Keep 'em coming back: one reason for Pharmacists Mutual's success is its extremely high retention rate--more than 90%.

In 1898, a young pharmacist named Albert Falkenhainer settled in the tiny village of Titonka, Iowa, and opened a drug store, the town's first business. It burned down shortly thereafter, and led Falkenhainer to open a second business in 1909: the mutual that later became known as Pharmacists Mutual Insurance Co.

According to company lore, it was Falkenhainer's firsthand experience with the hassles of loss settlement, bad service and high premiums that prompted him to charter the mutual. Today, PMIC President and Chief Executive Officer Edward T. Berg said it's the insurer's commitment to service and reasonable premiums that keeps customers around, which is one of the main reasons it has been able to maintain its A+ rating for so long. It is one of only 15 companies and only three unaffiliated companies to be ranked A+ or higher by A.M. Best Co. for the past half-century.

"One customer told me, 'Pharmacists Mutual takes care of me--I feel like I was taken care of,' and that's kind of been our philosophy. We just give them what they need, and we do that without over-covering them;' Berg said.

That philosophy bears fruit in the company's customer-retention rate. According to A. M. Best Co. data, PMIC renews more than 90% of its customers every renewal period; Berg said that figure actually fluctuates between 92% and 94%.

"Our success has a lot to do with the long-term relationship we maintain with our customers and partners," he said. "We don't have a lot of churn and a lot of expenses associated with that."

Also, practicing pharmacists sit on the company's board of directors, Berg said, an asset to the insurer because they tend to be more in touch with issues affecting their business than a non-pharmacist board member might be.

The company has a "highly conservative" approach to everything, not just investments. Nearly two-thirds of the company's invested assets are in bonds. The software used on company computers might be the third or fourth release, Berg said, but it still gets the job done. The company's headquarters building is another example. "We have a nice, well-built home office," Berg said. "Not flashy. But it's solid and sturdy."

The other factor working toward the company's financial strength: its location in tiny Algona, Iowa, population 5,741.

"Our salary structure has helped us," Berg said. "We're in a small, rural section of northern Iowa, and we're probably at the top of the pay scale when it comes to professional jobs around here." But, Berg noted, if the company were located in an urban market like New York or Chicago, the payroll would have to be at least 15% higher to attract the same level of talent. Bigger city equals higher payroll, which means higher premiums.

"We tend to hire locally, and the people we hire here have a strong work ethic. We get a lot of value for the salary we pay. And they are the kind of people who treat people well. They are friendly, and they are helpful," Berg said.

Pharmacists Mutual
Insurance Co.

Ratio Comparison

                  1998    1999     2000    2001     2002

Combined Ratio    95.7    100.3    92.9    105.0    98.7
Opening Ratio     88.4     93.0    92.9     98.8    93.2

Note: Table made from line graph.

Then And Now

                       1953             2002

Assets            $829, 868   $113.7 million
Net Premium    $1.8 million    $61.5 million

Source: A.M. Best Co. Executive Summary
Report; A.M. Best Company Report