A quarterly review of Company and industry news for Medical Mutual member-policyholders.
About Us » Publications & Announcements
The Advocate
Winter 2009/2010
Medical Mutual Reports 2009 Third Quarter Operating Results
For the Nine Months Ended September 30, 2009, Medical
Mutual realized net income of $4,849,000. Surplus increased to
$88.0 million at September 30, 2009, from $79.5 million at
year-end 2008. The increase in surplus is primarily due to favorable
net operating results and a significant increase in the value
of the Company’s equity portfolio as the stock market continued
its recovery.
In the first nine months of 2009 versus 2008, the number of
hospital claims reported to the Company increased by 9 to 66
(57 in 2008) while Physician and Surgeon reported claims
decreased by 7 to 116 (123 in 2008). The decrease in Physician
and Surgeon claims represents the lowest reported number in the
past eight years – 57 % of the level reported in 2002 and 2003.
Hospital claims, on the other hand, while lower than the high
watermark of 2003, are the fourth highest in the past eight years.
Tempering the impact of continued favorable results in the
reported number of claims (frequency) was an increase in the
overall expected loss per claim (severity), resulting in an increase
in net losses projected on a per-claim basis. Net losses of
$12,374,000 were reported in the first nine months of 2009,
a 21.28% increase from the $10,203,000 reported in the same
period in 2008. Most of the increase was attributable to a reduction
in the drawdown of loss and loss expense reserves set up in
prior years due to better-than expected loss experience.
Continued favorable trends in new claims filed since the 2003
high watermark have contributed significantly to the Company’s
solid operating results.
Other highlights and significant results for the first nine
months of 2009 include:
- Income Before Taxes and Dividends: Income before taxes and
dividends was $6,150,000. This compares to $15,612,000 for
the same period in 2008. The decrease was primarily due to the
$3.8 million decrease in drawdown of loss reserves for prior
years’ and a $3,034,000 decrease in realized capital gains. A
reduction in earned premiums and an increase in loss adjustment
expenses accounted for the remainder of the decrease.
- Pre-Tax Operating Income: Pre-tax operating income (ignoring
capital gains/losses) was $5,541,000 in 2009 compared to
$11,969,000 in the same period in 2008. The $6,428,000
decrease was primarily due to the decrease in drawdown of prior
year reserves, lower earned premiums, and higher loss adjustment
expenses, noted above.
- Net Earned Premiums: Net earned premiums were
$29,729,000, a decrease of 5.65% from the $31,508,000
reported in the same period in 2008. The decrease is reflective
of rate reductions and relativity changes approved in 2008.
- Insurance Operations: The Company reported a $489,000
underwriting gain in 2009, which is significantly less than the
$6,616,000 gain reported in 2008. The primary difference
between the two years is the reduction in drawdown of reserves
for prior report years, the reduction in net earned premiums,
and the increase in loss adjustment expenses.
- Investment Income: Investment income is $282,000 lower for
the nine-month period in 2009 than in 2008 because of a significantly
higher average investment in tax exempt securities.