THE ONLY CONSTANT IS
Making Change Work for Members 2015 ANNUAL REPORT
About Us The retail industry is vital to Michigan’s economy and quality of life. It provides more than 870,000 jobs to Michigan workers and is responsible for 20 percent of Michigan’s total economic activity. Michigan Retailers Association speaks for retailing in Michigan, working with businesses to help them succeed and working with state government to provide a retail business climate for success. Michigan Retailers is the nation’s largest state retail association. We serve as a valuable and trusted business resource for 5,000 member businesses and their more than 15,000 stores and websites across the state. Through its expanding national network of credit card processing referral partners,
Michigan Retailers serves businesses of all types in all 50 states and the District of Columbia. Membership services range from legislative advocacy and expert credit card processing to business insurances, discount programs and college scholarships. Michigan Retailers also established and operates the popular Buy Nearby campaign, which encourages all consumers to shop at retail businesses in the state to strengthen local communities and Michigan’s economy. MRA’s affiliated corporate entities are: Michigan Retailers Services, Inc.; Retailers Insurance Company; Michigan Retailers Foundation; and Michigan Retailers Association Political Action Committee.
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Contents 1 About Michigan Retailers Association 2 Contents 3 Leadership Message: Making Change Work for Members 4 Membership Services: Mobilizing to Prepare Members for EMV 6 Legislative Achievements: Protecting Members from Local Mandates 9 Buy Nearby: Greater Support Fuels Growth 12 Member Giving: Scholarships, Political Action, Buy Nearby 14 MRA Financial Summary 15 RIC Leadership Message: 35 Years of Change and Growth 16 RIC: Insurer Continues on Growth Path 17 RIC Financial Summary 18 Boards of Directors 20 Professional Management
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Leadership Message Making Change Work for Members
The insight that “The Only Constant Is Change” has become a staple of our annual boardroom review of the year just ended. Author Isaac Asimov’s quote appears in each year-end PowerPoint because it captures so cleverly the essence of our dynamic, technology-driven world. No sector of the economy or element of our lives is immune from change. Whether change comes big and abrupt or is small and persistent, it alters lives and businesses. Change is part of our individual and collective DNA. Since there is no escape from change, the “trick” is to harness it and make it work for us. The goal is to get on the right side of change by anticipating and getting out ahead of it, even fostering and speeding it up, so that it becomes an ally instead of a foe. At Michigan Retailers, we work hard to make change work for members. That was especially true in 2015. Important examples include: • In merchant processing, members faced the biggest industry change in decades because of the rollout of higher-security EMV/Chip Cards. Michigan Retailers mobilized staff and suppliers to provide members with the knowledge and updated equipment necessary to cope with an October 1 deadline. • In government affairs, members faced the growing threat of a confusing and expensive patchwork of local ordinances setting minimum wages and benefits higher than those required by state law. Michigan Retailers
Dan Marshall Chair, MRA Board of Directors President, Marshall Music Company, Lansing
worked with state legislators to achieve passage of a pre-emption law preventing such crazy-quilt regulation across Michigan. • In the constantly churning shopping landscape, retail members battle to keep more shopping dollars in their communities instead of having them flow to out-of-state Internet merchants that have not invested in Michigan. The Association stepped up the Buy Nearby campaign to encourage more consumers to shop in Michigan, by spreading key messages and information to more consumers in more communities. • In insurance services, members face the need to keep their workers’ compensation insurance costs low. They also must protect their business online banking accounts from the growing peril of “hacking” and a little-known gap in their financial institutions’ protection against it. Retailers Insurance restructured its work comp rates to lower costs in the largest employee class codes. The company also stepped up promotion of its unique EFT Guard coverage – included as part of every workers’ comp policy – to close the online banking protection gap. Those are a few of the highlights of this past year, which also marked Michigan Retailers 75th anniversary as a trusted business resource for thousands of businesses, retail and non-retail alike. In the pages that follow, we are pleased to present Michigan Retailers’ most important achievements of 2015 to you, the beneficiaries of another important year of constant change.
James P. Hallan President and Chief Executive Officer Michigan Retailers Association
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Membership Benefits Mobilizing to Prepare Members for EMV 2015 was “The year of big change” in the credit card processing world. It was bigger than the introduction of the magnetic stripe on cards in the late 1970s and early 80s, which ushered in the modern processing terminal, according to MRA’s John Mayleben, a national expert on the processing industry. It was bigger even than “Y2K,” which brought about the need to upgrade terminals because cards issued with expiration dates in 2000 and beyond couldn’t be processed when the calendar turned to the new millennium. What was so big this past year was that on October 1 there was a dramatic change in the way fraudulent or
Dan, Ken and Betsy Wahmhoff, Wahmhoff Farms For over 60 years, Wahmhoff Farms has been growing and selling quality Christmas trees. This family owned and operated business, located in Gobles, has won numerous state competitions and won Reserve Grand Champion at the National Christmas Tree Association. The award allowed them to supply Vice President Joe Biden and his family a Christmas tree in 2011. Brothers Dan and Ken Wahmhoff own the farm and employ 20 full-time, year-round employees, including sister Betsy.
Dan Wahmhoff, daughter Nicole, Vice President Joe Biden, Annette and Ken Wahmhoff, Dr. Jill Biden.
