Notice of CMIC Group Annual Meetings of Members

This is the Notice of the Annual Meetings of Members of CMIC Group, hereafter referred to as “the Group.” The Group includes two companies: CMIC and CMIC RRG. CMIC RRG is a sponsored company of CMIC.

  • The CMIC annual meeting will be at the Cranwell Hotel in Lenox, MA on May 9, 2015 at 1:00 p.m.
  • The CMIC RRG annual meeting will be held at the CMIC offices on May 6, 2015 at 4:00 p.m.

Voting members of the Group who are active policyholders vote on the election of the Directors at their respective Annual Meetings.

CMIC Director Nominees

David Kalayjian, MD, Mark Tramontozzi, MD, and William Potter, MD, or any of them or their duly appointed agents, are each hereby authorized to represent and to vote on behalf of the signer at the Annual Meeting of Members of CMIC to be held on May 9, 2015 and at any adjournment thereof.

The Board of Directors recommend voting for the election of the following four Directors to three year terms of office expiring in 2018.

 

Jeffrey Hopkins, MD

Dr. Hopkins is board certified in Emergency Medicine and is the Chair of the Department of Emergency Medicine at Milford Regional Medical Center in Milford, MA. He has served on the CMIC Loss Prevention Committee since 2013 and was elected to the CMIC Board of Directors in 2014.

 

John Hornby, MD

Dr. Hornby is board certified in Ophthalmology and is Senior Attending at Middlesex Memorial Hospital in Middletown, CT. He has been a CMIC Director since 2006, and is Chairman of the Finance, Investment and Pension Committee and a member of the Claims and Underwriting Committees.

 

Charles Kime, MD

Dr. Kime is board certified in Orthopedic Surgery and is an Assistant Clinical Professor of Orthopedic Surgery at the University of Connecticut. He has been a CMIC Director since 2009 and is Chairman of the Audit Committee and serves on the Finance, Investment and Pension, and Claims Resolution Committees.

 

Robert Marra, DPM

Dr. Marra is an Attending Podiatric Surgeon at St. Francis Hospital in Hartford, CT and on the Podiatric Residency Teaching Faculty. He has been a CMIC Director since 2009, chairs the Podiatric Advisory Committees and serves on the Finance, Investment and Pension, Loss Prevention and Audit Committees.


CMIC RRG Director Nominees

David Kalayjian, MD and John Hornby, MD or any of them or their duly appointed agents, are each hereby authorized to represent and to vote on behalf of the signer at the Annual Meeting of Members of the CMIC RRG to be held on May 6, 2015 and at any adjournment thereof.

The Board of Directors recommend voting for the election of the following Directors to a three year term of office expiring in 2018.


 

Sultan Ahamed, MD, MBA

Dr. Ahamed currently serves as President and Chairman of the Board of Directors of CMIC RRG and was a founding Director in 2010. He has served as President and Chairman of the Board of CMIC, CMIC RRG’s sponsoring company, since 1994

 

Edmund Schiavoni, MD

Dr. Schiavoni is board certified in internal medicine and is in practice with the Southern New Hampshire Internal Medicine Associates, P.C. in Derry, New Hampshire. He was appointed to the CMIC RRG Board of Directors in June 2014.

 

2014 - CMIC Group Highlights




 

 

CMIC Group Leadership

             
Denise A. Funk, CPU Emmanuel Zervos, CPA Michael F. Morgan Edward J. Carroll, Esq. Kevin M. Bresnahan, Esq. Denise M.Condron Raymond E. Lilley
Executive Vice President,
Chief Executive Officer
Vice President,
Chief Financial Officer
Vice President,
Business Development
Director, Underwriting Director, Claims Director,
Loss Prevention Services
Senior Manager, Information Technology
             

Financial Results

  • CMIC Group’s 2014 combined ratio, which includes the $5.0 million dividend, was 104.5% as compared to 97.5% in 2013. 
  • A Policyholders’ Dividend of $5.0 million was declared for CMIC policyholders renewing their coverage in 2015. This Dividend provides a 12.5% premium credit for renewing members.
  • The CMIC Group Policyholder Surplus grew from $266.2 million $280.7 million—an increase of 5.4%.
  • The CMIC Group Corporate earnings exceeded budgeted projections by $5.2 million.
  • Management expenses were 8.4% below the 2013.
  • Premium rates were unchanged for Connecticut policyholders for the 11th year while rates for Massachusetts members were unchanged for the 4th year. CMIC RRG rates were also unchanged for 2014.
  • Investment returns for 2014 were in the top quartile of comparable returns.
  • AM Best affirmed CMIC Group’s A- rating for 2015 and continued our corporate outlook as Positive.

