2019 TMLT Annual Report

Gerald "Ray" Callas, MD, FASA

I became a part of the TMLT family as a policyholder in 2004, and was elected to the TMLT Board of Governors in 2013. And this year, it has been an honor to serve as Chairman of the TMLT Board of Governors. 

I am excited to build on the strong foundation created by those who established TMLT, and the incredible leaders who came before me.

TMLT was successful from the beginning. In the mid-1970s, the idea of forming a self-insurance trust led by physicians sprang from a handful of physicians and a young Austin attorney. Working together, the governing board and staff took TMLT from a fledgling start up with a few hundred policyholders, to the leading writer of medical liability insurance in Texas.

And TMLT has expanded beyond Texas through its affiliate, Lone Star Alliance, RRG. We now cover more than 37,000 health care professionals nationwide.

In 2019 — as it was in 1979 — board members are driven by a calling to support physicians. We do this by offering flexible coverage for all practice types and any physician work arrangements. We cover all specialties in all areas of Texas.

We support physicians through our claims defense and risk management services. TMLT does not “settle” non-meritorious cases and will not settle a case without policyholder consent.

We have given back to physicians through our Trust Rewards and dividend programs. (We remain one of the only carriers with an active dividend program.) Since these programs began, we’ve paid over $316 million in dividends and allocated $205 million in Trust Rewards to Texas physicians.

We support physicians through our partnership with the Texas Medical Association, our support of the county medical societies, and our advocacy of the Border Health Caucus. TMLT Board members and staff also have a long history of fighting on the front lines to keep tort reform in Texas. Other advocacy efforts include helping to lessen the regulatory burdens placed on physicians.

Because TMLT is physician-led, Board members support physicians from within TMLT by giving critical input and feedback to staff on decisions that affect policyholders. We also support physicians through our involvement with the TMLT Claims Review Committee and the TMLT Underwriting Review Committee.

Robert Donohoe

I am extremely proud of TMLT’s growth and achievement in 2019. Our assets at year-end total $1.05 billion, and our surplus stands at $656.4 million. However, along with a strong balance sheet, I take even greater pride in the fact that TMLT has attained this success while remaining totally dedicated to protecting and serving physicians in Texas and beyond – fulfilling our core mission.

In addition to our strong financial position, we have the flexibility to offer products tailored to meet the needs of any health care professional or organization. Our product offerings are more creative than any offered by our peers, and our understanding of the marketplace is superior. We have worked to provide unparalleled claim and risk management expertise. And finally, dedicated customer service remains integral in everything that we do.

In 2019, we celebrated our 40th year serving the physicians of Texas. This is a tremendous accomplishment when you look at the history of how TMLT came together during a crisis, how we have weathered other crises in our industry, and how we’ve grown to become the trusted source for medical liability coverage in Texas.

Credit for this achievement goes to our employees. Their commitment to service, their adaptability, and their creativity led TMLT to one of its most successful years, as this annual report demonstrates.

With a successful year behind us, we look forward to the new challenges of 2020. TMLT will continue to listen to policyholders and respond to their needs, as we further customize our products and services for the physicians and health care providers in Texas and beyond.

In 1979, TMLT was created by physician members of the Texas Medical Association to establish a source of affordable and stable malpractice insurance in Texas. Today, led by a Board of Governors whose members are all physicians, TMLT sets the standard for coverage and service that is unmatched in Texas and in our industry.

The history of TMLT is a story of vision, creativity, dedication, and courage. The idea of forming a self-insurance trust led by physicians sprang from a handful of physicians and a young Austin attorney in the mid-1970s. They wanted to create their own company that would provide the kind of service and support Texas physicians deserved.

TMLT was successful from the beginning, as these same physician leaders recruited the right insurance professionals to lead the new company. Working together, the governing board and staff took TMLT from a fledgling start up with a handful of employees and a few hundred policyholders, to the leading writer of medical liability insurance in Texas. And TMLT is now expanding beyond Texas through its affiliate, Lone Star Alliance, RRG. We now cover more than 37,000 health care professionals.