During harvest and Christmas season, the need to change from a non-compliant terminal to a chip reader loomed. “Changing terminals isn’t an issue. We need to stay current with what’s going on in the market. It was just the timing,” Betsy Wahmhoff said. Having to hook up and program a new terminal during their busiest time of year wasn’t what the office staff anticipated, because they were busy helping wholesale customers. After about a week, the EMV terminal was up and running. “We feel absolutely comfortable calling Michigan Retailers,” Betsy said.
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counterfeit transactions are handled. This “liability shift” from card-issuing banks onto merchants in certain circumstances was tied to the first widespread distribution of EMV cards, also known as “chip cards” or “smart cards,” to consumers. The cards include an embedded chip on their face and provide greater security against data theft. The reason for the shift was because the card networks (Visa, MasterCard, Discover and American Express) all changed their rules to allow for the liability on a counterfeit card, and in some cases a stolen card, to fall to the merchant if the merchant’s processing terminal could not accept the new chip cards. The October 1 deadline set off a flurry of activity. It soon became clear that the nation’s credit card industry was ill prepared to handle the timing of the change. Card-issuing banks, terminal manufacturers and software developers were all slow to prepare for the complicated, far-reaching shift. Working within the constraints of supplier equipment shortages and gaps in the availability of operating software for the new terminals, Michigan Retailers stepped up to assist members as much as possible. Michigan Retailers responded by providing information, equipment and personal customer service. Not everything always went smoothly, but member businesses were far better served than most other businesses. The largest problem was delays in shipping new EMV terminals to Michigan Retailers for deployment to members. But Michigan Retailers persevered and was able to obtain, make ready and deliver 1,079 new chip-reading terminals in the last four months of the year. Seventyfive percent of the deliveries to members took place in the crucial months of September and October. Employees from other Michigan Retailers departments pitched in, and all worked past their regular hours many days to help get the equipment to members. Another major emphasis was helping members learn about the shift and understand that the new rules did not mandate that they suddenly abandon their current terminals. Because the chip cards continue to carry the magnetic stripe containing cardholder information, most merchants’ existing terminals can continue to process. John Mayleben, certified payments professional and senior vice president technology and new product development, advised merchants through webinars, blogs and phone calls that they needed to take a hard look at their
own business and decide if the risk from the liability shift was worth the cost of upgrading equipment. That type of practical education was a far cry from other processors that tried to use the deadline as a scare tactic to sell more terminals. New Record The merchant processing program, which for the first time in its history topped the $1 billion mark for annual volume in 2014, continued growing. It surpassed its FY 2015 goal of $1.1 billion by reaching $1.13 billion, another new record. New Segments To become more competitive at the start-up and extremely low-volume segments of the market, Michigan Retailers introduced a new micro category of membership. It features the popular flat-rate option for convenience and waives annual dues until the business matures and reaches a higher level of processing volume. Michigan Retailers also added another processing referral partner, the Michigan Floral Association. Digital Marketing In order to tie the retailers.com website more closely to social media and other marketing efforts, Michigan Retailers began an overhaul of the main website and hired a digital marketing specialist. Those efforts should begin to show results in 2016. The new position will use social media and digital advertising to drive more prospects to the website in order to increase sales of memberships and services. The new digital marketing specialist also will work with Michigan Retailers’ more than 90 merchant processing referral partners to improve their own marketing of the processing program and boost their referral productivity. Technology Map A comprehensive study of the Association’s internal systems and processes, in order to provide a road map for technology improvements necessary for the next three to five years, was completed late in the year. The consultants presented their recommendations for ways to increase automation and reduce manual tasks, saving time and money. Those recommendations are being discussed and evaluated against other budget needs in 2016.
Austin Morren, Morren Bros. Agri. Services John Morren and his brother started Morren Bros. Agri. Services in 1988. Located in Holland, the company specializes in livestock feed, bagged products, custom mixing and bulk deliveries. In 2007, John began working with his son, Austin, who was right out of high school. John eventually bought his brother’s half of the company and brought it to where it is now. John and Austin are the sole employees and work side by side. “We are very blessed to be able to work together everyday and get along well,” Austin said. Morren Bros. Agri. Services started accepting credit cards five years ago, with the realization that if they didn’t, they would lose many potential customers. This past fall, they upgraded to an EMV terminal. With assistance from Michigan Retailers, the equipment switch Austin Morren was no hassle. “We had a very easy process of switching over machines. We are happy with everything,” Austin said. “We have no worries about switching machines, with Michigan Retailers’ number handy. We can call and get through most situations quickly.”
The study followed the hiring at the start of the year of a manager of information technology, bringing the Association’s IT services in-house to save money and expand capabilities, especially in the merchant processing and insurance areas.
