Texas Mutual Insurance Company
2005 Annual Report
Letter from the Chairman
Letter from the President
Strength, Stability, Endurance: The Year in Review
Delivering the Services That Matter Most
Building Purchasing Groups
Rewarding Loyal Customers
Exceeding Growing Automation Needs
Working with Agents
Here for Texas, Here to Stay
Financial Highlights
2005 Annual Report brochure (PDF)
Letter from the Chairman
The Texas Legislature created Texas Mutual Insurance Company in 1991 to provide a stable, competitive source of workers’ compensation insurance. As this report demonstrates, the company is financially strong and absolutely prepared to continue fulfilling its mission in today’s rapidly evolving workers’ compensation system.
In 2005, Texas Mutual Insurance Company wrote over $706 million in premium, provided coverage for over 45,000 Texas businesses and their more than 743,000 employees, and returned over $56 million in policyholder dividends. The company’s remarkable financial strength means that unlike some insurance carriers, this company can and will be here for Texas employers through all possible market conditions.
These impressive results did not happen on their own. They are the reflection of continuing efforts of Texas Mutual® staff and management to exceed their customers’ expectations. During the past year, the company continued to focus on controlling premiums by fighting fraud, managing medical costs, and helping employers make their workplaces safer.
Texas Mutual® staff provided input to assist the Legislature in crafting the important reforms that were enacted for the Texas workers’ compensation system in 2005. The company has devoted substantial resources to implementing the changes necessary to function in the system once the legislative and regulatory reforms are implemented.
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Chairman Martin H. Young, Jr. (left) and President Russell R. Oliver |
I congratulate the board and management of Texas Mutual Insurance Company on another successful year. The staff and management can rest assured that they have the board of directors’ full support in their long-term commitment to making Texas a safer, more productive place to work and do business.
Martin H. Young Jr.
Chairman
Letter from the President
The saying “Change is the only constant” has never applied more to the Texas workers’ compensation system than it does today. I am proud of the financial results that appear in this report, but I believe this company’s greatest success in 2005 was how we worked to prepare ourselves and other system stakeholders for the challenges that lie ahead.
Even before the 79th Legislature convened, we responded to legislative requests for data and information. Our staff provided state officials with background information that helped them create House Bill 7, the first major workers’ compensation system reform in over a decade.
We also worked hard throughout the year to keep Texas employers and their agents up to date on the progress of this important legislation. Our You Need to Know email service, statewide workshops, and newsletters provided updates on workers’ compensation system reforms and explained what those reforms will mean to employers and agents.
As the workers’ compensation system changes, so will our customers’ business needs. In 2005, our staff stayed focused on anticipating our customers’ changing needs and delivering services that help keep their businesses strong. As one of our long-time policyholders put it, “We’ve been with them year after year. They continue to improve. Even when sometimes we think they can’t get any better, they do.”
Our workers’ compensation system will undoubtedly change in the future. We want you to know that Texas Mutual Insurance Company will be here to provide a stable, competitive source of workers’ compensation insurance in Texas through the changes. I am proud of Texas Mutual Insurance Company, and I am confident when I tell you: “We’re here for Texas, and we’re here to stay.”
Russell R. Oliver
President
Strength, Stability, Endurance:
The Year in Review
2005 was an eventful year for the workers’ compensation system.
The market became more competitive, and lawmakers passed important legislation that will affect the system for years to come.
In June, Governor Rick Perry signed House Bill 7, setting the stage for the most sweeping changes the Texas workers’ compensation system has seen in over a decade. Properly implemented, the new law will help make the system more efficient, control costs, and improve access to and quality of health care for injured workers.
On the national level, insurance carriers, employers and other system stakeholders worked with Congress to extend the Terrorism Risk Insurance Act (TRIA). TRIA provides a vital financial backstop for losses resulting from acts of terrorism. With the act set to expire on December 31, 2005, Congress voted to extend it in modified form for another two years.
Meanwhile, the Texas workers’ compensation market became increasingly attractive to insurance carriers. Carriers intensified their efforts to compete for agents’ hard-earned business.
In the face of these changes, Texas Mutual Insurance Company continued to position itself as a stabilizing force in the Texas workers’ compensation system. By staying committed to our mission and core services, we ensured that we will be here for Texas employers now and on down the road.
Delivering the services that matter most
Market research shows that employers value careful claim management, safety evaluation and training, and a strong stance against fraud.
