NORCAL Group 2017 Annual Report

norcalgroup

2017

ANNUAL REPORT


A MESSAGE FROM

THE CHAIR & THE CEO

As a healthcare provider, trust and care are two words that define a shared commitment

– a commitment to patients and to the betterment of healthcare. These are also two

words that frame NORCAL’s commitment to you, our policyholder-owner. We believe

these are the fundamental tenets of a policyholder-owned mutual company and an

important differentiator that NORCAL brings to our valued insureds.

We began building trust 42 years ago and continue to grow our legacy as we expand across the

nation to offer exceptional medical professional liability coverage. After Dr. Sandra Beretta’s election

as Chair in June, we undertook a comprehensive review of NORCAL’s mission and strategy focused

on the rapidly changing needs of physicians and other health care providers.

The new Mission Statement that emerged reflects our purpose:

NORCAL SAFEGUARDS OUR POLICYHOLDERS FROM RISK, GUIDES THEM THROUGH

THE UNEXPECTED AND PROTECTS THEIR PRACTICE OF MEDICINE.”

SANDRA BERETTA, MD

Chair

SCOTT DIENER

President & CEO

2 | 2017 ANNUAL REPORT


Our company exists solely to help protect our policyholders from the risks that are inherent to the

practice of medicine and, most importantly, to be there when the unexpected happens and our

insureds need us most. That is a commitment of care, trust and partnership. Throughout these pages

you will hear from some of our dedicated NORCAL employees sharing their personal perspectives

about their role in supporting members of the NORCAL Group of companies. The level of care and

commitment across the organization is a powerful factor that has fueled NORCAL’s momentum and

policyholder retention throughout a remarkable year.

2017 began with the acquisition of PPM Services, officially welcoming Preferred Physicians Medical

Risk Retention Group (PPM) to the NORCAL Group. Internally, the year was focused on strengthening

our foundation, which enabled us to navigate the continued soft market and pricing pressures through

prudent business decisions and purposeful efforts to reduce our operating expenses. All of these

efforts are reflected in our solid financial results, and the designation of an A.M. Best “A” (Excellent)

rating for the 34th consecutive year.

With a longer view, we also invested in key areas to support our national expansion through a national

operations center, and improvements in our interactions with our policyholders through our newly

established Customer Experience team.

2017 was also a year when we all saw and felt the devastating effects of natural disasters in Florida,

Texas and California – communities where we have numerous policyholders, agents and employees.

We immediately extended payment deadlines for our insureds, our employees joined several local

relief efforts, and NORCAL donated a total of $50,000 to the Red Cross to support the many efforts

to provide immediate relief and help prepare for recovery.

We are also very proud that NORCAL significantly expanded our philanthropic efforts with the

establishment of the NORCAL Group Foundation, focused on providing grants for the betterment of

health care in the local communities we live in and serve.

This was clearly a year of challenge and change. Our approach of staying ahead of known impacts

and successfully navigating through the unexpected – just as we do for our policyholders – has

served us well. As we enter 2018 and beyond, NORCAL will continue to ensure your coverage is

strong and your support is delivered with the trust and care you deserve.

Thank you very much for your business and for your confidence in our company. We look forward to

serving you for many years to come.

2017 ANNUAL REPORT | 3


WE’RE DEDICATED TO

MAKING A DIFFERENCE

At NORCAL, we understand that the practice of medicine is more than just

a business – it’s your life’s work. We also understand that supporting our

policyholder-owners is much more than a financial relationship. It’s about

the support and care we deliver, and the trust we instill at every phase of

our partnership – making a difference for you whenever you need us.