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Legislative Achievements
Protecting Businesses from Patchwork of Local Mandates Hard work, coupled with an assist from Michigan voters on a proposed sales tax increase, made 2015 another positive legislative year for retail. Our most important achievements in a year full of state government challenges and surprises included: 1) passage of legislation preempting local ordinances or policies on wage and benefit issues; and 2) enactment of a road funding solution that did not boost the sales tax. Early in the year, after four years of debate, a controversial road funding package that would have raised Michigan’s sales tax to 7 percent was placed on the May ballot by lawmakers. It was defeated by 80 percent of voters. After the shellacking, the legislature changed course and in November approved a road funding solution that retailers could support because of its reliance on user fees and reallocation of general fund revenues instead of higher taxes. The more conservative politics of the new legislature also worked to retail’s favor in enacting a law designed to protect private businesses from a patchwork of local labor laws. The legislation prohibits local units of government from adopting, enforcing or administer-
ing a local ordinance, policy or resolution regarding minimum wage, paid leave time and fringe benefits. It also prohibits ordinances related to work stoppage, strike activity, hours and scheduling, administrative or judicial remedies for disputes, or regulating the information an employer can request, require or exclude on an application for employment. MRA strongly supported the legislation and testified in support of the bill in the Senate. Approval of the legislation was a major victory for all retailers and will protect them from arbitrary local rules that increase the cost of doing business. We also were able to get a quick fix to a 2014 bill that required pharmacy technicians to be licensed – but failed to give the department, employers or technicians enough time to obtain a license. The glitch was producing several unintended consequences. Moving a bill from introduction to public act in less than four weeks is very rare, and we are grateful that legislators, department officials and the governor recognized the importance of quick action to keep pharmacies running smoothly.
New House Speaker Kevin Cotter (right) made Michigan Retailers one of his first official stops of the year. In mid-January he spoke to the boards of directors and presented a 75th Anniversary tribute to President and CEO James P. Hallan. Photo by David Trumpie
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Our biggest challenge in 2015 that carries into 2016 was defending against the moving target of “assessor overreach.” Local governments created the so-called “dark store” issue by claiming injustices were occurring at the Michigan Tax Tribunal whenever it ruled in favor of large retailers appealing their property taxes. MRA fought back with an education and advocacy campaign shining light on the facts of the situation, as well as the unconstitutionality and danger to all taxpayers of some of the locals’ suggested “solutions.” The House Tax Policy Committee held two informational hearings on the issue and convened a workgroup toward the end of the year. MRA hired tax experts to testify alongside us, and we formed a larger coalition of impacted business groups. We were successful in getting the workgroup to admit that retail property should not be singled out for unique treatment, that deed restrictions are an important property tool and that any changes would need to apply to all real property. We expect to see new legislation introduced
in 2016 and we’ll continue advocating for fair treatment and to educate lawmakers on the larger implications of making changes to property tax valuations. In addition, legislators were actively involved in our Buy Nearby campaign, creating and posting social media graphics encouraging residents to support retail stores in Michigan. Also looking ahead, there are a number of 2016 legislative priorities that will not directly impact retail. Auto No-fault reform and the Flint water crisis are at the top of the list, and heading into an election year we do not expect many controversial items to come up the closer we get to November. Legislation to allow substitution of interchangeable biosimilar drugs needs to be completed in 2016. There was much debate on the subject in 2015, and the House approved a version of the bill that concerns us. After meeting with senators and the Senate Committee Chairman we’re optimistic that the final bill will reflect language our members can support. Michigan has become more business friendly in recent years and we’ve had great success stopping harmful measures, repealing and updating outdated regulations and taxes, and passing protections for retailers. 2015 continued that positive trend. Given the makeup of the current legislature, 2016 will present similar challenges and some potential surprises, but we appreciate the opportunity to advocate in the Capitol on behalf of our members. Legislative reception attracts crowd Michigan Retailers held its annual legislative reception on April 21 and drew excellent attendance. Thirty-two legislators attended, including Speaker Cotter and Senate Minority Leader Jim Ananich, sponsor of last year’s Main Street Fairness legislation. There were more than 90 attendees overall. The event was a great success and wouldn’t have been possible without our sponsors’ continued support. Thank you to: Amway, Best Buy, Capitol Strategies Group, Dykema, Genoa a QoL healthcare company, Kroger, Macy’s, Meijer, Michigan Nursery and Landscape Association, National Association of Chain Drug Stores, National Retail Federation, Retail Industry Leaders Association, Target, Walgreens and Walmart.
Rep. Earl Poleski, Legislator of the Year MRA’s 2015 Legislator of the Year was selected for sponsoring and leading retail’s biggest victory of the year: passage of legislation pre-empting local governments from enacting ordinances that mandate local employee wages and benefits.
MRA’s Amy Drumm, Rep. Poleski, James P. Hallan and Board Chair Dan Marshall. Photo by David Trumpie.
His leadership on this key issue came as no surprise. He has been designated a “Friend of Retail” in every election since MRA began the distinction in 2012. He voted in support of such critical retail issues as item pricing reforms in 2011, the Organized Retail Crime Act in 2012, and Main Street Fairness in 2014. Rep. Poleski was elected in November 2010 to the Michigan House to represent the people of Jackson County, including Jackson and the townships of Concord, Hanover, Napoleon, Parma, Pulaski, Sandstone, Spring Arbor and Summit. He was re-elected to a third and final House term in November 2014. A Certified Public Accountant since 1981, he serves as a member of the House Appropriations Committee and the House Financial Liability Reform Committee.
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Legislative Achievements continued from page 7
Barb Stein, MRA Board member and owner of Great Northern Trading Co. in Rockford, traveled to Washington, D.C. in July as part of the National Retail Federation’s annual Retail Advocates Summit. Pictured above, Stein and MRA’s Amy Drumm present Congressman Bill Huizenga (R-Zeeland) with the Hero of Main Street Award for his support of retail industry priorities.
Legislators helped promote Buy Nearby by posting information and graphics on social media.
