to deliver difficult news but be assured that here at Armed Forces Insurance our focus is not to make stockholders or Wall Street analysts happy at our members’ expense. Our goal is to walk the fine line between doing what must be done and minimizing any negative impact as much as possible to our membership – you.

I want to thank you, our members, for continuing to put your trust in Armed Forces Insurance. You have many pressing concerns, so we thank you for continuing to let us help take care of your insurance needs.

Our Mission is You.^®

Arlen L. Briggs
President & Chief Executive Officer