From left to right: Dustin Shaver, VP of Risk Management // Rommel Tanega, Senior Underwriter //

Erica Presley, Underwriter // Shawn Walker, Underwriter // Chris Frostad, Claims Director //

John Nunes, UW Training & Development // NORCAL Group Office - San Francisco, CA

4 | 2017 ANNUAL REPORT


2017 ANNUAL REPORT | 5


FROM COAST TO COAST

WE’RE READY TO HELP

Through our continued expansion, NORCAL has grown to become the fourth largest insurer

of physicians and surgeons nationally,* offering our Health Care Professional policy in 39

states, including D.C., by the close of 2017. We also diversified and expanded our reach into

the specialty market with the acquisition of PPMR RRG, the only anesthesia-specific MPL

insurance carrier in the nation. Our national footprint and expertise is among the most comprehensive

in the industry, while still retaining strong local understanding through our NORCAL team and a

network of carefully selected local agent/broker partners.

In 2017, NORCAL welcomed the first female Chair of the NORCAL Mutual Board of Directors, Dr.

Sandra Beretta. As a practicing OB/GYN for nearly 25 years and a managing partner of a private

practice partnership in California, Dr. Beretta knows well and cares deeply about the needs of

our policyholders.

We continued to deliver industry-leading Risk Management services awarding more than 30,000 CME

certificates on patient safety and practice management topics in 2017. Leveraging more channels to

connect with our insureds, NORCAL introduced a series of live online webinars focusing on a variety

of topics applicable to today’s healthcare practices, including one of the top 100 healthcare webinars

of 2017.† As we look ahead, we’ll continue to build new channels to make it easier for insureds to

access our award-winning Risk Management materials, including enhancements to the MyNORCAL

app to include on-demand webcasts, as well as existing Claims Rx articles.

Supporting our policyholders includes being good stewards in the communities where we work

and live. The establishment of the NORCAL Group Foundation formalized our commitment to

giving back, offering grants to worthwhile non-profit programs focused on patient safety, patient

care and physician wellness.

6 | 2017 ANNUAL REPORT

* Data compiled from S&P Global Market Intelligence (formerly SNL Financial) on March 19, 2018 for direct premiums written in 2017

† Among healthcare webinars on the GoToWebinar platform


AS PART OF AN

AWARD-WINNING RISK

MANAGEMENT TEAM, I

TAKE GREAT PRIDE IN EDUCATING

INSUREDS SO THEY CAN IDENTIFY

AND MITIGATE POTENTIAL RISKS

BEFORE THEY HAPPEN.

TERRY SISLO, CPHRM

Senior Risk Management Specialist, PA

Throughout this Annual Report we highlight NORCAL’s successes in 2017 in delivering

on what has always been our mission — providing our policyholder-owners the care

they’ve come to trust to safeguard them from risk, guide them through the unexpected,

and protect their practice of medicine.

A SIMPLE AND SEAMLESS

BILLING PROCESS IS WHAT OUR

POLICYHOLDERS DESERVE — I’M

HERE TO MAKE THAT HAPPEN.

DAVID ALLEBE

Billing, Reporting and

Other Operations Manager, TX

2017 ANNUAL REPORT | 7


POLICYHOLDERS GET SO

MANY BENEFITS FROM OUR TEAM’S

STRONG PARTNERSHIP WITH OUR

NATIONWIDE NETWORK OF

AGENTS AND BROKERS.

LAURIE BUSH

Regional Business Development

Representative, PA

WHEN PHYSICIANS ARE IN THE MIDST OF A CLAIM,

IT’S ONE OF THE MOST STRESSFUL EXPERIENCES OF

THEIR CAREERS. I STRIVE TO BE THE CALM REASSURANCE

TO GUIDE THEM EVERY STEP OF THE WAY.

8 | 2017 ANNUAL REPORT

ASHLEY HAYES

Senior Claims Associate, FL


MY GREATEST SATISFACTION

COMES FROM KNOWING OUR

POLICYHOLDERS FEEL SECURE THAT THEIR

COVERAGE MEETS THE UNIQUE

NEEDS OF THEIR PRACTICE.

ROMMEL TANEGA

Senior Underwriter, CA

2017 ANNUAL REPORT | 9


OUR TEAM IS THE FRIENDLY VOICE ON THE OTHER END OF THE LINE.