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Buy Nearby
Greater Support Fuels Growth The changing shopping landscape, especially the recent rise of giant, online retailers located out of state – and whose success is coming at the expense of businesses in Michigan – led the Association to launch the Buy Nearby campaign in mid-2013. Its purpose: to help slow and eventually reverse the consumer trend of making purchases from “remote sellers” that could otherwise be made nearby – in the communities where shoppers live, work, vacation or visit. Buy Nearby is designed to get everyone excited about the great shopping in Michigan, get them to understand the important economic benefits of shopping in Michigan and then encourage them to make a commitment to shop at retailers that have invested in Michigan communities. The campaign grew dramatically in 2015. Tens of thousands of new supporters greeted the campaign mascot, Buy Nearby Guy, at a record number of community visits across the state. The mascot and his support team made 61 visits and traveled more than continued on page 10
Karen Hilt, My Secret Stash Karen Hilt, owner of My Secret Stash, knows firsthand how important and necessary a campaign like Buy Nearby can be. Her Traverse City store dedicates itself to buying and selling locally by specializing in unique, locally made goods promoting Michigan, such as tees, crafts, décor and homemade soaps. It also was a stop during a Northern Michigan Buy Nearby news conference and downtown tour in August. “I’m grateful that MRA created the campaign and brought awareness to the movement and why we should all buy nearby,” said Hilt. “I was honored to participate in the news conference to share how easy it is to start thinking local to buy local. Small changes in our habits can have a big impact on our local economy.” My Secret Stash also was featured in a promotional video the Michigan Economic Development Corporation (MEDC) produced to help spread the Buy Nearby message. “The MEDC acted as a great partner in showing how committed we are to our makers and our community. As our shop becomes more known as a stellar representation of local makers, the recognition we received from the video, the MEDC and MRA is invaluable. We are all proud to have a ‘stamp of approval!’” Hilt has benefited from the Buy Nearby initiative and knows it will continue to grow, leading to even better participation and overall success.
A Buy Nearby “fan mob” forms in St. Joseph.
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Clockwise: Cravings Gourmet Popcorn owner Chad Jordan gives the Buy Nearby campaign “thumbs up” at a news conference in Lansing’s Old Town area (Photo by David Trumpie); Buy Nearby Guy participates in the Alma Highland Festival Parade; the mascot greets a dragon-costumed admirer in Brooklyn; the Buy Nearby news conference outside Donckers in downtown Marquette included owner Tom Vear (right), current and past city officials and other retailers; during his first trip to the U.P., Buy Nearby Guy finds his sea legs on the SS Valley Camp, a Great Lakes freighter that’s now a museum ship in downtown Sault Ste. Marie.
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Greater Support Fuels Growth continued from page 9
8,200 miles to spread the word about the advantages of buying nearby. Both numbers doubled the previous years’ figures. The visits included stops in the Upper Peninsula for the first time, as well as five news conferences with local shop owners in downtown Saugatuck, Lansing’s Old Town district, downtown Traverse City, downtown Marquette and the Midtown area of Detroit. The messages were backed up by independent economic research, commissioned by Michigan Retailers, that found Michigan’s economy would have grown by more than $9 billion and added nearly 75,000 jobs throughout the economy in 2015 if all Michigan consumers practiced Buy Nearby 100 percent of the time. In addition to offering free window or wall posters to all retailers in the state to help promote the first Saturday in October shopping celebration of Buy Nearby, the campaign printed and delivered, free of charge, more than 21,000
special merchandise tags and bag-stuffer “Thank You for Buying Nearby” cards to retailers who requested them. Increased sponsor and contributor support made it possible for the campaign to eliminate the local fee for hosting an appearance by Buy Nearby Guy. Sponsors included Title Sponsor DTE Energy and Supporting Sponsors Pure Michigan/Michigan Economic Development Corporation, Discover, AT&T, Michigan State Housing Development Authority and Retailers Insurance Company. Individual contributions from dozens of Michigan Retailers members totaled $1,400. Those resources also enabled the campaign to overhaul the BuyNearbyMI.com website to make it mobile friendly, more attractive and more inviting to navigate. In addition, the social media campaign on Facebook, Twitter and Instagram was expanded with positive results. The number of Facebook fans jumped more than 100 percent to nearly 30,000 and total Facebook reach extended to nearly 1.5 million users.
