Success structured for
ANNUAL REPORT 2008
Table of Contents From the Director Commitment to Physicians Financial Highlights Investment Report Actuarial Confidence Reinsurance Protection Claims Management Advisory Boards Board of Directors Professional Alliances
2 4 6 8 10 12 14 16 18 20
From the Director
2
W
ith the passion and vigor that sets us apart, MPM continues to advance its singular vision of Re-Empowering Missouri Physicians. Our operational strategy of unconventional thinking and the implementation of our business model have produced record results in 2008. None of this could have been achieved without the unwavering faith and trust in MPM by the physicians and surgeons of Missouri. Gratefully, we remain the #1 choice for professional liability insurance in Missouri for the fifth consecutive year with a 35% market share and growing.
MPM truly is a one-of-a-kind medical professional liability insurer – one that has performed superbly in 2008. We set all-time highs in multiple measures of financial strength, with policyholder surplus topping $13 million and admitted assets exceeding $73 million. Moreover, we experienced a net underwriting gain of more than $5 million for the second consecutive year. Additionally, the value of our investment portfolio has also increased by more than 15% in spite of the free fall in the financial markets.
additional piece of mind, we have set in motion the plan to achieve the goal of making MPM a nonassessable company. Without our insureds spending one penny more, we can assure better healthcare for all by restoring the sacred relationship that exists between doctors and patients. And, we accomplished all of this while keeping our promise of no premium increase for the seventh straight year. We have great confidence in our business model and confidence that our collective voice will be a force for better healthcare in Missouri.
Operationally, MPM continued to set the pace in claims management. Warmest regards, I am proud to report that we have closed 80% of all claims filed against As in years past, our attentiveour insureds since the inception ness to every detail, no matter how of MPM in 2003 and that 83% of small, has further strengthened our those claims were closed with no financial and structural foundation. indemnity paid. To ensure continued We are thankful to our outsourced positive results in the future, we have business partners who have delivered launched a series of statewide risk in their particular areas of expertise management seminars that credit our and who understand that proactive insureds with premium discounts thinking is not only required but by helping them better identify and Timothy H. Trout Managing Director indeed critical for our continued mitigate potential liability risks. success. Our shared core beliefs of character, competency, commitment To further set MPM apart from our and creativity have served us well. competitors and give our insureds
3
Commitment to Physicians
4
An original is hard to find but easy to recognize.
MPM
was created to re-empower physicians. Since the formation of MPM in 2003, we have returned stability and affordability to physicians’ and surgeons’ professional liability insurance premiums. Because of your belief in MPM, and our belief in you, we have been the largest medical professional liability firm in Missouri since 2004. We insure more than 2,400 physicians with a market share of more than 35%. We are dedicated to providing actuarially sound insurance coverage for the good of physicians and the quality of medicine in Missouri. Our experienced professional insurance management team has solved the perplexing problems created by our predecessors. We remain concerned by the copy-cat attempts of many of our competitors. However, our competitors continue to be MPM’s best source of new business as physicians and their business
managers discover what our current insureds already know. To say the least, 2008 was a year of financial chaos. However, in spite of the collapse of the financial markets, MPM stayed the course, true to its original business model. Our discipline and belief resulted in yet another record year of continued growth in assets, surplus, premiums and insureds. Additionally, MPM added yet another facet to our model: risk management seminars. We are grateful that more than 2,400 physicians in Missouri have joined our efforts and continue to appreciate the superiority of our comprehensive and reliable professional liability solutions. Joining forces in this matter sets the stage for us to offer other business solutions that will make a key difference in your life, and the lives of your patients and staff…all of which build a healthier Missouri for tomorrow.
“I believe the vision and foresight of MPM saved medicine in Missouri and prevented the loss of our most valuable physicians to soaring premiums. Thanks to MPM, we all enjoy low cost liability insurance paired with the industry’s highest quality legal minds and consultants. I am passionate about MPM and its diligent member services.” J Peter Murphy, M.D., St. Louis, MO
5
Financial Highlights C1 Admitted Assets C2 Written Premiums C3 Net Underwriting Gain C4 Net Investment Gain C5 Net Income C6 Net Reserves C7 Policyholder Surplus
2003
2004
Admitted Assets
$11,387,030
$30,731,875
Direct Premiums Written
$18,873,274
$37,717,350
Net Written Premium
$15,173,274
$31,643,497
Net Underwriting Gain (loss)
$(2,123,741)
$4,676,967
$22,835
$297,191
$(2,105,029)
$2,496,202
$2,827,766
$13,891,753
$(2,850,870)
$859,457
Net Investment Gain Net Income (loss) Net Reserves for Unpaid Losses Policyholder Surplus 6
The Backbone of a Medical Professional Liability Company
he backbone of any insurance company is its balance sheet. The record shows that in 2008 MPM strengthened its balance sheet for the sixth consecutive year. Quite frankly, MPM excelled in its overall performance in 2008.