WE LOVE GETTING TO KNOW OUR CUSTOMERS, AND TRULY ENJOY

KNOWING WE MAKE THEIR DAYS A LITTLE EASIER.

MEGAN GILES

Customer Service Supervisor, PA

MARJORIE CALLANAN

Customer Service Manager, PA

10 | 2017 ANNUAL REPORT


MY FOCUS IS

TO ENSURE AN

OUTSTANDING CUSTOMER

EXPERIENCE WITH EVERY

INTERACTION — THAT’S

WHAT MAKES

US SPECIAL.

JOY CORSO

VP of Marketing & Communications

and Customer Experience, TX

THERE ARE MANY

OPPORTUNITIES FOR

UNCERTAINTY FROM THE

TIME A CLAIM IS REPORTED

TO THE TIME IT CLOSES. WE

TRY TO TAKE THAT WORRY

AWAY SO OUR PHYSICIANS

CAN CONCENTRATE ON

PRACTICING MEDICINE.

DANIEL DUPRE

Claims Director, FL

2017 ANNUAL REPORT | 11


A MESSAGE FROM THE CFO

STEADY AND STRONG

The NORCAL Group of companies finished 2017 in the

strongest financial position in the company’s 42-year history.

This is the result of steady, strategic efforts made over the past several

years to ensure that NORCAL has a solid foundation to weather the

changing healthcare market, with consolidations of medical practices

and emerging risks. In 2017, NORCAL Group completed the acquisition

of PPM Services, thereby establishing an affiliation with Preferred

Physicians Medical Risk Retention Group (PPM), the nation’s largest

anesthesia-specific medical professional liability carrier. Also in 2017,

NORCAL Group expanded its footprint to 49 states plus the District of

Columbia, thus completing its transformation to a true national carrier

serving the future of healthcare.

NORCAL Group was once again affirmed by A.M. Best with an “A”

(Excellent) rating for the 34th consecutive year for its stability and

financial strength. NORCAL Group’s diligence in identifying and

committing to operational efficiencies and sound underwriting and

claims practices resulted in a policyholders’ surplus of $741 million, the

highest in the company’s history.

NORCAL Group remains well-positioned to serve our policyholders for

many years to come.

MARK D. JOHNSON

Senior Vice President & Chief Financial Officer

12 | 2017 ANNUAL REPORT


DIRECT WRITTEN PREMIUM

grew to $332 million with the addition of PPM and other new business opportunities.

332+293+290

2015 // $290M

2016 // $293M

2017 // $332M

TOTAL ADMITTED ASSETS

steadily increased to $1.6 billion over the past three years.

2015

$1,560M

2016

$1,577M

2017

$1,637M

POLICYHOLDERS’ SURPLUS

is at the company’s highest at $741 million, due

to sound business practices and solid business

investment returns.

POLICYHOLDER COUNT

has grown to over 32,000 across 49 states.

2015

$670M

2016

$705M

2017

$741M

2015

27,736

2016

30,256

2017

32,142

2017 ANNUAL REPORT | 13


NORCAL GROUP CONSOLIDATED

FINANCIAL RESULTS

NORCAL Group continued to experience upward momentum in 2017, with strong

investment results, coupled with diligent oversight of expenses.

Reflected in the 2017 financial statement are the results of the acquisition of PPM Services.

Together, NORCAL Group closed the year with $332 million of direct written premium. The group

of companies remains well capitalized with more than $1.6 billion in total admitted assets and

$741 million in policyholders’ surplus.