Business Development

  • During 2014, CMIC Group added a total of 300 policyholders:
     
  Connecticut   88 policies
  Massachusetts 190 policies
  CMIC RRG   22 policies
    300 policies

  • Milford Hospital became insured with CMIC on October 1, 2014, an important business development achievement several years in the making.
  • CMIC Group’s retention rate for 2014 was 85.5%. While this retention rate meets the established goal, it is lower than last year due to the membership losses we experienced.

Claims Results

  • Six cases were tried to conclusion in 2014. Of this number, five (83%) were won through defense verdicts and one (17%) case was lost. An additional three cases were scheduled for trial but were either withdrawn or dismissed. 
  • Reserve development (time from opening to final reserve) for cases closed in 2014 averaged 23.1 months within our target of 24 months.

Loss Prevention

  • In 2014, the Loss Prevention Department focused its educational programs on techniques to enhance communication between physicians and patients, and physicians and peers. The Provider Handoff, a collaboration between a CMIC Physician and a defense Attorney was presented 9 times and had attendance from APRNs, Physician Assistants, Podiatrists, Physicians and Surgeons. The workshop to enhance the Physician Patient Communication was well attended in New Hampshire and additional programs and resources were requested.
  • With the revamping of the CMIC website, the Loss Prevention department has updated a number of resources available to policyholders including HIPAA documents and patient letters. New policies and procedures and sample templates are being added to the library frequently.
  • The Loss Prevention department has expanded the access of Educational events to include on-demand programs for ancillary hospital based staff and providers who find it challenging to attend live events. CMIC is making programs available to hospitals which have mandated courses to maintain their accreditation.



 

CMIC - 2014 Management Discussion and Analysis


CMIC FINANCIAL PERFORMANCE

Key financial data for the last two years.

Two Year Summary - Thousands

2014

2013

Net Premiums Written

$31,053

$35,857

Net Premiums Earned

$35,008

$35,179

Net Underwriting Income

$3,650

$4,503

Net Investment Income

$16,037

$14,138

Dividend & Rewards Program

$6,677

$3,500

Net Income

$10,698

$11,200

Invested Assets

$474,414

$459,815

Total Admitted Assets

$479,911

$468,641

Unpaid Losses & Loss Expenses

$137,094

$141,335

Total Liabilities

$200,829

$204,261

Policyholders’ Surplus

$279,082

$264,380


Results of Operations

The 2014 premium written was $38.6 million and is $4.0 million lower than 2013. While rates in 2014 remained unchanged, membership decreased year over year by 10% primarily due to the departure of three physician groups, two in Connecticut and one in Massachusetts. Reinsurance expenses were $.8 million higher than the prior year as the 2014 expense level includes a reinstatement premium of a prior year. Net premium earned for 2014 at $35.0 is $.2 million lower than 2013. The 2014 net premium earned benefited by a $4.0 million favorable adjustment to the Company’s unearned premium reserve.

Reported losses and loss expenses for 2014 amounted to $22.1 million. The 2014 loss provision benefited from the continuing improvement of ultimate loss projections relating to prior policy years. This trend has been in place for a number of reporting years. The savings from these improving ultimates in 2014 and 2013 amounted to $14.4 million and $21.0 million, respectively. Loss development occurs over an extended period of time which may result in actual ultimate losses and loss expenses differing significantly from projected amounts previously reported in the Company's financial statements. Therefore, estimates and assumptions used to establish the liability for losses and loss adjustment expenses are continually reviewed and, as adjustments become necessary, such adjustments are included in the current year's reported loss and loss expenses results.

Underwriting expenses at $9.2 million were $.8 million lower than 2013. The 2013 underwriting expenses increased by $.7 million for the renovation of its office space

2014 investment income at $13.6 million was approximately $.5 million higher than the amount reported for 2013. The Company’s investment portfolio continues to grow though in a continuing low interest rate environment. The Company recorded $ 2.4 million net capital gains for 2014 which is considerable higher than 2013’s $1.0 million. The gains were primarily generated by the full $1.4 million mortgage repayment held by the Company on the building it occupies as well as sales in the Company’s municipal fixed income and equity investment portfolios.