T
Combined with the proven operational efficiencies of the MPM business model, the true significance of our financial vitality is the confidence it instills in physicians. In 2008, MPM increased assets, direct premiums and net under-
writing gain. Policyholder surplus increased by $4.7 million (51%) to $13.7 million. Keep in mind that we have accomplished these results together, with no rate increases since the inception of MPM six years ago.
Admitted Assets
Direct Premiums Written
Policyholder Surplus
in Millions
80
63.8
68.1
63.8
60
50.6
40
20
0
006
80
73.4
2005
0
50 40
63.8
68.1
73.4 42.5
37.7
50.6 30 30.7
20
11.4
73.4
60
40
30.7
2007 2003 2008 2004
68.1
in Millions
11.4
2006
2003 2007
20
0
2005
41.2
41.4 37.7
42.5
18.9
20
18.9
20
0
2006
15
41.2
41.4 37.7
42.5
2007 2003 2008 2004
2005
0
2006
41.3 12
18.9
41.4
2003 2007
2004 2008
2005
9 6
3
2.1 3
-3
-2.9
0.9
15 12
12
6
0
13.7
15 41.2
9
10
10
2006 20032007 20042008 2005
41.3 40 30
30
10
2004 2008
50
50 41.3 40
in Millions
2.0
2006 2003 2007 2004 2008 2005
0 -3
2006
9.1
9 6
-2.9
2.0
0.9
0
2007 2003 2008 2004
2005
2006
2007
2008
$50,565,428
$63,800,304
$68,124,556
$73,396,433
$42,450,735
$41,270,790
$41,213,754
$41,440,608
$36,519,812
$41,270,790
$38,407,093
$40,677,430
$716,980
$3,307,621
$5,307,649
$5,411,015
$916,997
$1,647,997
$2,337,748
$1,833,746
$487,884
$2,799,266
$5,284,682
$4,712,714
$28,041,250
$39,289,000
$31,658,784
$30,807,217
$1,966,709
$2,062,694
$9,064,620
$13,717,531
3 2.1
2005
7
-3
2006
Investment Report
2003
2004
Cash & Cash Equivalents
$5,347,299
$9,637,003
Bonds
$2,153,663
$16,884,720
$0
$1,176,581
$7,500,962
$27,698,304
Cash and Investment Summary
Real Estate Owned Total Cash & Investments 8
We keep our hands on the pulse of the market.
A
conservative investment philosophy focused on generating steady, positive returns preserving capital served MPM especially well in 2008. Remarkably, in a year of epic turmoil in financial markets, MPM investments still grew by more than 15%. MPM continues to invest exclusively in AAA-rated obligations of the U.S. government, the only investments accepted for their safety.
Total Cash & Investments in Millions
70
61.5
60 50
53.7
53.4
2006
2007
40.4
40 27. 7
30 20 10 0
7.5 2003
2004
2005
2008
“Working with MPM is truly the best. The organization has a caring spirit from top to bottom. It never waivers in its pledge to protect Missouri doctors. Smart, conservative, responsible portfolio management in a tumultuous 2008 helped MPM grow the value of assets – a remarkable achievement.” Lawrence V. Niemann, Jr., member of L V Niemann Consulting Group, LLC
2005
2006
2007
2008
$2,366,026
$16,800,755
$16,902,676
$9,825,255
$35,600,958
$33,961,245
$33,560,314
$48,777,631
$2,427,442
$2,984,485
$2,921,208
$2,850,088
$40,394,426
$53,746,485
$53,384,198
$61,452,974 9
Actuarial Confidence
“MPM shows exceptional commitment to member physicians evidenced in its single minded focus on financial strength. It is rewarding for me to be a part of the MPM team in assessing the company’s risks and advising premiums that are fair and accurate. The trust that Missouri physicians have in MPM is very well placed.” James P. Streff, FCAS, MAAA, president and founder of Streff Insurance Services
10
Missouri Professionals Mutual Statement of Actuarial Opinion As of December 31, 2008
Exhibit B: LOSS RESERVE DISCLOSURES 1. Name of the Appointed Actuary.