In 2005, we continued to focus on delivering the services that matter most to our customers.
Through our “zero tolerance for fraud” program, we investigate every report of suspected fraud we receive. In 2005, our special investigations department identified over $13 million in fraud, saving money for honest employers. Their work resulted in 14 indictments and 11 convictions or civil rulings in our favor.
Our loss prevention staff made over 10,000 policyholder visits last year. Our safety resource center provided easy access to our multimedia library of safety training materials. Customers downloaded over 16,000 free pamphlets, handouts, posters and other materials from the resource center last year.
When workplace accidents did happen, our workers’ compensation specialists, nurses and case managers worked to ensure that injured employees received appropriate treatment. We are dedicated to minimizing the human and monetary costs of on-the-job injuries by helping injured workers recover and get back to productive employment.
“The staff at Texas Mutual is always ready to help see what we can do to put people back to work,” said Cruz Gonzales, owner of Gonzales Labor Systems in Ft. Worth. “Everybody there is very helpful. I’ve been with Texas Mutual for going on four years now, and I’m very satisfied.”
Gonzales is not the only satisfied policyholder. In 2005, over 82 percent of our policyholders renewed their Texas Mutual® policies.
Building purchasing groups
Purchasing groups are a cornerstone of our long-term strategy to keep premiums affordable and improve workplace safety. They also provide incentive for policyholders to stay with Texas Mutual Insurance Company.
We give each group member a premium discount based on an estimate of the group’s entire written premium. We also assign a loss prevention consultant to develop a safety plan for the group’s common operations. Our loss prevention consultants speak at group association meetings, educational workshops, and in other settings.
“The support is excellent,” said Brad Wicker, master agent for the Lone Star Auto Dealers group. “We’ve been with Texas Mutual for over five years now, and I wouldn’t have any other carrier doing what they do for us.”
Last year, we added two new groups: Texas Home Builders and Texas Petroleum Marketers and Convenience Store Association. We now offer 24 groups representing over a dozen industries.
Agents who work with us to build new groups and grow existing groups have the opportunity to increase their market share. They often see their marketing efforts improve as they make valuable contacts in industries that make up their primary markets.
“From my experience, Texas Mutual has hit a home run with its purchasing groups,” said Jim Sierra, master agent for the Texas Oil and Gas Association (TxOGA). “Texas Mutual has done an outstanding job for TxOGA. We’ve had this partnership for about 11 years now, and we’ve had a good experience with everybody at Texas Mutual.”
Rewarding loyal customers
Our 2005 dividend plan rewarded loyal policyholders whose low claim losses help control premiums. We distributed about $50 million in individual dividends among approximately 32,000 Texas Mutual® policyholders last year. We distributed another $6.8 million in purchasing group dividends. Many purchasing group members qualified for dividends under both programs.
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Individual Dividends Distributions to Policyholders (in $ millions) |
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“Our members are non-profit organizations, so dividends really mean a lot to them,” said Robert Nasits of Care Providers Inc, administrator of the Social Services Agencies of Texas purchasing group. “We’re proud our group is with Texas Mutual Insurance Company.”
Our 2005 individual dividend plan included an annual component and a retention component. The annual component rewarded qualifying policyholders with policies that expired the previous year. The retention component rewarded qualifying policyholders for up to five consecutive years of low claim loss experience. The plan also included a special component that we were able to offer due to our exceptional financial results in 2004.
“Although we can’t guarantee dividends, we make it a priority to give back to our policyholders when we can prudently do so,” said Ken Lauber, Texas Mutual® vice president of field operations. “We are committed to putting money back into the economy and helping Texas businesses build for the future.”
Exceeding growing automation needs
In October, we unveiled the newest addition to Texas Mutual® online services: online dividend reports. The tool allows policyholders and their agents to view detailed information about their individual and purchasing group dividend history.
The dividend reporting tool is just one example of how we use the Internet to help our customers streamline their workers’ compensation business. Other online services available at texasmutual.com include injury reporting, Internet quoting, loss run and claim details, interim reporting, and the safety resource center.
“I love the online services, and I use all of them,” said Shelly Lister of Miken Specialties in Clute. “I would suggest to any insured to go online and see what’s available because there’s something new all the time.”
Last year, we gave customers the ability to quickly download printer-friendly quotes, policies and endorsements. We also enhanced our loss run and claim detail tool to give customers convenient access to more claim information.