During 2014 the Company declared a $5.0 million policyholders’ dividend. The dividend will be distributed in 2015 as a premium credit to all renewing insureds.

Other expenses in 2014 include the Company’s recently initiated Policyholders’ Loyalty Rewards Program. The Program rewards insureds based on the number of consecutive years an insured is with the Company. The reward is payable upon an active insured’s retirement, total disability or death. The 2014 contribution to the Program was $1.7 million.

Federal income taxes for 2014 of $2.3 million which compares to $3.8 million paid in 2013. The decrease in federal income taxes is the result of lower taxable income for 2014 when compared to 2013 which was impacted by a tax change for the discounting of losses related to certain policy types.

Net Income at $10.7 million compares to $11.2 million in 2013. Net income for the current year was favorable impacted by the adjustment to the unearned premium reserve and capital gains while both calendar years were favorable impacted by improved loss development of prior policy years.

Financial Position

At year-end, total assets were $480.2 million, $11.6 million higher than the beginning of the year’s level. The increase in assets was due to higher equity investment valuations and the 2014 profitable operations.

The Company's investments are primarily made in the fixed income market and must comply with the Company's strict guidelines for liquidity, safety and after tax returns. The fixed income investment portfolio is comprised of 32% in municipals and states (not guaranteed by the U.S. Government), 30% asset-backed bonds, 35% in corporate and industrial bonds, 2% in U.S. Government and Treasury securities and 1% in cash and cash equivalents. The National Association of Insurance Commissioners (NAIC) has rated 99% of the Company’s bonds held at year-end in their two highest categories. The Company has $45.4 million in equities that have been market adjusted upwards at year-end 2014 by $33.1 million for a total equity market valuation of $78.5 million.

2014 Unpaid Losses and Loss Expenses Reserves were reported at $137.1 million which is $4.2 million lower than the prior year end. The Unpaid Losses and Loss Expenses Reserves were increased by the policy year 2014 provision for estimated losses of $36.6 million offset by reduced estimates for prior policy years' ultimate losses and expenses of $14.4 million and 2014 net payments for loss and loss expense of $26.3 million. The Company's 2014 Unearned Premium Reserve of $42.4 million includes $36.0 million to provide for the future issuance of free tails for death, disability or retirement. The reserve which was reduced by $4.0 million in the current year is determined actuarially in accordance with the guidelines established by the NAIC. The Company has received a favorable opinion from its consulting actuaries that Unpaid Losses and Expenses and Unearned Premium reserve levels for 2014 are reasonably stated. Management has continued to closely monitor the Company’s reserve development to insure these reserves are maintained at an adequate level. 

The Company has entered into reinsurance agreements which limit the risk assumed by the Company. Reinsurance payments are based on a fixed percentage of the Company's premium written. The Company incurred $7.6 million in expenses for its 2014 reinsurance program and prior reinsurance contract years. During the year the Company recovered from its reinsurers $2.3 million in losses and loss expense payments.

Policyholders' surplus at $279.1 million was $14.7 million higher than the beginning of the year balance. The higher level was principally the result $10.7 million from 2014’s profitable operations and the increase from unrealized gains in equity market valuations of $4.0 million.

Cash Flow and Liquidity

Cash flow from operations in 2014 generated $2.6 million which is $16.0 million lower than a year ago. Higher benefit payments ($13.9 million) and lower premiums and investment income ($2.3 million) were the principal drivers for the lower operational cash flow.




 

CMIC RRG – 2014 Management Discussion and Analysis


CMIC RRG FINANCIAL PERFORMANCE

Key financial data for the last two years.