Lansing Community College softball players with Buy Nearby Guy at Lansing’s Silver Bells celebration. Buy Nearby Guy poses with warmly dressed shoppers at the Royal Oak Farmers Market in downtown Royal Oak to begin Get Caught Blue-Handed Day 2015. Photo by David Trumpie
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Member Giving
Giving Life to Scholarships, Political Action and Buy Nearby Many Michigan Retailers members go beyond their dues investment and contribute to worthy projects undertaken by the Association. These include the annual scholarship program, Buy Nearby campaign and political action committee. In 2015, Michigan Retailers awarded 37 scholarships totaling $36,000 for the 2015-16 academic year. Those amounts brought the program’s totals since 1999 to $434,500 awarded through 465 one-year scholarships – $1,000 for those attending four-year colleges and universities and $500 for those at community colleges and approved vocational schools or training institutes. All scholarships are funded by Michigan Retailers Foundation, a 501(c)3 organization whose revenues come from member contributions and investment earnings. During the 2014-15 fiscal year, the Foundation received $43,510 in contributions and assets were $1.38 million. The Foundation’s policy is to spend no more each year than 5 percent of the average market value of assets over the previous five years. The Foundation’s largest donation opportunity is the “Links to a Legacy” program that enables members to leave a lasting legacy by having an annual scholarship named for themselves, their business, a family member or someone else. Contributors receive the legacy honor when their cumulative donations reach $10,000, and an additional scholarship is created for each added $10,000 donated. To date, there are 20 named scholarships: • James P. Hallan President and CEO Scholarship (established by D. Larry Sherman) • Helen McCurry Legacy Scholarship (established by Joseph McCurry) • Michigan Retailers Services Scholarship • Retailers Insurance Company Scholarship • Nathan Rosenfeld Legacy Scholarship* • Mark Schrag Legacy Scholarship* (established by Mark Schrag and friends) • D. Larry Sherman Legacy Scholarship • Fred and Lillian Sherman Legacy Scholarship (established by D. Larry Sherman) • Raymond A. and Mildred C. Sobelton Legacy Scholarship (2) (established by Peter Sobelton and family) • Barb Stein Legacy Scholarship • Joseph Swanson Legacy Scholarship (2) • Target Scholarship (5) • Walsh Family Legacy Scholarship (established by Jim & Kathy Walsh) • Kenneth A. and Margaret Schwark Legacy Scholarship (established by James, Michael and Thomas Schwark) * Donor is deceased
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Members are able to contribute additional money to the Foundation and the Buy Nearby campaign when they renew their annual dues investment in Michigan Retailers. 45 members contributed to Buy Nearby in 2014-15 and 50 contributed to the Foundation. Michigan Retailers also has an active PAC that supports officeholders and candidates who support the retail industry’s agenda in Michigan. The PAC works in tandem with our face-to-face advocacy and has helped make possible such recent dramatic legislative victories as modernization of the costly and burdensome item pricing law in 2011 and passage of landmark Main Street Fairness legislation in 2014. MRA PAC had 40 contributors in fiscal year 2014-2015 and is working to increase the number of politically active members in fiscal year 2015-2016. Major members also contribute to Michigan Retailers’ annual Legislative Reception, which provides an opportunity for retailers and lawmakers to get better acquainted and talk about issues in a more relaxed, social setting.
Brandon Roberts, One of 465 Scholarship Winners Brandon Roberts enrolled at Grand Valley State University after graduating from Crestwood High School. A $1,000 MRA scholarship he won in 2014 helped Brandon get to where he is today, studying computer and information systems, business and philosophy. Being a full-time student, athlete and working a parttime job is quite the task, but Roberts also found time to apply to represent his school at the Royal Henley, a regatta in London on the Thames. “It’s a very prestigious event,” said Roberts, who is still waiting to hear if he will be selected. Roberts’ mother worked at MRA member M-Den in Ann Arbor, which qualified him to apply for the scholarship. Being selected as a schol- Brandon Roberts arship winner meant a lot to Roberts. “Thank you for helping me get to where I am today,” he said.
Buy Nearby Contributors FY 2014 -15
Active One Construction Inc Andrews Hooper & Pavlik AT&T Baumans Running Center-Term 1 Becky Thatcher Designs Ben Franklin Mooney’s Store Inc Benchley Amish Furniture & Gifts BJW Custom Jewelers Borr’s Bootery Inc Brooklyn Plumbing Heating & AC Inc Comar & Comar PC Country Casuals D & D Gunsmith Ltd Dan & Chuck’s Kar Kare LLC Decors by Sandra Inc Discover DTE Energy F David Barney Inc Farmington Shoe Repairs Fields Fire Protection Inc Genuine Toy Company LLC Great Northern Trading Co Haigh’s Maple Syrup & Supplies LLC Herman’s Boy Inc Hogan’s Jewelers Home Heating & Air Conditioning Katy’s Kards Keane & Associates Inc Linde Furniture Inc Linn & Owen Jewelers Little Forks Outfitters Inc M Mazzoni Jewelers LLC Mack-Alger Tire Meier Camera Shop Inc Michigan House Cafe LLC Mieras Family Shoes Inc MSHDA Norm Henry Shoes Orin Jewelers Inc Pilgrim Investment Co Props Pure Michigan – MEDC Retailers Insurance Company Service Floor Covering Side Street Garage Inc South Lyon Cycle & Sports Inc The League Shop Inc Treasure Mart V & A Bootery Inc Votruba Leather Goods Co WoolyBuggers