“We use their website regularly. It’s well-done, and it contains most of the information we ever need,” said Sheila Armsworth, director of human resources at the Houston Museum of Fine Arts, a longtime Texas Mutual® policyholder.
Customer feedback consistently shows that agents and policyholders want to do more of their workers’ compensation business online. We will continue exploring new ways to exceed our customers’ growing automation needs.
Working with agents
Texas agents have always played a key role in our success. In 2005, we strengthened our business partnership with agents by signing 16 agency contracts. The contracts give agents the authority to bind policies and service accounts directly for Texas Mutual Insurance Company.
In addition to bringing in business, agents help us better serve our mutual customers. In 2005, our Agent Advisory Council and Account Executive Council met with Texas Mutual® leadership and provided valuable feedback about our services.
One of the services we discussed was our upcoming workers’ compensation health care network option. In November, we launched a campaign announcing that we would offer a network option to eligible policyholders in early 2006. The campaign encouraged employers to work with their agents to learn more about the network opportunity and potential premium discount. Our network implementation plan is indicative of the strong partnership between Texas Mutual Insurance Company and the agent community.
“We all work together to do the best job we possibly can. We couldn’t be any happier with anybody else,” said Sierra of TxOGA. “Because our group covers Texas, we feel that Texas Mutual better understands our members’ business because they’re here in Texas, too.”
Here for Texas, here to stay
“Texas Mutual has stayed with us all these years, and we’ve stayed with them, not out of convenience, but because the service is that great,” said Lister of Miken Specialties.
Our staff has built a culture of service to Texas. As part of that culture, we provide a host of services employers may not get with other carriers.
In 2005, we hosted 30 free workshops in 14 Texas cities. The workshops promoted the workers’ compensation system and showed agents
and employers how to get the most value out of their partnership with Texas Mutual Insurance Company.One guest noted that we are the only carrier that has held this type of workshop in the five years she’s been involved with workers’ comp insurance. She added that she found the claim section especially informative.
In August, we added a section on House Bill 7 to our workshop presentations. Our experts provided an overview of workers’ compensation system changes, including upcoming workers’ compensation health care networks, and explained what those changes will mean for our policyholders.
We recognize that system changes will affect all Texas employers, not just our policyholders. That’s why we offer our free You Need to Know service, a series of workers’ compensation-related email updates, to anyone who is interested in workers’ compensation system reforms. To date, over 700 employers, agents and other interested parties have registered for the service.
“The You Need to Know updates gave me a heads-up on the proposed changes to the workers’ comp law. It kept me informed as to what was said and what to watch for,” said Gonzales of Gonzales Labor Systems. “As a matter of fact, I took action based on the updates. I wrote a letter to the Governor and several state legislators about some of the problems I was having with the old system.”
We invest in stakeholder training because we believe in the power of education. Through our college scholarship program, we help pay tuition for qualifying family members of employees who die from compensable accidents. Employees who receive lifetime income benefits, as well as their family members, are also eligible for the program.
In 2005, we granted $37,450 in scholarship awards to 17 qualifying individuals. We have issued $114,606 to 32 qualifying individuals since launching the scholarship program in 2001.
“When we say, ‘We’re here for you, Texas,’ we mean we are here for the long haul,” said Texas Mutual® President Russ Oliver. “All of these services are part of our long-term investment in Texas employers and their employees.”
Financial Highlights
| For the year ended December 31, 2005 (in thousands) |
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| Gross premiums written | $706,591 |
| Gross premiums earned | $726,439 |
| Net premiums earned | $716,698 |
| Net investment income | $146,374 |
| Other income | $1,221 |
| Claim benefits paid and incurred | $530,305 |
| Dividends to policyholders | $56,696 |
| Underwriting expense and policy acquisition costs | $110,224 |
| Provision for uncollectible premiums | $1,186 |
| Operating expenses | $53,596 |
| Net income | $112,286 |
| At December 31, 2005 (in thousands, except number of policyholders and employees covered) |
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| Assets | $3,459,336 |
| Liabilities | $2,281,732 |
| Policyholders' surplus | $1,177.604 |
| Number of policies in force | 45,372 |
| Number of employees covered on policies in force | 743,991 |
| Key indicators, year ended December 31, 2005 | |
| Incurred loss ratio* | 73.0% |
| Combined ratio* | 104.9% |
| Premiums written to surplus ratio | 0.60:1 |
| *Ratios calculated as a percentage of gross premiums earned | |