Column 1 Last: Streff
First: James
2. The Appointed Actuary’s Relationship to the Company. Enter E if an Employee, or C if a Consultant.
C
3. The Appointed Actuary is a Qualified Actuary based upon what qualification? Enter F if a Fellow of the CAS, A if an Associate CAS, M if not a member of the CAS but a Member of the AAA approved by the Casualty Practice Council, as documented with the attached approval letter, O for Other.
F
4. Type of Opinion, as identified in the OPINION Paragraph. R if Reasonable, I if Inadequate or Deficient Provision, E if Excessive or Redundant Provision, Q if Qualified. Use Q when part of the OPINION is Qualified. N if No Opinion.
R
5. Materiality Standard expressed in $US (Used to Answer #6).
$4,500,000
6. Is there a Significant Risk of Material Adverse Deviation?
Yes
7. Statutory Surplus. 8. Anticipated net salvage and subrogation included as a reduction
to loss reserves as reported in Schedule P.
Mid: Peter
No
$13,717,531 $396,000
9. Discount included as a reduction to loss reserves and loss expense
reserves as reported in Schedule P. 9.1) Nontabular Discount 9.2) Tabular Discount
10. The net reserves for losses and expenses for the company’s share of voluntary
and involuntary underwriting pools’ and associations’ unpaid losses and expenses that are included in reserves shown on the Liabilities, Surplus and Other Funds page, Losses and Loss Adjustment Expenses lines.
$0 $0 $0
11. The net reserves for losses and loss adjustment expenses that the company
carries for the following liabilities included on the Liabilities, Surplus and Other Funds page, Losses and Loss Adjustment Expense lines.* 11.1) Asbestos, as disclosed in the Notes to Financial Statements 11.2) Environmental, as disclosed in the Notes to Financial Statements
$0 $0
12. The total claims made extended loss and expense reserve (Schedule P
Interrogatories). 12.1) Amount reported as loss reserves 12.2) Amount reported as unearned premium reserves
13. Other items on which the Appointed Actuary is providing
$887,781 $0 $0
relevant Comment (list separately).
*
The reserves disclosed in item 11 above, should exclude amounts relating to contracts specifically written to cover asbestos and environmental exposures. Contracts specifically written to cover these exposures include Environmental Impairment Liability (post 1986), Asbestos Abatement, Pollution Legal Liability, Contractor’s Pollution Liability, Consultant’s Environmental Liability, and Pollution and Remediation Legal Liability.
11
Reinsurance Protection
12
The MPM reinsurance program provides protection for both frequency and severity.
J
ust as the rib cage protects vital organs, reinsurance contracts issued by internationally respected carriers further protects MPM against potential catastrophic losses and reinforces an already strong financial core. MPM has reinsured each and every policy it has issued since inception. Our reinsurers also retain independent auditors and actuaries to ana-
lyze our business as part of their due diligence. They continue to validate MPM’s unique claims management strategy, actuarially-sound rate structure and overall financial strength. The success of our business model is summarized best by an MPM reinsurer who says MPM is “the company against which all other medical malpractice carriers in North America are measured.”
“The remarkable development of MPM as the premier medical professional liability insurance provider in the state of Missouri offers clear evidence of the power of combining vision, insight, aggressive physician advocacy, hard work and common sense. By remaining focused on doing right by its insured physicians and addressing those physicians’ professional liabilities in a fair, practical and honorable manner, MPM has set the standard for insurers everywhere.” Robert F. Kennedy, president of ReSource Intermediaries, Inc.
13
Claims Management
14
We realize and understand a claim can weigh heavily on the mind of a physician.
MPM’s
proactive philosophy of aggressive claims management speaks for itself. The facts are that since the founding of MPM in 2003 through December 31, 2008: ▶ MPM has closed its claims 3 times faster than the state average.* ▶ MPM has closed 80% of all claims filed since inception and 83% of those with no indemnity payments. ▶ MPM closed claims with indemnity at 34% less than the state’s average indemnity payment.*
MPM 2003 Claims
100% Closed
MPM 2004 Claims
96% Closed
MPM 2005 Claims
92% Closed
MPM 2006 Claims
90% Closed
MPM 2007 Claims
60% Closed
MPM 2008 Claims
42% Closed
*State averages include MPM data.