Vince Kasch

TMLT continues to reach new milestones as we focus on serving and defending our policyholders. We celebrated our 40th year in operation in 2019, and we hit another milestone with total assets now exceeding the billion dollar mark. As we grow, our commitment stays the same – remain financially strong and provide superior service for our policyholders. TMLT also shares success with our policyholders by giving back through dividends and Trust Rewards. 

Key financial highlights include:

• • Total assets grew from $947.2 million at year-end 2018 to $1.05 billion at year-end 2019.
• • Policyholders’ surplus increased substantially to $656.4 million at year-end 2019, an increase of $64.1 million from the prior year.
• • Net income totaled $41.5 million in 2019, compared to $30.9 million in 2018.
• • Gross premiums written continue upward from $172.3 million in 2018 to $178.6 million in 2019, reflecting a 3.6% increase from the prior year.
• • For the 15th year, we declared a policyholder dividend, which totaled $12.2 million for 2019. 
• • The Trust Rewards program continues its steady growth. Cumulative allocations now total $205 million at year-end 2019. Distributions of $3.8 million were made to policyholders in 2019.

A new accounting rule in 2019 requires changes in unrealized gains and losses on most equity security investments to be recognized in net income. These unrealized amounts were previously excluded from net income, and were reflected as direct increases or decreases to policyholders’ surplus. Changes in unrealized gains on equity investments included in 2019 net income totaled $20.8 million, net of related tax effects. For comparison purposes, excluding these net unrealized gains would result in 2019 net income of $20.7 million versus 2018 net income of $30.9 million. The lower net income in 2019 is primarily due to higher claim losses and loss adjustment expenses.

TMLT and the medical professional liability insurance industry are continuing to experience increased claims severity, yet the environment is still competitive and price sensitive. For TMLT, most of the increased severity is from affiliates located outside of Texas. As a result, TMLT made changes to mitigate future impacts from these affiliates. This includes the 2019 sale of the policy renewal rights associated with TMLT’s wholly owned Florida subsidiary, Physicians Insurance Company.

While navigating this challenging insurance climate, TMLT’s policyholder retention remains high. Gross written premiums continue to increase at a controlled pace, now totaling more than $178 million in 2019. Net premiums earned totaled $150.8 million and $155.8 million in 2019 and 2018, respectively. The decrease in 2019 was primarily related to lower reinsurance costs in 2018.

Our investment strategy focuses on high quality fixed maturity securities with appropriate allocations to equity and real estate holdings. While investing was challenging in 2018, market conditions improved significantly in 2019. The strong performance of the stock market in 2019 produced a substantial increase in the value of TMLT’s equity portfolio. Lower 2019 market interest rates, which can reduce interest income over the long term, also increased the value of our fixed maturity securities.  The unrealized gains in these investments were key drivers in the 10.8% increase in policyholders’ surplus during 2019.

Expense control is always a priority at TMLT. Expenses were lower in the current year as they were impacted in both 2019 and 2018 by the amortization of certain intangible assets. Amortization expenses totaled $642,000 in 2019 and $7.0 million in 2018 as we accelerated the amortization in 2018.  All goodwill and intangible assets related to TMLT’s previous acquisition of Physicians Insurance Company and related entities has now been charged off.

We thank you for your loyalty to TMLT and look forward to reaching new milestones together in the future.

2019

From left to right: A. Compton Broders, MD; John R. Holcomb, MD; William Fleming, III, MD; Pam Holder, MD; Russell Krienke, MD, Secretary-Treasurer; Michelle Harden, MD, Vice Chair; Robert Donohoe, CEO; Gerald “Ray” Callas, MD, Chair; Tim West, MD;  Mark S. Gonzalez, MD.

BALANCE SHEETS

Unaudited, in thousands

FINANCIAL HIGHLIGHTS

Unaudited, in thousands

INCOME STATEMENTS

Unaudited, in thousands

The foregoing unaudited condensed consolidated financial information has been derived from the audited consolidated financial statements.  These consolidated financial statements are available upon request.