Michigan Retailers Foundation Contributors FY 2014 -15 AA Financial Services Becky Thatcher Designs Ben Franklin Mooney’s Store Inc Benchley Amish Furniture & Gift BJW Custom Jewelers Bo Brines Brooklyn Plumbing Heating & AC Inc Comar & Comar PC Country Casuals Dan & Chuck’s Kar Kare LLC Dapple-Gray Bed & Breakfast Brian Ducharme F David Barney Inc Farmington Shoe Repair Fields Fire Protection Inc Bill Golden Goldstein Bershad & Fried PC James Hallan Holland Area Convention & Visitors Bureau Home Heating & Air Conditioning Jeff Joyce Becky Beauchine Kulka Little Forks Outfitters Inc The Luminous Group LLC Lynch Sales Company Dan Marshall M Mazzoni Jewelers LLC John Mayleben Orin Mazzoni
Joe McCurry Larry Meyer Mieras Family Shoes Inc Mark Miller Larry Mullins Dan Musser Orin Jewelers Rod Phillips Pilgrim Investment Co Jean Sarasin Tom Schwark Jim Schwark Mike Schwark Schlanderer & Sons LLC Peter Sobelton Barb Stein Joe Swanson Tom Ungrodt V & A Bootery Inc Jim Walsh Lisa McCalpine-Wittenmyer
Michigan Retailers Association Political Action Committee Contributors FY 2014 -15 Donald Baron Joe Benchley Teresa Breed Bo Brines Terrence Comar Doug Dancer Kurt Dettmer Amy Drumm Ron Dufina Rita Elkin Bill Golden Bill Hallan Jim Hallan Charles/Claudia Johnson Jeff Joyce Patrick Kerwin Becky Beauchine Kulka Craig Kufta Dan Marshall John Mayleben Orin Mazzoni Joe McCurry Larry Meyer Mark Miller Larry Mullins Dan Musser Naran Patel Ally Nemetz Don Rapson Burke Sage Jean Sarasin Tom Scott D. Larry Sherman William Spreder Barb Stein Joe Swanson Tom Tuggle Jim Walsh Bonita Wiegard Kathy Wilson
2015 Legislative Reception Sponsors
Jim, Mike, Tom Schwark, Honoring Their Parents It started with brothers Jim, Mike and Tom Schwark looking for a good way to recognize the legacy of their father, Macomb County retailer and businessman Kenneth A. Schwark, who died in March 2014 at age 89. Their solution? A Michigan Retailers Association legacy scholarship honoring their late father and their mother, who is in her early 90s.
Brothers Jim, Mike and Tom Schwark with a portrait of their late father, Macomb County businessman Kenneth A. Schwark.
The trio created the Kenneth A. and Margaret Schwark Legacy Scholarship, which provides an annual $1,000 college award to a deserving student selected as part of MRA’s annual scholarship competition. Funded by the Michigan Retailers Foundation, the program runs from January 1 to April 1. Approximately 35 scholarships are awarded each year, including the 20 named, legacy scholarships, of which the Schwark scholarship is the newest award. “We wanted to help students who wanted to get a better education and needed some help,” said Jim, a former member of the MRA Board of Directors. “We want to help them out as best we can and honor our parents’ names in doing it.”
Amway Best Buy Capitol Strategy Group Genoa, a QoL Healthcare Company Kroger Meijer Macy’s Michigan Nursery and Landscape Association National Association of Chain Drug Stores National Retail Federation Retail Industry Leaders Association Target Walgreen’s Walmart
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MRA Financial Summary Michigan Retailers Association Subsidiary and Related Entities Consolidated and Combined Statements of Financial Information JUNE 30…
2015
2014
ASSETS Current Assets Property & Equipment Less Depreciation Other Assets
$ 6,396,262 $ 2,310,507 $21,688,318
$ 5,962,462 $ 2,371,598 $21,210,090
TOTAL ASSETS
$30,395,087
$29,544,150
LIABILITIES & NET ASSETS Total Liabilities RIC Surplus RIC Common Stock Net Assets - unrestricted TOTAL LIABILITIES & NET ASSETS
$12,891,412 $11,797,099 $ 9,836,391 $ 9,847,628 $ 100 $ – $ 7,667,184 $ 7,899,423 $30,395,087
$29,544,150
These financial highlights are derived from the audited financial statements. The audit was performed by Andrews Hooper Pavlik PLC. To obtain a copy of the audited financial statements, please contact: William J. Hallan, Michigan Retailers Association, 603 South Washington Avenue, Lansing, MI 48933.
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RIC Leadership Message 35 Years of Change and Growth
December 31, 2015, marked the end of Retailers Insurance Company’s 10th year in business. This nimble, homegrown Michigan company was too busy moving forward to pause, look back and notice.
2006 to an insurance company that is able to provide coverage to a wide variety of Michigan employers instead of being restricted by state regulators to insuring only retail businesses, provides another strong example.
The significance of the date also eluded us at first because Michigan Retailers has been providing members with quality, competitively priced workers’ compensation insurance far longer than 10 years. Retailers Insurance grew out of Retailers Fund, Michigan Retailers’ group fund that was created in 1981, following important changes in state law.
As you will see on the following pages, these changes have enabled our organization to grow, and a growing number of members to benefit. A measure of growth is net new premium, which jumped from $2.6 million in 2006 to $8.2 million in 2015.
That makes it the 35th anniversary of Michigan Retailers serving as its own provider of workers’ compensation insurance. Our experience in this arena runs deep.
This type of growth would not have been possible without a strategic vision, dedicated board of directors, skilled management, excellent network of Independent Agents and the responsible business men and women who make up our policyholders.
Creating Retailers Fund early in the 1980s was a leading example of making a changing marketplace and regulatory environment work for members. Its conversion in
It is our privilege to report on this year’s achievements and how they help our members run their businesses in safer and more profitable ways.
