State Volunteer Mutual Insurance Company, the Tennessee medical malpractice insurer owned by the doctors themselves, has had another profitable year even with its significant rate decrease.
The company, which insures about 75% of the doctors in the state, has announced the following financial results and other data for the year ending December 31, 2011:
- Net income – $28,012,000.
- Policyholder’s Surplus (equivalent to net worth): $436,424,000
- 2011 Dividend – $20,100,000
- Total Dividends paid during company existence – $300,000,000
- Rate of return on investments – 5.3%
- Average decrease in premiums over last 3 years – 31% (mature, base premiums)
- Insured physicians – 14, 476
The gross premiums written have decreased since 2007 for two reasons. First, SVMIC has lost almost 1600 doctors as clients during that period. Second, rates have declined substantially during that period. The combination of the two factors has resulted in a decreased of gross premium written of a little over $90,000,000. Profits remain high because investment income has remained about the same (actually, it is a little higher) and net paid loss and loss adjustment expenses have increased only about 5% in five years. Surplus during the 5 year period has increased over 80% despite payment (through premium credits) of $48,000,000.
I expect medical malpractice insurance premiums to stay flat or decrease only slightly in 2012, unless it experiences pricing pressure from other med mal insurers. SVMIC is losing market share to other insurers and thus it may be forced to continue to cut insurance rates and maintain dividend credits to keep its share of the marketplace. Of course, claims experience will continue to be a factor in rates, but pricing pressure and investment income will play a major role as well.