“At MPM, we make decisions and resolve claims quickly to give physicians peace of mind. Lawsuits are devastating and intrusive, and for our members, it is usually the first time they have been sued. We work hard to absorb the worry so doctors can focus on patient care. Our direct communication keeps them informed step-by-step. In all cases, we leave no stone unturned, and we are not afraid to aggressively fight on behalf of our members.” Jodi Sease, R.N., Vice President Claims
15
Advisory Boards
16
MPM Regional Advisory Boards
T
he MPM team continuously strives to improve our relationships by listening to the input of physicians from our six regional advisory boards. James L. Trout, Jr., President of MPM Client Services and Risk Management, coordinates and implements the efforts put forth by these boards. Jim is also responsible for on-going communications with all MPM insureds, facilitating risk management seminars and the development of new business.
Kansas City Region North Central Missouri Region Central Missouri Region
Saint Louis Region Southwest Missouri Region Southeast Missouri Region
Jim welcomes and encourages your comments and questions. You can contact Jim Trout at 314-587-8008 or jim@mpmins.com.
“I appreciate MPM’s efforts to help physicians reduce our liability risk and to reward our contributions to great practice. While MPM is the largest insurer of physicians in Missouri, we continue to receive exceptional personal service when we have a question. They are extremely flexible in working with us to provide affordable liability coverage. I continue to recommend MPM to my colleagues.” Walter Peters, M.D., Columbia, MO
17
Board of Directors
18
E
ver mindful of their fiduciary responsibility to more than 2,400 practicing physicians and surgeons, directors pool the collective wisdom each has gained from decades of specialized experience to assure that MPM remains competently managed and true to its mission – to Re-Empower Missouri Physicians.
Timothy H. Trout
John M. Lorei, M.D.
Richard T. Meyer, CPA
“I appreciate MPM’s unique, physician-owned model of liability insurance. Their practical solution offers a win-win situation for both doctors and patients. I can provide the best medical care with a true sense of security from MPM’s liability coverage. Their model, member services, and enduring physician-advocacy, are, without any doubt, timetested and trusted.” Scott R. Gibbs, M.D., F.A.C.S., Cape Girardeau, MO
19
Professional Alliances Continuously invigorating us with fresh insights and strategies
MPM
has established working relationships with proven professional experts in matters related to physical professional liability insurance. The innovative “outsourcing� model we employ enables MPM to systematically draw upon these superior experts as needed. This structure allows MPM management to run an operation that optimizes economy of scale, efficiency and strategic implementation.
Actuarial Team
Corporate Accounting
Streff Insurance Services
L V Niemann Consulting Group, LLC Kerber, Eck & Braeckel, LLP Stohm Ballweg
Banking United Missouri Bank
Co-Counsel Anderson & Gilbert, P.C. Blanchard, Robertson, Mitchell & Carter, P.C. Blanton, Rice, Sidwell, Nickell, Cozean & Collins, LLC Bradshaw, Steele, Cochrane & Berens, L.C. Buckley & Buckley, LLC Carmody MacDonald, P.C Fredrick, Rogers & Vaughn, P.C. Gibbs Pool and Turner, P.C. Haden, Cowherd & Bullock, LLC Horn, Aylward & Bandy, LLC Hyde, Love & Overby, LLP Law Offices of David Hares Limbaugh, Russell, Payne & Howard Logan, Logan & Watson, L.C. McGlynn & Luther Rabbitt, Pitzer & Snodgrass, P.C. Schreimann, Rackers, Francka & Blunt, LLC Smith Lewis Attorneys at Law Wagstaff & Cartmell, LLP
Corporate Counsel Polsinelli Shugart, P.C.
Insurance Broker The Cornerstone Insurance Group
Lobbyist John Bardgett & Associates
Marketing & Public Relations Casey Communications KRB Creative Studio 2108 LLC
Medical Professional Liability Broker The Keane Insurance Group
Reinsurance Broker ReSource Intermediaries, Inc.
Risk Management MPM Client Services LLC
20
Timothy H. Trout, Managing Director 287 North Lindbergh Blvd Saint Louis, Missouri 63141 314 587 8000 Office 314 587 8001 Fax mpmins.com