Jeff Joyce Chair, Retailers Insurance Company Board of Directors Vice President and Co-Owner Mieras Family Shoes, Grand Rapids
James P. Hallan President and Chief Executive Officer Retailers Insurance Company
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Retailers Insurance Company Insurer Continues on Growth Path
Retailers Insurance achieved solid growth in 2015. The company’s net assets grew to $20.8 million, an increase of 4 percent over the previous year. Growth was driven primarily by increased sales of premium. New direct written business rose by $1 million, the fourth consecutive year of increases of $1 million or more. Total net premium jumped 16.3 percent to $8.2 million. Average new policy size grew 11 percent to $6,088, nearly double the figure from the company’s first year in 2006. That signifies that Retailers Insurance continues to attract larger and more diverse businesses in addition to its core of Main Street businesses. To remain competitive on workers’ compensation insurance rates in a prolonged soft market, Retailers Insurance late in the year adjusted rates downward in its most popular business codes. The reductions were aimed at maintaining sales momentum into 2016. Retailers Insurance and its predecessor Retailers Fund have been known for their vigilance over claims. The board of directors Claims Committee always flyspecks each claim and challenges any that appear questionable. That degree of scrutiny continued in 2015 and the company also stepped up efforts to reduce liabilities by settling older claims and coming up with settlement plans for the largest outstanding claims. Given the company’s strong and conservative investment history, Retailers Insurance was able to realize a large capital gain on the income statement while still maintaining surplus levels well beyond statutory requirements. For the 10th consecutive year, the company’s finances received a rating of “A, Exceptional” from Demotech, Inc., the national actuarial financial analysis and consulting firm that provides financial stability ratings for property and casualty insurers. Demotech says its rating means: “Regardless of the severity of a general economic downturn or deterioration in the insurance cycle, insurers earning a Financial Stability Rating of A possess Exceptional financial stability related to maintaining surplus as regards policyholders at an acceptable level.” Marketing of EFT Guard also increased during the year to show an important difference between Retailers Insurance and other workers’ compensation insurers. Retailers Insurance had partnered the previous year with RGS
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Limited LLC, a Michigan-based risk services company, to provide EFT Guard automatically to current and future policyholders. The coverage protects policyholders’ online business banking from theft. The threat it addresses comes from the little-known fact that federal banking regulations obligate financial institutions to reimburse individual banking customers for online losses from unauthorized electronic transfer, but the protection does not extend to business banking customers. EFT Guard fills that gap in protection.
John Fris, Fris Office Outfitters On January 1, 1900, Lambertus Fris opened a stationery business in downtown Holland. Today, 4th and 5th generation family members continue with Fris Office Outfitters selling office, facility and breakroom solutions commercially and through their retail location on River Avenue, and Fris Downtown selling art supplies, gifts and souvenirs in downtown Holland. The company is a Retailers Insurance Company policyholder and has been with Michigan Retailers for 30 years. “We’ve been very pleased with our workers’ compensation through Retailers Insurance Company. Fortunately, we’ve not had claims in many years,” John Fris said. When it comes to workers’ compensation reporting and auditing, Fris says it’s no hassle. “It’s been easy for us as to the reporting and audits. It takes little time for our controller to complete the paperwork.” As a member of Michigan Retailers, Fris Office Outfitters also has also benefitted from the Association’s college scholarship program. Last year, two students from Fris won MRA scholarships. “It’s getting harder and harder to afford post-secondary education, and this is a great help,” Fris said. Retailers Insurance policyholders automatically receive an additional coverage called EFT Guard, protection for their online banking accounts from hackers and thieves. Most business men and women aren’t aware that in most cases, financial institutions provide protection for their online personal accounts but not their business accounts. “It’s good to know we have this protection,” said Fris, “as it’s probably only a matter of time before this impacts all of us to one degree or another.”
RIC Financial Summary Retailers Insurance Company Statutory Statement of Admitted Assets, Liabilities, and Policyholders’ Surplus DECEMBER 31… 2015 2014
ADMITTED ASSETS Cash and investments Bonds, at amortized cost $14,457,118 $14,390,924 Common stocks, at fair value $2,017,850 $2,029,614 Cash and short term investments $1,634,717 $1,256,386 TOTAL CASH AND INVESTMENT $18,109,685 $17,676,924 Uncollected premiums $468,578 $329,135 Deferred premiums $1,754,817 $1,587,329 Accrued investment income $73,598 $75,692 Federal income taxes recoverable $9,401 $11,592 Net deferred tax asset $382,400 $306,500 Other assets $44,167 $43,600 TOTAL ADMITTED ASSETS $20,842,646 $20,030,772 LIABILITIES Losses and loss adjustment expenses $7,758,556 $7,074,560 Commissions payable $246,479 $211,477 Unearned premiums $2,704,225 $2,345,018 Premiums paid in advance $150,211 $205,269 Federal income taxes payable $0 $0 Ceded reinsurance premiums payable (receivable) $105,566 $97,536 Taxes, licenses, and fees, excluding federal income taxes $141,907 $104,883 Payable to affiliates $26,784 $87,723 Other liabilities $52,980 $67,815 TOTAL LIABILITIES $11,186,708 $10,194,281 POLICYHOLDERS’ SURPLUS Common Capital Stock $100 $100 Surplus note $750,000 $750,000 Unassigned surplus $8,905,838 $9,086,391 TOTAL POLICYHOLDERS’ SURPLUS $9,655,938 $9,836,491 TOTAL LIABILITIES & POLICYHOLDERS’ SURPLUS
$20,842,646
$20,030,772
These financial highlights are derived from the audited financial statements. The audit was performed by Andrews Hooper Pavlik PLC. To obtain a copy of the audited financial statements, please contact: William J. Hallan, Michigan Retailers Association, 603 South Washington Avenue, Lansing, MI 48933. 2015 ANNUAL REPORT 17
Boards of Directors
Michigan Retailers Association
Biographical information available at www.retailers.com
Bo Brines Michigan Retailers Services, Inc. Little Forks Outfitters, Midland
Brian Ducharme Michigan Retailers Association AT&T Mobility Division
Bill Golden Michigan Retailers Services, Inc. Golden Shoes, Traverse City
James P. Hallan Michigan Retailers Association Retailers Insurance Company Michigan Retailers Services, Inc. President and CEO
Emily Matthews Michigan Retailers Services, Inc. Potent Potables Project, Lansing
Orin Mazzoni, Jr. Michigan Retailers Association Orin Jewelers, Garden City
Joseph McCurry Michigan Retailers Association Credit Card Group
Larry Meyer Retailers Insurance Company Lansing Community College
Jean Sarasin Retailers Insurance Company Consultant Traverse City
D. Larry Sherman Michigan Retailers Association Board Member Emeritus
Peter R. Sobelton Michigan Retailers Association Retailers Insurance Company Mondial Properties, Birmingham
Barb Stein Michigan Retailers Association Great Northern Trading Co., Rockford
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Retailers Insurance Company
Michigan Retailers Services, Inc.
