2008 TMLT Annual Report

MillionsMillionsMillionswill allow us to have the needed space inthe future for additional growth as wellas afford us the advantage of controllingfuture rent increases. With a reduction ofquality investment opportunities in 2008,the building purchase was a sound alternativeinvestment for TMLT.We also took the opportunity tocommute a portion of our reinsurancecoverage attributable to the continuedfavorable results of Texas tort reform.Commuting reinsurance relieves thereinsurers from their obligation for futureclaim reimbursement to TMLT in returnfor a partial refund of premium to TMLT.Taking on this additional risk shows howconfident we are in the results of tortreform and how confident we are in thefinancial strength of TMLT to weather anyunforeseen uncertainties.The decline in written premiumsfor 2008 was primarily the result ofrate reductions based on diminishingclaim trends and competitive pressures.These rate reductions are partially offsetby our strong retention ratio of 92.6%.Throughout 2008 we experienced betterthan expected loss trends which had afavorable impact on current year earnings.Even with this favorable loss reserve“Our financial strengthhas afforded us theflexibility to declare a$33 million dividend to ourpolicyholders as they renewin 2009. We also loweredour rates in 2008 for thefifth consecutive year.”development, we remain committed tocareful reserving practices.Investment income remained fairlystable in 2008. While our total amount ofinvestments increased during 2008, overallinterest rates declined because of marketconditions. Also, a significant amountof money was withdrawn from the fixedmaturity investments during the yearin order to fund the purchase of thebuilding, which also contributed to lowerinterest income. During the year, TMLTincurred net realized capital lossesprimarily owing to declines in marketvalues of a portion of our equity investmentswhich were considered to be otherthan temporarily impaired.During 2008, we have sustained andincreased our financial stability duringdifficult market conditions throughresponsible pricing and loss reservingpractices and through conservative investmentpractices. While premium rateshave declined in recent years and reducedinterest rates and the economic marketshave had an impact on our earnings,we believe that 2009 will be anothergood year for TMLT – especially if thecurrent claim trends and premium pricingremain stable. As mentioned above, ouryear-end 2008 surplus was $275 million.Maintaining a proper level of surplus iscritical to the success of TMLT as surplusrepresents a cushion that can absorbthe impact whenever liabilities increaseunexpectedly or investments lose value.We are committed to maintaining prudentoperating and financial results and conservativelyinvesting our assets. We realizethat our policyholders value an insuranceorganization with financial strengthand we intend to manage our business toprotect that financial strength and security.$700Total Assets - Consolidated2005-2008$654.4 $662.4 $667.0Policyholders’ Surplus - Consolidated2005-2008Dividends2005-2008$600$500$400$588.7$300$250$200$203.4$227.7$254.0$275.1$40$30$32.9$35.1 $34.1$300$150$20$200$100$100$50$10$902005 2006 2007 2008Years02005 2006 2007 2008Years02005 2006 2007 2008Years19