STATUTORY - BASIS INCOME STATEMENTS 2017 2016

INCOME Net premiums earned 317,870 315,984

Net investment income 36,649 39,021

Net realized gains on investments 28,888 6,402

Other Income (735) 3,881

Total Income $382,672 $365,288

EXPENSES

Losses & loss adjustment

expenses incurred

236,639 234,384

Other underwriting expenses 50,739 47,926

Acquisition costs, net 31,269 32,078

Total Expenses $318,647 $314,388

Income before dividends

& federal income taxes

Dividends declared to

policyholders, net

64,025 50,900

- (76)

Income before federal income taxes 64,025 50,976

Federal income tax expense 362 6,379

Net Income $63,663 $44,597

Dollars in thousands, as of December 31

14 | 2017 ANNUAL REPORT


STATUTORY - BASIS BALANCE SHEET 2017 2016

ADMITTED ASSETS Debt securities 1,102,868 1,100,559

Equity securities 294,504 245,167

Cash, cash equivalents

& short-term investments

34,923 122,026

Other invested assets 22,345 23,333

Total Cash & Investments $1,454,640 $1,491,085

Investment income receivable 11,275 11,624

Premiums receivable 69,252 62,711

Reinsurance recoverables 4,950 11,317

Federal income tax recoverable 10,168 2,476

Deferred tax assets 14,776 31,809

Other admitted assets 68,859 46,230

Total Admitted Assets $1,633,920 $1,657,252

LIABILITIES Losses & loss adjustment expenses 652,065 705,239

Unearned premiums 150,100 146,124

Premiums collected for

future renewals

26,504 31,611

Dividend payable to policyholders - -

Reinsurance liabilities 8,092 6,934

Federal income tax payable - -

Funds held under

reinsurance treaties

3,387 2,492

Notes payable - -

Other liabilities 52,562 59,747

POLICYHOLDERS’

SURPLUS

Total Liabilities $892,710 $952,147

Unassigned surplus 741,210 705,105

Total policyholders’ surplus 741,210 705,105

Total Liabilities &

Policyholders’ Surplus

$1,633,920 $1,657,252

Dollars in thousands, as of December 31

2017 ANNUAL REPORT | 15


NORCAL GROUP’S 2017

BOARD OF DIRECTORS

1 2 3 4 5

1

2

3

4

5

SANDRA L. BERETTA, MD

Chair — Obstetrics & Gynecology

FABIOLA COBARRUBIAS, MD, MBA

Vice Chair — Hospitalist

STEVEN PACKER, MD

Secretary — President & CEO, Community Hospital Foundation

PATRICIA A. DAILEY, MD

Anesthesiology

SCOTT DIENER

President & CEO, NORCAL Mutual Insurance Company

16 | 2017 ANNUAL REPORT


6 7 8 9 10

6

7

8

9

10

ALICE H. GANNON, FCAS, MAAA, CPCU

Actuary

ROGER M. HAYASHI, MD

Vascular Surgery

M. DIANE KOKEN, JD

Legal Consultant

REBECCA J. PATCHIN, MD

Anesthesiology

SCOTT C. SYPHAX

President & CEO, Nehemiah Corporation of America

2017 ANNUAL REPORT | 17


NORCAL GROUP’S 2017

SENIOR MANAGEMENT TEAM

SCOTT DIENER

President

& Chief Executive Officer

RONALD C. RUMIN

Senior Vice President

& Chief Operating Officer

JULIE L. BURNS

Senior Vice President

& Chief Human Resources Officer

MARK D. JOHNSON

Senior Vice President

& Chief Financial Officer

KARA M. RICCI

Senior Vice President, Chief Legal Officer,

Corporate Secretary & Chief Compliance Officer

18 | 2017 ANNUAL REPORT


OUR MISSION

NORCAL SAFEGUARDS OUR POLICYHOLDERS FROM

RISK, GUIDES THEM THROUGH THE UNEXPECTED

AND PROTECTS THEIR PRACTICE OF MEDICINE.

THANK YOU FOR PLACING YOUR TRUST IN US — AND NORCAL GROUP.

2017 ANNUAL REPORT | 19


575 Market Street, Suite 1000 | San Francisco, CA 94105 | 844.4NORCAL | norcal-group.com

©2018 NORCAL Mutual Insurance Company. All rights reserved. ng5087

More magazines by this user