William J. Hallan Michigan Retailers Association Executive Vice President, Chief Operating Officer and General Counsel
Jeff Joyce Retailers Insurance Company Mieras Family Shoes, Grand Rapids
Becky Beauchine Kulka Michigan Retailers Association Becky Beauchine Kulka Diamonds and Fine Jewelry, Okemos
Dan Marshall Michigan Retailers Association Retailers Insurance Company Marshall Music Company, Lansing
Mark Miller Retailers Insurance Company MARSH, Southfield
Larry Mullins Michigan Retailers Association Brandon Tire & Auto Service Center, Ortonville
R.D. (Dan) Musser III Michigan Retailers Association Grand Hotel, Mackinac Island
Rod Phillips Retailers Insurance Company Country Casuals, Petoskey
OFFICERS Michigan Retailers Association Chair: Dan Marshall President and CEO: James P. Hallan Vice Chair: Orin Mazzoni, Jr. Secretary: William J. Hallan Treasurer: Peter R. Sobelton Past Chair: Thomas Ungrodt
Joe Swanson Michigan Retailers Association Target Corp.
Thomas Ungrodt Michigan Retailers Association Retailers Insurance Company Ideation, Ann Arbor
James Walsh Michigan Retailers Association Meijer, Inc., Grand Rapids
Retailers Insurance Company Chair: Jeff Joyce President and CEO: James P. Hallan Vice Chair: Mark Miller Secretary: William J. Hallan Treasurer: Thomas B. Scott Past Chair: Peter R. Sobelton 2015 ANNUAL REPORT 19
Professional Management Michigan Retailers Association EXECUTIVE TEAM
CUSTOMER SERVICE
Retailers Insurance Company
James P. Hallan President and Chief Executive Officer
Ally Nemetz Director, Customer Service and Data Administration
Tom Tuggle Senior Vice President, Insurance Sales & Membership
Penny Sierakowski Manager, Customer Service
Kurt M. Dettmer Senior Vice President, Insurance Sales & Business Development
William J. Hallan Executive Vice President, Chief Operating Officer and General Counsel Tom Scott Senior Vice President, Communications and Marketing John Mayleben, CPP Senior Vice President, Technology and New Product Development Tom Tuggle Senior Vice President, Insurance Sales & Membership
EXECUTIVE SUPPORT STAFF Amy Jolley Manager, Human Resources and Executive Assistant
GOVERNMENT AFFAIRS
Amy Drumm Director, Government Affairs
SALES Burke Sage Manager, Business Development Darcy Gates, CPP Lead Manager, Sales Chris Smith Manager, Business Development Miranda Piersol Business Development Representative Brian Scott Business Development Representative Harmony Clouse Administrative Assistant, Sales Department
Tamara Baker Customer Service Representative MarianChelize (Mari) Hosking Customer Service Representative Christain Shaull Customer Service Representative
COMMUNICATIONS & MARKETING Patrick Kerwin Manager, Design and Printing Ken Sierakowski Printing Operations Coordinator Rachel Schafer Digital Marketing Specialist
ADMINISTRATION AND OPERATIONS Cheryl Szczubialka Controller Dave Papp Manager, Information Technology Francine Bushrey Accounting and Membership Assistant Debbie Johnson Customer Data Representative Larain Pearsall Accounting Assistant and Bookkeeper Dora Serna Receptionist Melody Totten Customer Data Representative Ge Xiong Customer Data Representative
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Patty Zaskowski Director, Underwriting Judy Schafer Manager, Operations Mark Baynai Staff Accountant Laura Schilling Associate Underwriter
2015 ANNUAL REPORT 21
603 South Washington Avenue | Lansing, Michigan 48933 517.372.5656 | toll-free: 800.366.3699 | fax: 517.372.1303 mra@retailers.com
www.Retailers.com www.RetailersInsurance.com www.BuyNearbyMI.com