Two Year Summary - Thousands

2014

2013

Net Premiums Written

$526

$452

Net Premiums Earned

$389

$335

Net Underwriting Income

($196)

($40)

Net Investment Income

($18)

($20)

Net Income

($215)

($59)

Invested Assets

$3,396

$3,365

Total Admitted Assets

$3,627

$3667

Unpaid Losses & Loss Expenses

$247

$80

Total Liabilities

$885

$710

Policyholders’ Surplus

$2,742

$2,967



Results of Operations

The 2014 premium written was $1,592 thousand and is $209 thousand higher than 2013. The Company expanded its writings in 2014 into the State of Pennsylvania which is the primary reason for the increase premium writings. Additionally the Company became registered in the State of Maryland during the year. Reinsurance expenses are the result of contracts with the Company’s sponsor, Connecticut Medical insurance Company (CMIC), and several Lloyd’s syndicates. These contracts transfer a substantial portion of the losses and loss expenses to the reinsurers. The 2014 ceded reinsurance expense was $1,067 thousand, $135 thousand higher than the prior year due to the higher premium writings. The 2014 net premium earned after adjusting for the change in unearned premium is $526 thousand compares to the 2013’s net premium earned of $452 thousand.

Reported losses and loss adjustment expenses for 2014 amounted to $217 thousand and are $174 thousand higher than 2013. The increase is the result of higher projected losses from the medical and legal defense coverage offered by the Company which is not reinsured. Loss development occurs over an extended period of time, this may result in actual ultimate losses and loss adjustment expenses differing significantly from initial and projected amounts previously reported in the Company's financial statements. Therefore, estimates and assumptions used to establish the liability for losses and loss adjustment expenses will be continually review and, as adjustments become necessary such adjustments are included in the current year's reported loss and loss expenses results.

Underwriting expenses for 2014 are $367 thousand which compares to the 2013 underwriting expenses of $332 thousand. The $35 thousand increase is due to the commission generated from higher 2014 premiums.

The 2014 investment income at $46 thousand which is comparable to the amount recorded in 2013. The continuing low interest rate environment especially for higher quality investments held by the Company have significantly impacted investment income as reinvestment rates are lower than maturing ones. The Company did not realize any significant capital gains or losses in either 2014 or 2013.

The Company recorded and paid interest expense of $65 thousand in 2014 and 2013. The interest expense relates to the $3.25 million surplus note the Company has outstanding with its Sponsor, CMIC. The interest payments on the note require permission from the District of Columbia’s Department of Insurance, Securities and Banking Commission before the Company may record and pay the interest. 

No Federal income taxes were incurred for either 2014 or 2013 as the Company’s operations generated a loss of $215 thousand in 2014 and $59 thousand in 2013.

Financial Position

At year-end assets were $3.6 million, $40 thousand lower than the beginning of the year. The decrease is due to the pay down of the reinsurance payable due to its sponsor, CMIC during the year.

The Company's investments are in the fixed income market and must comply with the Company's strict guidelines for liquidity, safety and after tax returns. The fixed income investment portfolio is comprised of 34% in U.S. Government and Treasury securities, 28% in high quality corporate securities, 21% in asset backed bonds and 17% in cash. The National Association of Insurance Commissioners (NAIC) has rated all of the Company’s bonds held at year-end in their highest categories. 

 2014 Unpaid Losses and Loss Adjustment Expenses reserves were reported at $247 thousand and are $167 thousand more than the prior year. The increase is the result of higher projected losses from the medical and legal defense coverage offered by the Company which is not reinsured. The Company has received a favorable opinion from its consulting actuaries that Unpaid Losses and Loss Adjustment Expenses reserve levels for 2014 are reasonably stated. Management will continued to closely monitor the Company’s reserve development to insure these reserves are maintained at an adequate level. 

The Company's 2014 Unearned Premium Reserve of $303 thousand includes $286 thousand to provide for the future issuance of free tails for death, disability or retirement. This reserve will be determined actuarially in accordance with the guidelines established by the NAIC. The balance of the Unearned Premium reserve of represents policies written in 2014 that will be earned in 2015. The Company has entered into reinsurance agreements, which limit the risk assumed by the Company. The reinsurance contract for professional liability coverages is based on a 95% / 5% quota share basis with the Company retaining 5%. After commissions, the Company cedes approximately 70% of its professional liability premium to its Sponsor, CMIC. The Company also provides medical cyber-liability coverage for its insureds and the insureds of its Sponsor, CMIC. The Company cedes 100% of this premium to several Lloyds syndicates while retaining a ceding commission of 15%.

Policyholders' surplus at $2.7 million is $215 thousand lower than the beginning of the year. The reduction in surplus is the result of the net operating loss in 2014.

Life Insurance Company Ratings CMIC